DO PATENTS help or hinder innovation? Instinctively, they would seem a blessing, especially for backroom tinkerers. Patenting an idea gives its inventor a 20-year monopoly to exploit the fruit of his labour in the marketplace, in exchange for publishing a full account of how the new product, process or material works for all and sundry to see. For the inventor, that may be a reasonable trade-off. For society, however, the loss of competition through the granting sole rights to an individual or organisation is justified only if it stimulates the economy and delivers goods that change people's lives for the better.

Invention, though, is not innovation. It may take a couple of enthusiasts working evenings and weekends for a year or two—not to mention tens of thousands of dollars of their savings—to get a pet idea to the patenting stage. But that is just the beginning. Innovations based on patented inventions or discoveries can take teams of researchers, engineers and marketing experts a decade or more, and tens of millions of dollars, to transfer to the marketplace. And for every bright idea that goes on to become a commercial winner, literally thousands fall by the wayside.

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Most economists would argue that, without a patent system, even fewer inventions would lead to successful innovations, and those that did would be kept secret for far longer in order to maximise returns. But what if patents actually discourage the combining and recombining of inventions to yield new products and processes—as has happened in biotechnology, genetics and other disciplines?

Or what about those ludicrous business-process patents, like Amazon.com's “one-click” patent or the “name-your-price” auction patent assigned to Priceline.com? Instead of stimulating innovation, such patents seem more about extracting “rents” from innocent bystanders going about their business. One thing has become clear since business-process patents took off in America during the 1990s: the quality of patents has deteriorated markedly. And with sloppier patenting standards, litigation has increased. The result is higher transaction costs all round.

It is not simply a failure of the United States Patent and Trademark Office (USPTO) to scrutinise applications more rigorously. The Federal Circuit (America's centralised court of appeal, established in 1982 to hear, among numerous other things, patent disputes) has been responsible for a number of bizarre rulings. Because of its diverse responsibilities, the Federal Circuit—unlike its counterparts in Europe and Japan—has never really acquired adequate expertise in patent jurisprudence.

To be eligible for a patent, an invention must not just be novel, but also useful and non-obvious. Anything that relies on natural phenomena, abstract ideas or the laws of nature does not qualify. The USPTO has taken to requiring a working prototype of anything that purportedly breaches the laws of physics. So, no more perpetual-motion machines, please.

If truth be told, few inventions are really worth patenting. Time and again, surveys show that in both America and Europe companies rate superior sales and service, lead time and secrecy as far more important than patents when it comes to profiting from innovation. And, although applying for patents is relatively cheap, the cost of maintaining them can be horrendous. If the idea behind a patent has any commercial merit, it will attract imitators—and the inventor must be prepared to defend it in the courts. In a majority of cases, the cost of litigation will far exceed any revenue the inventor may subsequently earn from royalties or licensing.

By and large, the inventions and discoveries worth patenting are those in the pharmaceutical and biotech fields, where the pay-off for blockbuster drugs can amount to billions of dollars a year. Also, because the vast majority of inventions in such areas depend on unique molecular architectures, patents for new products are easier to defend in the courts. A me-too drug that is believed to violate a firm's patent is either based on the same molecule or not.

Another field where patenting is pursued aggressively is semiconductors. But it is done there not so much to make money, nor even to bar others from using the acquired know-how. Its main purpose is for negotiating cross-licensing deals with competitors. Of necessity, inventions in chipmaking rely on lots of existing technology, which is itself covered by hundreds of patents held by numerous other firms. Without a large portfolio of patents to trade beforehand, semiconductor firms developing incrementally improved products (next-generation microprocessors and memory chips, for instance) would run into litigation and injunctions at every turn.

Pursuing patents aggressively for cross-licensing agreements has little to do with encouraging innovation, though. Indeed, by increasing transaction costs, such deals are in effect a tax on innovation. By the same token, how much of a contribution have the 12,000 or so business processes patented annually in America (but few places elsewhere) made to innovation? Precious little, by all accounts. It is hard enough to find evidence (outside the pharmaceutical and biotech industries) showing that the patent system generally spurs innovation. It is harder still to find justification for business-process patents.

What is clear is that the “non-obviousness” part of the test for patentability has not been applied anywhere near rigorously enough to internet and business-process patents. Because they lack a history of “prior art” to refer to, examiners and judges have granted a lot of shoddy patents for software and business processes.

Mercifully, that is beginning to change. America's Supreme Court is about to issue a ruling which, by all accounts, will make it difficult, if not impossible, to get a patent for a business process. And because most business processes are, at bottom, computer algorithms, the Supreme Court's judgment could also bar all sorts of software patents in the process. As a result, a lot of patents for online shopping, medical-diagnostic tests and procedures for executing trades on Wall Street could be invalidated.

The roots of the dispute go back more than a decade to two inventors, Bernard Bilski and Rand Warsaw, who sought to patent a method of hedging weather-related risks in energy prices. The USPTO concluded that the process was too abstract and denied the application. On appeal, the Federal Circuit actually upheld the patent office's decision—and said, crucially, that the process would be eligible for a patent only if it was “tied to a particular machine or apparatus” or if it “transformed a particular article into a different state or thing”. Failing on both counts, the inventors took their case to the Supreme Court, which has been pondering for the past few months whether the “machine-or-transformation” test is an appropriate standard. It is hard to conclude it is not.

An end to frivolous patents for business processes will be a blessing to online commerce. Meanwhile, the loss of patent protection for software could make programmers realise at last that they have more in common with authors, artists, publishers and musicians than they ever had with molecular architects and chip designers. In short, they produce expressions of ideas that are eminently copyrightable.

That could be good news for innovation. After all, who in his right mind would seek a lousy old patent offering a mere 20 years of protection when copyright can provide monopoly rights for up to 70 years after the author's death? That one fact alone could spur more innovation than all the tinkering attempted so far.