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Innovation and Its Discontents

Innovation and Its Discontents: How Our Broken Patent System is Endangering Innovation and Progress, and What to Do About It

Adam B. Jaffe
Josh Lerner
Copyright Date: 2004
Pages: 256
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  • Book Info
    Innovation and Its Discontents
    Book Description:

    The United States patent system has become sand rather than lubricant in the wheels of American progress. Such is the premise behind this provocative and timely book by two of the nation's leading experts on patents and economic innovation.

    Innovation and Its Discontentstells the story of how recent changes in patenting--an institutional process that was created to nurture innovation--have wreaked havoc on innovators, businesses, and economic productivity. Jaffe and Lerner, who have spent the past two decades studying the patent system, show how legal changes initiated in the 1980s converted the system from a stimulator of innovation to a creator of litigation and uncertainty that threatens the innovation process itself.

    In one telling vignette, Jaffe and Lerner cite a patent litigation campaign brought by a a semi-conductor chip designer that claims control of an entire category of computer memory chips. The firm's claims are based on a modest 15-year old invention, whose scope and influenced were broadened by secretly manipulating an industry-wide cooperative standard-setting body.

    Such cases are largely the result of two changes in the patent climate, Jaffe and Lerner contend. First, new laws have made it easier for businesses and inventors to secure patents on products of all kinds, and second, the laws have tilted the table to favor patent holders, no matter how tenuous their claims.

    After analyzing the economic incentives created by the current policies, Jaffe and Lerner suggest a three-pronged solution for restoring the patent system: create incentives to motivate parties who have information about the novelty of a patent; provide multiple levels of patent review; and replace juries with judges and special masters to preside over certain aspects of infringement cases.

    Well-argued and engagingly written,Innovation and Its Discontentsoffers a fresh approach for enhancing both the nation's creativity and its economic growth.

    eISBN: 978-1-4008-3734-2
    Subjects: Business, Political Science, Law

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Preface to the Paperback Edition
    (pp. ix-xii)
    Adam Jaffe and Josh Lerner
  4. Preface
    (pp. xiii-xvi)
  5. Introduction: They Fixed It, and Now It’s Broke
    (pp. 1-24)

    Over the course of the nineteenth and twentieth centuries, the United States evolved from a colonial backwater to become the pre-eminent economic and technological power of the world. The foundation of this evolution was the systematic exploitation and application of technology to economic problems: initially agriculture, transportation, communication, and the manufacture of goods, and then later health care, information technology, and virtually every aspect of modern life.

    From the beginning of the republic, the patent system has played a key role in this evolution. It provided economic rewards as an incentive to invention, creating a somewhat protected economic environment in...

  6. Chapter 1 Today’s Patent System at Work
    (pp. 25-55)

    In 2001, Albie’s Foods, Inc., a small grocery and caterer in Gaylord, Michigan, received an unusual communication. The letter was from the law firm of giant jam and jelly maker J. M. Smucker Co. In the correspondence, Albie’s—which markets pastries and sandwiches in the northern Michigan region—was accused of violating Smucker’s intellectual property rights by selling crustless peanut butter and jelly sandwiches.

    In particular, Smucker’s claimed that Albie’s had infringed Smucker’s recently granted U.S. Patent No. 6,004,596 covering a “sealed crustless sandwich.”¹ Indeed, as the patent abstract noted, Smucker’s had been granted broad protection: “The sandwich includes a...

  7. Chapter 2 The Dark Side of Patents
    (pp. 56-77)

    Situations in which there is considerable ambiguity about exactly what is covered by related patents held by different firms are not uncommon. Often, the firms holding these patents manage to get along peaceably, like two neighbors who do not know exactly where the line is that divides their lawns, but do not worry about it too much because they each have sufficient room to enjoy their backyards. And yet, just as some people cannot seem to get along with their neighbors, some firms seem increasingly to want to do battle over patent rights. Even more worrisome, some firms have clearly...

  8. Chapter 3 The Long Debate
    (pp. 78-95)

    The legislators gathered to consider the national patent system. Angry industrialists complained of many flaws in the current system. Foremost among these was the scanty review that patent applications often received and the frequency with which manufacturers were surprised by new patents granted for established technologies, endangering ongoing commercial activities with the threat of baseless litigation over patent claims. The critics noted that an observation about the British patent system was equally applicable here: “the present machinery gives the minimum advantage to the inventor and inflicts the maximum disadvantage to the public.”⁴⁹ Others took a more extreme view, and argued...

  9. Chapter 4 The Silent Revolution
    (pp. 96-126)

    We now home in from the broad sweep of history to the shifts in the United States over the past two decades. These years saw two changes that may initially appear trivial: a change in the manner in which appeals of patent disputes were heard in the federal courts, and some even subtler shifts in the financing of the patent office. Yet, as we shall see, the shifts had profound effects.

    Given the pendulum-like nature of historical patent policy illustrated in the previous chapter, it will not surprise the reader to learn that the changes of the past two decades...

  10. Chapter 5 The Slow Starvation
    (pp. 127-150)

    The legislator rose on the Senate floor, waving a thick report that decried the state of the patent system.¹²² The patent office was fundamentally broken; indeed in the recent words of a federal judge, it was “producing evils of great magnitude.”¹²³ Far too many patents were being issued, with only minimal review; the patent office was not even pretending to ascertain the novelty or validity of the idea. Multiple patents were being awarded on the same discoveries, or—even worse—on inventions that had been made many decades previously.

    As a result, the Senator declared: “The original and meritorious inventor...

  11. Chapter 6 The Patent Reform Quagmire
    (pp. 151-169)

    For over seven decades, patent policy reformers had pushed for the creation of a patent opposition system. Task forces and commissions—consisting of seasoned patent lawyers, veteran policymakers, and learned professors—had urged the adoption of such a system. Finally, in 1997, the time appeared ripe for the adoption of this reform. And yet the effort to change the system failed.

    Were the key actors in this reversal of fortune leading patent lawyers or academics who developed second thoughts? No, the key leaders in scuttling these reform efforts were a checkered cast of characters with little experience related to the...

  12. Chapter 7 Innovation and Its Discontents
    (pp. 170-208)

    So the freight train is out of control, even if it has not yet jumped the tracks. While the patent system plays a vital role in creating and maintaining incentives for innovation, it is becoming more and more expensive to operate (and fight about). Worse, its pathologies increase the uncertainty associated with investment in innovation, and thereby undermine the very incentives it is designed to create.

    We saw in chapter 3 that crises in which patents are accused of stifling rather than encouraging innovation have been a recurrent feature of the industrialized world. Unlike the nineteenth century Dutch crisis, there...

  13. Notes
    (pp. 209-228)
  14. Index
    (pp. 229-236)