[Patents] Important article in the New York Times

[halber@timsi.com.pl (Jozef Halbersztadt)]

http://www.nytimes.com/2001/11/11/business/11PROP.html?pagewanted=pr

November 11, 2001

Suddenly, 'Idea Wars' Take On a New Global Urgency
By AMY HARMON


As officials from around the world gather to discuss global trade in
Doha, Qatar, this weekend, many are challenging one of the towering
achievements of American industry during its economic boom years: an
unprecedented expansion of intellectual property rights.

Brazil, India and other developing countries argue that America's
devotion to the sanctity of patents puts drugs for AIDS and other
diseases beyond the reach of the poor and costs millions of lives.
And, they charge, Washington showed its hypocrisy last month when it
considered revoking Bayer's patent on the anthrax-fighting drug Cipro
because it was Americans who seemed at risk. Suddenly, the American
stance, that without patent protection there would be no drugs, seemed
hollow.

But whether or not the two sides reach an accommodation - the Bush
administration wants the World Trade Organization meeting to serve as
a display of global unity in the face of terrorism - the dispute
illuminates a broader battle over the ownership of innovation in an
information economy.

The questions on the table at Doha - Should one corporation have
control over a lifesaving innovation? Would anyone develop new
products and technologies if he were not guaranteed a temporary
monopoly on their use? Can strong protection actually inhibit
innovation? - are at the core of a debate roiling nearly every
industry, encompassing areas from Internet services to scientific
research to movie characters.

Call it the idea wars. At a time when information has emerged as the
world's most valuable currency, owners are asserting, and winning,
more control than ever over how ideas are used, sold and consumed.

Proponents hail the advent of an era of "intellectual capitalism," the
latest stage in the evolution of the post-industrial economy. "In the
knowledge economy, ideas become the product," said Kevin G. Rivette,
author of "Rembrandts in the Attic" (Harvard Business School Press,
2000), which has become a textbook for would-be intellectual property
owners.

But critics warn that, far from promoting innovation, America is in
the midst of an information-age enclosure movement comparable to the
fencing off of public grazing lands at the dawn of the Industrial
Revolution. Building on the ideas of others, a fundamental part of
creativity, they say, is much harder when a license must be negotiated
to use any existing sliver of innovation. And, they complain,
intellectual property rights are regularly trumping social values like
free speech or public health.

Throughout the 1990's, the drug, entertainment and technology
industries lobbied hard to erect the strongest protections for
intellectual property rights in American history. For drugs, the
effective duration of patents has in some cases almost doubled, to 16
years. Copyrights on creative works can now stretch as long as 95
years, the result of lobbying by companies like Walt Disney, which
wanted to keep the 73-year-old Mickey Mouse from slipping into the
public domain alongside the works of Shakespeare and Victor Hugo.

A new copyright law made it a crime to distribute software or other
tools that could allow people to make illegal copies of digital media
like DVD's or electronic books. Although the tools may also have
legitimate uses, companies say they need the extra protection because
of the Internet-era ease of wide-scale copying.

Court cases established the right of companies like Bayer to extend
their monopolies on patented drugs by keeping cheaper generic versions
off the market. Drug, computer and software makers amassed extensive
"thickets" of patents to discourage innovation by competitors. Even
Bristol-Myers Squibb (news/quote), a company that supports the Bush
administration's efforts to extend drug patent protection in the
developing world, has said its researchers cannot pursue at least 50
promising approaches to fighting cancer because of patents accumulated
by others.

Meanwhile, more than 26,000 scientists, including several Nobel
laureates, have vowed to boycott major scientific publishers after
they rejected a petition demanding that journal articles be turned
over to a free, online archive within six months of publication. The
scientists say the efforts of magazines like Science and Nature to
control distribution of articles based on taxpayer-supported research
is delaying scientific progress.

Even trademark holders are increasingly asserting ownership claims
over their marks, based on laws originally intended to prevent
consumer confusion. Several young Harry Potter fans took their Web
sites down earlier this year after Warner Brothers threatened legal
action, claiming that sites like www.harrypotterfan.co.uk were "likely
to cause dilution" of its intellectual property rights to the film
about the fictional boy wizard.

Proponents say that tighter protections on intellectual property have
spurred creativity and innovation. Patents and copyrights certainly
have boomed. The Patent and Trademark Office received a record 315,015
applications for patents last year, up from 176,264 a decade earlier.
It issued 254,329, almost double the 1990 figure. The United States
Copyright Office said that registrations totaled almost 600,000 in its
last fiscal year, a 16 percent increase over the year before.

As the number of patents and copyrights has grown, so has the
disagreements over them. Patent litigation alone cost American
companies more than $4 billion last year. Many companies pay royalty
fees to patent holders rather than risk an infringement case - even if
they do not infringe. New businesses divert scarce resources from
generating innovations to paying lawyers to make sure someone else
does not already own their ideas.

Increasingly, patents cover things that were rarely subject to
anyone's ownership before, often lumped in a category called business
methods. The floodgates opened in 1998, when a court decision upheld a
patent on a bank's computerized method of managing a mutual fund, but
the patent office has since been widely criticized for issuing patents
on practices that are neither new nor novel.

Patents have been issued on a method for producing a personal golf
lesson video, computer software for privatizing socialist economies,
even a process for filing patent applications. The Marine Corps has
applied for a patent on the design of its new uniform, featuring a
digitally generated camouflage pattern. "Microsoft (news/quote)
Patents Ones, Zeros," read a recent headline on The Onion, a humorous
Web site, satirizing the frenzy.

Indeed, whole new industries are springing up, from insurers offering
hedges against litigation to patent bounty hunters and specialists in
spotting patent infringement. Self- styled "I.P." consultants tout
their ability to identify the stray innovations stored in a company's
file cabinets, on its hard drives and in the heads of its employees.

But some analysts say it is lawyers and business executives skilled at
writing patent applications - not innovators - who are being rewarded
the most.

Civil liberties advocates are contending in several court cases that
the assertion of property rights by copyright owners restricts the
development of technologies. They also argue that copyright holders
are using the Digital Millennium Copyright Act to restrict the free
expression of computer programmers like Dmitry Sklyarov, a Russian who
was arrested in the United States this summer, accused of illegally
distributing software that can enable consumers to copy electronic
books.

They say that the 1998 statute, by banning software tools used to
circumvent the locks on digital material, prevents consumers from
using copyrighted works in ways that have long been considered
acceptable - excerpts for criticism or teaching, say, or making a
personal backup copy.

"The emergence of new technologies has called into question whether we
might have gone too far in strengthening the rights of property
holders against consumers," said Richard C. Levin, the president of
Yale University, who is heading an investigation by the National
Academy of Sciences into the nation's intellectual property policy.
"The key question is, are we getting the balance right?"

It is a question that has long been relegated to lawyers and
lobbyists. But the direction of intellectual property policy has
gained urgency in recent weeks as the Bush administration has begun to
view international development in terms of national security. Further
complicating the debate, a growing contingent of economists suggests
that more protection for intellectual property does not necessarily
lead to more innovation.

"There's been a tendency on the part of policy makers in the United
States to equate stronger intellectual property rights with more
innovation in a very simplistic way," said Josh Lerner, an economist
at Harvard Business School. "A more nuanced approach is much more
appropriate." In a study of 150 years of patent policies in 60
countries, Mr. Lerner found that there was no evidence that increased
patent protection in developing countries led to increased innovation
among domestic companies.

Some economists, legal scholars and entrepreneurs argue that patent
protection should also be applied more sparingly in industries like
computer technology where innovation is already taking place at a
rapid rate. They point to the growth in a method of software
development known as open source, in which programmers do not patent
or copyright their work, as proof that innovation can occur without
intellectual property protection.

"Patents are regulating a broader range of innovative activity than
ever before," said Lawrence Lessig, a Stanford University law
professor and author of a book, "The Future of Ideas" (Random House,
2001), that emphasized the importance of a healthy public domain to
fuel innovation. "I believe we should be extremely skeptical about
extending government-backed monopoly in the context of the Internet
before we find out if it's doing any good."

At a hearing of the House Judiciary Committee earlier this year,
Andrew Steinberg, vice president of the Internet travel site
Travelocity.com (news/quote), said a flood of patents on business
practices was discouraging innovation in his industry and wasting
resources on legal fees that ought to be spent on developing products.

Travelocity had to pay to use Priceline's system for selling
name-your-own-price airline tickets over the Internet, for instance,
even though, Mr. Steinberg says, the basic reverse-auction concept is
not new. By contrast, since the concept of holding traditional
auctions online was not patented, he said, eBay (news/quote), Yahoo
(news/quote), Amazon (news/quote) and others have been free to
innovate and compete in that business.

"We believe the proliferation of these patents is a serious threat to
the growth of electronic commerce," Mr. Steinberg said. "No prudent
business would allow its competitors to patent key business processes
without attempting to obtain some patents of their own. And so we, and
virtually every other large Internet company, must accept the law as
it is and aggressively attempt to obtain patents wherever we can."

But Jay Walker, the founder of Priceline, said he could not have
started the company without being able to assure investors that
airlines would not be free to copy his idea.

"Strong property rights fairly applied build assets for society," Mr.
Walker said. "Lack of property creates uncertainty, destroys
investment and ultimately is worse for society. The only people who
really dislike intellectual property are the people who don't have
any."

That may well be true. Mr. Steinberg's testimony contained strong
echoes of a public hearing in 1994, when patents on computer software
were just beginning to be issued in large numbers. Then, most of the
executives who testified at patent office hearings argued for limiting
such patents, saying that novelty in the software business was
fleeting at best. Now, most of their companies have large patent
portfolios, and many bring in annual revenue.

"Companies found that software patents were very easy to get in very
broad terms," said Matthew Powers, a managing partner at Weil, Gotshal
& Manges, a law firm whose 20 or so software industry clients have all
been involved in patent litigation in the last year. "The inherent
power of a patent - the power to force someone to stop selling a
product - is so much greater than any other form of protection. They
started embracing patents with every arm they could find."

Rather than share patents, leading companies in the semiconductor
industry today swap and shuffle licenses in what is widely viewed as a
way to keep others out. Although large concerns like AT&T
(news/quote), I.B.M. (news/quote) and Texas Instruments (news/quote)
have long held large portfolios of patents for trading purposes, other
semiconductor manufacturers have radically expanded their portfolios
since the 1980's, largely for defensive purposes. For example, LSI
Logic (news/quote), a chip maker in Milpitas, Calif., increased the
size of its portfolio from 7 American patents in 1986 to more than
1,000 by last year, an increase that far outpaced its spending on
research and development, according to a recent study in the RAND
Journal of Economics.

"The main reason they've been patenting like crazy is either because
they lost a lawsuit or they want to prevent one," said Rosemarie
Ziedonis, an assistant professor at the Wharton School of the
University of Pennsylvania who helped write the study. "That's not the
same thing as saying, `I spend more money developing innovative
technologies because of patents.' "

Even some industry executives say the frenzy of cross-licensing may be
anticompetitive. "Pretty soon, if it continues, you'll find that
everyone's going to have rights to everyone else's technology, so
there's not going to be any competition," said Julie Mar-Spinola,
chief litigation and intellectual property counsel for the Atmel
Corporation (news/quote), a semiconductor maker in San Jose, Calif.

That may not sound much like Abraham Lincoln's famous description of
the patent system "adding the fuel of interest to the fire of genius."
Critics argue that the patent office, established in 1790, is tailored
to the needs of industries whose products require years of work and
large capital investment - manufacturing in the 19th and 20th
centuries, for instance, or the pharmaceutical industry today.

Indeed, drug makers justify their large profit margins on patented
medications by pointing to the billions they invest each year in
research and development, often in pursuit of drug targets that do not
pan out. But even pharmaceutical giants, facing the specter of
thousands of gene patents owned by universities and biotechnology
companies, are now raising questions about the effectiveness of the
system.

"If people have put effort into patentable material, they should
expect a return," said Dr. William Koster, a former senior executive
at Bristol- Myers Squibb. But what sort of return, and under what
conditions? "What is intellectual property worth?" asked Dr. Koster,
who recently left Bristol-Myers to become chief executive of a
biotechnology company. "It's a debate, and its outcome is very
significant."

Thomas Jefferson, who served as the nation's first patent examiner,
wrote that the exclusive right to ideas is "given not of natural
right, but for the benefit of society." The deliberate bargain is
enshrined in Article 1 of the Constitution, which authorizes Congress
to issue patents and copyrights "for limited times" in order to
"promote the progress of science and the useful arts." Patents
originally covered only inventions that could be demonstrated with
working mechanical models. Copyrights could be held for only 28 years,
and the law governing them evolved to allow for some public uses of
copyrighted material without the owner's permission.

Now, many legal scholars argue that major patent and copyright owners
are trying to stretch their qualified grants into a more absolute form
of control. The relatively new use of the term "intellectual
property," they say, has skewed the original legal and cultural
meaning of patents and copyrights.

Thinking of ideas as property creates "a very powerful metaphor that
tips the scales in the direction of the person asserting their
property rights have been violated," said Pam Samuelson, co-director
of the Center for Law and Technology at the University of California
at Berkeley. "When you're talking about real property you're not
talking about people's ability to express themselves in a democratic
society."

Some members of Congress want to shift the balance. Representative
Rick Boucher, Democrat of Virginia, and Representative Howard Berman,
Democrat of California, have introduced legislation that would
establish higher standards for issuing patents on the rapidly growing
category of business methods.

Mr. Boucher, the most outspoken critic of expanded intellectual
property rights on Capitol Hill, also said he planned to propose
softening the terms of the Digital Millennium Copyright Act. "There
has been an overreach at the expense of information users that needs
to be corrected," he said.

But even as there are signs of a backlash against intellectual
property expansion, from the coalition of developing nations making
their case in Qatar to the scientists who are starting their own
online repository for the free distribution of peer- reviewed
articles, companies are striving harder than ever to lock up their
valuable intellectual assets.

Consulting companies like InteCap Inc., which helps corporations
develop intellectual property strategies, are in high demand. And
entertainment companies are hiring technology firms to track people
who are illegally trading copyrighted music and movies over the
Internet.

Other companies are seeking to make money on the complaints that
patents, by their volume and breadth, are stifling competition.
Bountyquest, based in Boston, lets a customer offer a reward on its
Web site in exchange for proof that an invention was publicly
available before a patent was issued. Such information can be used to
invalidate a patent in court. Several bounty hunters have collected as
much as $10,000 since Bountyquest was started last year; the company
has collected its commissions in turn.

IP.com, in Rochester, offers "defensive disclosure." For $109,
inventors can publish on the company's Web site material they choose
not to patent - making it ineligible for patenting by anyone else.

"As we enter this patent race, and there's really no other name for
it," the IP.com chief executive, Tom Colson, said, "you need a way to
protect your freedom to practice innovation without patenting yourself
out of business."