State patents vs US patents: could addition by subtraction be the best bet for dissatisfied US inventors?

While this Kat was trying to understand why EU law scholars are generally adverse to constitutional law (as the on-going process of accession of the EU to the ECHR clearly demonstrates...), his attention was caught by a lonely RSS feed, entitled 'Dissenting State Patent Regimes'. Having a passion for the word 'dissenting' (and 'dissenting opinion' in particular - a fascinating device for an Italian lawyer), he immediately proceeded to SSRN and discovered an original, well-thought paper by Dr. Camilla Alexandra Hrdy. In her article, Hrdy devotes her attention to inventors that are dissatisfied with the current US patent system, either due to ideological reasons, or because they believe 'that information should be shared more freely than it presently is'. She points to a surprising solution, which would ultimately allow these inventors to stimulate a reform of the current US patent system. The abstract clarifies the key idea:

Inventors who believe in open innovation should start applying for state patents instead of U.S. patents. Patenting at the state level prevents rivals from obtaining U.S. patents and generates valuable innovation spillovers in other states where the patent has no legal effect. It also creates a unique opportunity to force patent law reform from the bottom up. In exchange for filing fees, inventors can demand patents based on rules that support open innovation, like shorter terms in fast-moving industries, stricter disclosure requirements, or new restrictions on patenting by non-practicing entities. The lobbyists who stymie reform at the national level will have a much harder time blocking reform in all fifty states. Meanwhile, patent law’s dissenters need only one state to start granting patents in order to get courts, the media, and eventually Congress to pay attention.

The paper identifies several issues that plague the current system (patents thickets, grindlock, patent assertion entities and inadequate disclosures), and examines how 'open innovation communities' (e.g. open source and Creative Commons communities) could restrict their patent rights, without opting out of the patent system. The example found in the article refers to a hypothetical nanotechnologist based in New York, who invented a new technique for isolating a nanomaterial with potential medical uses. The nanotechnologist, who 'worked hard on her invention for many years and is reluctant to give up any ownership stake in it', disagrees with the US patent law's policy of allowing federally funded researchers to obtain private ownership of their work, and 'believes patents generally frustrate research in her field'. However, she needs to fund her research and knows that, in order to attract grants, the research should be patented and ready to generate licensing fees.

The author observes that several studies, in relation to a similar case, suggested using partial or self-limited patents as a plausible solution, focused on defensive use and full disclosure of research results (see Parchomovsky and Mattioli here, Schultz and Urban here), but argues that state patents could provide an even better solution. Hrdy explains that state patents could (1) prevent rivals from obtaining patents, (2) generate valuable 'innovation spillovers' for innovators and competitors, and (3) provide inventors with exclusive right to their invention in a single state. She notes that the federal preemption doctrine (see Article I, § 8, cl. 8. of the US Constitution - which is commonly interpreted as prohibiting state patents which 'might become a significant competitor to federal patent laws, offering investors similar protection without the quid pro quo of substantial creative effort required by the federal statute') would not apply to state patents '[granted] on precisely the same terms and conditions as Congress, or state patents that utilize higher standards of patentability or that reduce the level of protection that US patents afford'.

What would happen if a dissatisfied inventor chose a state patent, rather than a US patent? According to the article, two positive consequences would take the stage. First, innovation spillovers: full disclosure and a limited right of exclusivity would allow inventors to internalize some of the benefits of their inventions, while eliminating any restriction on copying or using the invention outside the state (thus 'permitting problem solving and decision making by other minds to proceed without restrictions'). Second, state patents would stimulate a reform of patent law, centered upon the values of open innovation and free sharing of information. Hrdy describes in depth how state patents could address some of the critical issues of the current patent law system [emphasis added]:

[T]o reduce the number of unnecessary patents and the deadweight loss that occurs when a patent is granted for an invention that would have been developed anyway, states could supplement (though probably not replace) the federal standard for “nonobviousness” with a more refined analysis that asks whether the invention would have been discovered and disclosed, or as rapidly, without the incentive of a patent.

States could also tailor patent terms to specific industries and technologies—for instance, offering shorter terms in fast-moving industries where the cost of invention is low, as Judge Richard Posner suggests.

To tackle the problem of PAEs (so-called "patent trolls"), states could reinstitute the local working requirements that characterized historic state and colonial patents.

To address the distinct issue of "patent thickets" - where licensing requirements create prohibitive transaction costs for researchers in fields with many disperse patent rights - states could create efficient online compulsory licensing systems.

Finally, to promote information sharing, states could institute better disclosure requirements to ensure that patent disclosures are actually useful to future researchers.

The author clarifies that the state patents' limited jurisdiction (coupled with the state legislators' accountability to voters and judicial review) would severely reduce the risk of a distorted development or use of the system, countering the risks that intergovernmental competition could lead to a race to the bottom, to attract potential patentees. This Kat is not entirely persuaded by this conclusion, but he believes that Dr. Hrdy's proposal could spring a useful debate. Could addition by subtraction be the right way to foster research and protect innovation? If not, which are the changes that could improve the efficiency of the current patent law system, addressing the key issues highlighted by the author of the paper? The IPKat is eager to hear his readers' opinions.