Patent reform--or else

Squatters, trolls and terrorists.

Those are some of the more colorful characterizations of people accused of abusing the patent system in the United States. Corporate chiefs have groaned about the rise of patent terrorism, where their products are threatened by injunctions from companies who have scooped up patents for the purpose of litigating and reaching a lucrative settlement.

On the flip side, small businesses and individuals are expressing similar concern about comparable practices carried out by large corporations themselves, often, these critics complain, with the intent to keep competition down.

Certainly it seems that more creative liberties are being taken with intellectual property these days. Intellectual Ventures is an example of a company that is putting a new twist in the business of innovation. In a recent interview with CNET News.com, founder Nathan Myhrvold talked about his approach to investing in innovation by bringing great minds together to solve tough problems and create patents.

What has people concerned, though, is that apparently another function of Intellectual Ventures is to buy up patents (trolling) and then offer rights to use the patents to corporate investors such as Nokia, Intel and Microsoft, as well as reserve the right to license them to competitors. The practice has precedents and is perfectly legal, but it still raises concerns as to potential consequences.

If organizations are funded specifically to amass large pools of patents at the behest of investors' interests, without disclosure, the clandestine practice could become a significant competitive threat. If concerns are valid, there will certainly be more companies like Intellectual Ventures popping up to act as agents of corporations with common interests--to dominate their markets or fend off competitors already employing this tool.

This opens up a bit of a quandary--mainly, should a government-granted property right be completely open to free market uses? Or should the entity that grants the rights under patents have some level of authority over how the right is used or transferred? It's easy to see why the questions surrounding patent reform are complex and go so deep into the fundamental operation of our economy.

The ongoing lament from business circles about the degradation of both the quality of patents and their protection seems to be reaching a crescendo, with the House and Senate both now considering extensive measures to reform the system.

Part of the complexity in any measure of reform is that the intellectual property system established in the United States benefits many different levels of society: big corporations, small business, individual inventors and even consumers as a whole. It's often suggested that changes to certain provisions of the patent system can tip favor toward one or another of these classes of participants.

For instance, it's not uncommon for a reform suggested by a large corporation such as Intel or IBM to be picked apart by organizations of small inventors to demonstrate that the change could be utilized by greedy corporations to marginalize the rights of the little guy--such as diminishing the strength of injunctive relief as a consequence of patent infringement.

But even amid the ongoing flap about the numerous problems with the system, some are saying that we are succumbing to intellectual hype and the problems are overblown--that a few high-profile cases skew perception that patent abuse is rampant.

I'd contend that the increased activity and new practices in the market for intellectual rights are concerns and should be examined. However, the more immediate and pressing issue for lawmakers lies with patents themselves and the function of the Patent Office. In this, there is a majority concurrence: The United States Patent and Trademark Office needs more resources to keep up. We are in the midst of an innovation boom, and patents are being filed at a higher rate than the growth of the office charged to properly scrutinize and legitimize inventors' ideas.

Certainly, a small number of aggressive companies will take advantage of the system to game it for profit--shaking down large companies for license fees of patents they've trolled. This will continue with or without reform. But is changing patent laws in direct attempts to effect reduced litigation and anti-innovative, anti-competitive behavior the best way to go?

It makes more sense to address the fundamental issues with patents that can exacerbate issues with their use--mainly, the quality of the patents and the process that validates them. Holding reforms that address core issues ahead of those that treat the symptoms will more likely yield a beneficial system for all.