Are Patents Killing the Internet?

The headlines are ominous: "How Patent Attorneys are Stealing our Future," "Patently Absurd," "Software Patents Tangle the Web," "A Patently Obvious Threat to E-Commerce" and "Can Feds Keep Up with E-Patents?" An article in the widely read New York Times Magazine suggested that applying patents to "thoughts and ideas in cyberspace" is "a ridiculous phenomenon, and it could kill e-commerce." Yet another article suggested that "[g]reedy patent attorneys are in a frenzy," and "[i]f the trend continues, innovation could be halted." Some even say that today's IP lawyers will one day be seen as having hindered the Net by helping to recreate the barriers to creativity that the Net originally removed.

If these accounts were merely isolated ravings from the losing side of the old software patent wars, serious patent scholars might not be concerned. According to Professor Lawrence Lessig, however, the potential application of business method patents to cyberspace is limitless since every method of doing business in cyberspace by definition is instantiated in technology, rendering every cyberspace method subject to a patent in principle. Because of this, he predicts that cyberspace-related innovation will bottleneck, proceeding only as quickly as licenses can be consummated.

As evidenced by the recent federal legislation establishing prior user rights for methods of doing business, Congress is finally listening to these critics and may further restrict the ability of Internet inventors to protect their intellectual property. How would the patent bar like to have business methods statutorily removed from § 101 as a class of statutory subject matter? Figuring out the metes and bounds of the new prior user rights defense is going to be difficult enough, particularly in view of the apparently expansive definition of methods of doing or conducting business in the legislative history.

As noted in State Street Bank, even the Patent Office removed the business methods rejection from the Manual of Patent Examining Procedure because it was difficult to apply consistently. Accordingly, the Patent Office is also concerned about the recent developments, as evidenced by the recent promulgation of its Business Methods Patent Initiative, the aim of which is better partnership with industry and better quality through enhanced examiner training, new Examination Guidelines, better searching resources, and additional review levels. Although they cannot say it themselves, they obviously need more money, and keeping all the money they take in-as opposed to being forced to take part in the current tax on innovation resulting from Congressionally forced revenue diversion-would be a great start.

Some hope that the Patent Office's new measures and the establishment of the prior user defense will forestall the anti-patent forces from scaring Congress into making radically unhealthy changes to our patent system, a system that has worked just fine through previous economic and societal revolutions. Note that as more prior art is created through issued patents and made accessible to examiners, quality issues will subside since the patent quality problem is ultimately self-correcting, much like an adaptive algorithm. While some say "ideas" should not be protected, we should not forget that the idea/expression dichotomy in copyright law leaves patents as the fundamental legal method for protecting those higher levels of abstraction in cyberspace inspiration. Furthermore, as we all know, it is rare that a patent is really as broad as initially alleged.

Finally, the academics suggest that the Constitution does not provide for the advancement of "business" through patent protection. However, as Lessig himself pointed out, since business methods in cyberspace are instantiated in technology, a reduction in incentive to develop one will likely reduce the incentive to develop the other.