Intellectual Property (IP) is at the forefront of the US economy and as such is enjoying unprecedented importance in our world. In a 2003 speech FRB Chairman Alan Greenspan noted that “This trend [of increasing conceptualization of the economy] has, of necessity, shifted the emphasis in asset valuation from physical property to intellectual property and to the legal rights that inhere in the latter”. Indeed, this sudden shift coincided with the Internet Boom, and as a result has grown so fast that it has outpaced the US Government; creating a condition not unlike the old west: a small set of poorly enforced laws resulting in large amounts of crime. Unlike the old west however, this patent war is largely invisible to the general public, leaving corporations to run amok in the market place. In addition, due to the technological orientation of the .com boom, patent law, rather than copyright and trademark law, is the fountainhead of this conceptual boom. This new frontier is, by virtue of its newness, pushing the limits of our legal and bureaucratic institutions.

Just as with any other revolution, the initial stages of the patent revolution have come at a high price. The laws currently in place have produced wild, nonsensical results, largely the result of an overburdened patent system. Due to the inadequacies of the US patent system examiners routinely approve patents which are either obvious (only the non-obvious may be patented), or for which prior art exists. The examples range from the ridiculous “A method of swing on a swing is disclosed, in which a user positioned on a standard swing suspended by two chains from a substantially horizontal tree branch induces side to side motion by pulling alternately on one chain and then the other” (patent 6,368,227 ) to the overly broad “automatic business and financial transaction-processing system” (patent 6,289,319) or the ludicrously ignorant of prior art “A self service terminal for dispensing voice and video information, printed documents, and goods; and for accepting service orders and payments therefore by currency or credit card” (patent RE32,115).

Our patent system is in crisis, and is not getting better. Even with today's passive ineffectual patent system, the time required to have a patent granted is projected to grow from 2 to 4 years by the end of the decade. The patent office's task is truly mammoth; in 2001 the patent office received 326,5081 patent applications, and granted 166,039 patents. Add to this the fact that there are currently 408,000 patents pending and that patent examiners are paid by the patent, and you have a recipe for disaster. While the patent office has raised fees this year, and hired hundreds of new examiners, the prospect of improvement of the patent process is still dim as the measures are only enough to slow the office's degradation.

One of the key structural problems with the US patent system is that the patent office cannot revoke a patent on its own once it has been approved. The only way for a patent to be revoked is for it to be tested in court. With the average cost against defending a patent in California at $1.5 million a frightening new form of business has emerged: business based on false patents. In an all too common case an individual or corporation will be granted a patent for some common technology currently in wide use a proceed to to enforce its patent.

Many of these malicious patents holding entities then follow tactics similar to those of San Diego based Pangeatic IP (PanIP). PanIP's staff consists only of a Mr. Lawrence B. Lockwood. Mr. Lockwood filed for, and received the aforementioned patent # 6,289,319 for an “automatic business and financial transaction-processing system”, a patent ridiculously broad in scope. He then began sending out letters to small business that had on line stores. The letters informed the businesses that they were infringing on his patents and could obtain a permanent license to use them for a one time variable fee (it varied defining on the size of the business). Faced with the option of either paying the one time fee (typically under $100,000, sometimes as low as a few thousand) or taking him to court, a multi million dollar endeavor, the businesses would inevitably cave in, and pay for a license, leaving Mr. Lockwood with a fair chunk of change.

A raft of these unmerited lawsuits has hit the court system clogging the wheels of justice. Slimy individuals like Mr. Lockwood aren't the only ones going patent wild. Corporations of all sizes have integrated patent strategy as a fundamental business necessity. Amazon is the most notorious corporation committing this offense, with its patent on one click ordering forcing all others to use multiple page confirmations on their websites. Small fries aren't the only targets of patent lawsuits either, with relative lightweight SCO taking IBM to court over alleged IP infringement on legacy Linux code.

The disturbing consequence of these cases is the impediment of innovation. While inventors and corporations must have a profit incentive, something which patents provide, that very benefit is voided if with every discovery massive amounts of royalties or court fees are sure to ensue. Invention builds off past discovery, and discovery's speed is quickly reduced via today's strong and haphazard patent law. Much like the old west Greenspan refers to, an economy with a set of arbitrarily enforced laws is an economy with a severe cap on its growth. Major corporations like IBM boast of the thousands of patents they are awarded each year, clearly IP strategy is both an offensive and defense game, where there is little reason to exercise discretion in the patent application process.

The patenting of obvious and unmerited processes is truly proving to be a problem. Like any unexplored frontier, the rise of the patent is sure to be fraught with missteps and error, but as such a low key and secret causes the people who are affected most, the populace, have a disadvantage in awareness and understanding. The evolution of the patent system will no doubt be an interesting, yet dangerous, frontier as we embark upon this radical economic transformation.

Andrew Cholakian is a student at Santa Monica College. If you want to know more about Andrew, you may visit him online at www.andrewvc.com