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Guest Post: Engine That Drives The US Economy

This story starts about 1982. At the time we were doing job shop work One of the Engines that drives the US economy is the US patent system. Any talk about changing it or doing away with it is stupid. The rewards that a patent can bring are a huge incentive to create. Without the US patent system, I would be near destitute. I have 28 patents I have had 5 licensing contracts. Some of these are world wide successes now.  Do a Google search for my  and get over 30,000,000 hits. Without US patent protection, I wouldn’t have had an incentive to create these inventions. Anyone who says the opposite is juvenile-stupid or worse. This is why inventors from all over the world are flocking to the US to patent their inventions and corner one of the worlds biggest markets!

Another engine that drives the US economy is our free enterprise system.

[My business started] in my 2 car garage. One day my neighbor came over and asked if I could make some security wrenches for them. He was the manager for the warehouse of a large cable company. He showed me the sample and I could see it would be a very nasty job. So I said we were too busy. He kept coming back. On the third time I said we would. So I made him samples and received an order for 100. He reordered about every 9 months. In the mean time, another cable company wanted some of the same. My other machining business was evaporating. My son Eric said,  “lets go in to the cable business,” so I said OK. The first thing Eric did, was to go to work for a large cable company. There, he learned the business and got acquainted with a lot of personnel. This helped with future sales because my son Eric knew a lot of people in the cable business. He worked there for the summer and then came back to work for me.

I decided to build a house first.  It took 6 ½ months plus time for drafting and planning. I drew up plans and had them approved by the county. It was a raised ranch house with a 1700 square foot full basement, which would be a machine shop. It was great.

Eric came in one day and said, “ We need a name for this new business.“ I agreed.

I said,make a list tonight starting with your top choice, and we will discuss it tomorrow. The next morning we had the same name at the top of our lists. It’s ‘Cablepro”. I think this is a great name. Every cable installer that sees this name thinks in the back of his mind that these tools will make him more professional

Now the problem was expanding the business. We did several things which worked very well. One thing was that I bought a cable book which listed every cable system and their personnel in the USA. It cost me $375. I chose 1500 of the biggest cable systems in the US to make a mailing list. I made a flier although we only had a few tools and mailed them.

Mailing lists typically yield a return of around 2%. I received over 300 orders from this mailing. That is over 20%. It is important to recognize why this worked so well. First of all,  everyone who received a flier was using these very tools. Secondly, big companies don’t want to sell a $10 wrench. They want to sell a truck load of amplifiers at several thousand dollars each or several miles of cable, All the orders were for one tool because they had never heard of us. A few months later I sent out another flyer with more tools and received over 100 orders which were $100-$300 dollars each. Now we were  nationwide. I had to hire some more employees.

Another thing we did which worked very well was [to have] a truck with tools on the road. A customer would call and say they wanted to buy a dozen wrenches so the truck would be there the next morning. They usually bought more than they originally ordered. It is expensive to keep a truck and an employee on the road but it paid off. We took over the tool business in this town. An unforeseen benefit was new products. All cable systems have a box where they throw broken tools. My son Eric would ask to see if any of our tools were returned and none were. Whatever tool was the most prevalent in the box was our next new product guaranteed not to break. After we did this several times the cable companies starting saving the broken tools for us to redesign and make. Our biggest competitor was whining about how bad [the] sales of tools were. It was because he didn’t deliver. We never made money with that truck,  but we built a business.

Now I had 5 men working for me full time. One on the road and 4 of us in the shop making tools. Business was booming. We had 25 products by now and sales had hit $25,000 per month. What I needed was some fancy machinery which I didn’t have. I didn’t have the money to buy the machinery or a shop big enough to use it. Growing New businesses soak up operating capital like a sponge.

All of a sudden, a potential buyer shows up. His sales had dropped 50% [in the] last year and he had fancy machinery sitting around. We soon had a deal. I sold him the rights to my products for 5% of sales for 7 years. I gave him a customer list, a line of products and my son Eric. My son knew a lot about how to make the products. He was in charge of getting the tools made at the new company. He was responsible for ordering materials, Scheduling production and running production. It went smoothly and soon I was getting royalties.  I called it a licensing agreement but my accountant said it was a delayed purchase plan. Anyway, the checks cash the same.

At this time I had about $25,000 in receivables which I was able to collect and $25.000 in inventory which I sold to my licensee because he didn’t have anything to sell. One of the measures of business success is how long does it take to turn over your inventory. One month is outstanding. The shop was working 6 days a week and Sunday was for payroll, taxes, bookkeeping and preparing orders. I hadn’t taken any money out of the business since it started. These were factors which helped make the decision to sell,

Afterward, he asked me to see if I could design a crimper that would crimp a connector fitting round instead of the standard hex crimp. The standard hex crimp is on a round cable and it lets water and signal in and signal out. Does that make any sense? I am an engineer by trade, so I did it and it has been a real winner. This is an unusual situation, Using this crimper enables the cable company to use cheaper connectors, saving 5 cents each. If an employee is putting on 50 connectors a day you can see what a saving this new crimper is. The crimper will pay for itself. This tool and the others are being sold all over the world now.

By now the licensee has a factory in the USA, one factory in China, and two factories in India. He just finished building a new house for $11,000,000. This is what new products, intellectual property and hard work can do for you.

 

By Don Kesinger

 
Reason Magazine: Using Emotion and Faith to Advance their Anti-Patent Agenda

Reason Magazine has released a video, entitled How Patent Trolls Kill Innovation.  The magazine banner states that they support “Free Minds and Free Markets” but this video relies on the same irrational, emotion driven logic as the media.  I cannot point out all the errors in this video, but below I will highlight some of the major points.  Before I do that , let me show some of the sleazy attempts by Reason Magazine to use emotion and hidden assumptions to advance their argument, instead of reason and logic.

Emotion and Faith

*The video starts with the hidden assumption that patents are not property rights – faith not reason.

*The video uses the phrase “patent trolls” to immediately define who is right or wrong without actually proving their case – an emotional appeal.

*The video selects a small entrepreneur to narrate their story – using the typical liberal tactic of pretending this is a fight between a small virtuous entity against a big faceless entity.  The reality is that so-called “Trolls” sue large entities much more often than small businesses.  Emotional appeal, not reason.

*The video uses an “expert”, Julie Samuels, from a biased source, (Mark Cuban’s lobby group) who has no qualifications in the subject.  She has a degree in Journalism and Law, which means she is NOT A PATENT ATTORNEY and does not have the technical skills to understand the underlying technology of patents.  Faith not reason.

 

Title Search

The video never asks if Austin Meyer did a patent search and clearance opinion before building and selling his software.  You would not build a house without doing a title search to make sure you owned the land.  Given Mr. Meyer’s surprise that he was being sued for patent infringement, he almost certainly did not undertake this simple due diligence step.

 

Using Other Peoples’ Property

Mr. Meyer complains that he may have to pay the patent holder for the life of his product.  Yes, that is what happens when you use someone else’s property.  This is like a steel manufacturer complaining that they have to continue to pay for coal or pay rent for a building they do not own.

Note that the underlying technology is critical to Mr. Meyer getting paid, but he doesn’t want to pay for it.

 

East Texas

The anti-patent crowd always complains that these suits are brought in East Texas.  If someone refused to pay you rent for staying in your house, would you chose the slowest court in the country or a faster court?  Federal Court for the Eastern district of Texas has been one of the fastese to bring invention squatters to justice.

 

Patent Trolls

The video makes the implicit assumption that non-practicing entities (NPE) are evil.  However, Edison was a NPE, as was Tesla, as was almost every great inventor in the last 200 years, as our most major corporations, as most of our Universities and Government labs.  Our Founders looked at the issue of requiring inventors to practice their invention in order to keep their patent and rejected it.  They voted for a FREE MARKET system where people could be independent inventors, just like writers do not have to be publishers in order to obtain or keep their copyrights.  This is consistent with Adam Smith’s division of labor theory.

The video takes the stand that if you buy the patent rights instead of being the inventor,this is somehow evil.  First, all corporations buy their patents – often by paying wages.  Corporation don’t invent so they have to buy their patents.  Second, we do not argue just because you didn’t build your house you cannot rent it out .

 

Old Technology

Mr. Meyer states in the video that the technology he wants to use is old, from the 80s.  If this were true, Mr. Meyer would be free to use it.  But, instead, he wants the updated version of the technology that ensures he gets paid, he just doesn’t want to pay for it.

 

The Patent Should Not Have Issued

Neither Mr. Meyer nor the so called expert, Julie Samuels, are patent attorneys.  They are NOT QUALIFIED to evaluate the scope of the claims of a patent.  It is interesting how lay people (I include attorneys who are not patent attorneys in this definition) believe they can just read a patent and evaluate it, but they would never try to do the same thing with a Warranty Clause in a contract or an Indemnity Clause.  No one would believe a Journalism major or an attorney (non-technical) is qualified to comment on software technology; but somehow they are qualified to comment on patents on software?  This is like asking a plumber to comment on the design of a Nuclear Power Plant.

 

Patents and the Free Market

Patents are property rights, just like a property right in a farm.  The basis for all property rights is creation.  Inventions are clearly creations.  Property rights are part of the free market.  Those countries that are the freest economically have the strongest patents laws, are the most innovative, and have the highest standards of living.  REASON MAGAZINE is pushing a point of view that is much more consistent with a Marxist’s labor theory of value than Capitalism.

 

 

REASON MAGAZINE is neither promoting REASON or FREE MARKETS in posting this video.

 

 

 

 

Reason Magazine: How Patent Trolls Kill Innovation

 
The Pseudo Scientific Basis of Environmentalism

The underlying “scientific” basis for all environmentalism is the second law of thermodynamics or entropy.  Environmentalist believe that entropy scientifically proves that we have peak oil problem, an over-population problem, a pollution problem, global warming and the myriad of other things environmentalist believe need to be fixed.  It provides the moral basis for their argument that government must force people to quit using their cars, pro-creating, using ‘fossil fuels’, hydraulic fracturing, pesticides, irrigating, etc.  According to environmentalists it also proves that technology can never solve these problems and the only solution is for humans to abandon technology and live in a “state of nature.”  Entropy provides them the moral and scientific high ground in any debate and justifies any government intrusion into the private lives of people, including killing them.

Entropy causes things to become disordered according to environmentalists.  One paper explains it this way:

Things fall apart because it’s the Law: the Second Law of Thermodynamics also referred to as the Law of Entropy. Everything disintegrate, degenerate, shatter, fracture, split, tear, break up, break down, break, rust, die, decay, wear out, rip, or move from a state of order to disorder; not unless new energy is infused for regular maintenance and rebuilding of its structure.[1]

The paper further explains, “Left unchecked, entropy will eliminate all life forms by randomizing vital life-sustaining molecules.”  Jermy Rifkin, a leading environmentalist, has written a whole book about entropy, which argues that we need to use fewer resources to forestall the inevitable collapse of civilization.  The most extreme version of this idea is called the Heat Death of the Universe, which states that the Universe will end up with a uniform temperature and uniform distribution of matter.  Human’s are accelerating this process, according to the environmentalists and the more humans there are and the more energy they use the faster this is accelerated.  Their answer is fewer humans and less technology.  I wondered how they would tie entropy to anthropomorphic global warming (AGW) their favorite crisis right now.  One paper entitled Entropy and Global Warming I, explains the connection this way.

Population Growth and intense per capita energy consumption may be seen to be at the root of virtually all of the world’s environmental problems. Global Warming, Depletion of Ozone Layer, Air Pollution, Ground Water Depletion, Chemical Risks, Pesticide Residue in Crops and in Fish.[2]

It appears that the tie between entropy and AGW is over-population.

When I point out that environmentalists are anti-human most people think either I am wrong or that I am exaggerating.  But consider the following examples.

  • A leading environmentalist, Dr. Eric R. Pianka advocated the elimination of 90 percent of Earth’s population by airborne Ebola in front of few hundred members of the Texas Academy of Science who rose to their feet, and gave him a standing ovation.[3]  Dr. Pianka attempted to deny this, but the evidence was overwhelming including his student evaluations.
  • The DDT ban resulted in the death of over 100 million people.  Alexander King, founder of the Malthusian Club of Rome, wrote in a biographical essay in 1990: “My own doubts came when DDT was introduced. In Guyana, within two years, it had almost eliminated malaria. So my chief quarrel with DDT, in hindsight, is that it has greatly added to the population problem.”  http://jiminmontana.wordpress.com/2012/01/15/environmentalism-the-green-religion-of-dehumanization/.
  • Dr. Charles Wurster, one of the major opponents of DDT, is reported to have said, “People are the cause of all the problems. We have too many of them. We need to get rid of some of them, and this (referring to malaria deaths) is as good a way as any.”  http://jiminmontana.wordpress.com/2012/01/15/environmentalism-the-green-religion-of-dehumanization/.
  • “A total population of 250-300 million people, a 95% decline from present levels, would be ideal,” Turner stated in 1996.[4]

Environmentalist killed over 100 million people in the 20th Century – but they won’t be satisfied until they have killed at least another 5 billion people.

 

ENVIRONMENTALISTS ARE EVIL

 

Marxists seem to be the main people who are pointing out that Environmentalists do not understand entropy.  For instance, the paper The Limits to Entropy: the Continuing Misuse of Thermodynamics in Environmental and Marxist theory points out some of these errors.[5]  This paper ends with the terrifying thought “The appropriation of misleading entropy concepts by Marxists is particularly unhelpful, since Marxist theory should be a guide for red-green political practice.”  Another paper that disagrees with this entropy apocalypse is by the renown economist Julian L. Simon, entitled ENTROPY AND ENERGY ACCOUNTING:  ARE THEY RELEVANT CONCEPTS?

Entropy in science is the energy in a system that cannot be used to do work and the second law of thermodynamics states that in an ISOLATED SYSTEM entropy always increases or stays the same.  Entropy says nothing about order.  In fact, crystalline structures have high entropy but are very ordered.  A common example to explain this is provided by the article Entropy is Not Disorder, by Nathaniel Virgo.

Imagine filling a glass jar with water and cooking oil.  Give it a good shake: the oil is now interspersed with the water.  It’s an opaque, homogeneous mess. Very disordered. But now, leave the jar on the table for a few minutes.  In the parlance of thermodynamics, this is a closed system (more or less — we can safely ignore the various ways in which it isn’t), so its entropy must increase over time.  But as we watch, the oil separates from the water, forming a nice, orderly layer on top of it.  The system, to the eye at least, appears to have become less disordered even as its entropy increased.

As a result, all the statements about entropy leading to disorder by environmentalist are just so much nonsense.  In addition, the Earth is not an isolated system.  An isolated system is one in which there is no energy or matter exchange occurs.  Earth receives enormous amounts of energy from the Sun and exchanges it with the surrounding space.  It also exchanges matter with space.  Since gravity affects almost any system, almost no system can be consider isolated.  The Universe might be an isolated system, but new theories about multiple universes, multiple dimensions, and that the Universe is likely infinite cast serious doubt on this.  What this means is that Environmentalists supposed moral and scientific high ground is without any basis in fact.  How anyone who advocate mass murder can be considered to have the moral high ground escapes me.

It is not surprising that environmentalist make these mistakes as most of them do not have a solid background in physics or chemistry.  For instance, Jermy Rifkin, has a BA in economics and a MA in International Affairs.

 

Environmentalist Do Not Understand Entropy

Their Conclusions are Nonsense

They are Advocating and Implementing MASS MURDER Based on this Misinterpretation of Entropy

 


[1] Maharaj. Dr. Indar, ENTROPY:THE IMPACT OF A LOW-ENTROPY LIFE ON THE ENVIRONMENT

Live Simply that Others may Simply Live, https://sites.google.com/a/greenthinktank.org/greentt/mainmission/entropy

 

[2] Entropy and Global Warming I, by Dr. Mofiz Uddin Ahmed, http://www.newstoday.com.bd/index.php?option=details&news_id=2333010&date=2013-01-01

[3] Meeting Doctor Doom, By Forrest M. Mims, III, The Eco-Logic Powerhouse http://www.freedom.org/board/articles/mims-506.html.

[4] Ted Turner Repeats Call For Population Curb, by Paul Joseph Watson Prison Planet Monday, April 28, 2008 http://www.prisonplanet.com/articles/april2008/042808_ted_turner.htm

[5] The Limits to Entropy: the Continuing Misuse of Thermodynamics in Environmental and Marxist theory (PDF version))2008, Science & Society v. 72, No.1, 43-62.  By David Schwartzman, http://www.redandgreen.org/Documents/Limits%20to%20entropy%20final.htm

 

Wireless technology has been proved to be a boon for the internet connectivity. It is surely convenient to one and all, but when the connecting speed goes down, nothing can seem to help you. The signal of a Wi-Fi computer network is something that can be improved and boosted up in many ways. To know them all, read on the following.

Reposition the router or access point

This is done in order to escape from radio interference and obstructions as well. The two of these are majorly responsible for reducing and affecting the range of the equipment that serves for Wi-Fi connection. Cordless phones, microwave ovens, brick and even plaster walls are a few residential sources which serve as immediate barriers in creating interference in the connection. The solution to avoid this interference is to change the number of Wi-Fi channel and this is done on the Wi-Fi equipment itself.

Upgrade the antenna on the router

The stations with a wireless base have Wi-Fi antennas. These antennas have the option to be removed and thereby a more powerful antenna can be fixed whose range is much higher.

You may add some other access point or router

The residential areas that are typically large do have to go for two or a little more access points (AP’s). And when it comes to a business house, then the need can turn up to more than a dozen of access point as the range has to be too large. This is much simpler when it comes to a home. All you are required to do is to connect the primary access point (or the wireless router) to the other with the help of an Ethernet cable. The wireless router or the AP’s that are employed at home are the ones which do not reciprocate with each other through a direct contact.

Employ a bi-directional Wi-Fi signal amplifier

The Wi-Fi signal amplifier is fixed to the wireless device. This Wi-Fi signal amplifier is also known as a “Signal Booster” because it boosts and amplifies the signal. The signal booster is simply fixed to either a Wi-Fi client or a router or to the access point. And the antenna is connected to any one of these. There is a particular point where the antenna has to be connected. The purpose of employing bi-directional antenna is to amplify the signal which is wireless in receiving and transmitting directions. The Wi-Fi transmission of this kind is known as two-way radio communication.

Add a Wi-Fi repeater

A Wi-Fi wireless repeater is a device which has to be positioned in such a way that it falls within a certain range of access point or wireless router. Infect, it is a stand-alone unit as a whole. The repeater is also known as range repeater sometimes. The function of this range repeater is to work like a double way and relay station for all Wi-Fi signals. The clients who really lie at a far distance from the original wireless router or AP have a good option to set up a link to the WLAN using the repeater.

 

 

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About the author: Rebecca is a blogger by profession. She loves writing on environment and technology. Beside this she is fond of reading about new gizmos. Recently an article on Music Systems caught her attention. These days she is busy in writing an article on perfect evening dress for dinner.

 

 

 
Perfect Competition is Economic Equivalent of Altruism Morally & Why it Matters to Patents

Perfect competition is when no one producer or consumer has the ability to affect the market price and all producers and consumers compete for a homogenous product, driving down the cost of the product.  Under perfect competition, a producer’s profit is eliminated or at least reduced to a trivial return.  Why this matters to patents is that the theory of perfect competition is often used to attack the patents.  It is argued that patents allow producers a differentiating feature or product and therefore they have a greater margin than their competitors.  Economists argue this means that the patent holder is getting monopoly profits according to the “perfect competition” theory and they call this profit a “deadweight” loss.  This supposedly shows that resources are not being allocated efficiently.

So why do I say Perfect Competition is the equivalent of Altruism morally?  Altruism is the idea of self sacrifice as a moral value and perfect competition is the economic idea of sacrificing a producer profits and a consumer’s right to choice.  The goal of perfect competition is that no one, producer or consumer, is treated as an individual and everyone needs to be sacrificed to the altar of perfect competition collective.  There is never any discussion of property rights with respect to “perfect competition” or individual rights.

Ayn Rand often stated that so called defenders of capitalism are often worse than its detractors.  Perfect competition is another example of this.  The Chicago School of economics, which included Milton Friedman, pushed the idea of “perfect competition.”  The book of A Random Walk Down Wall Street was the application of perfect competition to Wall Street by a Chicago School of Economics professor.  Perfect competition is the enemy of capitalism, individual rights, and economic growth.

Real per capita growth is the result of increases in one’s level of technology.  Under perfect competition, there is no reason to invest in creating new technologies and in fact there is no reason to invest at all.  Under perfect competition every investment yields the same low rate of return or no rate of return.  Perfect competition is used to justify antitrust laws that destroy property rights and most importantly property rights in inventions.  Perfect competition results in the same sort of idea of self sacrifice as altruism and is totally incompatible with capitalism, property rights, natural rights, and human happiness.

 

 
Great American Inventor Steve Jobs Dies

Steve Jobs was an inventor on over 300 patents.  He is the quintessential American inventor entrepreneur.  He and Steve Wozniak started Apple in January of 1977.  The company went public in December of 1980 and was the largest IPO (Initial Public Offering) since Ford in 1956.  Apple goes on to launch the MacIntosh in 1984 with its now famous television ad that played off the book 1984, where IBM played the role of Big Brother.  This launches the graphical user interface (GUI) as the standard for computers.[1]

This fairy tale start to Apple is marred by John Sculley, former president of Pepsi, being appointed CEO of Apple and firing Steve Jobs in 1985.  Strangely enough, Jobs foreshadowed this event in his Playboy interview in which he talked about how Polaroid fired Edwin Land, their creative founder and how Polaroid floundered  thereafter.  Once Jobs was fired,  Apple floundered for over a decade, and in the late 1990’s was all but dead.  Jobs returned to Apple 1997 and to profitability by 1998.  This is a cautionary tale for all those management gurus who ignore the technical creative genius and believe running a business is all about people skills, management, or finance.  Real wealth is created by invention and Jobs was a consummate inventor as his patent record shows.

An interesting question is raised in the book Great Again is could Apple have been successful today?  They answer the above query with a series of questions:

Could a twenty-year-old college dropout, just back from six months in an ashram somewhere, attract funding for a capital-intensive venture based on the manufacture (yes, they manufacture) and sale of a $2,500 consumer product unlike any that had ever been bought by consumers before?  One whose potential uses were at best unknown, and possibly nonexistent? And one for which the total current market size was exactly zero?

Not only could Apple not get funded today, it probably could not go public. Nor would Apple have received its first patent (USPN 4,136,359) in only 20 months.  The book asks “how many of today’s Apples are not getting a chance?”  Perhaps the death of Steve Jobs is the right time to examine this question.


[1] XEROX’s PARC center deserves a significant amount of credit for inventing the GUI.  Unfortunately, the FTC’s absurd attack on XEROX in the early 1970s for being a technological leader caused this great American company to pull back on commercializing a number of great inventions, including Ethernet.  This is a shameful history in American government that is being repeated today.  For more information see http://hallingblog.com/jobs-the-economy-and-patents/.

 

 
Congress About to Pass the ‘Leahy-Smith Trade Secret Protection Act of 2011′

GUEST POST

by
Neil Thomas, Esq.
Silver Spring, MD 20902

On September 6, 100 U.S. Senators began final voting on the ‘Leahy-Smith America Invents Act of 2011′ which will stifle U.S. innovation, growth of new American businesses, and long-term job growth in America.

This legislation should more appropriately be called the ‘Leahy-Smith Trade Secret Protection Act of 2011,’ because it will encourage and reward keeping America’s innovation and new discoveries secret.  This concept of secrecy attacks the very foundation of our patent system put into place by our Founding Fathers.  Our entire patent system has, for over 220 years, been based on the concept of individuals disclosing new ideas so society will advance more quickly.

The very purpose and the fundamental mechanism that makes the patent system work so well, is in a word, ‘disclosure’…of new ideas and discoveries.

Our Founding Fathers saw that sharing new discoveries and innovation would promote progress in America.  They had seen in history how keeping new ideas secret had retarded the progress of civilization.  Historically that is what governments, craftsmen, merchants, academics, and scientists frequently did.  The problem naturally with secrets is that one inventor does not provide the seed for others to come up with even better ideas and improvements.  As a result, many secret processes have been either retarded or even totally lost over the ages because they were protected as such and died with their creators.  Society loses that considerable benefit.

From the making of violins by Stradivarius; to the Chinese keeping the making of fine porcelain a trade secret; for more than two thousand years the Chinese keeping the secret of silk the most zealously guarded secret in history; and, the making of concrete, known to the Romans, being lost for almost 2000 years.

Patents are not designed to benefit the inventor so much as to benefit society as a whole; patents are designed to encourage inventors to disclose their new ideas to the public.  Think about it for a second, if you had a good idea, you might want to keep it a secret if you could.   If I have a good idea, let’s say for a new formula for making iron harder, i.e. making steel, why do I want to share it with a competitor, cause he’ll just copy it.  So we think to ourselves, how can we keep our ideas secret so others don’t find out.  That might be good for you and me, for a while at least, but that would have an adverse effect on society and the economy as a whole.

Our Founding Fathers saw the need to give inventors a reason to disclose their ideas to the public instead of keeping them secret.  They did that by giving an inventor an exclusive right to his idea for a limited time, i.e. a patent, if the inventor would disclosed their idea publicly.  They even put it in the Constitution , “The Congress shall have power… To promote the progress of science and useful arts, by securing for limited times to…inventors the exclusive right to their respective…discoveries. “  ( U.S. Const. Art. 1, Sec. 8, Clause 8 )

That is why the ‘useful arts,’ science, technology, and commerce have exploded since the birth of the American patent system; literally a million ideas have come forth.  As a consequence, patents have protected new ‘start-up’ companies with new inventions so they can grow and create jobs.   Our patent system has been a major factor in America becoming the greatest economic success in history and the envy of the world…at least until recently.  American inventions have created new jobs and prosperity in America for over 220 years.  Where would America be without the: steam engine, telegraph, telephone, airplane, electric light, television, radio, copying machine, etc.?

But now the game is about to change…in a huge way.

Not only will patents now be open to more challenges under this new law, the whole concept of disclosing inventions appears to have totally eluded Congress.   Congress is now going to encourage and reward secrecy .  Beginning September 6, 100 U.S. Senators will vote on the ‘America Invents Act of 2011′ which will totally turn the patent system our Founding Fathers created upside-down and undo 220 years of success by encouraging and rewarding ‘trade secrets.’

They do that with something they call ‘prior user rights’ (Sec. 5) which says that if you have an idea, and if you can build, use it and keep it secret for a year, someone with a patent can’t sue you for patent infringement , and you can keep on using it…forever.  And just keeping something secret will certainly a lot less cheaper than going through years of time, expense and uncertainty getting and enforcing a patent under this new law about to be passed.
If you can make it through the first year, there doesn’t seem to be much of a downside for secrecy.  In fact there are many advantages to ‘hiding’ inventions  First, you’re protected from any successful patent litigation; you don’t have to go through the cost, work and uncertainty of getting a patent; you don’t have to go through years, and years of enforcing and defending a patent; and you certainly ought to be able determine the value of your idea much easier than the value of a patent.
With this new law Congress is about to pass, Congress will make obtaining and enforcing a patent much more difficult, risky and expensive.  Under this new law, the value of patents will become more uncertain because of all the new challenges and procedures they will be subjected to; and a lot of companies, particularly smaller ones with limited resources, are going say to themselves, “we’re better off just hiding our new ideas, cause we’re going to be protected anyway, and it’s going to be a lot less costly and time consuming than applying for and trying to enforce a patent.”

For small companies without $ millions of financial resources to litigate a patent against the big companies for years, the choice becomes even easier.   Why get a patent if you can’t afford to enforce it?

And ‘prior user rights’ will ironically add more uncertainty to the value of patents, because no one will know for sure what ‘trade secrets’ are out there to detract from the value of a patent.

In fact, if I’m a venture capitalist looking for investments, I’m going to see a whole lot less risk in investing in ‘trade secrets’ than in patents.  Why?  Because the value of the ‘trade secret’ is pretty easily determined once you get past the first year, which by the way costs very little; all you have to do is to tell time and you’re pretty much home free; whereas a patent can be challenged endlessly, and will be open to a lot of time-consuming and expensive questions under this new law.

These fools in Congress are killing the golden goose.   Not only is this a total contradiction of the Founding Father’s intent and 220 years of patent precedent, it is guaranteed to stifle U.S. innovation, growth of new American businesses, and long-term job growth in America.

This ill-conceived ‘prior user rights’ provision will encourage many new manufacturing, industrial, business, chemical, computer, biotechnology, nanotechnology, and medical “processes,” “machines” and “compositions” to be hidden from the wealth of knowledge of our society .  That list pretty much covers all of burgeoning technologies as I see it.

I’m interested to see how this slows down biotechnology research and development in particular.

Unfortunately for the public, Congress has jumped on a speeding train that is out of control, and it doesn’t appear that anything can stop it at this point… even reason.

What a mess they are creating!

 

 
Guest Post: Dale L. Carson – Patent reform: One giant step backwards?

Philosopher George Santayana’s sage words: “Those who cannot remember the past are condemned to repeat it,” ring as true today as they must have when he wrote them in 1905. The words aptly apply to the ineptly titled “America Invents Act,” S. 23 and H.R. 1249, currently meandering through Congress.

Perhaps President Barack Obama is preparing for the day when he can sign the bill into law. That day is likely to bring woe to patent practitioners and users of the patent system alike, and particular woe to small inventors and startup businesses that collectively drive our nation’s economy.

As perchance an omen of tumultuous times ahead, Obama was seen holding a copy of Aldous Huxley’s Brave New World at the Bunch of Grapes book shop during his recent summer idyll on Martha’s Vineyard. Written in 1932, Huxley’s tome depicts a distorted social order, ushered in by the darkness of the Holocaust, in which science, technology and the media are collectively used to control human behavior.

U.S. patent law is rooted in incentivizing inventors to innovate in, among others, the fields of science and technology. The current patent reform initiative is steeped in media jargon promising job creation for America at a time when jobs are desperately needed. Unfortunately, there’s no data to support this promise. Indeed, all empirical evidence points to the likelihood that this patent reform will result in job destruction.

It goes without saying that Congress has the power, working in concert with the president, to reform or deform the patent system as we know it. In short, its members can change the patent laws of our nation in a manner that would reframe the social order pertaining to patents for better or for worse.

Giles S. Rich and Paul Rose, co-authors of the 1952 Patent Act governing our nation today, opined on the differences. They concluded that patent reform should be adopted if, and only if, the proposed changes increase the incentive force associated with our patent system.

A key incentive provided by our patent system is the incentive for inventors to disclose their invention in a patent application in exchange for the possibility that they may achieve a patent grant in return. The subsequent publication of the patent application serves to inform the public about the invention, and thus enables others, including competitors, to build upon it. The net result of this incentivization is to promote “the Progress of the Useful Arts” as mandated by Article 1, Section 8, clause 8 of the Constitution.

Certain provisions of the patent reform bill will have the ill effect of disincentivizing small inventors and startup companies from using the patent system in the first instance. One provision would award the patent to the first person to file a patent application on the invention, rather than the one who is actually the first to invent. Another provision would eliminate the “grace period” that has traditionally provided a safe haven to allow an inventor to get his or her invention “off the ground” without forgoing the opportunity to patent it. The net result is to change the social order for patenting in a manner that selectively demotivates small inventors and startups.

There is no reason to believe that such changes will benefit society as a whole. To the contrary, the proposed changes will work to society’s detriment by disincentivizing inventors who fear that they can’t possibly win a race to the patent office and can’t properly vet their invention with others before filing. In short, these changes will discourage these inventors from disclosing their invention in a patent application.

Discouraging disclosure of inventions undermines a key incentive of our patent system, namely the incentive to disclose, and thereby undermines the patent system as a whole by inhibiting third- party access to information about those inventions, thus slowing down the rate of innovation.

Another proposal in the patent reform bill would adopt the European-style opposition protocol–ambiguously described in the bill as “post-grant review.” Such a protocol is analogous to the inter partes re-examination form of post-grant review that is already available under the existing U.S. patent law. The fact that a European-style opposition procedure was adopted by Japan, China and South Korea two decades ago, and was subsequently abolished in each of those countries within a decade, should be enough to give Congress and Obama pause.

The call for the United States to adopt a European-style opposition procedure is not new. It was bandied about back in the late 1980s during the Reagan era, as a bargaining chip in trilateral talks among Europe, Japan and the United States in an effort to “harmonize” their patent systems. The United States chose not to harmonize and did not adopt such a system then. Unfortunately for Japan, it did. Our nation needs to recall that history now.

At this critical juncture in the patent reform debate, the salient questions are: Why would a country that is a world leader in inventiveness change its patent system to comport with that of a European protocol that has been tried and shown to fail elsewhere? Why adopt “first to file,” and eliminate the “grace period” for filing, in the absence of evidence that doing so will improve the inventiveness of our nation’s inventors, which it clearly won’t?

So far, Obama’s term in office has been unremarkable, to say the least. The reasons, for what can be described as an abject failure of leadership, are set forth in Drew Weston’s Aug. 7, 2011 opinion piece in The New York Times entitled “What Happened to Obama?”

Mindful of Huxley’s warning about our “new world,” we can only hope that Obama, if not Congress, will reflect upon the likelihood that a patent reform initiative that has been tried, and found to fail in other countries, should not be adopted because it is likely to fail here. Likewise, a patent reform initiative that demotivates inventors with limited means should not be adopted because it is the antithesis of the incentive system that our patent system was established to provide. Both initiatives would deform our patent system, rather than reform it.

If neither Congress nor Obama respond to the risk posed by the patent reform bill, Huxley’s apocalyptic vision of control over human behavior via manipulation of ownership of science, technology and the media may become a reality sooner than we think. Under those circumstances, history will have all the more reason to discredit Obama’s term in office.

Dale L. Carlson is a partner at Wiggin and Dana in New Haven, Conn., an adjunct professor of patent law at Quinnipiac University School of Law in Hamden, Conn., and immediate past president of the New York Intellectual Property Law Association, the largest regional IP law association in the country.

 

 
Patent Wars: A Market Solution

There have been numerous articles complaining about patent lawsuits such as those being filed against Google and the Andriod apps developers.[1] For instance, see Mobile Computing Giants in Patent Free-for-All, in the Silicon Valley MecuryNews.  These articles often complain about the cost and time involved in litigating patents.  In this article, I will propose a market oriented solution to resolving these issues.

The solution involves creating a voluntary association of manufactures and inventors involved in a market space, such as the Andriod marketplace, that will quickly and inexpensively clear patent rights.  The Association would operate somewhat like a Standards Organizations, such as the IEEE P1394 (Firewire) Working Group that covers the IEEE 1394 High Speed Serial Bus.  These standards organizations often divide patents into various groups such as “essential” and “nonessential.”  The term essential patents usually means a patent that contains one or more claims that are necessarily infringed to practice the standard.  The members of the standards organization generally have to agree to license all essential patents on fair, reasonable, and nondiscriminatory terms to all members or to anyone.

The Association would also divide all patents of the members into “essential” and “nonessential.”  All members of the Association would be able to license the essential patents for the Andriod marketplace for a fixed percentage of their sales, such as 6%.  The Association would then rate the essential patents and each member of the Association who had essential patents would receive a portion of the royalties received based on the number and value of patents that are part of the essential pool.  The Association would also keep a list of nonessential patents and the terms that members were willing to license them under.  Members would be strongly encouraged to license all patents or fair, nondiscriminatory terms, under the theory that they will generally make more money emulating the VHS model than the Betamax model.

If a non-member of the Association asserted a patent against any of its members that was determined to fit in the essential category, the Association would undertake an independent analysis of the claim.  If it were determined that the asserted patent covers an essential part of the standard and is valid, then the Association would undertake to license the patent for all members and/or the Association would start developing a design around.  If the asserted patent was believed to not be infringed by practice of the essential part of the standard, but it was asserted that the patent does cover the essential part of the standard, then the Association would undertake the defense of against asserted patent.  The Association would also begin an effort to design around the asserted patent.  If practice the patent is not alleged to be essential, then the Association would only undertake a defense if a significant number of the members would be affected if they were found to infringe the patent.

If there is a patent contention between two members of the Association about a patent(s) mainly related to the Andriod market space, then the members would agree that the case would be resolved based on limited discovery rules, limited defenses, literal infringement only, limited times to present your case, and strict timeframes (3-6 months) in which a ruling is made.  The panel adjudicating the case would be made up of 3-5 judges selected from members/employees of the Association.  The judges will include both technical people and patent attorneys.  All technical people serving as judge will have to take a course in the basic principles of patent law.  The judges would only decide whether infringement existed, not damages.  The parties could appeal the decision in federal court, but members would have to agree not to retry issues unless new evidences was presented and a strong presumption would apply to the Association decision.

Other functions of the Association would include performing basic clearance searches and opinions for members, providing technical advice on how to implement the standard, helping Members explain the technical aspects of their non-essential patents.  The technical employees of the Association would also create interoperability guidelines so that software and hardware inventions can easily be integrated in with existing products.  This should increase the speed at which new inventions are integrated into the marketplace.

The Association would be funded with a one-time membership fee and with a percentage of the royalties collected.  For instance, the Association might keep 1% of the 6% charged for the essential patents.  As a result, the Association would have only a minor impact on the cost structure of the market at worst and most likely would reduce the overall costs of Association members.  The Association would also charge fees for adjudicating patent disputes between members.

This article provides an outline for a market oriented solution to the patent wars in the wireless market place.  Clearly, the details of how the Association would operate would have to be further defined.  However, this outline clearly shows that a market oriented solution to reduce the costs and time associated with patent disputes can be achieved.

 


[1] I have written on this issue before, but this post was inspired by my interview with Maisie Ramsay, Associate Editor, Wireless Week, on the patent wars in the wireless space.

 

 

 

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