Whose idea is it, anyway? 'Bounty hunters' track the validity of patents

It's a case that anyone who has ever struggled for possession of the TV remote could relate to.

Universal Electronics, a company based in Cypress, Calif., holds a patent on a multipurpose remote-control device - something that can program several electronic devices in, for instance, a house: the lights, the TV, the sound system. And just over a year ago, Universal filed suit against four other manufacturers of similar devices, claiming patent infringement.

But Universal's patent on the multipurpose remote is being challenged - a development that sent Duane, a software engineer in southern New Jersey and a bounty hunter, digging deep into the microfiche collections of his local public library.

Duane, who didn't want his last name used, thought the Universal remote sounded like a good idea - so good, in fact, that he remembered that someone had already invented such a thing. His triumph was to find a copy of a Byte magazine article he recalled from 1987 that told how to build a remote like Universal's. His diligence won him a $10,000 bounty offered by a litigant challenging Universal's patent.

Duane is a foot soldier in the struggle to keep the United States patent system honest. In this case, finding the article - like finding a blueprint or a technical drawing - provided "prior art," evidence that a certain invention existed before the current claimant invented it. Such a discovery can invalidate a patent.

Boston patent attorney Charles Cella, founder and chief executive of Bounty Quest, the company through which Duane won his prize, describes the situation as a "patent-quality crisis." Close to half of all patents are invalidated when litigated, he says.

The ongoing Universal case raises a number of questions about the US patent system. Are patents being granted undeservedly, simply because examiners are too swamped to give applications due diligence? And is America patenting itself into a corner: granting too many patents, and patents of the wrong kind, thus impeding the capacity for further innovation?

It's a crisis most civilizations would love to have.

In 1899, Charles Duell, commissioner of the US Patent Office, said "Everything that can be invented has been invented." But any number of companies generate more new ideas than they know what to do with: 10 patentable ideas per engineer or designer per year is a number tossed around in patent-law circles.

Applications stream into the US Patent Office at a rate of well over 300,000 a year. Some are staggeringly complex. "Technology develops so rapidly that it's almost impossible to absorb it," says James Rogan, US undersecretary of Commerce for intellectual property.

"You see all these inventions that changed the face of the world, and the original patent art fit on a single piece of paper," he adds. "The new biotechnology patents come in on six CDs - the equivalent of 12 million pages."

Mr. Rogan notes that "every successful civilization has a strong patent system." From the founding of the republic, the patent system has been essential to ensuring innovation and technology transfer. A patent has represented a certain tradeoff: a time-limited monopoly right to exploit an invention in exchange for full disclosure from the inventor of how it works.

The United States and other advanced countries have long made adoption of Western standards of intellectual property protection the sine qua non of freer trade for developing countries desperate for access to Western markets.

But now some critics are concerned that the innovative American economy is fencing itself in.

"It's clear that there is a danger," says James Boyle of Duke University Law School, emphatically. The problem, he says, is that so much innovation is being put under patent protection that inventors, to stave off the threat of costly patent-infringement litigation, often end up entangling themselves in an expensive web of licensing arrangements to protect themselves as they work on new products.

What ticks off tinkerers like Duane are patents that, as he sees it, prevent him from taking things apart and experimenting. "It's as if the hood of your car were welded shut, and if you opened it up, you could go to jail."

Professor Boyle uses the metaphor of "the second enclosure." It's a reference to a period in English history, from the 15th century until the 19th, when agricultural land once held in common was being fenced off for private property. The process was known as the enclosure movement.

Gross dislocation of landless peasants and other woes ensued. But from an economic perspective, it worked: Clarity of property rights and ownership led to great gains in agricultural productivity.

Today's common grazing land is a territory of ideas, "the commons of the mind," Boyle argues, where the ownership model doesn't apply, because ideas can be held - and used - by more than one party.

Similarly, Christine Peterson, director of the Foresight Institute, a technology think tank in Palo Alto, Calif., and a member of the "Open Source" school of thought, thinks the patent system has been overextended - not just in volume but in kinds of patents.

The US economy has prospered, she says, in part because of the strength of its property rights, including patent rights. "We have deeply learned the lesson of private property ... but we've gone too far. As far as I can see, the property rights model works with physical things, but not ideas. We're pretending they can't be shared."

She lists several new classes of patents that she finds problematic: Business-method patents, such as Amazon.com's famous patent on a one-click online purchase system; patents on plants, genes, and software. Her suggestion: Keep the system for mechanical inventions intact but roll back provisions allowing for patents in these newer classes.

Patent skeptics, such as Boyle and Peterson, argue that to treat ideas like physical things - "rounding 'em up and branding 'em like cattle" - is to deny everyone the full benefits of an economy based on infinitely sharable ideas. The patent advocates counter that it is precisely because so many of today's new products are almost pure "idea," with little physicality, that robust patent law is necessary.

New York patent attorney Steve Bazerman puts himself in the latter camp. "I deal with a lot of companies that have only one asset: intellectual property." Everything else "they farm out," he says. "Even a company like Ford is basically trademarks and a design center - and they're a hard-goods company!" Other megabucks sectors of the American economy are even more ethereal, he suggests.

This is the situation that Charles Cella ventured into a little over a year ago to launch Bounty Quest.

The idea is pretty simple: Interested parties who want to challenge a given patent pay to post on the company's website a bounty (typically $10,000) payable to anyone who can find "prior art" showing the patent-holder didn't get there first.

Cella says his company gets smart people, not just databases, into the search. "People know what other people know.... The best way to check [for prior art] is not to check databases but to ask people. It's using the Net as a vehicle for communication, not for database searches. It's like a conference call with Einstein and Fermi and Watson and Crick, and getting to ask, 'Who did this first?'"

It is one of the ironies of the information age that the search for prior art is not as systematic as it ought to be. Databases are expanding all the time, Cella acknowledges, but they're still falling behind in relation to the information available.

In the case of Duane and the Universal remote, the database that mattered was the one in the engineer's head: He was able to remember a published article.

Other bounties have been won by people who have worked with the "invention" in question, as built by someone else.

Frank Pita, a patent attorney in Research Triangle Park, N. C., won a bounty for identifying a network-routing chip as something he had worked with as a network engineer for IBM. He concurs with Cella on the value of vetting patents with people rather than databases. "There's such a vast amount of information out there. You could spend your whole life searching."

Clarke McAllister, an inventor in Eugene, Ore., won a bounty for identifying prior art in the case of a patent on an electronic ticketing system - a product like something he had invented himself, but had not patented, because business-method patents weren't possible at that time. He calls Bounty Quest "a way to get at the stuff that's hidden in people's closets and filing cabinets."

If Bounty Quest is helping people challenge patents already issued, "we're the front-end guys," says Tom Colson, chief executive of IP.com, another effort to help tame the intellectual property wilderness.

At IP.com, in West Henrietta, N.Y., the focus is "defensive disclosure," Mr. Colson explains.

Defensive disclosure lets a company make public innovations that it chooses not to patent, typically for reasons of cost, but doesn't want to lose claim to. Defensive disclosure, or defensive publishing, puts an innovation into the public domain - beyond the reach of the digital barbed wire, as Boyle would say. Everyone can use it, but no one can patent it.

Also about a year old, IP.com aspires to be "the world's publication office," Colson says - the first place outside their own databases that patent examiners look for "prior art." Typically, he adds, "they have an hour and a half to do a full search, and they have a zillion places to look. "

Back at the Patent Office, James Rogan makes clear that he welcomes challenges to patents as well as efforts to ensure their quality. "I don't get a cut in pay if a patent gets reexamined," he says. He also stresses that his office has taken steps to tighten up the rules on the particularly controversial business-methods patents.

But do strong patent laws really make that much difference?

Josh Lerner, a Harvard economist who has studied the effects of strong intellectual property law on innovation, has found that it doesn't matter that much. In research looking at changes in the patent laws of 60 countries over 150 years, he found that the impact of strengthening patent laws was really "very little boost to innovation." He suggests that "a real humility" is called for on the part of those trying to draw conclusions in this area.