Friday, October 06, 2006

Works in progress: Michael Meurer

Michael Meurer, If You Can’t Tell the Boundaries It Ain’t Property: The project comes from a book by Meurer and James Bessen, Do Patents Work? The chapter is available at the conference website, and is worth reading if you’re interested in the subject.

There is a huge notice problem in patents, varying across types of technology. Claims can be submerged for long periods, amended during the application process without publication, and otherwise hidden. Even when the claims are public, it’s hard to figure out what’s covered, and most businesses don’t bother to try. As opposed to title insurance and E&O insurance for copyright infringement, both of which indicate the existence of mature and predictable markets, patent infringement insurance is essentially unavailable because it’s so unpredictable.

Much infringement is inadvertent. Defendants tend to be large and to invest more in R&D than plaintiffs – in fact, the hazard of patent litigation increases with more R&D. Pirates would do better by increasing R&D and hiding their tracks; this is further evidence that independent invention drives most patent lawsuits, as with the Blackberry. Parties are often in different industries and patent in different technology classes.

The harm of notice failures is greater than the harm of low-quality patents.

Structural features of the relevant industry to some extent drive patent prosecution. Maybe with more valuable technologies drive investment in patenting, but he thinks the causation flows the other way – the cost of defining clear rights changes the property people try to stake out.

Mark McKenna: What about protection by other means? Trade secret, copyright (for software), trademark.

A: That may affect the differences between industries. We may be giving more rights where they’re least needed.

Josh Sarnoff: Blackstone saw the difference between protecting real property, where possession helped give notice, and protecting ideas with embodiments. Abstract claims are used to control presently unanticipated potentials, and that’s just wrong.

A: Software is interesting as a general-purpose technology – along with business methods. There’s an abstractness to the invention which generates more abstract claim language.

Jay Kesan: Your analysis suggests that the only good patentee is one who invests a lot in R&D. You privilege technologies that require a lot of investment instead of the tiny inventor.

A: Independent inventors, nonpublic firms, and universities: We can estimate the patent premium for those different groups; for some of them (university profs) there is essentially no risk. The patent premium for small guys is smaller than the patent premiums for big firms, but the costs are also lower – there’s a net benefit for small guys, whereas there’s a net tax for big companies. Small guys will make most of their money by licensing. Still, improving notice quality would be good for small guys (by enabling licensing?).

Mark Lemley: What is to be done?

A: A rigorous indefiniteness doctrine. If we can’t make the notice function work and if patent isn’t really property, then we shouldn’t have strong injunctive remedies – and this could be industry-specific, depending on how easy to define technologies it is per industry. Even in pharma, the value of patents has declined over time, perhaps because of new problems with biotech.

My comment: I'm a little disturbed by the idea that the licensing thicket that exists in movies is a model for a well-functioning system. Right now, until insurers start accepting the documentary filmmakers' fair use principles, you can get insurance against copyright infringement if and only if you rigorously license or cleanse your film of obvious references to identifiable copyrighted works. This is hardly an ideal system.

The orphan works problem is a separate indication that notice is not exactly working perfectly in copyright. Moreover, the insurance system that works so well for Paramount works not at all for individual/amateur film productions, which now risk discovery by copyright owners if they're posted on YouTube.

What the E&O market shows is that the large-scale commercial film industry can produce works by editing and distorting their products more easily than a big tech firm can avoid patent infringement. But that's hardly a recommendation.

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