Trade Mark Law: A Practical Anatomy Book

Bessen and Meurer argue that the popular portrayal of the patent system as an efficient and effective mechanism for encouraging R&D is generally inaccurate. In contrast with tangible property, today's intellectual property system is fraught with ambiguity and fragmentation that lead to increased litigation and clearance costs, stifling innovation. The final chapters offer several suggestions for reform and areas that merit increased investigation.

The book opens with a remarkably succinct outline explaining the deficiencies of the patent system. Following this introduction, intellectual property is compared and contrasted with other forms of tangible property. Here, the authors note features that either enable property rights to function efficiently or inefficiently. The patent system is plagued with uncertain rights, unreliable enforcement, substantial informational and clearance costs, and the difficulty of setting rules for technology that changes rapidly.

Perhaps the most noteworthy complication with intellectual property is that it lacks clear boundaries. Claim construction can be ambiguous and unpredictable (and occasionally over-reaching). Inventors can "hide" claims for years, and due to the flood of patents in today's market, clearance can become prohibitively expensive in both time and money.

Next, the book examines empirical evidence to examine the extent to which the patent system provides incentive (or disincentive) for innovation. Historical evidence, cross-country studies, and natural economic experiments, and estimates of patent value do not support the notion that strong patent rights lead to marked increases in innovation.

Next, the costs of patent disputes are analyzed. Since the 1990's, the costs of litigation have increased. For most public firms (excluding chemical and pharmaceutical firms) the cost of litigation exceeds the profits derived from patents. In these situations, patents impose a net tax on innovation and R&D. Small firms do better than large public firms, but the benefits are small. Nevertheless, the chemical and pharmaceutical industries derive significant value from patents. In this realm, IP seems to function rather well.

The authors then attempt to examine numerous parameters that might explain the increase in litigation, concluding that failure to provide adequate notice is most significant.

One chapter is devoted to software patents. Fuzzy boundaries complicate the IP landscape and create significant uncertainty.

The following are some suggestions/areas for further investigation suggested by the authors. They note, however, that crafting an effective policy is quite difficult and complicated. Hence, these should be considered as ideas for further consideration:

1) Examine other methods (non-patent) to increase R&D and innovation (e.g., rewards, subsidies, procurement)
2) Post-grant administrative procedure for third parties to challenge patent validity
3) Courts should defer to PTO for claim interpretations
4) Institute multiple appellate courts for patent cases (facilitate inter-circuit competition)
5) Demand a more strict interpretation of "enablement" to improve notice
6) Prohibit claims that could be interpreted in more than one way
7) PTO could issue infringement opinion letters which would be given significant weight in the court system
8) Restrict claim revision
9) Restrict patentability (prohibit business methods or maybe even software)
10) Increase patent fees
11) Stronger non-obvious standard
12) Lessen penalties to "good-faith infringers"/independent inventors

The book concludes with a "glance forward" and notes that several of the most important IP players (pharmaceutical industry and patent lawyers) have little incentive to support patent reform.

I really liked the book and found the evidence that patent reform is needed to be compelling. Given the provocative title (probably recommended by the publishers), the book's even-handed tone came as a welcome surprise.