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Internet Society Panel on Business Method Patents
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Larry Lessig: So, I'm a lawyer with a guilty conscience. I don't make a lot of money, but that's the kind of lawyer I am. I want to start with a story and then a little bit of an explanation of the guilty conscience. There's a movement called the Law and Economics Movement that was born at the University of Chicago in the early 1950s. It was borne when the dean of the Chicago Law School, Edward Levy, who would go on to be attorney general under President Ford, asked an economist from the University of Chicago Economics Department, Aaron Director, to attend his antitrust law class. And so four days a week Levy would teach the class of antitrust in the way lawyers thought about antitrust and on the fifth day, Director would get up every week and show the class, and show Levy, using economics, why everything Levy had said was wrong. And by the end of the year Levy was convinced and a revolution was born.

Now, in that class there was a man named Robert Bork, who went away from the University of Chicago and wrote a book called the Antitrust Paradox, which was published about 22 years later and in that book, he bemoaned the fact that, though at the University of Chicago they had figured this out 22 years before, the Supreme Court had not yet got it. But, Bork's book was extraordinarily successful and when he wrote the second edition, he had to very sheepishly say in the beginning of the book "I know this book says the Supreme Court didn't get it, but they've gotten it and the Law of Antitrust has been radically redone because it finally faced up to a fundamental fact that antitrust was about economics." Now, that was some 35 years after this insight was made and for 35 years lawyers did their damage to the economy by racing around talking lawyer-speak when what they needed to be speaking was economics-speak and because they had an arrogance about the way they think about the world that said, "I have my categories given to me by the framing, the founding fathers, about the way to look at the world and I'm applying them and don't bother me with economic reality." But when that was crushed - that arrogance - antitrust changed.

I share very much Tim's attitude about this question of patents. That attitude is: this is a pragmatic question and I translate pragmatic into economic question. The question is from an economic perspective, do patents do good. Now, you can't answer that question in yes or no for all kinds of innovation. Clearly, patents, for some kinds of innovation, do wildly good things for the economy. There's no doubt about that and so when Mr. Dickinson says there's been a history of patents contributing to innovations particularly for small developers, that's absolutely true. But economists have been saying for a very long time that the question is extraordinarily complicated as you change the field of endeavors.

As you move from one kind of field of development to another and, in particular, there's a growing and strong amount of economic research that says in a field like the Internet, where development is sequential and complementary, strong patent rights can actually do harm to innovation not benefit innovation. Now, my perspective on this debate is just this: There's a hard question out there that has to be answered. What is the good that this does? And, it ought to be answered before we roll out a mechanism, a lawyer's structure for regulating this in the way that patent law regulates it. It ought to be answered before we do that because once that system is rolled out it's extremely hard to roll it back.

Jay Walker will be in court claiming a taking under the Fifth Amendment of the Constitution if somebody comes along and says, well this idea was a bad one, we're going to revoke all these patents. So, we've got to be figuring this out now, but instead of figuring it out now, we're seeing the same debate occurring between lawyers and the rest of the world. We have our systems, we've been doing it for a 150 years, we've always been doing it just like this and we should continue to do it like this for the rest of time and I say bullshit. We ought to be examining in an economically serious way whether this makes sense and when you start from a world where we didn't have, regardless of whether you filed a patent in 1870 whatever about whatever, the fact is people who developed software in this world did not live by the rules of the patent office. They didn't live by that ethic. And, as we see this changing, and it is changing, we should be asking now, prove it to me that this will improve innovation. Prove it to me first and if you can't prove it to me then you haven't the justification for changing a system of innovation which has produced the Internet.

Vint: Now there's a challenge. Now I have vast quantities of questions here and they're all very good. Thank you for your participation in this, but I also wanted to give the panelists an opportunity to shoot at one another on the basis of their earlier remarks, so we'll take about 10 minutes at least to allow the panelists to raise issues with each other before I attack you with questions that have come from our participants in the audience. So, is there anyone who wishes to take the first blow.

Todd: I appreciate Professor Lessig's comments very much, particularly - I guess I'm a little envious - some days I wish I was a professor and only had to think about these things and not actually do the work. But, I got an office to run and I got 1,500 of these applications coming in this year and I got to figure out what to do with them. I don't have the luxury of stopping and waiting for five years while Congress debates whether they're going to change the law or not. With all due respect. We have, I think, made a good faith effort, through the recent initiative, to deal with a number of the very pragmatic, but also philosophical concerns that have been raised about - particularly some of the very thoughtful issues that Tim's raised - about how we gain access to prior art and I think that's a key question.

The courts are the body which are responsible for interpreting the statutes and applying the kind of juris prudential philosophical kinds of overlays that Professor Lessig was talking about and they've said very clearly - the Court of Appeals for the Federal Circuit to this point has said very clearly - that there is no exception under Section 101 for business methods and no member of Congress has introduced a bill changing the standard under Section 101 yet, so we do what we're told to do by Congress and the courts and hopefully we do the best job that we can.

Tim O'Reilly: Todd, can I jump in with something here? In Vint's introduction, he made the point that you have roles. One is, you are managing the patent office, but he also made the point that you are the Advisor to the Administration on Intellectual Property Issues and in that second capacity, it would seem to me that it would behoove you to say to the administration, there are some serious issues here, there are serious debates underway, shouldn't we be cautious? Because I think that's ultimately what Larry is saying.

Todd: I agree with that a 100 percent. This issue has been debated with the administration. I see members of this audience today who are participants in that debate and I think that where we have come down is the business method initiative that we've promulgated, but I didn't mean to single out that congressman who called me today, that occurs regularly. There are people on both sides of this issue that feel very passionately about it.

Tim O'Reilly: There is a taffy pull, no question about it.

Todd: As far as the policy device, we take that very seriously. I think the most learned paper at the moment is the one that Josh Learner from Harvard promulgated on this issue and he basically said that economists have thrown their hands up. Some say that patents impede innovation. Some say that it spurs innovation and there is no concurrence or consensus at least in his particular field as to that - I don't know of any study - I hate to disagree with Larry, but I'd love to see it - I don't know of any study that specifically says that patents are, on the Internet, are retarding the development of the Internet. I think the evidence to the contrary is how rapidly the Internet's grown over the last three or four years while we've been doing patents in this area.

Tim O'Reilly: I'm curious why we have a moratorium on Internet taxation but not a moratorium on Internet patents.

Vint: I'm sorry. Let's not go there. I realize it's a good question, but it is not on the point, so I am going to invoke privilege and say that that's another topic for the D.C. ISOC. We'll get Gov. Gilmore here to discuss that. OK, I have a bazillion questions - this is wonderful - we are not going to make it through all of them by 8:30. Let me tell you, some of you have submitted questions about trademark, copyright and so on. I'm going to rule those out for the moment so that we can stay on topic with respect to patent. And, one of the wonderful questions that came in is for Todd. It says, "Why is the language used in patent applications and PTO responses so arcane?"

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