Instead, our PB and J-friendly patent system costs companies and individuals billions of dollars and millions of man-hours annually to obtain patents and fight frivolous lawsuits. More often than not, patent holders win in court, despite problematic claims stated in their patents. In recent years, as many as two-thirds of patent holders have succeeded in litigation at the federal district court level, compared with an average success rate of 32 percent in the decades before the congressional reforms took hold [see graph, "U.S. Patents Found Valid and Infringed"].

In other cases—as in the Smucker's suit—the two parties ultimately settle the dispute. Many times, a small company like Albie's concludes it is just too difficult and risky to dispute a patent and agrees either to pay for a license or to stop producing the offending technology. The cost of litigation is also a factor. A recent survey suggests that the median cost of litigating a major patent case today is about US $4 million.

These facts have led observers such as the U.S. Federal Trade Commission and the National Academy of Sciences (NAS)—both of which have released major studies of the patent system in the past year—to conclude that the U.S. patent system has significant problems.

As the NAS bluntly stated in its report: "[I]t is clear that both economic and legal changes are putting new strains on the system. Patents are being more actively sought and vigorously enforced. The sheer volume of applications to the U.S. Patent and Trademark Office—more than 300 000 a year—threatens to overwhelm the patent examination corps, degrading the quality of their work or creating a huge backlog of pending cases, or both. The costs of acquiring patents, promoting or securing licenses to patented technology, and defending against infringement allegations in court are rising rapidly."

To stop this waste and to inject some sanity back into the process, we must create a more rational patent system. Our patent policy reform agenda rests on three related proposals.

First, create incentives and opportunities for parties to challenge the novelty and nonobviousness of an invention before the PTO grants a patent.

Second, provide multiple levels of application review, with examiners devoting successively more time and effort as an application proceeds to higher levels. The goal would be to avoid wasting money to meticulously examine unimportant patents, while taking sufficient care to avoid mistakes where the stakes are high.

Finally, in cases involving claims of patent invalidity based on the existence of prior art—that is, previously issued patents or public disclosures covering the invention at issue—replace juries with judges who could call on experts, called special masters, for guidance. The change would give parties threatened by invalid patents a better opportunity to make their cases to the court.