The patent system has been in focus all year, with the Senate last week announcing a bipartisan proposal to reform the system. Similar to legislation that passed the House last year, the Senate bill will be aimed at making life more difficult for abusive lawsuits by so-called patent trolls — companies that buy up dubious patents from inventors and use them to extract settlements from innovators and users rich and poor.
Last month, the U.S. Patent Office hosted its annual “Design Day,” which brought together representatives of an estimated 40,000 industrial designers to discuss developments in the law specific to design patents, a growing and problematic category.
The two events are closely linked. Though design patents play a valuable role in the system that encourages innovation by inventors, they’ve also proven to be a rich source of meritless litigation.
Design patents cover distinct ornamental features of a product that are not functional, in contrast to the more common “utility” patents, which cover actual uses of a product. As with utility patents, designs can only receive legal protections if they are both novel and non-obvious. And the applicant must specify the design sufficiently so that a competitor can reproduce it once the patent expires and the design enters the public domain.
Those limits are intended to ensure a system aimed at protecting innovation doesn’t instead stifle it. But the restrictions aren’t working. Though few are calling for the abolition of the patent system, there is general agreement that the patent office has lost control over the last two decades as applications mushroomed, especially for relatively new kinds of inventions including software and business methods.
And industrial designs. Between 1997 and 2007, according to the website PatentlyO, the number of design patents issued each year grew from under 2,000 to nearly 20,000, an order of magnitude increase.
The pressure on examiners to process a mountain of claims has led to an explosion of dubious and excessively broad patents being issued — patents, in other words, that should have failed either or both the novel and non-obvious tests.
Comedian John Oliver recently explained how overly generous patent grants by U.S. regulators feeds the problem of patent trolling:
In that sense, patent trolls are more a symptom than the actual problem. Curbing their extortionate litigation will certainly reduce the drag on the U.S. economy, which the Consumer Electronics Association, a long-time advocate for reform, pegs at $1.5 billion a week. But it won’t solve the real problem, which is the issuance of so many bad patents for the trolls to work with in the first place.
And for design patents, it isn’t just the trolls who are abusing the system. High-tech companies have become aggressive both in applying for design patents and using them as leverage against competitors, especially in the highly competitive mobile device market.
In what remains of extensive patent litigation launched by former Apple CEO Steve Jobs, for example, the company continues to assert several dubious design patents against Samsung. These include such trivial and obvious features as the rectangular shape, rounded corners, translucent screen, and colorful icons of Apple’s devices.
Even more dangerous, Apple has demanded as damages for infringement of these design elements the entire profit Samsung earned on several smartphone and tablet models — over a billion dollars in total. (Samsung continues to appeal the finding of infringement, as well as the award.)
Stanford law professor Mark Lemley, a preeminent patent scholar, rejects Apple’s approach. In a brief signed by Lemley and nearly 30 other scholars, the authors note that as many as 250,000 active patents cover various aspects of today’s complex devices. Attributing all of their value to their rectangular shape, the brief argues, follows neither the law nor common sense. “People don’t buy iPhones simply because they look cool; they buy them because they function.”
The point of the litigation, as Jobs didn’t hesitate to acknowledge, was not so much to protect Apple’s design innovation as it was to wipe out Google’s Android operating system, which Jobs saw as an unforgiveable rip-off of Apple’s iOS. “I will spend my last dying breath if I need to, and I will spend every penny of Apple’s $40 billion in the bank, to right this wrong,” Jobs was reported to have said. “I’m going to destroy Android. I’m willing to go thermonuclear war on this.”
And so he did. But the patent war Jobs launched has almost entirely failed to win the company any relief, let alone the end of Android. Over the past few years many of the combatants, including Apple, have been eager to cut their losses and get on with competing in the market rather than in the courtroom.
The lingering stain on design patents, however, remain. During the PTO’s Design Day activities, consultant Peter Bressler argued that the high stakes litigation between Apple and its competitors has had the unintended consequence of artificially increasing the value of design patents overall. That bubble may soon pop, depending on the outcome of pending appeals in the remaining cases that challenge Apple’s extreme damages theory.
As the absurdly broad claims in some of Apple’s patents suggests, however, limiting damages, like limits on patent trolls, is just another exercise in treating a symptom.
That’s why, whether or not Congress finally moves on legislation this year, it’s important for the Patent Office to make substantial reforms of its own.
Recently confirmed Director Michelle K. Lee, who had a long stint as head of patents for Google, seems to be taking positive steps in that direction. Earlier this year, the Patent Office announced an initiative to enhance patent quality, holding a two-day conference in late March that explored six practical proposals for reducing the flood of junk patents.
These include bringing in supervisory quality reviewers before an application has been fully processed, changing the agency’s quality metrics, and looking for ways to streamline the often protracted review procedure.
In opening the event, Lee emphasized the historical difficulty the patent office has had improving itself given budget constraints and a resulting lack of staff. But based on changes in a 2011 law, the Patent Office can now spend more of the money it collects from applicants, leaving the agency “in a historically healthy financial position.”
And so, Lee said, “for the first time in a long time, the USPTO doesn’t just have to make do. We can focus more than ever on building a world-class patent quality system for American entrepreneurs and innovators.”
For the sake of not just inventors but consumers everywhere, let’s hope she succeeds.
Larry Downes is co-author with Paul Nunes of “Big Bang Disruption: Strategy in the Age of Devastating Innovation” (Portfolio 2014). He is a project director at the Georgetown Center for Business and Public Policy.