There are two main ideas:
1. Company A requests a patent for the algorithm x * y = z, stating it as "a way to allow users to add one number a variable number of times"
2. The PTO releases this patent publicly as in the refutation stage, listing what it does but not how its done.
3. Concerned patent-watchers from rival firms, as well as concerned individuals and members of academia see this potential patent and realize its obviousness.
4. Company B, a competitor to Company A, quickly comes up with a solution to "a way to allow users to add one number a variable number of times" and submits a refutation within 1 month.
5. The PTO receives Company B's refutation, finds it valid, and denies Company A's patent. Both solutions are made public, and any substantially similar solution to the problem is declared obvious and unpatentable.
This allows fair patents to be tied to a competitive market. Companies would suffer from rivals registering bogus patents, and is thus motivated to refute them. Both a new obvious solution or an example of prior art would be an acceptable refutation, and would essentially the same thing as far as a reviewer is concerned.
Problems with this: increased load on the PTO - For every attempted patent they receive, will they also receive 100 refutations? Well there need be only one valid refutation, so the PTO shouldn't need review many refutations for a truely bogus patent. As for patents where the obviousness is less clear, I assume there will be similarly less refutations. On the question of how do we pay for all these refutations reviews, I suggest a scheme where a invalid refutation is charged to the refuter, and an unreviewed or valid one not charged. However this may decrease the motivation to file a refutation, especially for an individual who cannot afford paying a fee if he fails to convince the PTO . You could increase funding for the PTO but that's never palatable. Although, one might hope that the neccessary increase in funding would be minimum because companies would very quickly realize it a waste of time to bother with obvious patents. Also, if you're concerned about funding for the valid refutations, you could charge a fee to the original patent-seeker for being refuted.
When does the refutation stage begin? - It should begin as soon as the request for the patent is made public, but I am not sure how this works. As far as I know, sometimes it is public on first request and sometimes it is not. I am hoping someone can clear this up for me. In any event, if it does not begin when the request of a patent is first made public, rivals obviously have longer than the obviousness timeframe to refute. But if it begins right away, refutations will be submitted that don't need to be as many bogus patents will be denied merely by the PTOs own inquiries.
Potential patent race conditions - Imagine 2 companies both racing to discover, say, the cure for cancer. Finally Company A discovers the cure and files a patent. Company B discovers the cure a week later. Company B then waits to the refutation stage, and says aha, that is obvious, as a refutation, here is a product that also cures cancer. Neither company gets the patent and both solutions become public. Now even if you had no knowledge of Company B's R&D department, you'd know they didn't cure cancer in a month. But how do we provide a way of knowing legally? Perhaps it is still in Company B's best interest to file their own patent after Company A's, because they do not know if Company A has actually found the cure. If so that would reduce the window for a race condition but may not eliminate it, and is hardly reliable. Perhaps the PTO would have the power to investigate and see you were working on it previously, but this goes beyond their scope. I'm not sure how to solve this problem.
Extended patent approval time - Could you delay a rival's patent approval simply by submitting many refutations? Perhaps no one entity could send more than one refutation. Perhaps refutations wouldn't delay, but refutations could retroactively apply? Now the PTO doesn't deal with infringement of copyright afaik, but this isn't exactly infringement...
Works best in competitive markets - Everything relies on having competitors checking your actions. A small market may not have this luxury.
My idea of basing obviousness on time it takes to invent comes from considering stories of patent discoveries. Many of them seem to have been some guy(s) tooling around and stumbling upon something, and realizing he could patent it and possibly make some money. This doesn't seem to be the spirit of patent law to me. It does not exist to make people rich; it exists to ensure the betterment of the society by motivating research and discovery. In these kind of unwitting discoveries, there was no way for you to be motivated in the first place! My view of inventions that need protecting are the ones which serious thought and research are put into, and there is some sort of intent of what to discover beforehand. This isn't quite consonant with the idea of obviousness as a function of time, but it is a start.