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One of Alex Tabarrok’s recipies for the innovation renaissance is patent reform. Felix Salmon has an excellent example of how harmful current legislation is.

RIM had discovered prior art for all of the patents that NTP was suing over — but that didn’t really help them at all. The problem was that the patents had already been awarded to NTP, which meant that NTP was within its rights to sue RIM for as long as it held those patents. Once RIM found out what NTP was up to, it could and did challenge the patents at the U.S. Patent Office, which has a procedure for such things. But the U.S. Patent Office is an entirely separate entity from the U.S. District Court, where judge James Spencer made it very clear that his job was to rule only on whether RIM was violating NTP’s patents, and not on whether NTP’s patents were properly granted. Had RIM not settled the case, the court could and probably would have shut down the entire BlackBerry service.

Even if law suits are based on bogus patents, it may still be better for the victim to settle. Surely, it’s difficult to argue that this protects innovation.

While reform is needed, there is a lot to improve on regarding the implementation of current law. To be efficient, patent offices need to both work quickly and have sufficient knowledge to avoid awarding patents to what is really prior art. Those two goals conflict, and it’s not clear how the trade-off should be made. And reform itself is difficult, both because of the global nature of the problem, and because of regulatory capture. But until it can be achieved we will suffer from reduced growth and innovation.

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