Category: How to
Jacob Schmookler, who conducted the most extensive econometric study of patents, estimated the mean value of a patent as $80,000.00 in 1966.[1] Adjusting for inflation this would place the mean value of an issued patent at $506,000.00. This estimate seems reasonable based on other data points. For instance, Intel’s venture capital arm around 2000 would increase the valuation of any start-up they invested in by $1 million for each issued patent. Of course, not all patents are created equal and the very illiquid market for patents means that the value of any particular patent will vary significantly. If there were a strong secondary market for patents, we would not only have a better understanding of the value of an issued patent but also less variation. For more on how to create a strong secondary market for patents see Jump Starting a Secondary Market for Patents. (http://hallingblog.com/2009/11/16/jump-starting-a-secondary-market-for-patents/)
[1] Schmookler, Jacob, Invention and Economic Growth, Harvard University Press, Cambridge Massachusetts, p. 55, 1966.
For engineers and scientists it is easier to understand the major concepts of patent law from the perspective of natural rights, since it is consistent with their scientific training. Natural rights and science share the assumptions that the world is comprehensible and that reason plus observation can be used to understand how nature operates. A third assumption needed for this analysis is that a person owns themselves. This assumption is consistent with John Locke’s conception of natural rights.
Real Property
Property law results from the analysis that if a person owns themselves, then they own the product of their labor.[1] An example from United States history is the Homestead Act. The concept behind the Homestead Act is that land is not owned by anyone until it is improved by a person’s labor. Once the person has improved the land, then they are the owner. Similar concepts are used to define who owns a wild animal. Once a person owns property they can trade if for other property and this is the basis of a market economy.
This is my second post on the nonobviousness standard for patents (35 USC 103). The earlier post focused on the practical questions that an inventor and his attorney face when negotiating with the Patent Office (PTO). This post attempts to provide a rational approach to the nonobviousness requirement.
Once it has been determined that a patent claim is novel, step 10 in the flow chart, there are only two things that can make the invention nonobvious. One is a new result and the other is a new combination that has provides same result in the prior art. At step 12, we determine if the invention has a new result. For instance, Edison’s light bulb had a new result of a high resistance filament. This result is important because it makes it possible to build an economically
According to AIPLA the Patent and Trademark Office announced October 8, 2009, that it will rescind the claiming and continuations rules package that have been the subject of litigation in Tafas v. Kappos. GlaxoSmithKline and the USPTO, parties to the litigation, have agreed to request the Federal Circuit to dismiss the appeal in that case and to vacate the district court decision below.
This is excellent news and shows that Director Kappos is listening to the patent community. These rules would have been disastrous for independent inventors and start-up companies. They also would have increased the pendency time for patent applications. Hopefully this is a further sign that Director Kappos intends to undue the reprehensible damage Director Dudas did the USPTO.
The goal of this post is to describe how to prepare an Intellectual Property (IP) strategy document that shows your company is an IP expert. According to the book The Invisible Edge: Taking Your Strategy to the Next Level Using Intellectual Property, IP is the most important “sustainable competitive advantage.” There are numerous types of intellectual property, but this post is going to focus mainly on patents and trade secrets, because these types of intellectual property protect a company’s innovation. Innovation is the most important method of creating a sustainable competitive advantage. Innovating without protecting the innovation with patents or trade secrets is charity according to the authors of The Invisible Edge.
The first step in build a market dominating patent portfolio is to undertake a survey of the patent landscape in your marketplace. For more information on how to perform a prior art survey please see Competitive Analysis and Patent Portfolios . This analysis will show you where there are gaps in the prior art that can be exploited and also help stimulate your thinking about design options. Gary Boone, the inventor of the microcontroller, explains the advantage of surveying the prior art this way. “Most engineering design groups do not feel there is much to learn by reading patents. I feel that’s unfortunate, because there is a huge amount to learn from the accumulated five million issued patents, just picking up the U.S. patents alone.”
The only asset that technology start-up companies have is their intellectual property. Creating a strong patent portfolio and understanding the competitive landscape are critical to maximizing the market value of technology companies. A strong patent portfolio is also the company’s best barrier to entry.
Most companies that generate enough patents to justify an in-house patent counsel have a Patent Review Committee. The Patent Review Committee determines if an invention described in an “Invention Disclosure Form” is worthy of obtaining patent protection. The committee is usually made up of a business/marketing person, one or more technical people, and one or more patent attorneys. An inventor usually makes a short presentation to the committee based on the Invention Disclosure Form. Here are the top five reasons why Patent Review Committees result in second rate patent portfolios, hurt innovation, and increase legal costs.
Gary Locke, the U.S. Commerce Secretary, in an article in Journal Sentinel stated that the time it takes to issue patents is unacceptable. The article also points out the problem of patent office policy forcing examiners to reject applications at unprecedented rate. Secretary Locke also acknowledged that these problems have hurt the American economy. This is great news for inventors.
The only potentially bad news in the article is the statement that the patent office faces severe financial problems. This may mean higher fees in the future. Please read the full article at http://www.jsonline.com/business/54199852.html
This comment was posted by an Patent Examiner at Patent Prospector. The Examiner explains why he thinks the allowance rates are so low and his explanation is consistent with my post, Patent Allowance Rate Falls to 42%.
ALLOWANCE RATE
I believe that the allowance rate is artificially low, although not due to churning…at least not exactly.
I am a current examiner. Under Dudas, the PTO pursued a policy of “increased patent quality”. The way that the PTO enforced this quality initiative was by reviewing office actions. Not reviewing all office actions, mind you, but only reviewing allowances.
Unfortunately, the PTO failed to see the problem that they were setting up. An examiner is then left with two choices:
1) An examiner could generate rejections without ever incurring quality review, or
2) An examiner could generate an allowance that would be scrutinized by quality review and possibly find themselves assessed a quality review error.
So, it has been safer for an examiner to always reject…at least until very recently. There has been some loosening of the allowance quality review rules in recent weeks as it appears that “reduced pendency” is the new key motivation under Obama.
According to the AIPLA (American Intellectual Property Association) the allowance rate for patent applications in the U.S. fell to 42% in the first quarter of 2009.
This continues the trend of falling allowance rates that started in 2002. Why has the allowance rate changed so dramatically in the last six years? Sometime early in this decade, the USPTO started to define the “quality” of examinations by the allowance rate. The USPTO tracks the allowance rate of every examiner and grades the quality of their examinations by their allowance rate. If one examiner’s allowance rate is higher than the average allowance rate of the group they work in, their examination of applications will be considered to be of lower quality. If an examiner never allows any patent applications, they will be considered to have the highest quality examinations. This has created a perverse incentive for examiners.
For an update on the allowance rate click here.
The cost of a patent application usually comes in the early stages of commercializing your invention. This makes it difficult to estimate a return on obtaining a patent. If you do not have a revenue stream associated with the patent, then it is an extremely expensive speculative investment. So what can we do to reduce the risk on investing in patents?
Note that this post is based on free audio CD, titled How to Make Your Patents a WMD- Weapon of Market Domination. If you want a free copy of the audio CD click here.
For a businessperson to be able to make an informed investment decision, he needs to know the cost and timeframe the investment will require and compare them to economic benefits. Today I am going to present the costs associated with obtaining a patent in a traditional patent acquisition timeline. After this, I will discuss how these costs can be deferred to lower the risk of an investment in a patent.
Note that this post is based on free audio CD, titled How to Make Your Patents a WMD- Weapon of Market Domination. If you want a free copy of the audio CD click here.
In order to understand how these companies (see the article The Value of Patents: Case Studies) were able to create patents that were Weapons of Market Domination, you need to understand the legal rights you obtain with a patent. Under United States law, a patent gives you a right to exclude other from the manufacturing, importing, selling, or using your invention. Two key points in the previous sentence are the right to exclude. A patent does not give the right to do any of these things. The second key point is your patent right is limited to the United States. If you want patent protection in foreign countries, you will need to file for a patent in those countries.
The present proposal for patent reform, will do nothing to increase innovation, and is built on a foundation of sand. Pat Choate’s article, Patent Reform is ‘Anything’ But completely debunks the present patent reform proposals. So what would real patent reform look like? Here is my list of ten real reforms that will increase innovation and spur economic growth.
1. Double the Funding of the PTO
The absurd length of time and outrageous cost necessary to obtain title (a patent) to one’s invention is a national disgrace. If it took this amount of time and cost to obtain title to real property, we would assume you were discussing some corrupt third world country. The major goal for the USPTO should be an average time to a first office action of six months and average pendency of 1.5 years. Doubling the USPTO’s budget would be a good start. I suggest the funding be pulled from transportation projects. This would be a drop in the bucket for the pork laden transportation federal budget. An aggressively funded patent office results in real innovation and real increases in per capita income.
Recent Comments