State of Innovation

Patents and Innovation Economics

Equitable Estoppel: Another Excuse for Stealing Inventions

The Aspex Eyewear v.  Clariti case decided by the CAFC on May 24, 2010 used the excuse of equitable estoppel to allow Clariti Inc. to steal Aspex Eyewear’s invention in U.S. patent 6,109,747.  Aspex sent a letter to Clariti asserting that Clariti was selling products that were covered by three other of Aspex’s patents in 2003.  Aspex then sends a letter in 2006 that one of Clariti’s products is infringing the 6,109,747 (747 patent) and seven months later files suit against Clariti for infringement of the 747 patent.  The court found that this seven month delay justified a defense of equitable estoppel on the part of Clariti.  There is no evidence that Clariti relied on Aspex’s statements or that it relied on Aspex’s seven month silence.  This is clearly just another backhanded way to undermine patent rights.

This case makes a mockery of the Constitutional guarantee of securing inventor’s rights.  Congress has already spoken on when silence or inaction bars the awarding of damages.  35 USC § 286 limits damages for infringement that occurs more than six years before the filing of a lawsuit.

This case opens up the possibility that by marking your product with a patent and failing to file a lawsuit within seven months might result in a defense of equitable estoppel.  This makes the notice provision of the patent laws 35 USC § 287 a minefield for the patent holder.

This case is one in a long line of changes to our patent law that are designed to make it easier to steal patented technology.  These changes include the publication requirement, the underfunding (stealing of user fees) of the patent office, the appointment of an incompetent PTO director (Jon Dudas), the requirement of maintenance fees to keep your patent alive, the elimination of the duty of care, the elimination of automatic injunctions for infringement, the imposition of a subjective (unworkable) standard of obviousness, the doubling of the pendency time to obtain a patent, the increased ability to attack the validity of a patent under new procedures, the lowering of the standard of inequitable contact, prosecution history estoppel and on and on and on.  This is an all attack on the patent system, which will destroy our economic and technological leadership.

July 6, 2010 Posted by dbhalling | -Law, Patents | 1 Comment

BILSKI: the Good, the Bad, and the Ugly

First, the decision that Bilski’s claims were not considered to be patentable subject matter is not surprising.  The Supreme Court’s hostility to the Bilski patent was evident in oral argument.

THE GOOD

It is not surprising that the most patent friendly Justice (based on the opinions in this case) is Justice Kennedy.  President Ronald Reagan, who was the last president to understand the importance of patents to economic growth, appointed him.  For more information see National Inventor’s Day.  The so-called “conservative” justices on the court could learn a lot by reviewing Reagan’s understanding of patents and how they fit into his economic program.

No categorical rule was proclaimed against business method patents.

Section 101 similarly precludes the broad contention that the term “process” categorically excludes business methods. The term “method,” which is within §100(b)’s definition of “process,” at least as a textual matter and before consulting other limitations in the Patent Act and this Court’s precedents, may include at least some methods of doing business. p. 10.

The Court acknowledges that the “machine or transformation test” might inhibit patents on software.

The machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age—for example, inventions grounded in a physical or other tangible form. However, there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age.  As numerous amicus briefs argue, the machine-or-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals. p. 9.

The Court acknowledges, (Kennedy), that there is no good definition of a business method patent.  I have made a similar observation in Bilski, Software Patents and Business Method Patents.

The following passage provides a ray of hope that the Court may someday reach a proper analysis of section 101:

that the term “process” categorically excludes business methods. The term “method,” which is within §100(b)’s definition of “process,” at least as a textual matter and before consulting other limitations in the Patent Act and this Court’s precedents, may include at least some methods of doing business. See, e.g., Webster’s New International Dictionary 1548 (2d ed. 1954) (defining “method” as“[a]n orderly procedure or process . . . regular way or manner of doing anything; hence, a set form of procedure adopted in investigation or instruction”). The Court is unaware of any argument that the “‘ordinary, contemporary, common meaning,’” Diehr, supra, at 182, of “method” excludes business methods. Nor is it clear how far a prohibition on business method patents would reach, and whether it would exclude technologies for conducting a business more efficiently. p. 10.

THE BAD

The concurring opinions (Stevens, Ginsburg, Breyer, Sotomayor) (Breyer, Scalia) show that most of the Justices want a categorical rule against business method patents.  However, they fail to provide a definition of a business method patent.  Because the Justices refuse to provide a definition, it is likely that different Justices mean different things by a business method patent.  The only clue as to what they mean by a business method patent is either a way of organizing people or a patent related to finance or money.  I explain why excluding finance and money from patentable subject matter is flawed at Is Money and Abstract Idea.

The Opinion leaves behind a confused set of Jurisprudence on Section 101.  Steve Kunin’s AIPLA presentation is excellent at pointing out the nonsense of the Court’s previous opinions on point.

The Opinion seems to overturn State Street, which was the most intelligent statement of section 101 by our Courts.

THE UGLY

The Court confuses statutory subject matter 101 with Novelty 102 and Non-Obviousness 103.  For instance, Justice Kennedy writes:

In light of these precedents, it is clear that petitioners’ application is not a patentable “process. Claims 1 and 4 in petitioners’ application explain the basic concept of hedging, or protecting against risk: Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class. p. 15.

Whether Bilski claims a well known economic practice is irrelevant to a 101 analysis.  Confusing and blending the different sections of the patent statute is a consistent problem of the Supreme Court,  and first year patent law associates.

The Court again proves that they do not understand that every invention is a combination of known elements and that pointing out that one of the elements is known provides no insight about a patent.  Specifically the Court writes,

These claims attempt to patent the use of the abstract idea of hedging risk in the energy market and then instruct the use of well-known random analysis techniques to help establish some of the inputs into the equation.

For more information see   Non-Obviousness: A Case Study in Judicial Activism.

All of the opinions of the Court embrace the myth that a patent is a monopoly.  A patent is a property right.  Just as individuals have property rights in land or automobiles.  Property rights are derived from Locke’s theory of Natural Rights. This is completely consistent with patents.  For more information, please refer to, The Myth that Patents are a Monopoly: and Scarcity – Does it Prove Intellectual Property is Unjustified? .  The Court would be wise to consult the preeminent  philosopher on Capitalism: see Ayn Rand on Intellectual Property.

The Court repeats the familiar myth about the Preamble to the Patent and Copyright clause of the Constitution.  We know this is a red herring, because the Court and other proponents of this theory never discuss that a trashy novel which does not “promote the Progress of Science and useful Arts” should not receive Copyright protection.  In addition, the same argument is made with respect to the second amendment and the Court clearly rejected this interpretation.  It is Intellectual Fraud to suggest that the Preamble is meant to limit the “rights” of inventors and authors.  For more information see  Levine & Boldrin Argue the U.S. Should End the Patent System .

The Court repeats well known myths about the economics of patents.  For instance, the Court writes patents

can discourage research by impeding the free exchange of information, for example, by forcing people to avoid the use of potentially patented ideas, by leading them to conduct costly and time-consuming searches of existing or pending patents, by requiring complex licensing arrangements, and by raising the costs of using the patented methods. Although [e]very patent is the grant of a privilege of exacting tolls from the public. p. 43.

The Court does not understand that inventions are the only method of increasing real per capita income and are property rights not monopolies. By forcing people to invent instead of copy or perform redundant research we increase our wealth and protect property rights.  For more information see Source of Economic Growth.

SCARY

Nonetheless, not every new invention or discovery may be patented. Certain things are free for all to use. “Bonito Boats, Inc. v. Thunder Craft Boats, Inc.

Really, the Constitution states that Congress is to secure “for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  What part of “Right” do the Justices not understand? The Constitution does not allow Congress or the Supreme Court to decide which inventions ought to receive patent protection.  This complete disregard for the Constitution shows that this Supreme Court is hostile to patents and has no intention of doing their Constitutional duty of securing the Rights of inventors.

June 29, 2010 Posted by dbhalling | -Law, Patents | , , , , | 2 Comments

Non-Obviousness: A Case Study in Judicial Activism

The genesis of the non-obviousness standard (Inventive Step in Europe) was the Supreme Court’s decision in Hotchkiss v. Greenwood, 52 U.S. (11 How.) 248 (1851).  This case first articulated the idea that the improvement that was the subject of a patent had to be more than “the work of the skilful mechanic.”  The case involved making door and other knobs of all kinds of clay used in pottery, and of porcelain.[1]The invention according to the patent holder was:

This improvement consists in making said knobs of potter’s clay, such as is used in any species of pottery; also of porcelain; the operation is the same as in pottery, by moulding, turning, and burning and glazing; they may be plain in surface and color, or ornamented to any degree in both; the modes of fitting them for their application to doors, locks, furniture, and other uses, will be as various as the uses to which they may be applied, but chiefly predicated on one principle, that of having the cavity in which the screw or shank is inserted, by which they are fastened, largest at the bottom of its depth, in form of a dovetail, and a screw formed therein by pouring in metal in a fused state.[2]

The Supreme Court upon reviewing the case made the common error of pointing out that each of the elements in the invention were known.

But in the case before us, the knob is not new, nor the metallic shank and spindle, nor the dovetail form of the cavity in the knob, nor the means by which the metallic shank is securely fastened therein. All these were well known, and in common use, and the only thing new is the substitution of a knob of a different material from that heretofore used in connection with this arrangement.[3]

All inventions are combinations of known elements since conservation of matter and energy means that you cannot create something from nothing, for more information see KSR: Supreme Ignorance by Supreme Court.  As a result, this analysis by the Supreme Court is meaningless and sheds no light on whether the invention should have obtained a patent.

Based on this analysis the Supreme Court then reasons:

for unless more ingenuity and skill in applying the old method of fastening the shank and the knob were required in the application of it to the clay or porcelain knob than were possessed by an ordinary mechanic acquainted with the business, there was an absence of that degree of skill and ingenuity which constitute essential elements of every invention. In other words, the improvement is the work of the skillful mechanic, not that of the inventor.[4] (underlining added)

This ruling states the well known idea that for an invention to be patentable, it must be more than just the work of a skillful mechanic.  Today this is stated as the invention must have taken more than just the work of “one skilled in the art.”

There are a number of problems in the Supreme Court’s ruling in Hotchkiss v. Greenwood. First, where did the Supreme Court get the authority to add an additional requirement above novelty in order for an invention to obtain a patent?  The statute at the time did not contain any such additional requirement.  It was judicial activism to add a requirement not found in the statute.  Another error in the Supreme Court’s reasoning is the use of hindsight.  All inventions are obvious in hindsight and must be described in enough detail that they can be practiced by one skilled in the art (ordinary mechanic) to meet the requirement of the social contract of patents.[5] Another error in the case was the failure to recognize that copying by competitors of the invention or success of the invention tend to show that it was non-obvious.  Finally, the Supreme Court failed to understand the implications of the laws of physics as they apply to inventions, specifically that conservation of matter means all inventions are combinations of known elements.

Despite these errors, it is reasonable to ask did the Supreme Court’s judicial activism result in any lasting problems?  According to Gale R. Peterson, Cox Smith Matthews in their paper, “Obviousness / Non-Obviousness Of The Novel Invention: Hotchkiss v. Greenwood to KSR v. Teleflex 35 U.S.C. § 103 – 1851 to 2006.”[6]

The cases decided after Hotchkiss in 1851, both by the Supreme Court and the lower courts, were chaotic. There was no statute governing the additional hurdle an otherwise novel invention must cross before being deemed a patentable invention.[7]

The Supreme Court’s decision in Hotchkiss v. Greenwood resulted in an unworkable standard of patentability, because it was inherently subjective.  This increased the uncertainty whether an inventor would obtain a patent for their invention and increased the risk that their patent might be held invalid.  It also caused the standard of patentability to vary in different Circuits and the Patent Office.  Today this is widely understood to increase the cost of obtaining a patent and decrease the amount of resources invested in inventions.  The Supreme Court’s judicial activism in Hotchkiss v. Greenwood resulted in numerous problems that haunt us today.  Including the complete nonsense opined by the Supreme Court in the KSR v. Teleflex[8] decision, see KSR: Supreme Ignorance by Supreme Court.

Is there any logical reason for the additional requirement of non-obviousness for patents?  The definition of invention according to Free Dictionary online is “to produce or contrive (something previously unknown) by the use of ingenuity or imagination.”[9] While Merriam Webster (online) defines invention as “a device, contrivance, or process originated after study and experiment.”[10] I will ignore how and invention is created as a criteria and suggest the following definition, “to create something new” as a common sense definition.  This definition differentiates production or manufacturing from invention.  Production is creating something, but it is not creating something new it is creating something old.  If you argue that it is creating something new, then the word new has no meaning in the definition.  This definition does not do a good job of differentiating an invention from a new book or painting.  It might be argued that a new book is not creating something new, but it is not the same as other books.  So I believe this simple common sense definition has to be supplemented.  Specifically, I suggest that invention is “to create something new that has an objective result.”  By an objective result I mean that goal of an invention is an objective result that can be tested as opposed to a subjective result that is the result of a song being played or a book being read or a painting be viewed.  An objective result distinguishes an invention from a new artistic creation.

So how does this common sense definition of invention, “to create something new that has an objective result,” match up with the requirements of patent law (101, 102, 103, 112)?  This definition is generally consistent with section 35 USC 101, statutory subject matter.  It excludes scientific and mathematical discoveries since these are not creations.  Notably it clearly does not exclude software patents.  A software enabled invention is clearly a new creation and it has an objective result.  The same is true of business methods patents (for more on the nonsense associated with business method patent see – Bilski, Software Patents and Business Method Patents.  This definition is clearly consistent with section 102 – new equals novel.  Is this definition consistent with section 35 USC 103?  No this definition is not consistent with section 103.  There is nothing in the definition that suggests a standard above novelty or new.  The general reason given for section 103 is that we do not want trivial inventions that just change the size or the weight or some other trivial feature of an existing invention to obtain a patent.  If a change in size or weight or color does not make a difference in the objective result, it is not new and it is not an invention.  So I believe the definition of invention I have offered covers this issue and therefore there is no reason for an addition standard above novelty.  My suggested definition is neither consistent nor inconsistent with section 35 USC 112, since this section does not define what is an invention.  Section 112 defines the requirements an inventor must meet to obtain a patent for their invention.  Section 112 deals with the social contract between the inventor and society.  Overall the common sense definition I suggested for invention fits nicely with patent law, but there is absolutely no logic for a nonobviousness criteria for patents based on this definition.  The creation of the nonobviousness standard was judicial activism on the part of the Supreme Court without any statutory justification.  The standard has proven to be completely unworkable and completely subjective.  Only the CAFC’s jurisprudence before KSR provided any measure of a stability and logic to the section 103.  The nonobviousness standard has resulted in increase costs to inventors without any benefit.  It has increase the cost of ligation, helped technologies thieves to steal inventions, and decreased the amount invested in new technology.

I suggest the radical notion that logically the nonobviousness standard, 35 USC 103, should be repealed.  If it is not repealed then we should demand a statutory definition that is as objective as possible.  One objective solution would be to codify the CAFC’s teaching, suggestion, motivation (TSM) test.  I have proposed an alternative standard for 35 USC 103 that I believe is even more objective, clearer, and more consistent with reality than the TSM test – see Obviousness Flow Chart .  By adopting any of these solutions we will reduce the cost and uncertainty of obtaining a patent and litigating patents.  This will increase the value of issued patents and increase the investment in new technologies, which are the only way to increase real per capita income – see The Source of Economic Growth.

PS

As an interesting intellectual exercise I attempted to use ordinary definitions of novelty and obviousness to determine if the Supreme Court’s seminal decision in Graham v. Deere[11] had any basis in logic and was in anyway consistent with the statutory language.  The non-obviousness standard was added to U.S. patent law in the 1952 Patent Act.  The Courts’ job is to interpret the statute.  The key portion of the non-obviousness statute states:

A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.  (underlining added)

While many lawyers will want to immediately jump to the legislative history to interpret the statute, this is only appropriate if the statute is not clear on it face.  Based on the wording and the fact that section 103 was added later than the novelty requirement, logically 103 is intended to be an additional requirement above the novelty requirement.  According to Dictionary.com, novelty means “of a new kind; different from anything seen or known before: a novel idea.”  The nonobviousness requirement logically requires something more than an invention be novel.  In order to understand what nonobvious means, lets find out what obvious means.  Then anything that does not meet the definition of obvious is nonobvious.  According to Dictionary.com obvious means, “easily seen, recognized, or understood; open to view or knowledge; evident.”  It is axiomatic to patent law that whether an invention is nonobvious has to be determined at the time the invention was made, in other words before the invention was known.  How can an invention that has not been made be easily seen, recognized, or understood; open to view or knowledge; evident (obvious)?  Clearly, an invention that has not been made cannot be open to view and how can you have knowledge of something that does not exist.  Evident means, according to Dictionary.com, plain or clear to the sight or understanding, which cannot be true of something that does not exist.  Unfortunately, this line of examination does not lead to any useful results.  No wonder the 1952 Statute has not lead to meaningful clarification of what is patentable!

[1] Hotchkiss v. Greenwood, 52 U.S. (11 How.) 248, 249 (1851)

[2] Ibid 250-251

[3] Ibid 266

[4] Ibid 268

[5] 35 USC 112, first paragraph (Modern)

[6] Gale R. Peterson, Cox Smith Matthews, “Obviousness / Non-Obviousness Of The Novel Invention: Hotchkiss v. Greenwood to KSR v. Teleflex 35 U.S.C. § 103 – 1851 to 2006.” 11th Annual Advanced Patent Law Institute, October 26-27 2006.

[7] Ibid 3.

[8] KSR Int’l Co. v. Teleflex, Inc., 550 U.S. 398 (2007).

[9] http://www.thefreedictionary.com/inventor (6/16/10).

[10] http://www.merriam-webster.com/netdict/invention (6/16/10).

[11] Graham v. John Deere Co. of Kansas City, 86 S.Ct. 684 (1966)

June 18, 2010 Posted by dbhalling | -Law, -Philosophy, Patents | , , , , , , , , , , | 7 Comments

First-to-File vs. First-to-Invent

My good friend, Gene Quinn, of IPWatchdog, has am interesting post on the present patent reform bill.  http://www.ipwatchdog.com/2010/04/04/kappos-round-table-listening-continues-on-campus-of-uspto/id=10002/

His post brings up several interesting points.

Interferences & Independent Invention

If there were only 55 interferences last year, how come all the people calling for patent reform state that independent invention happens all the time?  If independent conception of inventions are so common you would expect a lot more interferences.  While I would grant you that the PTO is very reluctant to declare interferences, even taking this into account it shows very little independent invention.  So all the people calling for patent reform claiming that technological progress is inhibited because they are not allowed to practice their independent inventions appear to be disingenuous at best.  What is more likely is that they have not independently derived these inventions and they just do not pay a license fee to the true inventor.

First to File vs. First to Invent

The proposed solution for the first to file conversion is the scaled down one year grace period.  Your post clearly points out the limitations of this provision – namely it only protects the inventor against bar issues, but does not protect them from thieves that file a patent before the true inventor.  This does nothing to preserve our patent system for independent inventors or start-up companies.  No one with any resources and knowledge will rely on this scaled down one year grace period.  Within a decade of having passed this reform, people will argue that the one year grace period is meaningless and we should just move to a true first to file system.  Given the cost of filing a patent this will be the nail in the coffin of American Entrepreneurialism.  The patent system will just be for large entrenched companies who create incremental inventions.

Cost of Interferences

Your argument sounds logical.  Since most independent inventors cannot afford the cost of an interference, we will just get rid of them.  This correctly identifies the problem, but proposes an unjust solution.  A just solution is to reduce the cost, time, and formalism associated with interferences.  Logically, the inventor is the first one to conceive of the invention and reduce it to practice.  We need a system that is just and practical.  A practical system that is not just will lead to unintended consequences.  For instance, the publication requirement has led to our patent system giving away our technology to the rest of the world.  The practical answer was to publish our patent application and conform with the rest of the world.  The just and practical answer was to fund the PTO fully, eliminate needless formalities to patents and have patents issue in under one year.  The just and practical answer would have ensured that the US stayed the technological leader of the world and therefore economically vibrant.  Our present economy is the result of the sin of being practical but not just.

24 Month Provisional

While I am not inherently against this proposal, I can just hear the critics screaming “submarine patents.”  Extending the time to 24 months from 12 months that a provisional patent application allows the applicant to file a regular patent application sounds like a practical solution, however the better answer would be to streamline the process of applying for a patent.  We should work to reduce the time it takes to obtain a patent, reduce the cost it takes to obtain a patent, and reduce arbitrary rules required to obtain a patent that add no real value to the patent system.

Real Patent Reform

Nothing in the present patent reform proposal does anything to solve the real problems faced by inventors.  Instead of agreeing to a less bad patent reform bill, which should trash this bill and start over.  The number one issue that has to be in any patent reform bill is to stop fee diversion.  Fee diversion is fraud pure and simple.  If Congress had to live up to Sarbanes Oxley, they would all be in jail.  We need to repeal KSR.  Any objective system of patentability is better than a subjective standard for entrepreneurs and businesses.  (Only a judge or a trial lawyer thinks a subjective test is just).  For more on real patent reform see Real Patent Reform.

April 7, 2010 Posted by dbhalling | -Law, -Philosophy, Patents | , , , , , | 1 Comment

Patent Reform and Independent Inventor

David Kappos and Gene Quinn argue that the present patent reform bill is good for independent inventors and small entities.  See Kappos Trying to Sell Patent Reform to Independent Inventors.

I disagree that patent reform is good for independent inventors or the US economy.

1) Damages – I believe that the patent reform bill still has the provision that reduces damages for infringing.  As long as this provision is in the patent reform bill it will damage small inventors and the US economy.

2) First-to-File:  I understand and have made the point that very few cases are won by the second to file.  However, a first-to-file system is a first step in eliminating the inventor from the patent process.  The next step will be to issue patents to entities, why name the inventors since we are not serious about the true inventors anyway.  A first to file system is a fraud.  It rewards not inventors but people who are skilled at gaming the system.

This is similar to the publication rule.  Most patent applications were being published at 18 months anyway and if you did not want to foreign file you could avoid publication.  But publication is a breach of the social contract between the inventor and society.  Society gets the benefit of disclosure but the inventor may never receive his part of the bargain.  Note that immediately after this breach pendancy times expanded and the allowance rate fell off a cliff.  Ron Katznelson has done a study showing that pendancy times always expand, usually by a factor of two, when a country adopts publication.

3) Publication:  I believe that the present bill requires the publication of all patent applications.  As stated above this is a clear breach of the social contract between the inventor and society.  Publication discourages people from inventing and filing for patents.  If an invention can be kept a trade secret, more people will chose this right to the detriment of everyone.  I have been advising more clients to consider trade secret protection.  We tried the trade secret route in the middle ages and the level of innovation was pitiful.  If an invention cannot be kept a trade secret, investors will be less willing to back a company whose inventions are known to the whole world before the company even gets protection in their own country.

Real Patent Reform

Here are my suggestions for real patent reform that would not only help small inventors but the US economy.

1) Repeal Publication: This would restore the social contract

2) Repeal KSR: A subject standard of patentability just increases costs and uncertainty associated with the patent process.  KSR makes bureaucrats the ultimate arbiter of what is patentable instead of logic.

3) Repay PTO:  Congress should repay the over $1B it stole from inventors with interest.

4) Regional Offices for PTO:  This would ensure steady funding of the PTO and increase examiner retention

5) Repeal eBay:  This decision is logical absurdity.  If a patent gives you the right to exclude, then if you win a patent infringement case you must be able to enforce your only right – the right to exclude

6) Eliminate “Combination of Known Elements”:  The fact that the Supreme Court does not understand that every invention in the history of the world is a combination of known elements is pinnacle of ignorance.  Have they ever heard of “conservation of matter and energy”?

7) Patent Reciprocity:  If you drive your car across the border into Canada you do not lose title to your car.  If you take your manuscript across the border into Canada you do not lose the copyright to your manuscript.  But, if you take your invention across the border into Canada, you lose your patent protection and anyone can steal the invention – not the physical embodiment, but the underlying invention.

Patent reciprocity would automatically provide patent rights in a foreign country when you obtained a patent in the US and vice versa.  This idea was first proposed by the US in the mid 1800s according to B. Zorina Kahn’s book “The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920“. Unfortunately, the idea died and since then patent rights have been part of the convoluted process of trade negotiations.

Patent reciprocity would significantly increase the value of patents and increase the value of research and development.  As a result, it would spur investment in innovation.  Reciprocity would increase the valuation of technology start-up companies in all countries that participated.  It would also increase per capita income.

February 25, 2010 Posted by dbhalling | -Law, Patents | , , , , , | 1 Comment

Why Investors Need to Pay Attention to the Bilski Decision

A significant portion of the value of stocks is represented by intangible assets.  According to Ocean Tomo, Patent Attribution to Equity Returns , 75% of the value of the S&P 500 is intangible assets.  The Bilski case in front of the Supreme Court could significantly affect the value of these intangible assets.

Bilski is a case about whether certain types of technology are patentable subject matter.  The patent in this case was directed to a financial system for hedging commodities risk.  However, the Supreme Court may use this case to undermine patents related to software and business methods.  If the Court does significantly limit the patentability of software based inventions, the value of the intangible assets of many of these companies will be significantly reduced.  (For more information on the Bilski case see, Bilski, Financial Patents, and the Financial Crisis , and Bilski, Software Patents and Business Method Patents .

The most important intangible asset of most companies is their patents.  The nadir in this country’s legal atmosphere for patents occurred in the 1970s.  It is not surprising that the chart above shows 1975 as the year when companies had the lowest percentage of their value represented by intangible assets.   According to the book, The Invisible Edge , the FTC & DOJ used antitrust law to force US companies to give away the technology associated with over 50,000 patents.  The result was the U.S. transferred its cutting edge technology to Japan and many U.S. companies found themselves unable to compete with the Japanese.  The book cites a MITI study that substantiates that most Japanese companies took advantage of this traitorous policy by the U.S. government to catch up with U.S. companies technologically.  This policy also resulted in reduced research and development spending.  Read more »

January 26, 2010 Posted by dbhalling | -Law, Patents | , , , , , , , , | 2 Comments

KSR: Supreme Ignorance by Supreme Court

Under the KSR decision (KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 416 (2007)) by the Supreme Court nothing is patentable under the sun, unless you believe in black magic.  The Supreme Court in the Bilski (http://hallingblog.com/2009/11/10/bilski-case-reveals-supremes-ignorance/) oral arguments proved that the justices do not have the competence of a first year patent law associate.  KSR shows that the justices do not understand basic physics. 

See if you can spot the errors in physics in the following statements.  “The combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.” KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 416 (2007).  “A court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions.” Id. at 417.  While the Supreme Court’s writing is not the model of clarity, the Court thinks these statements are equivalent.  The Court is saying that a patent for an invention made of known elements (prior art elements, familiar elements) and connections (according to known methods) is likely to not be patentable. 

Every real invention is a combination of known elements, unless you can violate the conservation of matter and energy – black magic.  The fact that the Supreme Court does not know this basic application of the laws of physics demonstrates that it is incompetent to rule on patent matters.  Another flaw in their logic is that if an inventor filed for a patent with an element that was completely new, then the Patent Office would reject the application, appropriately, as failing to clearly and distinctly claim their invention under 35 USC 112, second paragraph.  The fact that the Supreme Court does not understand the legal contradictions of their opinion, demonstrates that they do not understand the basics of patent law.  Read more »

January 19, 2010 Posted by dbhalling | -Law, Patents, Uncategorized | , , , , , | 10 Comments

Patent Quality Nonsense

There has been a constant drumbeat of propaganda suggesting that the U.S. is issuing low quality patents.  The academic papers supporting this propaganda compare the issue rates of patents that were filed in the U.S. and in the EPO (European Patent Office) or JPO (Japanese patent office).  While a number of papers have pointed out  the methodolical problems with  these academic papers (see Patent Quality Myth ), the bigger question is whether they selected the correct metric in the first place.  This post suggests that other metrics are more appropriate measures of patent quality and do not suffer from imposing other countries’ goals on the U.S. patent system.  These metrics show that U.S. patent quality has been steadily increasing for over a fifty years and shows that perhaps the U.S. system is becoming an elitist system – much like Europe and Japan have practiced for years. Read more »

January 7, 2010 Posted by dbhalling | -Law, -Philosophy, Patents | , , , , | 1 Comment

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