Patents are for innovation, not your bank account

Earlier this year, a company called Intellect Wireless sued four major cellular service providers — T-Mobile, U.S. Cellular, Virgin Mobile, and Helio — for patent infringement. One of these patents was called “Picture Phone with Caller ID.” It does sound like an ambiguous patent. However, since the patent holder, Daniel Henderson, was the inventor of the patents, I initially figured this wasn’t a big deal vis a vis patent law.

As I understood it at the time, trolls were the crux of the problem with patents in the U.S. A patent troll, as I understood it, was a person or company who bought up patents with the sole purpose of suing other companies for infringement. But then the folks at Techdirt set me straight. All problems, including trolls, reflect back to a huge inefficiency in the U.S. Patent Office: They allow too many flimsy and non-innovative patents to pass through.

But in the real world, the courts have made the rules for patenting so permissive that a ton of patents get awarded for obvious concepts. This would be a bad thing even if there weren’t any patent trolls around.

This is significant now because Jon Dudas, head of the U.S. Patent Office, is finally noticing the wealth of crap patent applications looming in his office. This is because, as Mike Masnick notes, people and companies have every reason to file flimsy patents. If the U.S. Patent Office is accepting them, why not get your hands on as many as you can, and then make as much money as humanly possible from them, whether in the form of licensing agreements or legal settlements?

The clear problem is that this slows innovation. I hear big companies (especially in the telecommunications industry) talk about free markets speeding innovation. Regulation, they say, only holds things back. I’m not so sure there’s substance behind those claims. But there is substance behind the claim that bad patents are slowing innovation. Where is the incentive to create if you’re only going to be sued for your troubles?

When the cost of getting a patent is so much smaller than the potential payoff of suing others with it, then of course you’re going to get more of that activity.

So if all of this is clear, then why aren’t we seriously looking into patent law reform? What, is it too obvious?