A solution to the abuse of obvious patents

One aspect of patent law reform focuses on the issue that many patents are issued for techniques that are not novel or non-obvious, or for which prior art exists, or the patent is non-specific enough to be more like patenting an idea than a process. Patents are thrown out by the courts on a regular basis.

The problem is that the patent must be thrown out in court once issued, necessitating that the target of a patent lawsuit spends his own money in a gamble to try to convince the court that the patent is invalid. This is compounded by the fact that the USPTO examiner has no interest in closely examining patents to ensure that they are actually valid, because USPTO is paid the same fee whether the patent is valid or not.

So we have the current morass where a bunch of dubious patents are thrown at the USPTO, some of which “stick” and are granted, and then the grantee immediately embarks on a litigation strategy to extract as much money as possible through licensing before one day they pick the wrong fight and the patent is invalidated. Unfortunately, the companies who chose to “pay the piper” instead of fighting just threw their money down a hole.


Patent royalties should, by law, be secured in some form so that they may be returned to the licensee if the licensor’s patent is invalidated at any later point.

How it works

This could be accomplished by placing royalties in escrow and only allowing the licensor to access the interest until the end of the patent period. This would not work for companies who depend on license income to sustain their R&D budget.

Alternatively, the licensor should be allowed to purchase patent invalidation insurance from a private party who then possesses bonds covering the sum total of royalties paid out. If the patent is invalidated, the insurance company pays back the licensees and terminates the policy.

Private insurance patent examiners, unlike the USPTO, have a fiscal stake in the validity of the patent. They will exhaustively examine prior art, isolate the novel and non-obvious components of the patent, and ensure that the patent is specific enough to meet the demands of case law. The weaker the patent, the more expensive the insurance will be. The company then has to choose between paying a higher premium or cleaning up their patents.

This idea would be a win for technology firms who can be assured that if another company comes knocking for royalties on an iffy patent, that even if today they make the choice to license, the patent fees will be returned to them later if the patent turns out to be worthless. Several companies in the same industry could even pool their resources to attempt to get patents overturned that they all share a stake in. The more these companies have paid out in royalties, the more desperately they will work to build a case against the patent, and if it is overturned, everybody wins except the former holder of an abusive patent.

This idea is the free market at its best attempting to minimize the harms of the patent monopoly while allowing all of its fruits to continue unabated.

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