A Renaissance legacy

Proto-patents
During the Renaissance, the notion of “proto”-patents was developed. Entrepreneurs were encouraged to produce a certain commodity and, in exchange for making it, they were given exclusive rights to continue making the commodity by having competition excluded within a certain geographic area or time period.

For example, if a government knew that a hill contained a valuable ore, it would say to an individual, “If you spend the money to build a mine in this hill to extract the ore, we will give you the exclusive right to extract ore from the hill for a certain number of years.” Under this arrangement, other people would not be allowed to compete by building another nearby mine.Similarly, a town might have said to an individual, “If you undertake the expense of building a mill at this location on this waterway, we will prohibit others from making a competing mill near you for a certain length of waterway.”

This type of right was not a “patent” in the modern sense because it does not deal with technical inventions, but these notions were the beginning of exclusive “patent” rights in the economic sense. These rights assured individuals that their investment was protected.

Analogous rights were later granted to weavers. Weavers who created a new design could be given exclusive rights to that design. So let us say that you were the first person who created the “paisley” design. You then would have been given the exclusive right to make the paisley pattern for a certain period. Patents developed logically from these proto-patents.

Economic definition
Economically speaking, a patent is the granting of an exclusive right to encourage development. Companies and individuals have limited resources and must decide whether to use them for R&D of new products or for satisfying the demands of current consumption.How does a company decide how to allocate resources? The patent scheme is an incentive to shift those resources toward the quest for new products and new technologies. Companies know that a patent can protect their inventions and, hence, their investment.

The pharmaceutical industry is a good example of how patents protect investment. It may take $200–400 million to bring a new pharmaceutical product to market. Patents provide a pharmaceutical company with exclusive rights for its product for a period of time. A company would not invest millions of dollars in making a new product when someone who did not invest the same money could produce the same product using their research. Because of patent protection, producing new pharmaceuticals is the driving force of the industry.

Patent evolution
After the proto-patent time, artisan guilds, or unions of artisans, grew in power, primarily in the Italian city states. To be a member of a guild, you had to follow its rules. A guild member had to treat fellow members in certain ways, and rules evolved to protect members who came up with innovations. For example, protection was provided for new designs and patterns, and all guild members had to recognize and respect that protection.

Next came the first formal patent system. Historians disagree about when modern history started: Some believe it began with the fall of Constantinople in 1452, whereas others believe it started when Columbus discovered America in 1492. Personally, I think that modern history started in 1476—smack in the middle of those two dates—when Venice started the first formal patent system in the world.

Some of the concepts in the Venetian system are still used in most patent systems. For example, the Venetian system had some of the same remedies as the U.S. system.Under the Venetian system, infringing devices were destroyed, which is basically the same as a permanent injunction received today after a successful patent litigation. The Venetian and U.S. systems require monetary damages as penalties for patent infringement, although Venice’s penalties were fixed at 100 ducats, which is much less than today’s penalties.

The Venetian scheme spread across the European continent and into England. Although inventions were patentable in England, England passed a law called the Statute of Monopolies, which, unfortunately, allowed the English patent system to be abused. Besides protecting new inventions, the royalty provided “patents”, or exclusive rights, for common products.For example, if you were a military leader who had won an important battle for the British crown, the royalty might give you a patent on, say, playing cards. So, for a certain period, you would have a monopoly on selling playing cards and would made a great deal of money.

Despite the abuses, which hindered the freedom to innovate, the benefit of patent systems could not be denied because they did help to advance scientific innovations.

The American system
The patent scheme spread to America. Thomas Jefferson, in Federalist Paper no. 43, said, “The utility of the patent power will scarcely be denied.” He wrote that although the Founding Fathers disdained the temporary monopolies and abuses in England, in fact we needed a patent system. Therefore, the Patent Clause appears on the first page of the U.S. Constitution, in Article I, Section 8, Clause 8 (even before the judicial and executive branches are established). This clause also includes the Copyright Clause. The Patent Clause states, “Congress shall have power ‘To promote the progress of science and useful arts by securing for a limited time to authors and inventors the exclusive right to their respective writings and discoveries.’”

President George Washington, in his first inaugural address, said that one of the first business items that the new Congress should undertake was to implement the Constitutional provision of a patent statute. To do so, Congress had to choose between two paradigms for a patent system: the registration system and the examination system.

Patent paradigms
The registration paradigm describes a system in which a patent is automatically granted when a description and fee are sent to the government. The technical merits of the patent are left for the courts to decide when the patent is challenged.

The examination paradigm describes the current U.S. system, in which a patent is applied for and a patent office examines the application to determine whether it is worthy of a patent. In the current U.S. system, patent examiners at the U.S. Patent and Trademark Office read the application and examine it against a set of statutory requirements for worthiness. However, the United States has not always had this system (see Table 1 below).

In our patent history, patentability standardsthathave been specific to a certain technology have not worked; industry-specific standards were adopted because of industry lobbyists, creating unfair favoritism. But now we have a patent law that is essentially blind to the type of technology that is being invented.

Conclusions
Every country in the world has a patent system of some sort. In recent history, only Communist countries did not have patent systems because all developments were owned by the state.In the United States, patent law has been a rich part of our history, starting with Thomas Jefferson, George Washington, and the Patent Act of 1790.