Sunday, October 22, 2006

The absurdity of patent law

Last week, the Patent office granted a patent to a firm called Parago. Hardly newsworthy- patents are granted hundreds of times a week. This patent, however, ought to infuriate everyone.

Manufacturers and service providers offer rebates as a financial incentive to increase sales. Rebates offer cash back to consumers who fulfill a set of requirements after purchasing a product bearing a rebate. By requiring post-purchase activities, the rebate offerer attempts to reduce the number of successful rebate claimants. Breakage occurs when a product bearing a rebate is sold, but the rebate is not successfully claimed.... Thus, manufacturers establish procedures to maintain a sufficient rate of breakage....

Consumers, in contrast, desire the quickest and easiest process for receiving their rebates. This creates a tension between the manufacturer's desire to maintain consumer satisfaction and the need to sustain a sufficient level of breakage in rebate programs.

In other words, Parago has developed a better system to get people to screw up, thus denying the rebate. That may be offensive and bad business sense for Parago's clients- according to one blog, their big account is Circuit City- but that is not the truly offensive part.

What bothers me is that this was patentable at all.

Reading the patent in depth, it would appear that the real "invention" amounts to a web interface for rebate processing- all the same stupid steps (receipts, account numbers, proof of purchase, etc.) done on the web. Any remotely web savvy person could have developed their site, same as all the other businesses that have adopted the internet.

The problem is twofold. In patent law, the burden to prove patentability is not on the inventor- it is on the patent agent, a disinterested government employee charged with determining the two criteria, novelty ("Is this invention really new?") and non-obviousness ("Is this invention really just the next logical step after all the other steps have been added up?").

Here is where things get really screwed up. The current state of the law requires a prior "teaching, suggestion, or motivation" that the agent can point to before the patent will be denied. In other words, even though it is completely obvious that you can process rebates online, it is not legally obvious unless someone, somewhere, wrote an article about it.

Fortunately, all this could change soon. The issue will be argued this November at the Supreme Court, and hopefully they will do the right thing. As the EFF argued in its amicus brief, this test threatens open source software development, because "holders of bogus obvious patents, assisted by the Federal Circuit’s improper test, may limit that growth by destroying the alternative economic incentives upon which [open source software] companies rely."

Think of it like this- the more obvious the idea, the less likely someone is to write about it. While it may seem like a no-brainer that an engine could be installed on a carriage, George B. Selden, who had neither built an engine nor a carriage, would not be remembered as the first patent troll but as the inventor of the car- because nobody wrote about it.