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Category: Patents


The website Rebirth of Reason, which is supposed to be an Objectivist website, posted an article entitled Patent Scam.  Below is my open letter to the author of this article.

 

Dear Ms. Vera S. Doerr,

 

If someone displayed the ignorance in criticizing Objectivism that this article does about patent law, Objectivists would be furious.  First of all it is clear that you do not know how to read a patent.  You don’t know the difference between the claims and the background, you don’t know the difference between an independent claim and a dependent claim or a patent and a patent application.  In fact it is clear that you did not read the patent application, which can be found here http://www.freepatentsonline.com/20140215201.pdf.  If you had read the patent application and understood how patents are written, instead of the summary from the article, you would clearly have seen that the invention is not about a device which can turn into a “cell phone, a smartphone, a tablet PC, a laptop, a personal computer, a netbook, a personal digital assistant, an e-book reader, a TV and/or other computing devices…”  You would have seen that this was about a device with a foldable display that takes certain action when it is folded in different ways.  These actions are explained in the patent application as making or receiving a phone call, sending or receiving an electronic document, activating or deactivating a software program, and connecting to or disconnecting from a network.

Despite your ignorance of patent law, electronics technology, and the specifics of the invention, you pontificate that “the technology behind it (the invention) would be so diverse that no material, no hardware, no software, existing today even as a theoretical prototype, could be combined into such a device.” Perhaps you are unaware that one of the requirements of a patent is the enablement requirement under 35 USC 112.  It requires that the inventor explain his invention in enough detail that one skilled in the art be able to practice the invention.  But you don’t have to take my word for it, foldable displays are known, see displays.  Having a foldable display that when folded in a certain way receives a phone call, or sends a document, is well within the reach of today’s technology.  As a patent attorney, with a BS in electrical engineering, a MS in physics, and named inventor on nine patents, I can assure you that this patent application is enabled and could easily be built by one skilled in the art.  Now that I have shown that to you, you will probably turn around and say it should not be patented because it is obvious, further proving your ignorance of patent law, logic, and reason.

Next you state that everyone is doing this and you “simply cannot believe this patent scam! Worse: it’s actually legal!”  This is clearly an appeal to emotion not logic.  You continue this unsubstantiated attack on the patent system, suggesting it is a legal hold up game that people are using to get rich.  Your article is worthy of a muckraking SOCIALIST journalist or a follower of Kant, Hegel, or Kierkegaard, but not someone writing on the Rebirth of Reason  or someone who has studied Ayn Rand.

Rand stated that Patents and Copyrights are the source of all property rights, because they protect the source of all human creation, the products of man’s mind.  Patents are property rights for inventions and your attack on the patent system is really an attack on the very basis of property rights.

There is a SCAM going on here Ms. Doerr, but it is not patents.

 

Sincerely,

Dale B. Halling

 
Fallout from Alice: Digitech Image v. Electronics for Imaging

We are beginning to see the absurd results from Alice in the case Digitech Image Technologies, LLC v. Electronics For Imaging, Inc., Case No. 13-1600 (Fed. Cir. July 14, 2014), the Federal Circuit affirmed a district court decision invalidating all claims of Digitech’s patent (U.S. Patent No. 6,128,415).  The invention tags digital images with particular information about the camera and its color/spatial image qualities in a form that is device-independent. The patent includes claims directed to both a “device profile” and a “method of generating a device profile.”  The Court found the claims invalid under 35 USC 101.  Independent Claim 1 states:

 

1. A device profile for describing properties of a device in a digital image reproduction system to capture, transform or render an image, said device profile comprising:

first data for describing a device dependent transformation of color information content of the image to a device independent color space; and

second data for describing a device dependent transformation of spatial information content of the image in said device independent color space.

According to Patently O:

At the Federal Circuit, the patentee argued that one of skill in the art would understand that the claims required hardware or software within a digital image processing system. However, in an implicit claim construction, the appellate panel rejected that argument – finding that the claims are not so limited. “The claims encompass all embodiments of the information contained in the device profile, regardless of the process through which this information is obtained or the physical medium in which it is stored.” The underlying problem with this analysis is the reality that data is always stored in a physical form lest it disappear.

The court disagreed and found the patent was directed to an Abstract Idea, a term that the Supreme Court has refused to define.  Logically all inventions are directed to an abstract idea, in that they abstract the invention from the particular or specifics.  The only logical definition of Abstract Idea is a thought or conception that is separate from concrete existence or not applied to the practical.  Here the invention is clearly drawn to the practical and is being widely used.

You can argue that patentee wrote the claims incorrectly, but the Supremes would then counter than cleaver draftmanship will not save you from 101.  Of course the Supremes then look to the claims to determine 101 eligibility.  This is circular reasoning on the part of the Supremes.

Claims are supposed to define the invention, they are not the invention.  A definition should not have extraneous information that does not add meaning.  Here the physical structure would not have added anything to the definition.  This is why I have been arguing that 101 should really be about the specification.  Here the patentee clearly describes an invention.  Patent law is devolving back to the 1940s and now we are all talking about how many angels can dance on a pinhead.

 

The long awaited decision by the Supreme Court in Alice v. CLS Bank came out on June 19, 2014, while I was away giving a talk at Atlas Summit 2014, which is why this post has been delayed.  Even in the statement of the question presented in the case the Court got it wrong:

The question presented is whether these claims are patent eligible under 35 U. S. C. §101, or are instead drawn to a patent-ineligible abstract idea.

Abstract ideas are not an exception to section 101, despite a long line of nonsense by the court.  Every invention is an abstract idea in that it describes a class of things, not a specific instance.  The failure (purposeful) of the Court to define what they mean by an “abstract idea” has resulted in an incomprehensible standard.

An abstract idea is a thought or conception that is separate from concrete existence or not applied to the practical.  From this definition, it is clear that if an inventor were to describe an “abstract idea” it would be a section 112 issue, not a 101 issue.  In this case, Alice describes and claims a concrete existence that is applied to the practical problem of settlement risk that saves billions of dollars a year.  Note using any rational definition of abstract idea, means it would not be a “process, machine, manufacture, or composition of matter.”  Therefore the abstract ideas exception is just redundant.  But the Court is unable to think logically, so instead of applying the statute, they make up the law as they go along.

In any event, we need not labor to delimit the precise contours of the “abstract ideas” category in this case. It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here. Both are squarely within the realm of “abstract ideas” as we have used that term.

Biliski did not claim or describe “risk hedging” and Alice did not describe “intermediate settlement” any more than the patent for the LASER described “light making.”  The Court’s characterization of these inventions with two word tag lines is intellectually dishonest.

Note the Court admits that they refuse define what they mean by abstract idea.  Failure to define one’s terms is the hallmark of charlatans and tyrants.  The Court’s statement means that no one can know what will be considered an abstract idea until the Supreme Court rules.  This is a judicial power grab.

Below the Court tries to justify what is clearly an absurd position.

The fact that a computer “necessarily exist[s] in the physical, rather than purely conceptual, realm,” Brief for Petitioner 39, is beside the point. There is no dispute that a computer is a tangible system (in §101 terms, a “ma­chine”), or that many computer-implemented claims are formally addressed to patent-eligible subject matter. But if that were the end of the §101 inquiry, an applicant could claim any principle of the physical or social sciences by reciting a computer system configured to implement the relevant concept.

But what petitioner characterizes as specific hardware—a “data processing system” with a “communications controller” and “data storage unit,” for example, see App. 954,958, 1257—is purely functional and generic. Nearly every computer will include a “communications controller” and “data storage unit” capable of performing the basic calculation, storage, and transmission functions required by the method claims.

A computer is a machine and those are covered by 101.  The Court is intellectual dishonest or just plain stupid when they state “an applicant could claim any principle of the physical or social sciences by reciting a computer system configured to implement the relevant concept.”  Alice never said any such thing, but because the Justices are incompetent in reading claims and computer technology, they ignore the claims and description, and come up with their own characterization.

Here they again prove they cannot read the claims and instead paraphrase them, of course ignoring any part they find inconvenient.

The representative method claim in this case recites the following steps: (1) “creating” shadow records for each counterparty to a transaction; (2) “obtaining” start-of-day balances based on the parties’ real-world accounts at exchange institutions; (3) “adjusting” the shadow records as transactions are entered, allowing only those transactions for which the parties have sufficient 8resources; and (4) issuing irrevocable end-of-day instructions to the exchange institutions to carry out the permitted transactions. See n.2, supra.

The Court then proceeds to suggest that there is some sort of balancing test to 35 USC 101.

The former “would risk disproportionately tying up the use of the underlying” ideas, id., at ___ (slip op., at 4), and are therefore ineligible for patent protection. The latter pose no comparable risk of pre-emption, and therefore remain eligible for the monopoly granted under our patent laws.

Balancing tests are inherently unconstitutional.  A nation of laws is based on Natural Rights and clearly delineated laws.  A balancing test turns that into a nation of men.  Judges like them because they are the “men” so it is an inherent power grab.  The Constitution requires the Rights of Inventors be secured.  It does not allow for judicial balancing of inventors’ rights.

The Court then ignores the 1952 Patent Act and deconstructs the claims, which not only violates 35 USC 103, but is illogical (every invention is a combination of existing elements – conservation of matter and energy).  In addition, it brings back the discredited idea of “inventive concept”, which the 1952 Patent Act specifically was directed at eliminating.

To answer that question, we consider the elements of each claim both individually and “as an ordered combination” to determine whether the additional elements “transform the nature of the claim” into a patent-eligible application. Id., at ___ (slip op., at 10, 9). We have described step two of this analysis as a search for an “ ‘inventive concept’”—i.e., an element or combination of elements that is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.” Id., at ___ (slip op., at 3).

It would be nice if the Justices could actually read a statute.

The following statement shows the intellectual dishonesty of the court.

A claim that recites an abstract idea must include “additional features” to ensure “that the [claim] is more than a drafting effort designed to monopo­lize the [abstract idea].” Id., at ___ (slip op., at 8–9). Mayomade clear that transformation into a patent-eligible application requires “more than simply stat[ing] the [ab­stract idea] while adding the words ‘apply it.’Id., at ___ (slip op., at 3).

Alice’s patent application never said any such thing.  The Justices should be impeached for this sort of outrageous characterization.

Here again, the Justices prove they have no idea how to read a claim.

On their face, the claims before us are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. Like the risk hedging in Bilski, the concept of intermediated settlement is “ ‘a fundamental economic practice long prevalent in our system of commerce.’” Ibid.; see, e.g., Emery, Speculation on the Stock and Produce Exchanges of the United States, in 7 Studies in History, Economics and Public Law 283, 346–356 (1896) (discussing the use of a “clearing-house” asan intermediary to reduce settlement risk).

The claims are not drawn to anything.  This is just an attempt to ignore the limitations of claims to smear the invention.  The LASER is a part of the fundamental practice of creating light that has been known before for millions of years.  Does that mean it should not have been patentable?

 

Conclusion

The bottom line on this case is the Court is opposed to patents that cover financial products.  Alice and Biliski are Wall Street protection act decisions.  It is impossible to draw any conclusions broader than the Court will not allow patents on financial products.  This is not logic and it is not law.  It is time that we withdraw the Supreme Court’s jurisdiction over patent cases.  Not one of the Justices or their aides are legally or factually competent to be patent attorneys, and the consequences of their incompetence are just too high.

 

 
$120 Per Smartphone in Royalties – Outrageous!

An academic paper claims that the cost for royalties ($120 per phone) is about the same as the cost of the components in a smartphone.  This was accompanied by a number of articles suggesting this was outrageous and unsustainable.  For example see:

* High smartphone patent royalties undermine industry profitability: report 

* The $120 Smartphone Patent Tax: Patent Royalties Cost More Than The Actual Hardware In Your Phone:   This one from my favorite patent Luddite site, Techdirt.

* Smartphone royalties now equal manufacturing costs

The logical flaw underlying all these articles is that the value of products is determined by the amount of physical labor and/or the cost of the underlying materials.  On this basis, the actual material costs of a cell phone are probably less than $5 and the labor (unskilled labor in the US is worth perhaps $10/hr) involved in making the phone might be worth $5, let’s throw in $10 for distribution and the hard costs of a smartphone are about $20.[i]  The rest of the costs are the result of intellectual property, much of which is in the form of patents, but some is in the skilled labor, copyrights and trademarks.  The actual cost of the intellectual property in a smartphone is closer to $380.00.  Much of these costs are hidden.  For instance, when Intel sells a microprocessor they charge you $50, for example, but the labor cost and material cost of the microprocessor is pennies.  The reason they can charge $50 is because of the intellectual property, which means patents.  From an economic point of view you are paying a dollar or so for the manufacturing and $49 in patent royalties.

Another logical flaw in these articles is that this is an unsustainable business model.  First of all the underlying paper points out that sales of smartphones and tablets is now bigger than all the rest of the consumer electronics space, with over a billion smartphones sold in 2013.  Clearly the business model is not falling apart.  Second of all, the cost of Microsoft Office Home and Business 2013 is $219.00 and none of that is manufacturing cost.  The cost of Microsoft Office is essentially all IP (Patents, Copyrights, etc.).  Solidworks, which is 3D CAD software, cost $4000.00 and also has essentially no manufacturing costs, which means you are paying the equivalent of $4000 in royalties.  The argument that the model is unsustainable is absurd.

 

Actual Paper

The paper that started this economic stupidity is The Smartphone Royalty Stack: Surveying Royalty Demands for the Components Within Modern Smartphones.  The paper is clearly designed to sway public and Judicial opinion in a manner that will be beneficial for Intel.  Namely, Intel wants a patent system that emphasizes manufacturing, not inventing.  Another goal of the paper is to get courts to reduce the amount of royalties that inventors receive.

“In particular, there has been significant recent focus on “royalty stacking,” in which the cumulative demands of patent holders across the relevant technology or the device threaten to make it economically unviable to offer the product.”

This statement is absurd on its face, as the paper itself points out.

“The market for smartphones has exploded. Smartphones sales for 2013 topped one billion units globally for the first time ever.  In addition, global revenues for smartphone and tablet sales in 2013 are estimated to have surpassed for the first time revenues for the entire consumer electronics markets (e.g., televisions, audio equipment, cameras, and home appliances).”

Here is the real point that this paper is pushing:

“Further, the available data demonstrate a need for licensees to advocate and courts to rigorously apply methodologies for calculating royalties that focus on the actual value of a claimed invention put in context of the myriad other technologies in a smartphone and the components in which the technologies are implemented.”

I will admit that having courts set royalty rates is not ideal and the results can be squirrelly, which is why eBay  should be reversed.  The courts used to just prohibit the infringer from using the patented technology and then the parties had to work out a deal.  But the Supreme Court decided that enforcing the only right you get with your patent is an injunction – actually it is not an injunction it is an exclusion order requiring the infringer to not trespass on (use) the patent owner’s property.

The paper admits that its methodology is limited and the actual cash cost going to pay royalties could be higher or lower.  For instance, the paper does not track cross licensing, pass through, or patent exhaustion, all of which could significantly reduce the actual royalties paid.  They clearly made an error if they did not account for patent exhaustion.  If patent exhaustion was part of the royalty costs, then almost every high value component’s price is mainly due to patents.  Correctly accounting for patent exhaustion would show a royalty per smartphone closer to the $380.00 per phone as explained above.

The paper is just dishonest when discussing the growth in the number of patents issued and the number of patent lawsuits.  It shows in 20 years the number of patents issued in the US has increased from 100,000 per year to 250,000 per year.  The implication is that this is an absurd increase in the number of issued patents, but if you do the math this turns out to be a 4.75% annual increase, about the same as the increase in worldwide GDP over the same time period.  The paper also shows a graph depicting the number of patent lawsuits exploding around 2011.  This increase is due to the America Invents Act, which limited the joinder of defendants in patent lawsuits.  This has been well documented, as in the article  The America Invents Act at Work – The Major Cause for the Recent Rise in Patent Litigation.  The paper’s failure to point this out is just outright fraud.  The fraud is perpetrated again when the paper points to the increase in the number of NPE lawsuits.  These authors seem to have gotten their training from Al Gore and French economist Thomas Piketty.

 

 


[i] In fact you can buy cell phones for less $30.00 on the Internet.  The cost of materials in a smartphone and a $30 cell phone is essentially the same.  The material costs in a cell phone include the plastic which costs several cents, the metal for the conductors which might be worth a dollar, the silicon which in its raw form is worth almost nothing.

 
Why did Rand Choose Inventor as Galt’s Profession?

Dale B. Halling, author of Pendulum of Justice (with his wife Kaila) and The Decline and Fall of the American Entrepreneur, will be speaking at the Atlas Summit 2014.  The topic of his talk will be “Why did Rand Choose Inventor as Galt’s Profession?”  The paper below roughly tracks the talk.

 

 

Rand stated that the goal of her writing was to portray an ideal man and Galt was her artistic embodiment of the ideal man.  In the famous Galt speech, he says “I was an inventor.  I was one of a profession that came last in human history and will be first to vanish on the way back to the sub-human?”  What is so important about inventors that Rand would make that the profession of her ideal man and indicate that the profession of inventing was the canary in the coal mine of human progress?

In order to answer these questions, we first have to define what an inventor is: it is a person who makes their living from creating and selling inventions, as opposed to manufacturing, marketing, distribution, etc.  We all think we know what an invention is, but actually courts have struggled with this question.  In the last couple of years the Supreme Court has heard a couple of cases on this exact question and has provided no clear answer.  Dictionary definitions tend to be circular or so vague as to not be helpful.  I am going to propose that an invention is a human creation that has an objective result, i.e, the effect of which is demonstrable repetitively, and measurable objectively, and  independent of the observer.  While art is a human creation that has a subjective result, i.e., whose effect is the reaction of the observer, which not only varies from observer to observer, but may also vary over time in the same observer.  Art and inventions together are the complete set of human creations.  For instance, the invention of an incandescent light bulb has the objective result of putting out light when the appropriate electrical signal is applied.  Note that inventions are always about a class of objects, not an individual object (instance).  Art does not have an objective result.  How I react upon seeing Atlas Shrugged III will be different than how you react.  This can become confusing, because movies are an invention.  A specific instance of a movie is a human creation with a subjective result, while the class of objects called movies is an invention, actually a modern movie is a combinations of many inventions.

Manufacturing is the process of recreating an object.  If I produce a hundred bikes, I have recreated the invention of a bicycle a hundred times.  Standard engineering involves repurposing an invention.  For instance, if I am making bikes for adults and I decide to make them for children; I know children are smaller so I will design a smaller frame, I might design the frame out of thinner steel because kids are lighter, I might change the gearing because kids are not as strong, but in the end it is still a bicycle and not a new invention.  Neither manufacturing nor standard engineering meet the definition of an invention.

Rand has a scene in Atlas Shrugged between Jim Taggart and his wife that gets to the essence of what an invention is and many of the debates about inventions.

’He didn’t invent smelting and chemistry and air compression.  He couldn’t have invented HIS metal but for thousands and thousands of other people. HIS Metal! Why does he think it’s his? Why does he think it’s his invention?  Everybody uses the work of everybody else.  Nobody ever invents anything.’ (Jim Taggart)

She (Cheryl) said, puzzled, ‘But the iron ore and all those other things were there all the time.  Why didn’t anybody else make that Metal, but Mr. Rearden did?”

This scene clearly illustrates that Rand understood that an invention is a combination of existing or known things and it is the combination that is unique.  We know this is true because you cannot create something out of nothing and this is James Taggart’s reason for saying Rearden did not invent anything.  Cheryl’s responses is also classic in pointing out that all the things necessary to create the invention were available to others, but only Rearden created the metal.

Rand stated, “I seem to be both a theoretical philosopher and a fiction writer.  But it is the last that interests me most; the first is only a means to the last.” [1]  She described Galt as, “He too, is a combination of an abstract philosopher and practical inventor.”[2]  She illustrates this point in the scene where Dagny goes to talk to Dr. Stadler about the motor.  Stadler states, “Why did he want to waste his mind on practical appliances?”  Dagny replies, “Perhaps because he likes living on this earth.”  For Galt philosophy and theoretical physics are a means to inventing, with inventing being the primary goal.  According to the definitions of art and invention above, all of human creation is divided between the two.  This makes Galt the mirror image of Rand and together they make a complete set, which is why I think Rand choose inventor as Galt’s profession.

Why are inventors important?  Rand stated “Nothing can raise a country’s productivity except technology”[3] and inventors are the ones who create technology.  In classical economics we are taught that the inputs to the economy are land, labor, and capital.  Robert Solow received the Nobel Prize in economics for an econometric study of whether labor, capital, or technological change had the biggest impact on economic growth.  He found that almost all economic growth is due to new technologies, i.e., inventions.  Follow up research has found that all real per-capita economic growth is due to inventions.  Imagine if we had the same technology as the people living in 1600.  Would we be any wealthier than the people at the time?

The cotton gin is an interesting example of the power of inventions.  In 1791, the entire output of cotton in the U.S. was 4,000 bales.  The cotton gin was invented in 1793 by Eli Whitney.  By 1801, the output of cotton in the U.S. was 100,000 bales, over a 25 fold increase.  This increase was only possible because of the cotton gin.[4]  Note that this is consistent with Rand, who stated “Man’s mind is his basic means of survival.”  The way man uses his mind to meet his needs is by creating things, i.e., inventions, and this has been confirmed by econometric research.

Despite the importance of inventing, there have been very few professional inventors throughout history.  One time period that we do remember for its professional inventors is the beginning of the Industrial Revolution through the late 1800s with Edison, Tesla, Westinghouse, and others.  Why did this time period have so many professional inventors?  An inventor is someone who makes his living by selling his inventions.  In order to be able to sell an invention, you need to have property rights in your invention.  Property rights for inventions are a relatively recent legal concept.  The first known patent statute (property rights for an invention) was enacted, in 1474, by Venice.  Note that Venice was one of the richest places in the world at the time and home to many great inventors including Leonardo da Vinci and Galileo.  England slowly developed an archaic patent system starting with the Statute of Monopolies of 1623.  Even this archaic patent system was enough to spur inventors to create the Industrial Revolution.  The United States and the Colonies had patent systems roughly modeled on England’s.  The (original) US Constitution only mentions one RIGHT and that is the rights of inventors and authors, i.e., patents and copyrights.  It was not until the Patent Statute of 1836 that the US created the first truly modern patent system.  A modern patent system is characterized by an examination system administered by an independent, technically competent examination core that is readily accessible to all inventors (as opposed to only wealthy or politically connected inventors, see England in 1800s), has a system for widely publishing patents, and provides a freely alienable property right.  This is why we do not see the profession of inventing until relatively recently.  Before a modern patent system an inventor had nothing to sell, which is why the Middle Ages are characterized by trade secrets passed along by guilds.

I do not find it surprising that property rights for inventors were one of the last to be created.  A nomadic society has no need for property rights in land and history shows that the concept of property rights in land is unfathomable to them.  For instances, here is a quote by an American Indian that illustrates my point.

“What is this you call property? It cannot be the earth, for the land is our mother, nourishing all her children, beasts, birds, fish and all men. The woods, the streams, everything on it belongs to everybody and is for the use of all. How can one man say it belongs only to him?” -Massasoit

Nomadic people gather, they do not cultivate.  As a result, a nomadic people cannot possible understand why they cannot pick an apple from your orchard.  Only with the agricultural revolution (and mining) did the concept of property in land make any sense.  It would be impossible to have an agricultural revolution in which people who planted and cultivated the crops were not given the rights to the harvest and the land which they turned into a productive asset.  Similarly the concept of property rights in inventions is difficult for people who see all wealth as coming from agriculture.  For an agricultural people wealth is the result of physical labor, not thought.  Sure labor saving devices are great, but they are meaningless until some puts the labor into using them, much like raw land in their minds.  Putting this in more modern language, you can own an instance of say a plow, but cannot possibly have an ownership right in an instance of a plow you have never seen and did not build.   Note the similarity to Marx’s labor theory of value.

This chart shows the income per capita from 1000 BC to approximately 2000 AD and is most representative of the US, England and the West.  It also illustrates the importance of property rights for inventions.  Until the Industrial Revolution around 1800, people were stuck in the Malthusian Trap, which means they lived on the edge of starvation.  With the advent of relatively effective property rights in inventions, per capita income started to grow exponentially.  Note this occurred with an exponentially growing population.  This is not surprising.  Economic growth is due to inventions and the advent of property rights in inventions spurred people to invent more.  The same pattern with real property has been well documented, for instance see the Peruvian economist Hernando de Soto.

Rand stated “Patents and copyrights are the legal implementation of the base of all property rights: a man’s right to the product of his mind.”[5]  “What the patent and copyright laws acknowledge is the paramount role of mental effort in the production of material values: these laws protect the mind’s contribution in its purest form: the origination of an idea.”[6]  The source of all property rights is creation.  It is the legal system’s recognition of the metaphysical fact that but for the creator, the creation would not exist.  Not surprisingly those that hate achievement and those who want to live off the efforts of others deny that creation exists or that it is result of individual effort.  As Barak Obama put it, “you didn’t build that.”  Similarly, one of the popular academic papers on patents today is entitled “The Myth of the Sole Inventor.”[7]

Rand wrote in 1967, “Today, patents are the special target of the collectivists’ attacks …”[8]  She was right then and she is right today.  In the 1970s the FTC (Federal Trade Commission) published their nine no-nos on patents.  These severely limited the patent rights of inventors in the 1970s.  Xerox was an example of this attack on patent rights and success.  In the early 1970s Xerox was sued by the FTC for monopolistic practices.  The inventor of xerography, Chester Carlson, was a patent attorney who started work on his invention in the late 1930s.  He pitched his idea to IBM, Kodak, and many others and was turned down until the forerunner of Xerox.  They spent years perfecting his idea and in the 1950s the Xerox started developing and deploying a commercial version of the copy machine.  By the 1960s Xerox was one of the most successful corporations of all time.  Xerox initially thought the FTC allegations baseless, but several years later with mounting private antitrust lawsuits Xerox decided to settle with the FTC.  In 1975 when Xerox agreed to the FTC consent decree, which required them to license their patents for next to nothing to all comers, they had almost a 100% market share in plain paper copiers.  Just four years later, their market share was down to 14% and most of the rest of the market was controlled by Japanese companies.[9]  While this was the most dramatic example of the FTC’s and Department of Justice’s (DOJ) abuse of U.S. companies’ property rights in technology, it was hardly an isolated incident.  The FTC/DOJ brought more than 100 of these cases and gave away the technology associated with over 50,000 patents.  The result was that the U.S. transferred its cutting edge technology to Japan and many U.S. companies found themselves unable to compete with the Japanese, because the Japanese did not have to spend the money on R&D or the large initial cost of marketing for a new product.  A MITI study substantiates that most Japanese companies took advantage of this traitorous policy by the U.S. government to catch up with U.S. companies technologically.[10]  Once again Rand proved herself prescient.

American companies’ response was to forego obtaining patents in the 1970s and this did not change until the 1980s.  In the late 1990s there was a renewed attack on inventors.  Instead of using antitrust law and going after large corporations, the new attack has been a crony capitalist scheme to create a playing field that only benefits large, politically connected companies.  Among the many changes to US patent laws since 2000 are the requirement that all patent applications be published, the change from a first to invent to a first to file patent system, the Supreme Court not allowing patent holders to enforce their rights through an injunction, and the introduction of three different systems to attack the validity of a patent administratively.  This is a more focused attack on the profession of inventing than the assault of the 1970s.  In the late 1800s 85% of all patents were licensed by their inventors in the US.  Late 19th century U.S. inventors increasingly operated as independent inventors who extracted returns from their discoveries by licensing or selling their patent rights.[11]  Among these inventors were Edison, Bell, Tesla, etc.  “An astonishing two thirds of all America’s great inventors in the nineteenth century were actually NPEs” (Non-Practicing Entities).  Today’s system makes the cost and uncertainty of inventing far too risky for all but the most wealthy inventors.  Most large companies practice a policy of purposeful ignorance of other people’s patent rights and rely on the fact that litigation is too expensive for independent inventors and small companies to prevail in court.  If you asked the success rate for independent inventors (People who just create and sell their inventions) to people in the industry, you would hear somewhere around 2%.

But as Rand pointed out the attack on patents is not limited to socialists.  There has been a concerted attack on patents by Libertarians and Austrian Economists.  One of the best known proponents of this point of view is Stephen Kinsella.  They argue that property rights are not about creation, not about owning yourself and the product of your labor, but about scarcity.  According to them, patents and copyrights create artificial scarcity.  Their argument fails even if you believe that property rights are based on scarcity, because it takes real resources to create inventions and real resources to distribute these new technologies.

The press has also joined in this all out attack on patents, labeling anyone who does not manufacture their invention a “patent troll.”  This attack includes so-called free market media outlets including Forbes and the Wall Street Journal.  These attacks ignore Adam Smith’s idea of the division of labor, ignore that many of our most revered inventors in history meet their definition of a patent troll, and ignore that many large manufacturing companies enforce or license inventions that they do not manufacture.  But the goal of these articles is not logic, but to create a narrative to eliminate the profession of inventing.

The legal attack on the profession of inventing is not limited to destroying the property rights of inventors, but also includes limiting inventors’ access to capital through laws like Sarbanes Oxley.  However, the people who hate human progress and hate humans are not content to just stop inventors, the engine of human progress, they want to roll back the technology of the last two hundred years.  For instance, they want to outlaw DDT, they want to outlaw fossil fuels, and they want to outlaw private vehicles.  Environmentalists have the stated goal of forcing humans back to the state of “sub-humans”, meaning people without technology.

This is why Galt said his profession, inventor, would be one of the first to disappear on the way back to the sub-human.  The first step in this process is to stop new technologies from developing and the second step is to roll back the technology that has already been developed.

All human creations can be divided into art and inventions, with one having a subjective result and the other having an objective result.  Rand was an artist and philosopher, while Galt was her mirror image of an inventor and philosopher.  Inventions are the result of man’s mind trying to fulfill his needs.  Property rights for inventions are a fairly recent development and correspond generally with the escape of mass numbers of people from the Malthusian Trap.  This has made patents a key target of those who hate human progress.  This presents and opportunity for the Atlas Society and Objectivist to differentiate themselves from other so-called free market organizations and to stand up for the Galt’s of the world.

 

 

Suggested Actions and Further Research

This talk is a small part of the work I have been researching in what economists call ‘New Growth Theory.’  This area of economics recognizes the central nature of man’s mind in producing wealth.  As a result, it presents the possibility of being able to define a school of economics that is consistent with Objectivism.

 


[1] Rand, Ayn, Atlas Shrugged, Introduction to the 35th Anniversary Edition.

[2] Rand, Ayn, Atlas Shrugged, Introduction to the 35th Anniversary Edition.

 

[3] “The Moratorium on Brains,” The Ayn Rand Letter, I, 3, 5

[4] Evans, Harold, They Made America, Little, Brown and Company, 2004, pp. 49-50.

[5] Rand, Ayn, Capitalism: The Unknown Ideal, Signet, New York, 1967, p. 130.

[6] Rand, Ayn, Capitalism: The Unknown Ideal, Signet, New York, 1967, p. 130.

[7] Lemly, Mark A., “The Myth of the Sole Inventor”, March 2012, Michigan Law Review, http://www.michiganlawreview.org/assets/pdfs/110/5/Lemley.pdf.

[8] Rand, Ayn, Capitalism: The Unknown Ideal, Signet, New York, 1967, p. 133

[9] Mark Blaxill, Ralph Eckardt, The Invisible Edge: Taking Your Strategy to the Next Level Using Intellectual Property.

[10] Mark Blaxill, Ralph Eckardt, The Invisible Edge: Taking Your Strategy to the Next Level Using Intellectual Property.

[11] Henry R. Nothhaft (Author), David Kline (Contributor), Great Again: Revitalizing America’s Entrepreneurial Leadership

 

 
Another Libertarian Argument Against Patents Bites the Dust

Libertarians and Austrians, including such organizations as the CATO Institute, Von Mises, and the Wall Street Journal, have put forth a number of arguments against patents and intellectual property.  These arguments include that ideas (an invention is not just an idea, but I will let that go) are not scarce and therefore patents are not real property rights, patents are monopolies, patents inhibit the growth of technology, patents require the use of force to enforce one’s rights, patents are not natural rights and were not recognized as so by Locke and the founders, among other arguments.  I have discussed most of these arguments earlier and will put the links in below.  One of their favorite fall back arguments is that patents limit what I can do with my property.  For instance, a patent for an airplane (Wright brothers) keeps me from using my own wood, mechanical linkages, engine, cloth, etc. and building an airplane with ailerons (and wing warping).  This according to the libertarian argument is obviously absurd.  After all it is my property.  Here is an article Scarcity, Monopoly, and Intellectual Property on the Von Mises website where you can see almost every variation on the arguments mention above either in the article itself or in the comments.

Can I do whatever I want to with my property, or are there restrictions?  Well when I buy a book, a movie, or a song, it does not give me the right to make unlimited copies of them.  I have a property right in the physical book, but not the rights (copyrights) to make copies.  Of course, many Libertarians think copyrights are absurd also, so let’s look at another example.  Let’s assume you own your house and land outright.  Does that give you the right to do whatever you want to with you land?  Most likely, your land has easements for utility lines, such as water, gas, sewer, electricity.  You are not allowed to do anything that interferes with those easements.  You might object that I don’t own the easement, so this is a bad example.  So let’s say you own a bulldozer, does that give you the right to bulldoze my apple orchard and build a house there?  It is your property after all and according to the libertarian argument you are allowed to do whatever you want to with your property.  You might object, that of course the libertarians did not mean that you could take advantage of my property to build on.  Of course that begs the question, what is property?  If a patent and copyright are property rights, then this is exactly the same situation.  Another example where you are prohibited from doing something with your property, is in the case of water drainage.  In particularly wet areas of the US you are prohibited from moving the earth on your land so water drains onto your neighbors property more freely – and no this is not an EPA rule, this is common law property rights.  In parts of the country where water is scarce you are prohibited from damming up water on your land.  If you buy land in a residential neighborhood you are prohibited from setting up a pig farm.  Just because I own a gun, doesn’t give me the right to go around shooting people.  The libertarian argument that patents are not real property rights because they prevent others from doing something with their property fails even the most cursory review.

One of the common themes that runs throughout all Libertarian arguments against patents is that Libertarians’ do not seem to know what property rights are, or how they arise.  Here is a post on point, Property Right, Possession, and Objects; this post not only explains the proper basis of property rights, but why the Libertarian point that property requires possession is a fallacy.  Libertarians have failed to provide a clear definition of what property rights are and how they arise.  In fact, most anti-patent libertarians believe property rights are a useful social convention for distributing scarce resources.  This is interesting, because they can become so adamant about what is their property.  But nothing in this concept of property has anything to do with RIGHTS.  If another, better system comes along for distributing scarce resources, then your property is gone.

Property rights do not give the owner the right to do whatever they want with their property.  The source of property rights is creation, not the idea that it is a socially useful convention.  Patents recognize the metaphysical fact that the inventor is the creator of his invention and are completely consistent with other property rights in prohibiting an owner of other property from using it to build his invention.

 

 

Below is a list of other Libertarian arguments against patents and why they fail.

 

Inventions are not scarce:

Scarcity – Does it Prove Intellectual Property is Unjustified? 

 

Patents are monopolies

Patents: Monopoly or Property Right a Testable Hypothesis 

If patents are a monopoly, as some suggest, then it should led to certain outcomes.  A close examination shows that none of the supposed monopoly effects result from granting patents.

 

Monopoly/Rent Seeking vs. Property Rights/Intellectual Property

This post explains the characteristics of a monopoly and a property right and poses three questions to show the difference.  Patents fit all the characteristics of a property right and none of a monopoly.  Note that professional license, such as a law license has some of the characteristics of a monopoly.

 

More on the Myth that Patents are Monopolies 

This post contains a number of quotes from philosophers explaining that patents are not monopolies.

 

The Myth That Patents are a Monopoly 

This post compares the definition of a monopoly to the rights obtained with a patent.  It shows that the rights obtained with a patent do not confer a monopoly.

 

Patents are Natural Rights 

This post traces the ideas of Locke and William Blackstone to show patents and copyrights are natural rights.

 

Patents inhibit the growth of technology:

Source of economic growth

This post shows that those countries with the strongest patent systems are the technological leaders of the world Patents: Monopoly or Property Right a Testable Hypothesis

 

Patents require the use of force

This is one of the more absurd arguments by libertarians.  All property rights are enforced by the government’s use of force.  If someone trespasses on your land or steals your car, the government threatens or uses force to get it back.  The same is true for patent, which are property rights in inventions.

 

 
Natural Rights: Objective, Subjective and Volition

I often have people say Natural Rights do not exist.  Then they point to something like the Earth and state the Earth is a sphere – that is real, the mass of the Earth is real and can be measured, but the Right to Property or the Right of self ownership are not real, they don’t exist in nature and there is nothing natural about them.  A similar complaint is that Natural Rights are subjective, while the mass of the Earth is objective.

This sort of argument represents an extreme empiricism point of view and confuses objective with subjective with volitional.  Here are the definitions of these words from web based dictionaries.

Objective: (of a person or their judgment) not influenced by personal feelings or opinions in considering and representing facts.

Subjective: based on or influenced by personal feelings, tastes, or opinions.

Volition: 1) the act of willing, choosing, or resolving; exercise of willing: She left of her own volition. 2. a choice or decision made by the will.

Note that a choice can be objective or subjective but both are exercising one’s will.  One can choose to not believe the world is a sphere (technically a spheroid and not a perfect spheroid).  One can choose to ignore the objective facts and contend the Earth is flat.  This does not make the decision to understand the Earth is a spheroid subjective.  Note the Catholic Church choose to believe the Sun rotated around the Earth, despite the objective facts.  Global warming (AGW) prophets ignore the facts every day.  It is clear that just because something is volitional does not make it subjective.

But what about Natural Rights or ethics, there are no objective facts involved according to these people.  As we established above, just because something is volitional (i.e., a choice) does not make it subjective.  Euclidean Geometry (EG) is not based on any objective facts.  It is a purely logical system and devoid of any empirical facts, does that mean it is subjective?  There have never been any two perfectly parallel lines that go on forever and finding or not finding such lines is irrelevant to EG.  Does this mean that Euclidean Geometry is subjective?  Does it mean it is not real?  Well the answer to any problem in EG is not based on personal feelings or opinions, it is based on facts, but not empirical facts.  But is EG real?  Well certainly the mathematical system of Euclidean geometry exists.  You might object that EG is not based on empirical facts, but it is influenced by them.  Two perfectly straight parallel lines might not exist in nature, but close representations of them do exist and are used in construction and numerous other area’s every day.

The extreme empiricist wants to deny any higher order concepts exist.  So to the extreme empiricist the number four does not exist.  Four oranges exist and four nails exist, but four does not exist.  This sort of thinking, would deny the existence of gravity.  Things fall to the Earth and the Earth rotates around the Sun, but gravity is not an empirical fact; it is a scientific theory.  A scientific theory is a model of nature that explains and predicts many different empirical facts.

Locke explained Natural Rights in terms of a “state of nature.”  He stated that when man lived by himself, he necessarily owned himself and the products of his labor.  Locke’s theory of Natural Rights explains why slavery is illegal, where property rights come from, why theft, murder, and assault, are illegal.  Almost all of our common law is based on Natural Rights.  It is an extremely powerful theory, much like Newtonian gravity and motion, or evolution.  The Marxists attacked Locke based on the idea that people lived in groups.  This is an intellectually dishonest sleight of hand.  Locke was not making an empirical argument, he was making a logical argument.  It is the same as Euclidean Geometry starting with the idea that two parallel lines never intersect.  The power of Locke’s ideas is undeniable.  The results were the creation of the industrial revolution, unparallel reduction in human suffering, the elimination of slavery and the elimination of force as an accepted method of settling disagreements.

Ayn Rand explained that values are only possible to living things, because life faces the metaphysical choice of life or death.  Ethics is the selection of those rules consistent with life.  The ethics of a human being are different than the ethics of a tree.  Man is the only species that does not have a built in ethical system or instinct.  Man is volitional, so he can choose an ethics of death.  However, such an ethical system is a contradiction in terms, since only something that is alive can have values.  Ethics is based on the fact of life and the only logically consistent ethical system is one that chooses life.  Humans are rational animals and therefore must have an ethical system consistent with their nature.  Since reason is a personal attribute (not collectivist), ethics is about a set of rules that allow individuals to exercise their attribute that is necessary for survival.  Thus any ethical system that limits or undermines man’s reason is inherently an ethics of death, which is a contradiction in terms.  This means that man must own himself, because the ability to think without the ability to act is meaningless.  Now we are back to Locke.

Natural Rights and ethics are based on objective reality.  You can choose to ignore these facts, just as you can choose to ignore gravity, but you cannot escape the reality that to do so is to choose death in both cases.

 
CLS v. Alice Oral Argument

Reading the transcript of the oral argument at the Supreme Court in this case is like listening to bunch of stoned college freshman debating Jonathan Livingston Seagull.  Not one person involved in the discussion would pass a first semester law school class in patent law.  None of the people involved are patent attorneys, none of them have a solid technical background, none of them understand how a computer works, none of them of legally or factually competent to be patent attorneys.  Everyone of the people involved in this oral argument should have recused themselves as incompetent

Alice’s attorney failed for three reasons: 1) he is not a patent attorney, 2) he tried to make sense of the Supreme Court’s earlier decisions, which a full of logical contradictions, 3) he failed to define what an invention is and what an abstract idea is.  CLS’s attorney was unscrupulous and played fast and loose with the law and the facts as I will explain below.

Because the oral argument was so incoherent, I will just highlight the parts that I found outrageous, interesting, or nonsensical.

Abstract Idea:  Justice Breyer is using the technique of all charlatans and refusing to define what an abstract idea is.  He should be thrown off the court for this stunt.  The abstract idea exception to 35 USC 101 is illogical.  Any truly abstract idea would not meet the requirements of 35 USC 112 and that is where this issue should be dealt with.  But Justice Breyer is not interested in logic, he likes using an undefined phrase that he can manipulate to attack any patent.

Justice Breyer’s use of analogies is against the law.  An invention is defined by its claims and the claims must be taken as a whole (35 USC 101 and Conservation of matter and energy).  The reason Breyer uses analogies is because he is too stupid to be able to understand the actual invention and is incapable of reading a claim.

Here is an example of this

I mean, imagine King Tut sitting in front of the pyramid

10 where all his gold is stored, and he has the habit of

11 giving chits away.  Good for the gold, which is given at

12 the end of the day.  And he hires a man with an abacus,

13 and when the abacus keeping track sees that he’s given

14 away more gold than he is in storage, he says, stop.

15 You see?

16  Or my mother, who used to look at my

17 checkbook, when she saw that, in fact, I had written

18 more checks than I had in the account, she would grab

19 it.  Stop.  You see?

20  So what is it here that’s less abstract that

21 the computer says, stop?

 

Using analogies to inventions is completely useless.  The law requires the invention be evaluated on the patent, not on some absurd analogy.  I warned Alice about this.  Alice’s council should have refused to deal in hypotheticals and pointed to the law.  They also should have defined what an invention is and what an abstract idea is.  An invention is a human creation that has an objective result.  Here Alice’s invention is a specially programmed computer.  Those do not exist separate from man.  Therefore Alice’s invention is a human creation.  Alice’s invention has an objective result of affecting a transaction if all the conditions are satisfied and not affecting a transaction if any of the conditions are not satisfied.

 

Here is an excellent analogy to the absurdity of Justice Breyer’s statements that using a computer to implement the invention is irrelevant, by my good friend and patent attorney Peter Meza, “A new idea for a current mirror does not become patent eligible merely by tacking on a transistor to carry it out.”

 

Another idiotic statement by Breyer when Alice’s counsel suggests Breyer’s analogy is caricature.

 

JUSTICE BREYER:  Of course it’s a

20 caricature.  It’s a caricature designed to suggest that

21 there is an abstract idea here.  It’s called solvency.

There is an abstract idea in every invention.  That is like saying the LASER is abstract because it uses the ‘abstract idea’ of stimulated emission.  Breyer is an idiot.  He uses analogies because he is totally incompetent in the technology, so he has to bring up something he does understand.

 

Justice Sotomeyer seems to be creating a new exceptions to 35 USC 101

 

JUSTICE SOTOMAYOR:  I’m sorry.  But ­­ but

20 what it appears to be, it sounds like you’re trying to

21 revive the patenting of a function.  You used the word

22 “function” earlier, and that’s all I’m seeing in this

23 patent is the function of reconciling accounts, the

24 function of making sure they’re paid on time.  But in

25 what particular way, other than saying do it through a

1 computer, is this something new and not function?

 

Was there ever a rule against patenting a function.  Patent law allows, actually requires that well known complex functions not be described in detail.  Thus we do not claim the transistors, resistors, capacitors in a low pass circuit or a transceiver.  Claiming a low pass filter is claiming a function: claiming a transceiver is claiming a function.  These Justices are idiots.  The function of error correction code is to correct errors.  A patent on an error correction code is a patent on the function of correcting error in the transmission of data.  The claims do not recite I claim intermediated settlement (whatever that is – note this is not a standard term used in banking)

 

Justice Scalia seems to be slowly learning some patent law.  Here he recognizes that this case in not about novelty.

 

JUSTICE SCALIA:  Well, I’m not saying use a

5 computer is ­­ is much of a novelty.  I mean, that’s ­­

6 that goes to whether it’s novel or not.  If you just say

7 use a computer, you haven’t invented anything.  But if

8 you come up with a serious program that ­­ that does it,

9 then, you know, that may be novel.  But that’s a novelty

10 issue, isn’t it.

 

Note the claims never say “use a computer” but these people are too ignorant to read claims.

 

Justice Kennedy shows he knows nothing about patent law.  Alice’s attorney should have force him to analyze the claims.  He should have said to Kennedy and Breyer the invention is defined by the claims, if you wish to discuss this invention then you must look at the claims and tell me what it is you are referring to.

 

 JUSTICE KENNEDY:  Suppose I thought ­­ and,

9 again, it’s just a thought because I don’t have the

10 expertise ­­ that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend.  Suppose I thought that.

 

Here both Alice’s attorney and Justice Sotomeyer, who is suppose to be a copyright attorney, prove their ignorance of a concept any law student taking copyrights should know the answer to – my only caveat to this is perhaps this was a backhanded way of saying Alice never wrote any code.  While CLS makes this claim, I seriously doubt it is true.

 

 JUSTICE SOTOMAYOR:  Is your software

15 copyrighted?

16  MR. PHILLIPS:  No, I don’t believe so.

 

Of course the software is copyrighted.  This is the incompetent leading the incompetent.

 

Alice’s counsel attempts to force Justice Kagan to look at the claims, but she proves her ignorance of patent law by ignoring the claim limitations.

 

 MR. PHILLIPS:  I’m saying both actually.  I

15 mean, I’m making both of those arguments.  I ­­ I

16 believe that if you analyze the claims and you don’t

17 caricature them and you don’t strip them out of the

18 limitations that are embedded in there, this is not some

19 kind of an abstract concept.  This is not some kind ­­

20 it’s not an abstract idea.  It’s a vary ­­

21  JUSTICE KAGAN:  So putting the computer

22 stuff aside completely ­­

 

Here Alice’s attorney attempts to get back on track.

So my suggestion to you would be follow that

15 same advice, a liberal interpretation of 101 and not a

16 caricature of the claims, analyze the claims as written,

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process.  If you ­­

 

This might be a hopeful sign.  Justice Scalia is pointing out that not all the Justices agree on this interpretation of an abstract idea.

 

JUSTICE SCALIA:  And four is not five

10 anyway, right?

11  MR. PHILLIPS:  That’s true.

12  JUSTICE SCALIA:  Four is not five.

 

Another hopeful sign by Justice Scalia.

 

JUSTICE SCALIA:  By the way, we ­­ we have

16 said that you can’t take an abstract idea and then say

17 use a computer to implement it.  But we haven’t said

18 that you can’t take an abstract idea and then say here

19 is how you use a computer to implement it ­­

 

Justice Kagan proves she can’t read a claim or a specification and has no intention of doing so.

 

JUSTICE KAGAN:  Well, how are you saying the

5 how?  Because I thought that your computers ­­ that your

6 patents really did just say do this on a computer, as

7 opposed to saying anything substantive about how to do

8 it on a computer.

 

Justice Kagan proves she is incapable of reading claims or the patent statute

 

 JUSTICE KAGAN:  No, but exactly.  I mean,

22 the claim would have said something along the lines of,

23 you know, there’s this process by which people order

24 products and we want to do it over the Internet, we want

25 to do it electronically, and we will use a computer to

1 do that, to essentially take the process of mail order

2 catalogues and make it electronic.

 

 

Mr. Phillips lies to himself and the court about his ability to write claims.  Mr. Phillips is not a patent attorney and I am sure has never written a claim in his life.  He does not have the technical background to write claims and does not have the legal knowledge to do so.

 

 MR. PHILLIPS:  I could certainly ­­ I think

4 I could write a claim ­­ a set of claims that I believe

5 would satisfy 101.  And ­­ and to the extent that

6 you’d ­­ that you’d think those are no different than

7 the ones I have here, then my argument is simply I think

8 I satisfy 101 with the claims we have before us,

 

Here is blatant lie by Mr. Perry.

On the abstract idea, Justice Ginsburg, you

8 asked Mr. Phillips what’s the difference between hedging

9 and this claim. There is no difference.  This is

10 hedging.  It is hedging against credit default rather

11 than price fluctuation, but it is simply hedging.

 

The definition of hedge is “Making an investment to reduce the risk of adverse price movements in an asset.”  Nowhere in Alice’s claims is there any investment to reduce the risk of adverse price movements.  Mr. Perry should be disbarred.

 

 

Another blatant lie by Mr. Perry

This claim has simply two steps.  It’s very

18 simple.  “First, debiting and crediting on a realtime

19 basis the relevant shadow records; and second, by

20 periodically affecting corresponding payment

21 instructions.”

 

The patents involved are USPNs 5970479, 6912510, 7149720, and 7725375.  All of the claims require more than Mr. Perry’s lie.  He also shows he does not understand the difference between the claims and the specification. He should be disbarred.

 

 

Justice Roberts is on the right track but proves he is incompetent to rule on patent cases.

 

CHIEF JUSTICE ROBERTS:  Well, that’s a

25 little more complicated.  He referred us to Joint , which is not a change in how

2 computers work.  But it is ­­ constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected.  And just looking at it, it looks

5 pretty complicated.  There are a lot of arrows and

6 they ­­ you know, different things that go ­­

 

 

Mr. Perry in the quote below has attempted to redact the whole specification.  Since Mr. Perry is not a patent attorney perhaps he doesn’t understand the claims have to be supported by the specification.

 

It’s 4 columns.

6 It’s less than five pages in the printed appendix that

7 actually pertains to this invention.  And it contains no

8 disclosure whatever.

 

 

Mr. Perry attempts to define what would be patentable.

 

MR. PERRY:  Your Honor, there are many

1 examples.  One would be a technological solution to a

2 business problem.

Mr. Perry isn’t this what Alice’s invention is?  Of course you are too ignorant to read the claims, so you wouldn’t know.

 

Justice Kennedy proves his ignorance of patents.  All inventions can be described as a method or an apparatus.

JUSTICE KENNEDY:  Well, I ­­ I ­­ in my

16 language, I’ve called that mechanical rather than

17 process.  Can you give me an example of process?

 

This admission by CLS should win the argument for Alice in a rational world – but this is not a rational world.

  MR. PERRY:  At a point in time in the past,

12 I think both of those (word processor/spreadsheet) would have been technological

13 advances that were patentable.

14  JUSTICE SOTOMAYOR:  How?

MR. PERRY:  Today ­­ because they would have

16 provided a technological solution to a then unmet

17 problem.

 

 

Mr. Perry is putting words in other people’s mouth that are clearly not true and demonstrating his lack of understanding of physics and inventions.  Every invention in the history of the world is a combination of known things/elements/steps because you can’t create something from nothing.  This is because of conservation of matter and energy.  In addition, section 112 requires that you explain your invention in language people understand, which means it has to describe the invention in terms of things that are known.

 And here we know that these patents don’t

1 claim anything that was not conventional, well

2 understood, and routine.  We went through that in great

3 detail, and Alice has never disputed a word of it.

“It is

10 possible to do the business methods of maintaining

11 accounts, adjusting accounts, and providing an

12 instruction without a computer or other hardware.”

 

It is possible to separate the seeds in cotton without a cotton gin, SO WHAT.

 

More stupidity from Mr. Perry.

We know from Benson, the Court’s seminal

20 computer implementation case, that if you can do it by

21 head and hand, then the computer doesn’t add anything

22 inventive within the meaning of the 101 exception.  That

23 is the holding of Benson.  And the Court reiterated that

24 in Mayo.

 

You can type by hand, you can do spreadsheets by hand.  Mr. Perry has just contradicted himself, but appears to be too technically incompetent to understand this.  Most likely so are most of the Justices.

 

Mr. Perry proves he does understand how claims of a patent work.  This is the sort of thing a first year associate in patent law should know.  Once again we have the incompetent leading the incompetent.  Alice’s invention cannot be implemented without a computer because of the need nearly real time communications.

 CHIEF JUSTICE ROBERTS:  What if ­­ what if

9 you can do it without a computer, but it’s going to

10 take, you know, 20 people a hundred years?  In other

11 words, theoretically, you can replicate what the

12 computer does ­­

13  MR. PERRY:  Two answers.

14  CHIEF JUSTICE ROBERTS:  ­­ but it’s

15 impractical without looking to do it on the computer?

16  MR. PERRY:  Mr. Chief Justice, first, these

17 claims literally read, as Alice reads them, on a single

18 transaction between two parties, so it’s not 20 people

19 for a hundred years.  It’s one person sitting in a room,

20 so that’s not a problem.

21  Second, if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities, if you will, of a computer, then it would

24 have to be claimed, and there’s nothing claimed here.

25 All that is claimed ­­ and my friend is going to stand

 

No Mr. Perry the claims would never say any such thing.  But you are too incompetent to know that.

 

Mr. Perry proves he does not understand the purpose of 35 USC 112.  He is not a patent attorney.  Factually and Legally is not competent to be one.

MR. PERRY:  If I can answer in two steps,

20 Justice Kagan.  First in the negative:  What the

21 applicant or patentee must do ­­ must not do is simply

22 describe the desired result.  That would take us back to

23 State Street.  That would simply say:  I claim a magic

24 box that buys high and sells low or vice versa, I

25 suppose, I claim a magic box for investing.  That’s what

these patents do.

 

Listening to Mr. Perry is like listening to a teenage bull session.  Note that he makes a completely contradictory statement without even blushing.

MR. PERRY:  No, Your Honor.  I think the ­­

20 actual description of the programming is a 112 problem.

21 I agree with that, A 112 issue.  That is the realm of

22 the written description requirement.  What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results, simply say:  A magic box that does

25 intermediate settlement.

 

Justice Ginsburg clearly thinks she is a queen who can manipulate reality.  She is clearly too incompetent to even understand the contradictions and absurdities of her (the courts) own writings on patents.

 Justice Ginsburg, this Court’s precedents

3 are clear.  They are unanimous.  They just need to be

4 applied.  To suggest that there is confusion that needs

5 to be addressed by retreating, beating a retreat from

6 recent unanimous decisions, would simply reward

7 intransigence, difficulty, refusal to adhere to what are

8 clear precedents

 

 

Mr Verrilli proves he does not have the slightest idea how a computer works.  Any software is part of computing technology.  Patents are not about improvements, they are about whether the invention is novel (non-obvious).  Many designs around inventions are not improvements.  Mr. Verrilli should be fired for this clear ignorance of the law, but as a political appointee competence is irrelevant.

 GENERAL VERRILLI:  Mr. Chief Justice, and

17 may it please the Court:

18  An abstract idea does not become

19 patent­eligible merely by tacking on an instruction to

20 use a computer to carry it out.  A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim.  That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions.

1 That’s the test that we believe is most faithful to this

2 Court’s precedents in Bilski and Mayo.

 

Mr. Verrilli is incompetent to read the claims of a patent, so he ignores them.

 

At least Justice Ginsburg is beginning to understand that ‘abstract idea’ has never been defined.  Clearly Alice’s invention is a concrete invention, it solves a real problem using technology.  Clearly, the Obama Administration is doing the bidding of Wall Street and trying to ensure that there are no patents having anything to do with finance.  But neither the Obama Administration nor Wall Street can provide a rational explanation for this, so they resort to argument of “tradition.”

 JUSTICE GINSBURG:  I have a question about

3 how do you identify an abstract concept.  The ­­ a

4 natural phenomenon, a mathematical formula, those are

5 easy to identify, but there has been some confusion on

6 what qualifies as an abstract concept.

7  GENERAL VERRILLI:  We would define

8 abstract ­­ an abstract concept as a claim that is not

9 directed to a concrete innovation in technology,

10 science, or the industrial arts.  So it’s the ­­ it’s

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law.

 

Justice Sotomayor proves that she cannot understand basic logic.  If there are no business patents, then there are no patents.  All patents are directed to a business, people are not getting patents so they can hang a plaque on their wall.

 JUSTICE SOTOMAYOR:  If we were to say that

19 there are no business patents ­­

 

Patent law has now devolved to the state of politics.  As this oral argument proves, there is no logic, the statute is ignored, the claims are not analyzed, the only real question is who has the most political pull.  Patent law has become a cesspool in the same vein as anti-trust law, environmental law, and the Obama Administrations belief that they can change statutory law by Executive Orders.

 

 
Adam Carolla and the Podcast Patents: The Real Story

Adam Carolla is being sued by Personal Audio LLC and has created a FundAnything (crowdfunding site) campaign to raise money for his legal defense.  He is billing this dispute as a patent that will kill off podcasting.  This is the sort hyperbole people who don’t want to pay inventors engage in.  Note Mr. Carolla wants to be paid for his intellectual property.  Since Mr. Carolla is making the standard arguments against inventors who attempt to enforce their property rights, I will examine some of the arguments below.

1.  The inventor will not receive any of the profit from this lawsuit, only a shell company, whose only purpose is to sue people.

One of the inventors on the patent is a serial entrepreneur and is an owner of Personal Audio LLC who is suing Adam Carolla.  James Logan founded MicroTouch Systems in the 80s and served on the on the Board of Directors of Andover.net, the company that acquired Slashdot back in 1999.  He founded, Personal Audio, in 1996.  The original company was Personal Audio Inc. and the patents are now owned by Personal Audio, LLC.  Personal Audio invested $1.6 million developing this technology.  As Mr. Logan points out, when inventors are paid for their inventions it reduces the risk of investing in new technologies.  This increases the willingness of investors to put money into inventions, which results in more advances in technology.  In addition, Mr. Logan explained that he and the company want to see podcasting thrive, because that will maximize their profit.  Killing off podcasting is not the goal of or in the interest of Personal Audio.  Mr. Carolla statements to the contrary are just nonsense.

 

Conclusion: Adam Carolla is spewing BS.

 

 

2.  The inventor never made anything.

As the inventor, James Logan, points out Tesla never made anything either.  Most of Edison’s inventions were sold to companies and he produced nothing, the same can be said of Bell and many of the great inventors of the US.  Mr. Logan points out that many inventors have no interest in manufacturing, marketing, distribution etc.  But today’s system forces inventors to work for a company.  You would think someone in the media would have read Adam Smith and understand division of labor.

In the late 1800s it was quite common for people to specialize in inventing and over 85% of those inventors who obtained a patent eventually sold or licensed it to a manufacturer.  Today the attack on inventors mean that even when inventors have a valid, issued patent that has been upheld in court (Personal Audio v. Apple), people like Mr. Carolla, argue they have the right to steal other people’s inventions.

Note that Mr. Carolla never makes anything.  He sells his comedy, which is just a bunch of words, until a recording device and a transmission device turns that into a product.  Perhaps actors and comedians should not be paid either.

Imagine if actors and authors could not sell their creations without first having a company turn them into a book, movie, or recording?  That is exactly what Mr. Carolla is advocating.

 

Conclusion: Adam Carolla is spewing BS.

 

 

3.  The invention was created by other people independently.

This is a common argument by people who don’t want to pay inventors.  The patent in question was applied for in 1996 and the Patent Office divided the original patent application into three or more patents.  The first patent issued in 2001, so the world has known about this technology for a long time.  This makes the claim of independent invention absurd.  But on top of that according to Mr. Logan these patents have been cited in over 1300 other patents.  Clearly the world was aware of his technology.  The idea of independent invention without knowledge of Personal Audio’s invention is absurd.   The US had a system for disputes between nearly simultaneous inventions until the passage of the American Invents not Act in 2011 and this process was rarely invoked.  The infrequency of this process was a major argument for changing our laws from a first to invent to a first to file.  Independent invention is a diversionary argument, to distract from the fact that people like Carolla want to steal other people’s work.

 

Conclusion: Adam Carolla is spewing BS.

 

 

4.  The patent is not valid and is overly broad.

This is a favorite of the leaches who do not want to pay inventors.  This patent was applied for in 1996.  No one had thought about podcasts at that time.  Few were thinking about sending large files or streaming files.  A high speed modem at the time was 64Kbaud and compression techniques were much more limited.  This invention was ahead of its time so it is very unlikely that there is prior art to invalidate this patent.  As a result of the invention being ahead of its time, it can validly ask for and receive fairly broad claims.  However, the claims do not cover all podcasts, as the hyperbole of Mr. Carolla and other suggest, they are directed to playlists.

Personal Audio LLC sued Apple over these same patents and won.  Apple already raised these issues in court and lost.  It is complete nonsense to suggest that these patents are overly broad and should never have been issued, without providing specific evidence that was not raised by Apple.  Clearly, Mr. Carolla has no respect for the law and more importantly no respect for inventors.

 

Conclusion: Adam Carolla is spewing BS.

 

 

5.  The Patent was applied for on March 4, 2009 and granted on February 7, 2012

This comes from TechDirt which has no compunction about lying about patents.  The patent was filed for in 1996.  TechDirt then argues that the Patent Office is allowing patents too fast.  Imagine if you built a house, bought a stock, or a car and it took three years to obtain title to it.  You would think you were living in a third world country, which is exactly what is happening to inventors.

 

 

 

Mr. Carolla is a hypocrite who thinks artists should be paid for their work, but not INVENTORS.  I bet if I start selling copies of Mr. Carolla’s performances he would sue me in a nanosecond.  He would talk about how I was stealing his work, but inventors are supposed to work for nothing.  Note all the above arguments apply to actors/comedians as well as inventors.

 
Interesting Academic Study on Value of Patents to Startups

This paper has some interesting points, HIGH TECHNOLOGY ENTREPRENEURS AND THE PATENT SYSTEM: RESULTS OF THE 2008  BERKELEY PATENT SURVEY.

We also report that for many startup companies, patents are an important part of the mix of strategies used by them to capture competitive advantage from their technology innovations. But this important role tends to be much more pronounced among biotechnology and “hardware” companies (including both medical hardware such as surgical devices, and IT hardware, such as computers and semiconductors) than among software and Internet startups.

Prior research shows that this small share of firms is disproportionately responsible for innovative output in the economy.

Firms that seek venture-funding appear to be patenting more actively prior to the funding event (and for the purpose of securing funding), and venture-capital investors appear much less willing to fund companies that hold no patents.

 

Here is another study on point Why VCs and Start-ups should Love IP

While having intellectual property increases the probability of success, those who manage intellectual property well have an even higher probability of success. In certain sectors, such as healthcare, data demonstrates the value of higher quality portfolios. In other sectors, such as telecommunications or information technology, the effect is less prominent – although still clearly and demonstrably present.

 

The book The Invisible Edge makes a broader point.

“Without intellectual property protection a business can have no sustainable advantage.”

 

 
CLS Reply Brief:  Alice v. CLS Bank Supreme Court

CLS’s Reply Brief is not only illogical it is filled with intellectually dishonest statements.  The lack of logic is not surprising given the Supreme Court’s confused and disorganized thinking on the subject, but the intellectual dishonesty is inexcusable.  Despite this a careful reading of CLS’s brief shows that their argument fails on its face.  If you don’t have a winning argument, confuse and overwhelm them.

CLS’s arguments boil down to Alice’s patent claims preempt the idea of an escrow account and they are a non-practicing entity to boot.

The claims asserted by Alice recite the fundamental economic practice of intermediated settlement or escrow, in which a “middleman” stands between the counterparties to a transaction and effectuates the transfer of entitlement once all conditions are satisfied.

There are so many problems in this statement it is hard to know where to begin.  First of all ESCROW has a definition: it is money, property, a deed, or a bond put into the custody of a third party for delivery to a grantee only after the fulfillment of the conditions specified.  The claims do not cover this situation.  The term ‘intermediated settlement’ does not have a well defined meaning.  You cannot find a definition for this term in the online finance dictionary.  So it clearly is not a fundamental economic concept.  CLS is using the charlatan technique of purposely blurring the definition of words.

Then CLS makes this statement:

Allowing patent claims like these would effectively foreclose the productive use of economic concepts and other fundamental principles in our increasingly computerized Information Age, in contravention of the Constitution and the Patent Act.

The claims are clear and if CLS wants to computerize an escrow arrangement it can do so.  This is just a lie that Alice’s patent preempts a fundamental principle and the lawyers who wrote this should be sanctioned for lying to the court.  Second the purpose of the Constitution is to protect the rights of Inventors.  No patent forecloses the productive use of any invention.  This is an attempt to confuse patent law property rights with anti-trust law.  Property rights provide for the owner the right to exclude others from using their property.  Ownership of a building or an invention does not foreclose economically productive uses of the property.

Here is another dishonest statement in CLS’s brief.

The economic concept of intermediated settlement is an abstract idea under the approach taken in Bilski and subsequently endorsed by the PTO.

Note the intellectual slight of hand here.  Alice did not claim the concept of an intermediated settlement.  Instead of dealing with the claims, CLS attempts to provide a broad generalization of the claims and then analyze the abstraction.  This is against the law and fundamentally dishonest.  The court must deal with the claims, not CLS’s self serving broad categorization of the claims.

 

Property Rights, Patents, and Monopolies

CLS and some judges are suggesting the blatantly false statement that patents are monopolies.  Patents are property rights.  Property rights are the result of creation, see John Locke.  This was recognized in common law and can be found in Sir William Blackstone’s Commentaries on the Laws of England.  For more information see Patents are Natural Rights http://hallingblog.com/patents-are-natural-rights/.

Antitrust law is never applied to a property right.  It only can be invoked based on how property rights are used.  Enforcement of one’s property rights in court cannot be consider a violation of antitrust law.  This whole line of reasoning is straight out of a Marxist text and should not be tolerated.  But on top of it Alice’s patents do not give it property rights in electronic escrow accounts.

 

Definitions

I have often stated that using loose definition is the handmaiden of charlatans and tyrants and CLS seems to be quite good at it.

Laws of nature, natural phenomena, and abstract ideas are not patent-eligible under this Court’s established construction of 35 U.S.C. § 101. The asserted claims of Alice’s patents are ineligible under that standard because they attempt to monopolize the abstract idea of intermediated settlement.

First of all property rights do not monopolize anything.  This line of reasoning by CLS is straight from Marxist dogma.  CLS and the courts have thrown around the phrase abstract idea but failed to define it.  Perhaps Thomas or Scalia will demand a definition.

Let’s examine what a reasonable definition of an abstract idea would be.  Some of the potential definitions of “Abstract” from Dictionary.com are provided below:

1. Considered apart from concrete existence: an abstract concept.

2. Not applied or practical; theoretical. See Synonyms at theoretical.

3. Difficult to understand; abstruse: abstract philosophical problems.

4. Thought of or stated without reference to a specific instance: abstract words like truth and justice.

5. Impersonal, as in attitude or views.

6. Having an intellectual and affective artistic content that depends solely on intrinsic form rather than on narrative content or pictorial representation: abstract painting and sculpture.

Clearly the first or second definitions appear to be the closest to what the Supreme Court means when speaking of patents.

Now here are some of the definitions of “idea” from the same source.

1. Something, such as a thought or conception, that potentially or actually exists in the mind as a product of mental activity.

2. An opinion, conviction, or principle: has some strange political ideas.

3. A plan, scheme, or method.

4. The gist of a specific situation; significance: The idea is to finish the project under budget.

5. A notion; a fancy.

The first definition appears to be the most appropriate.  So what we end up with is a thought or conception that is separate from concrete existence or not applied to the practical.  In the broadest sense of the word, every patent defines an invention that has been abstracted.  An invention by definition is an abstraction or a category of things.  If this is what the judges mean, then the standard is complete nonsense, since it negates every patent.

If we use the definition of an Abstract Idea given above “a thought or conception that is separate from concrete existence or not applied to the practical”, then every invention that meets the requirements of 35 USC 112 first paragraph is not an Abstract Idea, since this section requires that the invention be described in a manner so one skilled in the art can practice the invention.  Something that can be built and used (practiced) is concrete and applied, therefore it is not an abstract idea.  The ABSTRACT IDEA exclusion to 35 USC 101 should be dropped, because any logical definition of an abstract idea is excluded by 35 USC 112, first paragraph.  It should also be dropped, because, Judges should not read into statutes things that are not there.

A computer is not an abstract idea, it uses electrical power, generates heat, causes electrons to move.  Those are all real world effects.

 

Another poorly defined term is used by CLS in this statement.

The claims asserted by Alice do not include “significantly more” than the abstract idea of intermediated settlement, such that they could be patent eligible under Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012). Alice fails to come to grips with the analytical approach this Court articulated in Mayo, which requires an “inventive concept.”

First of all the patent statutes do not discuss an inventive concept.  Second of all, the phrase ‘inventive concept’ is not defined in the brief, statute, regulations, or by the Supreme Court or any other US court.  Courts do not have the right to reinvent statutes.  The requirements for a patent are clear and substituting another term for what the statute says is illegal and should cause any judge to be impeached for subverting the Constitution.

 

Another poorly defined term used to smear patents by CLS.

Petitioner Alice Corporation Pty., Ltd. Contends that the CLS system infringes “business method” patents that broadly claim a computerized form of intermediated settlement.

Every patent is part of a business and any method patent is therefore broadly speaking a business method patent.  The first patent issued in the US was a method of making potash.  Since making potash is/was a business the very first patent issued in the US was a business method patent.  The people who argue against business method patents have failed to provide a consistent, clear definition of what they mean.

 

Bilski

CLS tries to paint Alice’s claims as being the same as Bilski.  This is nonsense.  Bilski admitted that their claims did not require a computer.  Alice’s claims specifically require computers and a communication network.

Note that a series of steps performed by hand can definitely be an invention.  The first patent issued in the US was for a method of making potash and all the steps were performed by hand.

 

Other Points Nonsensical Points in CLS Reply Brief

Alice suggests that its claims do not meet its chosen dictionary’s definition of escrow because they “do not prescribe that the electronic intermediary (or any other third party) receives any money or property.” Pet. Br. 47 (emphasis added). Of course, Alice’s claims do not preclude the receipt of money or property and thus would cover such activity. In any event, nothing in the concept of intermediated settlement requires the physical exchange of money or tangible property.

This shows a lack of understanding of patent law.  Either these lawyers should be fired as incompetent or they should sanctioned for lying to the court.  No patent claim precludes the use of something outside of the claim.  Alice’s claims do not cover the use of an electronic escrow.  Claims don’t preclude things, they define what is covered by the claim.  If my patent claim on a bicycle includes a shock absorber in the fork, it does not preclude having a solid fork.  It also means you can build a bicycle with a solid fork.  Here CLS is admitting that Alice’s claims do not preempt an escrow arrangement.  But like all charlatans they state it in such a convoluted way that it is hard to untangle the mess to see what it really means.

 

CLS quotes two Mark Lemley papers.  Mr. Lemley is not a patent attorney, has never written a patent claim in his life, is not legally or factually competent to practice patent law.  Mr. Lemley is a charlatan who spouts off recycled Marxist ideology applied to patents.

 
Are Patents too Vague?

Adam Mossoff takes on the common claim that patent are too vague in his paper THE TRESPASS FALLACY IN PATENT LAW, by Adam Mossoff, 65 Fla. L. Rev. 1687.  The argument is often framed as patents are not like real property where you know if you are trespassing another person’s property.  This analogy is flawed, he points out, because property rights in land are not limited physical trespass.  Property rights include time (future interest), use, and physical boundaries.  The proper analogy would be with the estate or all the property rights associated with land.  Then he points out that critics of patents actually have no empirical data on litigation involving all aspects of ‘real property’.  He also points out that real property disputes often turn on the meaning of arcane terms and arise because legal drafting in not an exact science or math.

I would add that most of the commentators on patents are not legally or factually competent in reading claims.  In addition, neither are most judges.  (See Is the Supreme Court Competent to Rule on Patent Cases?)    This is not because patents are vague or purposely obscure or overly formalistic.  Drafting claims is a skill that takes several years to become proficient with.  The same is true of being able to interpret a paper on electromagnetics or quantum mechanics and these are very precise sciences.

Most of the people complaining that patents are too vague are not interested in the truth, logic, or reason.  They want to destroy all property rights or they are crony capitalists that want a patent system that favors them, particularly against individual inventors and startups.

 

THE TRESPASS FALLACY IN PATENT LAW, by Adam Mossoff, 65 Fla. L. Rev. 1687

 
Business Method Patents: A Solution?

I have been particularly critical of the whole notion of business method patents.  Every patent is part of a business and any method patent is therefore broadly speaking a business method patent.  The first patent issued in the US was a method of making potash.  Since making potash is/was a business the very first patent issued in the US was a business method patent.  The people who argue against business method patents have failed to provide a consistent, clear definition of what they mean.

I have also defined an invention as a human creation with an objective result, while art is a human creation with a subjective result.  By objective result I mean that the invention has a repeatable result.  For instance, a patent for an incandescent light bulb always produces light when the correct electrical signal is applied to the light bulb.  Just because a person performs one of the steps in a claim does not make it invalid.  For instance, in the patent for the method of making potash a person performed many if not all the steps.  However, if the person is making a non-objective evaluation or decision as part of the method, then the process does not have a repeatable or objective result.  This is why most management theories are not patentable.  For instance, the popular SWOT (Strengths, Weakness, Opportunities, Threats) analysis relies on experts to define each of these points.  If you put different experts into the process then you get a different result.  On the other hand double entry accounting yields the same results no matter who is performing the process (as long as they apply it correctly), so it has an objective or repeatable result.

Using this standard I have found that a number of ‘business method’ patents that are invalid.  These patents rely on the use of subject matter experts to evaluate something and then provide input in the middle of a process.  This does not result in an objective, repeatable result.  Now if these experts’ subjective opinions are at the beginning of a process, then this may still provide an objective result.  For instance, if the SMEs provide a subjective 1-10 evaluation of certain Strengths in a SWOT analysis and the invention then processes these to determine the mean or rank them is some way, then this is an invention, because if the process receives the same inputs it will provide the same output, i.e, it is repeatable and objective.  Alternatively, if the SMEs are provided with processed information at the end of the process, then this is an invention.

 
Philosophy of Science

This paper explores the philosophy of science.  The philosophy of science is mainly concerned with metaphysics and epistemology, but it is not completely divorced from ethics.  This paper defines the necessary philosophical underpinning of science.  At the end of this paper I will show that the Copenhagen Interpretation of Quantum Mechanics is inconsistent with the philosophy of  science.  Note that I am not suggesting that every scientist holds or held this philosophy.

Identity: The fundamental principle of science is that A is A (Identity), meaning that things exist; they have certain properties; they always act in accordance with these properties; A does not suddenly become B without a reason.  Aristotle had three laws of thought: 1) Law of Identity, 2) Law of non-contradiction, and 3) Law of excluded middle.  It seems to me that the second and third laws follow from the Law of Identity.   Note for the present discussion we will assume that A is an inanimate object.

Causality is the second tenant of science meaning things happen for a reason or for every effect there is a cause.  This means that A is always A unless acted upon by another object/force.  For example, gold is always gold unless it is acted on by another object/force.  It means a body at rest stays at rest unless acted upon.  Causality and Identity result in repeatability.  In other words things in the same situation will act in the same way.  A mass acted upon by a certain force will accelerate in a consistent way.  Identity and causality provide the justification for experimentation.  If an experiment is correctly setup to exclude other factors (object/forces) then it will result in the same result, excluding measurement and experimental errors.  If any of these tenants were not true, then there would be not point to experimentation.  If a lead ball’s mass could suddenly change without any cause, then experimentation would never lead to repeatable results.  When we find out experiments are not repeatable, then we know that we have failed to account for a variable.  Note the Identity and Causality tenets are the rejection of superstition.

Experimentation: The goal of experimentation is to isolate causes and effects.  For instance, if we are to determine if the gravitational effect of an object on Earth is the same, independent of mass, we have to ensure that our experiment does not include other factors.  For example, we cannot allow wind resistance in our experiment.  This means the objects have to have an equal wind resistance, or better yet, we need to eliminate wind resistance in our experiment.

Since no experiment or measurement can be perfect, we take into account measurement/experimental errors.  Note that if these errors are truly random (Gaussian), then they will average out for a continuous random variable and significantly reduce for a discrete random variable.  If they are not random, then we have not properly setup of the experiment, meaning we have failed to account for a variable.  Note the experimental tenet of science requires that we can trust our senses.  This does not mean that our senses give us perfect information, but that the information we receive from our senses is also ruled by the Identity and Causality laws.

Theories: Identity and causality allow us to use logic and reason to categorize and predict results, or form hypothesis and theories.  Experiments are used to verify or disprove these theories.  Smaller theories can be built upon using logic to create broader theories.  For instance, inertia and Galileo’s law of falling can be applied to planets and tides, which is what Newton did in creating his ideas of motion and gravity.

A good scientific theory is one that explains and predicts many individual facts.  Every theory so far is incomplete and it is where experiment does not agree with theory that leads to the next big leaps in science.  Thus if we assume that heavier object are subject to a greater gravitational acceleration than lighter objects, but we find that lead balls of differing masses fall at the same rate, we know we need to revisit this hypothesis/theory.  This also means that there is an evolutionary or expanding nature to scientific theories.  Newton’s laws of motion and gravity refined and expanded upon Galileo’s theory of inertia and his law of fall.  Einstein’s relativity did not disprove Newton, it just refined and expanded on them at speeds near the speed of light and in regions of very large gravity.  Part of how we know that Einstein’s theory of relativity is ‘correct’ is that it is consistent with Newton in certain regions and with the body of facts that Newton physics explained.  There is a similar thing in mathematics, where we define over what range a statement is true.  For instance, if a*b=c, then b=c/a, where a is a non-zero real number.

This evolutionary, expanding nature of scientific theories is the difference between a real science and pseudo science (or at least a poorly formed science).  In a pseudo science a new theory can come along and predict totally different results.  For instance, under classical economics printing money (counterfeiting) has a negative effect on the economy.  Along comes Keynes and suddenly if the government prints money it causes an increase in wealth (GPD).

Perfect Knowledge: Does knowledge have to be perfect knowledge in order to be knowledge?  Often scientific theories are attacked because as being incomplete.  Every scientific theory so far is incomplete, because we don’t know everything about everything.  I am going to postulate that we cannot ever know everything because there is always a deeper layer of knowledge.  For instance, Newton explains the effects of gravity but not how it works.  In fact, Newton was greatly disturbed that his best explanation of gravity required action at a distance without some intermediate (corpuscle).  Knowledge is certainty that a fact or theory is correct within certain limits and therefore repeatable in science.  For instance, if a builder assumes that Earth is flat or described by Euclidean geometry will this inaccuracy cause any problems?  Even if the builder is constructing a building with a mile long foundation, the error of assuming the Earth is flat is less than two inches or much less than the underlying variation in the terrain.  On the other hand if I am sailing across the world or launching a spaceship and I assume that the Earth is flat, then I have a problem.  This is like the bounds in mathematics and as long as we know the bound of our knowledge it does not cause any problems.  On the other hand, discovering the bounds of our knowledge is where the really interesting science and engineering occur and how we expand the bounds of our knowledge.  The idea that knowledge has to be perfect seems to come from Plato’s idea of pure forms.  Physics makes it clear that Plato’s ideal forms do not exist and are not necessary for science or realism.  Attacking a scientific theory for failure to explain everything is meaningless, it is just saying we have not learned everything.  It is only a valid attack on a scientific theory if it predicts something that turns out to not be so – a contradiction.  Even then the contradiction may only occur within certain bounds or only matter within in certain bounds, in fact any well tested scientific theory will only be meaningfully incorrect within certain bounds.

In keeping with this idea of imperfect or lack of absolute knowledge, I am sure my thesis (philosophy of science) is not ‘perfect.’  As a result, I have tried to define the minimum requirements for the philosophy of science.  I have not for instance included Locke and Newton’s corpuscular ideas, which are really about their philosophy of how physics works.

Statistics as applied to physical sciences is not in conflict with the Law of Identity or Causality.  Statistics are a way of bounding our lack of knowledge about certain factors.  For instance, if you know all the initial conditions of a coin flip, you can determine whether it will land on heads or tails exactly.  In grad school in physics I had to solve a similar problem of a quarter slightly tilted to one side and given an initial velocity, will it land on heads or tails.  There is an exact solution, it is not random.  Statistics also deal with measurement errors and uncertainty in the conditions of the experiment.  None of this in anyway suggests that the Law of Identity or Causality is suspended.

Curve fitting: There has been a popular theory in physics that all we are doing is curve fitting and understanding is illusory and wrong.  Curve fitting is something engineers do when working from first principles is too complex.  For instance, we know that the resistance of a thermistor varies with temperature, but we cannot solve the relationship from first principles.  In this case we will take a number of measurements (experiments) and then just fit a curve so that we can covert an output resistance, actually voltage to a temperature.  Curve fitting is useful, but it does not provide an understanding of the underlying phenomena and is generally limited to very specific situations.  It is not the goal or what science does.  Science looks to understand underlying physical phenomena, not just model it.  Curve fitting can tell you the rate that an object will fall to Earth, but not why and it can’t tell you why this is related to planetary orbits.

Animate objects present additional challenges.  For instance, a tad pole turns into a frog.  Does this violate the law of Identity?  The answer is no because a tadpole never turns into a cat or something else.  But with animate objects it is necessary to apply the law of identity at a finer granularity.  For instance, are you the same person you were ten years ago?  Well all the cells in your body have completely changed and you are older, so probably you have some wrinkles and of course ten years of experience you did not have ten year ago.  The difficulty with animate objects is that they can use internal energy to change their position or state.  But when we look inside of the animate object we see that it acts according (sometime very complex) to the law of Identity and Causality.

Ethics: The philosophy of science does include an ethics, which is that we must report (record) data accurately.  Fudging the data in science is the greatest sin in science.  This is one of the reasons the proponents of Anthropomorphic Global Warming (AGW) cannot be taken serious.  Not only have they repeated lied and fudged the data but their advocates suggest this is okay in fact required.  It also why much of economic data can no longer be taken seriously.

The Copenhagen Interpretation (CI) of Quantum Mechanics (QM)

There was a great fight at the beginning of QM over how to interpret Schrodinger’s wave equation.  Einstein, Schrodinger and others never accepted the point particle statistical model (PPSM) of QM.  Nothing in the mathematics or experimental evidence required the PPSM of QM and certainly nothing required the CI model.  The main justification for the statistical approach to QM is the Heisenberg uncertainty principle.  If we can only know the location and momentum of a particle with certain precision then we cannot know the original state of a system exactly or the final state of the system exactly.  This is how I resolved the statistical nature of QM while I was in grad school in physics and I would bet that this is how most physicists think about this issue.  Note new research has shown problems with the uncertainty principle.  However, the CI does not resolve the issue this way.  The CI has never actually been well defined, but here is a rough sketch of their ideas:

a) negation of causality

b) negation of realism and

c) involvement of infinite and imaginary velocities or masses.

Note that part (a) directly contradicts one of the fundamental tenants of science.  You may think I am exaggerating, so here are some quotes:

Heisenberg[1] states clearly:

“The law of causality is no longer applied in quantum theory.”

In order to be coherent, physicists today should no longer try to find the cause of a physical phenomenon. According to Heisenberg’s statement, there is no cause, it is simple magic. Greenberger[2] uses the same expression and states simply, “Quantum Mechanics is Magic”.

Much more recently, following the use of the Copenhagen interpretation, Feynman[3] concludes:

“The theory of quantum electrodynamics describes Nature as absurd from the point of view of common sense. And it agrees fully with experiments. So I hope you can accept Nature as she is – absurd.”

Even worse, Mermin states that the results of those absurd interpretations are enjoyable. He[4] writes:

“The EPR experiment is as close to magic as any physical phenomenon I know of, and magic should be enjoyed.” (Whole section[5])

You may think the rejection of realism is also not true.  But here is another quote by Heisenberg.

“The next step was taken by Berkeley. If actually all our knowledge is derived from perception, there is no meaning in the statement that the things really exist; because if the perception is given it cannot possibly make any difference whether the things exist or do not exist. Therefore, to be perceived is identical with existence.”[6]

Clearly, the CI rejects the fundamental tenants of the science of philosophy.  We know that without causality the whole point of experimentation is meaningless – if anything can happen what is the point of an experiment.  The only logical result is that even the proponents of CI did not believe what they were saying.  However, the problems with the PPSI of QM keep compounding.  Below is a list of some of those problems.

1) Requires infinite velocities

2) Spin makes no sense for a point particles.[7]

3) Point Particles:  “Because point particles are assumed to occupy no space, they have to be accompanied by infinite charge density, infinite mass density, infinite energy density. Then these infinities get removed once more by something called “renormalization.” It’s all completely crazy.. But our physics community has been hammering away at it for decades. Einstein called it Ptolemaic epicycles all over again.”[8]

4) The Laser: “At the heart of laser action is perfect alignment of the crests and troughs of myriad waves of light. Their location and momentum must be theoretically knowable. But this violates the holiest canon of Copenhagen theory: Heisenberg Uncertainty. Bohr and Von Neumann proved to be true believers in Heisenberg’s rule. Both denied that the laser was possible.”[9]

 

Carver Mead, who studied under Feynman and worked closely with him had this to say about the CI.  “It is my firm belief that the last seven decades of the twentieth will be characterized in history as the dark ages of theoretical physics.”[10]

 


[1] Heisenberg, Werner, Physics and Philosophy, the Revolution in Modern Science, New York, Harper and Row, 1966, p. 88.

[2] Greenberger, Daniel, Discussion remarks at the Symposium on Fundamental Questions in Quantum Mechanics, Albany, SUNY, April 1984.

[3] Feynman, Richard P., The Strange Theory of Light and Matter, New Jersey, Princeton University Press, 1988, p. 10.

[4] Mermin, N. David, “Is the Moon There when Nobody Looks? Reality and the Quantum Theory”, in Physics Today, April 1985, p. 47.

 

[5] Marmet, Paul, Absurdities in Modern Physics: A Solution, http://www.newtonphysics.on.ca/heisenberg/chapter1.html#1.6

[6] Heisenberg, Werner, Physics and Philosophy, the Revolution in Modern Science, New York, Harper and Row, 1966, p. 84.

[8] American Spectator, Sep/Oct2001, Vol. 34 Issue 7, p68, Carver Mead, The Spectator Interview, http://freespace.virgin.net/ch.thompson1/People/CarverMead.htm

[9] American Spectator, Sep/Oct2001, Vol. 34 Issue 7, p68, Carver Mead, The Spectator Interview, http://freespace.virgin.net/ch.thompson1/People/CarverMead.htm

[10] American Spectator, Sep/Oct2001, Vol. 34 Issue 7, p68, Carver Mead, The Spectator Interview, http://freespace.virgin.net/ch.thompson1/People/CarverMead.htm

 
Guest Post: Stop the Destruction of Independent Invention

This is an open Letter by Randy Landreneau

Hello Friends,

The fight to stop multinational corporations from destroying the Patent System our Founders so intelligently created is coming to a head.  The Senate is expected to do something before the end of the month. I and some other inventors are going to Washington DC next week to meet with our Senators, and to do what we can to stop the further destruction of the American Patent System. We want as many inventors as possible to join us.

For any of you who aren’t up to speed, here’s the short version. Our Founders created the American Patent System much differently than patent systems in the rest of the world. The intent was that an individual from any walk of life would be able to own and benefit from that which he or she created. Since most innovation, and especially game-changing innovation, comes from individuals, not large corporations, the result of the American Patent System has been much more innovation from America than the rest of the world, and much greater economic success.

Effective innovation has been the reason for the economic success of America, but it is a threat to the vested interest. Large corporations would rather not have to worry about new products to compete with, and they would rather not have to deal with patent infringement lawsuits when they choose to act badly. The result has been serious efforts to change the American Patent System to something that is quite different than what was originally intended.

What is playing out right now is a very well-constructed campaign using misleading propaganda that has our politicians very close to destroying the American Patent System (as it relates to independent invention). The US House passed the Innovation Act faster than anyone thought possible. The Senate appears is trying to do the same. The only way to stop it is to get our Senators to see the truth.

The truth is that “Loser Pays” will make it virtually impossible for the typical independent inventor to defend a patent. Allowing “serial challenges” to issued patents will allow large corporations to bankrupt independent inventors and thereby eliminate competition. “Enhanced pleadings” and “limiting discovery” are further efforts to put patent holders at a disadvantage (see attached document). Everything in this legislation works against independent invention.

If there is any way you can come to Washington DC next week, please do it. I will be there Tuesday, January 22nd, but Paul Morinville will be there the 21st through the 23rd, and possibly the 24th also. We will work together, and go as a group to each other’s meetings where possible. We will inform you and support you in this effort. I am confident that we can make a difference. Please join us and help make sure independent inventors will not be shut out of America’s future.

If you can’t go, definitely continue to email and leave voice mails for your senators. This is easy – just go online, find them, go to their websites, hit “contact,” etc. Whether we win or lose this fight depends on what we do right now. Please help us win this battle.

 

 

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