The Economist has a good write-up of the sorry state of the patent system and the Supreme Court’s impending Bilski decision:
Another field where patenting is pursued aggressively is semiconductors. But it is done there not so much to make money, nor even to bar others from using the acquired know-how. Its main purpose is for negotiating cross-licensing deals with competitors. Of necessity, inventions in chipmaking rely on lots of existing technology, which is itself covered by hundreds of patents held by numerous other firms. Without a large portfolio of patents to trade beforehand, semiconductor firms developing incrementally improved products (next-generation microprocessors and memory chips, for instance) would run into litigation and injunctions at every turn.
Pursuing patents aggressively for cross-licensing agreements has little to do with encouraging innovation, though. Indeed, by increasing transaction costs, such deals are in effect a tax on innovation. By the same token, how much of a contribution have the 12,000 or so business processes patented annually in America (but few places elsewhere) made to innovation? Precious little, by all accounts. It is hard enough to find evidence (outside the pharmaceutical and biotech industries) showing that the patent system generally spurs innovation. It is harder still to find justification for business-process patents.
What is clear is that the “non-obviousness” part of the test for patentability has not been applied anywhere near rigorously enough to internet and business-process patents. Because they lack a history of “prior art” to refer to, examiners and judges have granted a lot of shoddy patents for software and business processes.
One place the Economist errs is here:
It is not simply a failure of the United States Patent and Trademark Office (USPTO) to scrutinise applications more rigorously. The Federal Circuit (America’s centralised court of appeal, established in 1982 to hear, among numerous other things, patent disputes) has been responsible for a number of bizarre rulings. Because of its diverse responsibilities, the Federal Circuit—unlike its counterparts in Europe and Japan—has never really acquired adequate expertise in patent jurisprudence.
The reality is close to the opposite: patents dominate the Federal Circuit’s docket, and as a consequence the court tends to strongly reflect the pro-patent views of the patent bar. I’ve argued before that we’d get better results if patent appeals were handled by the regular appeals system, with its 11 circuit courts.