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When Are Patents Obvious?

August 15th, 2011 · 19 Comments

I recently did a diavlog with my friend Tim Lee on the new BloggingHeads spinoff site TechHeads, during which I had a thought that seems like it might be worth spinning out. We’re all accustomed to seeing horror stories about ludicrously broad, bad technology patents that have given rise to a wasteful arms race between real tech companies and patent trolls. A growing body of scholarly literature suggests that two decades of software patents, in particular, have been a hindrance rather than a net plus for innovation, and I think it’s worth thinking a bit about why that’s especially likely to be the case.

It has probably always been the case that our intellectual property policy has been skewed by a romantic vision of the lone genius in his workshop crying eureka! as some radical breakthrough strikes—when real innovation is more a matter of gradual, cumulative evolution. But I suspect it’s also true that one kind of innovation is more likely when you have a small number of pioneers working in a new field. A Newton or an Einstein born today wouldn’t be as likely to make similarly earthshattering contributions, partly for the simple reason that Newton and Einstein already did it (you can’t write the Principia twice), and partly because with thousands of people making small, incremental additions to our knowledge pool, it’s harder for even a genius to outpace them in a single bound. But we still want our genius—an identifiable individual to credit with the latest leap forward.

The thing is, as technologies mature, and innovation is more likely to proceed by a series of increments that shouldn’t be individually patentable, it also becomes much harder to police the quality of patents, which makes it more likely bad patents will slip through. To see why, consider the old economist’s aphorism that “division of labor is limited by the extent of the market.” That is, the more people are connected in an extended system of economic cooperation, the more specialization becomes possible. Robinson Crusoe has to be a generalist—has to know how to produce everything he’s going to consume. In a small isolated village, most people need to be food producers first and foremost, and a few others can focus on providing other necessities. In a globally networked marketplace, an incredible amount of specialization is possible—which is why, notoriously, there’s almost no type of porn so bizarre or niche that someone hasn’t created a website dedicated to providing it.

When my parents were children, “computer programmer” was not even an occupational category. Now we have thousands upon thousands of people who specialize in working on very specific types of software: Web applications or encryption or databases or first-person-shooter games. Crucially, an innovation developed by one person can be circulated to a whole community almost instantaneously—which makes it less likely that we need a “genius” to make huge innovative leaps because small components of his big idea, if they do already exist, are scattered across obscure journals in other languages where he’ll never encounter them. Predictably, this enables an enormous amount of very rapid progress.

It also makes it a lot harder to evaluate patent quality. Patents are not supposed to just be a pointless monopoly granted to the first person who happens to file a description of a particular invention with the Patent Office; the justification for granting the monopoly is that it (in theory) elicits innovations that would not exist but for the incentive a patent provides. To that end, patents are only supposed to be granted for inventions that are “non-obvious.” But of course, “obvious” is a relative term: You wouldn’t want to give an industrial engineer a monopoly on some minor improvement to a production process just because it might not be obvious to me. The standard, rather, is whether it would be obvious to a person “skilled in the relevant art” applying reasonable diligence and effort.

The more highly specialized professionals are in rapid communication with each other, the more likely it becomes that you’ll see innovations that are “obvious” because they involve combining various disparate kinds of incremental prior innovative steps, but which don’t have “prior art”—meaning nobody has taken that exact step before, because it required a bunch of other pieces to be in place before it was viable. So searching for “prior art”—if that means exactly the same preexisting invention—becomes a less reliable guide to what is “obvious” in the relevant sense. But as specialization increases, it also becomes vastly more difficult for a patent examiner with broadly relevant training (engineering and electronics, say) to use his own understanding and expertise as a guide to what is truly “obvious” to someone trained in the specifically relevant domain (say, engineering mobile cellular data networks). It’s increasingly unreasonable to expect even the smartest and most diligent examiner—even assuming away all the bureaucratic and institutional incentives to err on the side of granting patents—to judge the “obviousness” of innovations across an ever-proliferating array of subspecialties.

As specialization increases the number of eyes on each particular type of problem, it also shifts the degree of non-obviousness that makes the granting of a patent monopoly a wise bargain for society. As I suggest above, when a small number of people are working on a problem, and in only sporadic communication, then you’re more likely to need someone to make a big leap to hit on an innovation rather than relying on the accumulation of many small incremental insights. (Perversely, patents may create an incentive to keep quiet about those incremental insights along the road to a functioning, patentable idea.) But sheer numbers also make it vastly more likely that someone—and more likely many someones independently—will arrive at even less-obvious ideas. If only 1 in 100 people working on a type of problem would hit on a specific solution, it seems a stretch to call it “obvious.” But if there are 10,000 people working on the same class of problems, that’s still 100 independent inventors.

That very much changes the shape of the problem patents are meant to solve. If you’re in a market with a dozen other players, then in the absence of a patent monopoly, your inventive might be to take measures to keep that one-in-a-hundred innovation secret so your competitors can’t copy it. (Send me your raw materials and I’ll apply my new improved production process behind closed doors, rather than making a machine to sell.) The public loses the benefit of learning how the invention works because secrecy is an effective alternative means of maintaining a monopoly. If there are a thousand other players in the same market, the perverse secrecy incentive drops away, because you can be reasonably sure lots of other people are going to hit on the same invention, and it’s likely that your costly efforts to maintain secrecy won’t actually leave you with a monopoly, or even ultimately prevent the knowledge of how the invention works from getting out.

More specialization, in short, means that society can get the benefit of even less-obvious innovations without having to pay the cost of an inefficient monopoly grant. Needless to say, the greater the efficient standard of “non-obviousness”—the larger the logical leap it makes sense to require from “prior art” to a new innovation before that step becomes patentable—the harder it is for a non-specialist examiner to correctly apply that standard.

So there’s an irony here: As a sector becomes more innovative, as even “good” patents become less necessary and more likely to hinder rather than spur innovation on net, and as the economically efficient “non-obviousness” standard for patent issuance rises, patent examiners necessarily become less likely to be able to discriminate effectively between good and bad patents. In other words, the circumstances under which it is efficient to be granting fewer patents are the very circumstances under which patent examiners lose the ability to accurately judge “obviousness,” and therefore become more likely to grant more patents. No wonder it’s such a mess.

Tags: Economics · Law · Tech and Tech Policy



19 responses so far ↓

  • 1 Noah // Aug 15, 2011 at 4:31 pm

    Quick comment on your diavlog. It’s not true that most journals are owned by universities. Elsevier and other large publishers have a huge chunk of the scientific publishing market.

  • 2 Julian Sanchez // Aug 15, 2011 at 4:42 pm

    Yeah, I suspect my perception there is skewed by the fact that the academic journals I most frequently have occasion to read are law reviews, the most prominent of which are university-based. I’d be interested in hearing from academics in the sciences whether a different model would be viable there.

  • 3 Noah // Aug 15, 2011 at 5:02 pm

    There’s certainly a big movement among academic scientists (especially younger scientists and scientists closer to physics) to reform the journal system. The main success is the ArXiv which is a preprint journal which is ubiquitous in physics and in many fields of math. Also several editorial boards of journals have quit and moved to a non-profit publisher.

    The main problem is that in the short-run this doesn’t save schools any money because the big publishers sell their journals in giant packages. E.g. the entire University of California buys a 5-year subscription which includes all Elsevier journals for all 10 campuses plus electronic access to back issues. The fact that the big corporations have bought up all the back issues to all the journals, combined with the way copyright law is interpreted in reference to computers means that they have a lot of power that they can wield.

    Another big problem is that young researchers are the most aware of these issues, but young people don’t really have the option of being picky about where to publish.

    For more info a good place to start is http://math.ucr.edu/home/baez/journals.html (though unfortunately that seems to be suffering from some linkrot).

  • 4 Dave // Aug 16, 2011 at 11:38 pm

    I think this could be easily solvable by having a very skilled and connected network of patent examiners, but most importantly, they must err on the side of not granting a patent rather than on the side of granting one. In other words, the burden of proof should be on the applicant, and there should be a straight forward process for them to appeal to other examiners.

    But as Yglesias is suggesting, I don’t think capital investment is the key factor. Take for instance software patents. Just because the capital cost of developing software is less than developing drugs, the relative cost to the inventor can still be huge.

    If a person has a huge innovation that they want to bless the world with, but they lack the time and capital to develop it given the risk of having it easily copied, then the world might never see it. The standard of obviousness is appropriate in my opinion, but the way we’re applying it is not. In other words, assume it obvious until proven otherwise.

    If someone is twiddling bits around in software, it is almost certainly obvious. However, if someone is solving a global problem in a new way whereby software is required, then a patent can help provide incentive for a person to share it with the world regardless of their ability to fund the project.

    Often times, the best inventions see the light of day only because a single person is willing to shepherd their idea to fruition, and the only motivation is knowing they might benefit financially before somebody else copies it.

  • 5 Dave // Aug 16, 2011 at 11:49 pm

    Another way of stating my objection to Yglesias’ view is to say that one of the most important reasons for patents is to provide a means of making money from useful inventions that can’t provide a return on investment within any business model without the monopoly. The level of capital investment is irrelevant.

  • 6 Julian // Aug 17, 2011 at 1:45 pm

    So, yeah, I’m not sure a PURE capital-intensiveness model is the right approach (do companies start needlessly ploughing money into R&D to justify patents?) but in software in particular I just really doubt even a much more functional patent system would actually elicit more net innovation. I mean, can you actually think of a real live case that fits your description? Because I can point to a lot of great software innovation that seems to happen without people needing to rely on a patent model to monetize their effort.

  • 7 Dave // Aug 17, 2011 at 3:06 pm

    So to Julian, yes I can think of real live examples. I have one under development myself and I plan to get 2 patents to make sure it can provide income.

    Of course much ‘innovation’ in software occurs as a normal part of the business model of companies that engage in innovative software development. I’ve done that my entire professional career. Most patents I’ve seen were obvious, and few companies created patents because it was critical to their business model.

    Patents are specifically supposed to even the playing field for the little people. They’ve changed, but we don’t need to leave the little people behind just because the big businesses have corrupted the system purely for monopoly power.

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  • 9 Mike // Aug 18, 2011 at 3:49 am

    Jonathan Schwartz’s (Sun ex-CEO) candid blog post on software patents and patent trolls couldn’t be more relevant to this topic:

  • 10 Dave // Aug 18, 2011 at 10:44 am

    There are a few important points that often get lost in this debate:

    1) People usually define the problem by the costs to huge businesses. While these problems often hamper innovations instead of encouraging them, they are not significantly contributing to our current economic troubles. This is a problem of innovation rather than economics. In other words, if we fix this patent system, we can expect much better technology products and more competition, which is good, but it won’t on balance contribute significantly to raising our GDP and creating jobs.
    2) Obama’s aim was to reduce litigation costs, but the answer isn’t to make it ‘easier’ to get a patent, the answer is to make it harder such that having the patent actually provides protection. Now a patent is useless without an army of lawyers.
    3) This can’t be fixed easily, and any true fix (not Obama’s ‘fix’) will take many years to help because we need the old stock of obvious patents to end first.

    I think Obama was trying to use this crisis to push legislation that sounds good on the surface. But how likely is it that the President has good information given that the problem is almost always defined in terms of huge companies with huge litigation problems? Not very likely.

    This is just another example of how the money of big business is buying a louder voice than anyone else. Legislation by big business for big business. The truth is that if we actually fixed the patent system, many big business would shrink and many smaller companies would take their place in the market place. This legislation doesn’t do that. Why would big business advocate to create more competition for themselves? They’re not, they’re advocating for reducing their litigation expenses. That’s it.

  • 11 Dave // Aug 19, 2011 at 3:05 am

    So you guys are at Cato (I just realized it)? I’m an Yglesias reader, and as such a so-called ‘liberal’. But I’ve often said that liberals and libertarians are really on the same side in many ways. In this way, we should be on the same side. I don’t think the Kochs ok everything that goes out of Cato, so I can agree on this issue without being disloyal.

    This is what makes this so hard. Ideology divided by 2. Is that really possible? No.

    So is 2/2 = 1? No. Yikes. You people are right on this issue as far as I can see. Just don’t try to expand this to the economy, please…

  • 12 Elizabeth // Aug 19, 2011 at 4:20 pm


    I will like to hire you to review a patent for me and tell me if it is obviousness in my opinion this patent is hurting the U.S. ability to recovery just so a few can profit.

    What exist here is a bad software that “creates” the process of foreclosing on property with the use of certain created documents and a process.

    Reading the comments here I know I am not experience enough to get into a discussion here all you guys are very experience, still I have two
    patents that are being use by law firms state wide to foreclose on property.

    Will you help me ?

  • 13 Dan // Aug 23, 2011 at 7:18 am

    – “obvious” itself is subjective.
    – You can’t prove “non exist” “not exist”. You can only compare it with evey existing item so you could safely testify “it might not exist”. How many time and effort to verify a patent?

  • 14 Jesse // Aug 23, 2011 at 8:36 am

    The real problem is that programming is a very specific realm of applied mathematics.

    All computers work based on the rules of Boolean algebra. When they don’t follow these rules, then there is a hardware fault.

    And mathematics is not patentable.

  • 15 Renee Marie Jones // Aug 23, 2011 at 10:52 am

    “If a person has a huge innovation that they want to bless the world with, but they lack the time and capital to develop it given the risk of having it easily copied, then the world might never see it.”

    Every pro-patent person says stuff like this, but where is the evidence? Why is virtually every software innovation available as free software first? Your statement seems to claim that high quality free software cannot exist, yet all the major inventions were free software FIRST.

  • 16 Renee Marie Jones // Aug 23, 2011 at 10:56 am

    “You can’t prove “non exist” “not exist”. ”

    Depends on your definition of “prove” … as a practical matter you CAN prove non-existence. Example: You claim their used to be a Sears store on the corner of 3rd and main ten years ago. I can look at the telephone book for that time period and, not finding a telephone number, I can safely presume that the Sears store did not exist. As a practical matter this is proving the non-existence of the Sears store.

  • 17 Dan // Aug 23, 2011 at 10:06 pm

    Your “Sears store” exaplem assume the store has a phone. What if store don’t have a phone?

    Your example is exactly what goverment doing. if they can’t find the “invention” on their list and from the examiner’s knowledge, they assume the are non-exist and allow application get the patent.

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