Category: Law
CLS Bank v. Alice Corp was an en banc decision that attempted to set the record straight on 35 USC 101. IT FAILED. The patents in suit deal with settlement risk in financial transactions. The holding can be boiled down to we don’t like patents on software or on financial transactions and we really don’t like patents that cover both.
Yesterday the Supreme Court heard oral arguments in the Association for Molecular Pathology v. Myriad Genetics No. 11-725 and once again proved that they are incompetent to rule on patent cases. The Justice made analogies to baseball bats and chocolate cookies in trying to understand this case involving genetic testing for breast cancer. For more see USA article and Genetic Engineering and BioTechnology News articles. Asking these Supreme Court Judges to rule on this decision makes about as much sense as giving a child explosives (This analogy actual works – unlike the Justices). This would be funny if this case did not involve property rights worth billions of dollars and have the potential to destroy the biotech industry.
THE SUPREME COURT IS NOT COMPETENT TO RULE ON PATENT LAW.
The Justices on the Supreme Court neither have the scientific and technical training to rule on patent cases nor do they an appropriate understand of the basics of patent law. Congress has the power to limit the Supreme Court’s jurisdiction and it should strip it of jurisdiction for patent cases.
The Supreme Court is hearing oral arguments in the Association for Molecular Pathology v. Myriad Genetics No. 11-725 case that revolves around the myth that you can patent a person’s genes. Typical of the idiocy surrounding this case is the article by the AP, which states that this case is about monopolies for human genes. The author proves not only their lack of understanding of the science, but also the fact that they do not know that patents are a property right. (For more on Patents, Property Rights and Monopolies see below) A number of books have also pushed the agenda that 
human genes are patentable. The CAFC’s ruling in this case sets the record straight.
CAFC ruling under reviewed
The ruling in the 2012 version of this case was very similar to the ruling in 2011 that I discussed in my post Association of Molecular Pathology v. USPTO. Below I provide what I think are the most interesting excerpts from the opinion.
Composition claims are all eligible under 35 USC 101.
They (The isolated strands of DNA) are obtained in the laboratory and are man-made, theproduct of human ingenuity. While they are prepared from products of nature, so is every other composition of matter. All new chemical or biological molecules, whether made by synthesis or decomposition, are made from natural materials. For example, virtually every medicine utilized by today’s medical practitioners, and every manufactured plastic product, is either synthesized from natural materials (most often petroleum fractions) or derived from natural plant materials. But, as such, they are different from natural materials, even if they are ultimately derived from them. The same is true of isolated DNA molecules. PP. 38-39
The highlight portion points out a general rule of patent law (actually nature) – all inventions are combinations of existing elements, these elements are formed from natural materials. You cannot create something from nothing – it’s called conservation of matter and energy. Unfortunately, this simple rule of physics is often ignored by the courts – probably because most of them do not have a scientific background and are therefore unfit to rule in patent cases.
A composition of matter is not a law of nature. P. 51
The anti-patent crowd has been trying to expand laws of nature to include anything that occurs naturally. A law of nature is something that explains a host of data and can be used to accurately predict how things will behave in nature, such as gravity. Using a counterbalance in an elevator uses gravity – a law of nature, but it is not a law of nature.
It is undisputed that Myriad’s claimed isolated DNAs exist in a distinctive chemical form—as distinctive chemical molecules—from DNAs in the human body, i.e., native DNA. P. 44
The critics of patenting human genes miss this point. The claims do not cover native DNA, they cover DNA that does not exist but for the intervention and ingenuity of humans.
Claims 1 of the ’999, ’001, and ’441 patents, as well as method claims 1 and 2 of the ’857 patent—all of which consist of analyzing and comparing certain DNA sequences—not to be patent-eligible subject matter on the ground that they claim only abstract mental processes. P. 55
I strongly disagree with this statement. Myriad clearly showed that the analyzing step requires machines that are clearly described in the specification. Even if a doctor had the print out of the results of analysis and then he compared the results without a machine, then this is contributory infringement. The only justification for the CAFC’s decision is hyper technical analysis of the claim that requires a recited machine in the claims. This sort of overly formal interpretation does nothing to protect the property rights of inventors, but does advance the interests of entities that want to steal other people’s inventions.
We once again, even in light of Mayo, arrive at the same conclusion of patent-eligibility because at the heart of claim 20 is a transformed cell, which is made by man, in contrast to a natural material.
By definition, however, performing operations, even known types of steps, on, or to create, novel, i.e., transformed subject matter is the stuff of which most process or method invention consists. All chemical processes, for example, consist of hydrolyzing, hydrogenating, reacting, etc. In situations where the objects or results of such steps are novel and nonobvious, they should be patent-eligible. P. 61
The idiots at the Supreme Court have attempted to break claims down and determine if each step is new. You can’t create something from nothing and a step which is completely new does not meet the requirements of 35 USC 112. This form of interpretation of the claims was specifically rejected by the 1952 Patent Act under 35 USC 103. But the anti-patent Justices on the Supreme Court are not interested in logic, the Constitution, or the law. They are only interested in forcing their policy visions on the American public.
Patents and 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.
Property Rights, Possession and Objects
This post explains the difference in the concepts of property rights, possession, and objects. Most economists and patent detractors confuse these concepts. The origin, definition, and legal basis of property right are explained.
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.
The en banc rehearing of this case is considering whether the presumption of validity applies to under 35 USC 101. The statute involved in this question is 35 USC § 282 which states:
(a) In General.— A patent shall be presumed valid. Each claim of a patent (whether in independent, dependent, or multiple dependent form) shall be presumed valid independently of the validity of other claims; dependent or multiple dependent claims shall be presumed valid even though dependent upon an invalid claim. The burden of establishing invalidity of a patent or any claim thereof shall rest on the party asserting such invalidity. (Emphasis added)
CLS Bank argued in their brief that validity and eligibility are different and 35 USC 101 is directed to the latter. Nothing in the statute suggestions that there is a distinction between eligibility and validity. How can a patent be valid and not meet the requirements of 35 USC 101? It can’t. When you turn the question around you see the absurdity of this position. In addition, the reason for a Patent Office is to review inventions to determine if they are eligible for a patent. If the courts are going to ignore the determinations of the Patent Office, then we should just have a registration system. In every other area of law the courts are extremely deferential to administrative agency decisions, but not with patents. Ask yourself why this is. I would suggest the reason is that every other administrative agency increases the power of government, but the Patent Office increases the power of the people. It is patently unfair that an inventor has to defend their patent, two, three or more times and on multiple issues. If the EPA or the FCC or the FTC, etc. had to survive this scrutiny or legislation in general, almost none of the laws or regulations passed in the last decade would stand. It is time to end the double standard that gives a pass for every regulation that increases government power, while forcing private people to jump through hoops. In fact it is time to reverse the process, as the Founders intended.
NO RATIONAL person would buy CLS argument that there is a difference between validity and eligibility. But that does not mean the Judges on the CAFC or Supreme Court will not buy into CLS argument.
For more on the earlier decision CLICK HERE.
DYSTAR TEXTILFARBEN GMBH & CO DEUTSCHLAND KG, Plaintiff-Appellee, v. C.H. PATRICK CO., and Bann Quimica LTDA, Defendants-Appellants, 464 F.3d 1356, 1368 (Fed. Cir. 2006) illustrates the problem of non-technical, non-patent attorney judges on the CAFC. I suspect this case will cause more and more problems.
The case states:
Indeed, we have repeatedly held that an implicit motivation to combine exists not only when a suggestion may be gleaned from the prior art as a whole, but when the “improvement” is technology-independent and the combination of references results in a product or process that is more desirable, for example because it is stronger, cheaper, cleaner, faster, lighter, smaller, more durable, or more efficient. Because the desire to enhance commercial opportunities by improving a product or process is universal — and even common-sensical — we have held that there exists in these situations a motivation to combine prior art references even absent any hint of suggestion in the references themselves. In such situations, the proper question is whether the ordinary artisan possesses knowledge and skills rendering him capable of combining the prior art references.
I guess you can obtain a patent when your invention is not more desirable, one that is weaker, more expensive, slower, heavier (unless that would make it better), less durable, or less efficient. Inventors need to focus on inventions that have reduce their commercial opportunities, according to these judges.
Do these people actually read what they write? Do they understand the logical implications of their statements? The judges on this case were Michel, Raider and Schall. Not surprisingly, none of the judges who wrote this have a technical background and none are patent attorneys.
What the hell does “the ‘improvement’ is technology-independent” mean? Not surprisingly, there is no explanation of this phrase in the case.
This is just one more example of why we should not allow non-patent attorneys on the CAFC – or at least they should have to take a course on logic as it applies to patents and inventions.
The Supreme Court agreed to review the case Association for Molecular Pathology (AMP) and ACLU v. USPTO and Myriad Genetics (Fed. Cir. 2012). Myriad holds a patent for identifying certain mutations in the BRCA genes that correlate with an increased risk of breast and ovarian cancer. Myriad’s stock dropped nine percent on the news. This is the market’s way of saying they don’t believe the Supreme Court will uphold Myriad’s property rights. The Supreme Court has displayed a shocking lack of understand of patents and property rights. For instance, their decision in Mayo Collaborative Services v. Prometheus Labs., Inc. (Supreme Court 2012) if followed logical would hold that only magic is patentable. If I were handicapping this I would say there is a 75% chance that the Court will hold all the claims do not meet the requirements on 35 USC 101 (Patentable subject matter). This will be devastating to the biotech industry, 
probably wiping out billions of dollars of value in a single day.
This case revolves around the myth that you can patent a person’s genes. A number of books have been published on this theme and I have explained why this is nonsense in my post Patenting Life. The CAFC’s most recent decision discussed below also explains why this is not true.
The only issue involved in the Myriad case is whether the claims are patent eligible under 35 USC 101. In the Mayo case the Supreme Court mixed the concepts of 35 USC 101 (patent eligibility) with novelty (35 USC 102) and nonobviousness (35 USC 103). No doubt we will see more of this confused statutory interpretation by the Court in this case. The only minor justification for this confusion is that 35 USC 101 states the invention must be NEW and useful. However, 35 USC 102 clearly defines novelty (new) in detail and any invention that meets the requirement of 35 USC 102 should be considered NEW under 35 USC 101. This is something that should have been fixed in the America Invents Act that was just passed in 2011, but the drafters were too busy passing out goodies to Wall Street, pharmaceutical companies and large companies generally to actually worry about improving the clarity of statute.
CAFC ruling under reviewed
The ruling in the 2012 version of this case was very similar to the ruling in 2011 that I discussed in my post Association of Molecular Pathology v. USPTO. Below I provide what I think are the most interesting excerpts from the opinion.
Composition claims are all eligible under 35 USC 101.
They (The isolated strands of DNA) are obtained in the laboratory and are man-made, the product of human ingenuity. While they are prepared from products of nature, so is every other composition of matter. All new chemical or biological molecules, whether made by synthesis or decomposition, are made from natural materials. For example, virtually every medicine utilized by today’s medical practitioners, and every manufactured plastic product, is either synthesized from natural materials (most often petroleum fractions) or derived from natural plant materials. But, as such, they are different from natural materials, even if they are ultimately derived from them. The same is true of isolated DNA molecules. PP. 38-39
The highlight portion points out a general rule of patent law (actually nature) – all inventions are combinations of existing elements, these elements are formed from natural materials. You cannot create something from nothing – it’s called conservation of matter and energy. Unfortunately, this simple rule of physics is often ignored by the courts – probably because most of them do not have a scientific background and are therefore unfit to rule in patent cases.
A composition of matter is not a law of nature. P. 51
The anti-patent crowd has been trying to expand laws of nature to include anything that occurs naturally. A law of nature is something that explains a host of data and can be used to accurately predict how things will behave in nature, such as gravity. Using a counterbalance in an elevator uses gravity – a law of nature, but it is not a law of nature.
It is undisputed that Myriad’s claimed isolated DNAs exist in a distinctive chemical form—as distinctive chemical molecules—from DNAs in the human body, i.e., native DNA. P. 44
The critics of patenting human genes miss this point. The claims do not cover native DNA, they cover DNA that does not exist but for the intervention and ingenuity of humans.
Claims 1 of the ’999, ’001, and ’441 patents, as well as method claims 1 and 2 of the ’857 patent—all of which consist of analyzing and comparing certain DNA sequences—not to be patent-eligible subject matter on the ground that they claim only abstract mental processes. P. 55
I strongly disagree with this statement. Myriad clearly showed that the analyzing step requires machines that are clearly described in the specification. Even if a doctor had the print out of the results of analysis and then he compared the results without a machine, then this is contributory infringement. The only justification for the CAFC’s decision is hyper technical analysis of the claim that requires a recited machine in the claims. This sort of overly formal interpretation does nothing to protect the property rights of inventors, but does advance the interests of entities that want to steal other people’s inventions.
We once again, even in light of Mayo, arrive at the same conclusion of patent-eligibility because at the heart of claim 20 is a transformed cell, which is made by man, in contrast to a natural material.
By definition, however, performing operations, even known types of steps, on, or to create, novel, i.e., transformed subject matter is the stuff of which most process or method invention consists. All chemical processes, for example, consist of hydrolyzing, hydrogenating, reacting, etc. In situations where the objects or results of such steps are novel and nonobvious, they should be patent-eligible. P. 61
The idiots at the Supreme Court have attempted to break claims down and determine if each step is new. You can’t create something from nothing and a step which is completely new does not meet the requirements of 35 USC 112. This form of interpretation of the claims was specifically rejected by the 1952 Patent Act under 35 USC 103. But the anti-patent Justices on the Supreme Court are not interested in logic, the Constitution, or the law. They are only interested in forcing their policy visions on the American public.
We hold that claim 20 of the ’282 patent recites patent-eligible subject matter under § 101.
Conclusion
The Supreme Court is incompetent to hear patent cases and their jurisdiction over them should be removed by Congress.
This is another case looking at subject matter jurisdiction (35 USC 101) of patents. Alice Corp sued CLS Bank for infringement under four patents. The patents are directed to eliminating the risks associated with financial transactions. Specifically, something called settlement risk.
The Federal Circuit has ordered a rehearing of the case en banc. In the previous opinion of the court, they found the claims were directed to an abstract idea and therefore not patent eligible. 35 USC 101 states:
Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.
First of all let’s acknowledge that this is bad legislative drafting since section 101 talks about new and section 102 of the patent statute is directed to what is new (novelty). Of course the AIA did not correct this poor legislative drafting, because it was too busy handing out goodies to special interest groups.
Because the “new” requirement of 35 USC 101 is redundant with that more clearly defined in 35 USC 102 we are going to ignore it and assume that the new requirement of 101 is met if the invention meets the requirements of section 102.
Second of all let’s notice that “abstract idea” is never mentioned in the statute. Where does this theory that an abstract idea is not patent eligible come from? It comes from the Supreme Court. See LeRoy v. Tatham, 55 U.S. 156, 14 How. 156, 14 L.Ed. 367 (1852) and the most recent history starts with Gottschalk v. Benson, 409 U.S. 63 (1972). Does it make any sense? Before we can answer that we need to define what we mean by an “abstract idea.” 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. None of the judges using the “Abstract Idea” standard have bothered to define what they mean by these words. In the broadest sense of the word abstract, 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. Not defining your terms leads to an Alice in Wonderland world, where words mean whatever the person using them wants them to mean and the reader/listener has no idea what they are talking about. Failure to define one’s term is the province of charlatans.
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 truly Abstract Idea is not a “process, machine, manufacture, or composition of matter” under 35 USC 101. The Court need proceed no farther. But the real thrust behind the Abstract Idea exclusion is to provide a broad (arbitrary) basis for Judges who do not like patents or do not like software patents or patents directed to financial transactions or directed to medical technology to rule patents invalid. This turns patent law into nothing more than glorified politics. It is shameful act by a bunch of charlatans and they are getting away with it, because litigants have not demanded terms be defined.
The CLS Bank v. Alice Corp case is nothing more than an attempt to steal the invention of Alice corporation, by a Kangaroo Court methods.
It is common for people and economists to state that patents are a monopoly. Because patents are a monopoly, it is argued that they negatively affect the pace of innovation and slow down the diffusion of inventions. The only redeeming feature of patents they concede is that if provides a profit incentive to invent, but then it inhibits follow on inventions and the dissemination of knowledge. If this thesis is correct, it should be testable. Let’s test this hypothesis.
If MONOPOLY
1) Countries with strong patent systems should innovate less than countries with weak patent systems.
2) Countries with strong patent systems should have slower dissemination of new technologies than those countries with weak patent system.
If PROPERTY RIGHTS
1) Countries with the strongest patent systems should innovate more than countries with weak patent systems.
2) Countries with strong patent systems should have faster dissemination of new technologies than those countries with weak patent system.
Let’s take a look at the facts, according to the World Intellectual Property Organization (WIPO), the top ten most innovation countries and the bottom 10 countries for 2012 are:
Top 10
1. Switzerland
2. Sweden
3. Singapore
4. Finland
5. United Kingdom
6. Netherlands
7. Denmark
8. Hong Kong (China)
9. Ireland
10. United States of America
Bottom 10
132. Syrian Arab Republic
133. Pakistan
134. Cote d’Ivoire
135. Angola
136. Togo
137. Burundi
138. Lao PDR
139. Yemen
140. Niger
141. Sudan
In a report from National University of Singapore they show a chart of the Fraser index vs. Ginarte-Park index. The Fraser Index is a ranking of economic freedom and the Ginart-Park index is a ranking of patent strength. The chart shows an almost perfect correlation between the two. For those of you who are not familiar with economic freedom indices, there are several and they all show that economic freedom correlates positively with economic growth, wealth, education access, health, longevity, the environment, civil rights, etc.
They also had a couple of charts for the countries with the strongest patent systems for four different years and those with the weakest patent systems. I do not know all the countries that were included in this survey.
Top countries
| 1980 | 1985 | 1990 | 1995 |
| U.S.A. 39.30 | U.S.A. 39.06 | U.S.A. 39.06 | U.S.A. 42.75 |
| Netherlands 28.20 | Belgium 32.23 | Belgium 36.22 | Netherlands 41.36 |
| Switzerland 28.12 | Netherlands 31.47 | Netherlands 35.22 | Denmark 41.26 |
| Germany 28.01 | Switzerland 30.55 | U.K. 33.57 | Finland 41.01 |
| Japan 27.14 | Germany 28.73 | Germany 33.14 | U.K. 40.15 |
Bottom countries
| 1980 | 1985 | 1990 | 1995 |
| Nicaragua 2.38 | Nicaragua 2.38 | Guyana 3.17 | Niger 5.38 |
| Peru 2.22 | Bolivia 2.30 | Pakistan 3.17 | Guatemala 5.10 |
| Guatemala 1.90 | Guyana 1.69 | Jordan 2.95 | Nicaragua 5.00 |
| Guyana 1.78 | Guatemala 1.50 | Guatemala 2.15 | Rwanda 4.64 |
| Jordan 1.72 | Peru 1.31 | Peru 1.73 | Zaire 3.51 |
If we examine the first postulate, does it appear the most innovative countries have the strongest patent systems or the weakest patent system? Which countries do you think have the strongest patent systems – the USA, Singapore, Switzerland or Niger, Pakistan, Sudan? It is clear that the most innovative countries according to the WIPO survey have the strongest patent systems. If we look at the charts from the National University of Singapore (NUS) we see those countries with the strongest patent systems are clearly the most innovative. Although the WIPO data and the NUS data are from different time frames we see some overlap between those countries with the strongest patent systems (NUS) and the most innovative (WIPO) and the same is true for the weakest and least innovative.
If we examining the second postulate, does it appear that the countries with the most technology diffusion have the strongest patent systems or the weakest patent system? Which countries do you think have the most technology diffusion – the USA, Singapore, Switzerland or Niger, Pakistan, Sudan? It is clear that those countries with the strongest patents have the most technology diffusion.
The macroeconomic evidence does not support the thesis that patents are a monopoly. The data shows the exact opposite of what this theory predicts.
The empirical evidence is overwhelming that patents are a PROPERTY RIGHT not a MONOPOLY.
I have written extensively on whether the defining characteristics of a patent are consistent with the definition of a monopoly or the definition of property rights. For instance see:
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.
Property Rights, Possession and Objects
This post explains the difference in the concepts of property rights, possession, and objects. Most economists and patent detractors confuse these concepts. The origin, definition, and legal basis of property right are explained.
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.
The only way to suggest that patents are a monopoly is define “market power” so broadly that any property rights confer market power. I admit that I reject this argument. A property right is not a monopoly and this is an attempt by people with a political agenda to attack the concept of property rights.
PATENTS are PROPERTY RIGHTS under the law, by definition, and according to all statistically significant macro-economic evidence. People who suggest otherwise are pushing a political agenda or do not understand the definition of the words monopoly and property rights.
A year ago the pork laden so called Patent Reform bill known as the America Invents Act (AIA) was enacted.
First to File Provision:
Article 1, Section 8, Clause 8 of the Constitution states:
To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.
The Constitution does not give Congress the authority to grant patents to the first person to file and doing so violates the exclusive Rights of inventors. The proponents of the AIA argue that it is really a First Inventor to File system, not a first to file system. This is nonsense. There is no such thing as being the second or third or ninth inventor. An inventor is the first one to create something. For more information see Lawsuit Challenges AIA’s Constitutionality.
Fee Setting Authority:
Article 1, Section 7, Clause 1 states.
All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills.
The AIA gives the US Patent and Trademark Office (USPTO) fee setting authority. However, the part of the AIA that made sure that USPTO would be able to keep all its fees was removed by Representative Paul Ryan. Since it is very unlikely that the USPTO will keep all its fees, they are creating a bill for raising Revenue.
Periodically, the PTO decides they need a more aggressive (more European) approach to restrictions. This practice not only fails to follow the law but it is an attempt to use restriction practice to limit the applicant’s right to define their invention. In other words, it is a backhanded way of limiting invention under 35 USC 101 or 35 USC 103.
According the MPEP 803,
There are two criteria for a proper requirement for restriction between patentably distinct inventions:
(A) The inventions must be independent (see MPEP § 802.01, § *>806.06<, § 808.01) or distinct as claimed (see MPEP § 806.05 – § *>806.05(j)<); and
(B) There *>would< be a serious burden on the examiner if restriction is >not< required (see MPEP § 803.02, **> § 808<, and § 808.02).
The statutory basis for restriction requirements is 35 USC 121, which states
If two or more independent and distinct inventions are claimed in one application, the Director may require the application to be restricted to one of the inventions. If the other invention is made the subject of a divisional application which complies with the requirements of section 120 of this title it shall be entitled to the benefit of the filing date of the original application. A patent issuing on an application with respect to which a requirement for restriction under this section has been made, or on an application filed as a result of such a requirement, shall not be used as a reference either in the Patent and Trademark Office or in the courts against a divisional application or against the original application or any patent issued on either of them, if the divisional application is filed before the issuance of the patent on the other application. If a divisional application is directed solely to subject matter described and claimed in the original application as filed, the Director may dispense with signing and execution by the inventor. The validity of a patent shall not be questioned for failure of the Director to require the application to be restricted to one invention.
Why does the MPEP change “independent and distinct” to “independent or distinct?” It appears the Patent Office’s is not following the law and attempting to make it easier to require a restriction.
The question the statute leaves unanswered is what is an independent and distinct invention. According to the MPEP 802.1:
The term “independent” (i.e., **>unrelated<) means that there is no disclosed relationship between the two or more inventions claimed, that is, they are unconnected in design, operation, and effect.
According the MPEP 802.2 the term distinct means
Related inventions are distinct if the inventions as claimed are not connected in at least one of design, operation, or effect.
From the above it is clear that “distinct” casts the widest net. I will note the MPEP suggests that the case law on point does not always use the above definition. The important thing to remember is that we are talking about the inventions as claimed. Thus, if any set of claims incorporates both inventions, they are clearly connected by design, operation or effect.
The Patent Office when issue a restriction requirement often asserts the combination/sub-combination rule to argue that two inventions in an application are distinct. However, this rule is still based on how the combination/subcombination are claimed and requires the PTO show that it would be a serious burden if the restriction were not upheld.
Unfortunately, the PTO often ignores the “claimed” requirement for distinct inventions. If the PTO is allowed to do this it arbitrarily limits what the applicant can claim as their invention. Every invention is a combination of known elements (conservation of matter and energy) and when the PTO incorrectly limits which subcombinations the inventor can claim, they limit the right of the inventor to define what their invention is. This has the same effect as limiting what the inventor can claim under 35 USC 101 or 35 USC 103. From a practical point of view this arises when a subsequent Office Action rejects the claims based on certain prior art and the applicant then wants to modify their claims to incorporate the features of one of the subcombinations. The PTO disallows this amendment by suggesting the applicant has not selected that subcombination. This practice is wrong, illegal, denies the applicant of due process, and denies the applicant’s right to define their invention.
The paper Illuminating Innovation: From Patent Racing to Patent War, by Lea Shaver, is a draft of an article to be published in the Washington and Lee Review, is another example of the deteriorating state of academic research. First, I will examine the primary hypothesis of the paper and second I will examine the factual errors and inherent biases of the paper.
The Assumption
The underlying assumption of the paper is:
For more than two centuries, U.S. patent law has assumed that patents promote innovation. Yet for all the profound impact that patent law has on industry and society, we have little empirical evidence to test this “innovation assumption.” In fact, there are good reasons to believe that patents may also impede innovation, by creating barriers to competition.
Really? How about the clear differences between countries that have patent systems versus those that did or do not. In the early 1800s the strongest patent systems in the world were in the US and England, which were the leaders of the Industrial Revolution. The Industrial Revolution was really an invention revolution as the book The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention, by William Rosen documents. Why didn’t this innovation occur in Africa, or the Middle East? They did not have an anticompetitive patent system? Or even why didn’t it occur in France or Germany or Japan?
There is also strong empirical evidence that human beings did not escape the Malthusian Trap until the advent of a patent system, which are property rights in inventions. The only way to increase real per capita income is by increasing our level of technology. This has been shown by such diverse economists as Robert Solow, Paul Romer, Jacob Schmookler, and Gregory Clark. The first large group of people to escape the Malthusian Trap were the English and the Americans. Japan did not escape the Malthusian Trap until they copied the US’s patent system. For more information see The Source of Economic Growth.
Ms. Shaver completely ignores the work of economist B. Zorina Khan, who has undertaken an extensive survey of the effects of patents on innovation. But she does cite her work while ignoring its conclusions. For those interested in a true academic study of the history of patent law in the US see the book The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920 (NBER Series on Long-Term Factors in Economic Development) by B. Zorina Khan. Note I do not agree with all of Professor Khan’s conclusions, but it is an extremely well researched book.
Both the development and dissemination of technology occurs at a more rapid rate in those countries that have the strongest patent laws. The empirical evidence is overwhelming that stronger patent system results in increase innovation and wealth creation. Professor Lea Shaver’s statement that there is a lack of empirically evidence is outrageous and shows that the professor’s paper is really a propaganda piece.
The Paper: Flaws, Errors, and Distortions
This paper is so full of factual errors, distortions, and propaganda that it is impossible to point them all out or correct them. But it is necessary to point out at least some of them, so that they do not go unchallenged. These errors and distortions are pointed out in roughly the order they were brought up in Professor Shaver’s paper.
The abstract to the article starts with the provably incorrect hypothesis (see above),
Patent law assumes that stronger protection boosts innovation, yet empirical evidence to test this “innovation hypothesis” is lacking.
The article purports to use the example of the invention of the incandescent light bulb to determine if stronger patent protection boosts innovation. It explains that this is not the story of brilliant inventors and bright inventors. No its,
It is a story of corporate maneuvering and high-stakes litigation, as Thomas Edison and his competitors employed patents as weapons in their battle to dominate the electrical industry.
What does the author believe patents are for? Does she believe people collect patents like blue ribbons without any business goals? Does the author believe it is wrong for the owner of a factory use it to dominate a market? Does she understand the purpose of property rights is to enhance the owner’s ability to increase production and lower costs? In other words, does this so-called professor of law understand the purpose of property rights?
Since this statement is in the author’s introduction, it is clear that she has a bias before she has even examined the facts.
She goes on to state,
The smartphone is today’s light bulb. A complex machine, developed through the collaborative and competitive efforts of many engineers, rather than a single mythological inventor.
This shows the author’s bias against the light bulb, which she calls a “humble device.” I doubt the author could build this “humble device” with the materials that Edison had at the time. I am sure her law and sociology degrees have prepared her for building and understanding technology – not.
She also exposes her collectivist ideology when she elevates “collaborative” efforts and suggests that a single inventor is mythological.
The author proves that she does not understand property rights when she states
Patent law is a tremendously influential aspect of modern economic regulation.
Patent law is not economic regulation it is the property law of inventions. It recognizes the simple fact that but for the creator, the invention would not exist.
It is hard to believe how incredibly corrupt our academic institutions have become, but Ms. Shaver sums it up in one sentence.
Within the substantial social scientific literature employing and commenting on case study methodology, some researchers prefer case studies because of normative commitments that achieving objective, accurate explanation of complex social phenomena is unattainable or undesirable. From these researchers’ point of view, there is no “truth” in social science, only “interpretation.”
Let me translate this academic BS. Ms. Shaver is suggesting that objective and accurate explanations are UNDESIRABLE. Well we can start with your paper Ms. Shaver, it is clear that you have no interest in being accurate or objective, your conclusions are based on your feelings not on the facts. The paper and bandwidth to print your drivel is an extravagant waste of the individual human greatness that created the Internet, computers, electronics, incandescent light bulbs, and the printing press.
Ms. Shaver’s dishonesty knows no bounds. She cites Adam Mossoff’s paper on the sewing machine as support for her anti-patent tirade. Adam Mossoff discusses how the markets were able to clear the patent rights of sewing machine inventors, but Ms. Shaver pretends his article supports limiting patent rights.
Next, Ms. Shaver complains
In the case of the light bulb, these long-term dynamics included massive litigation, the consolidation of a previously competitive industry, and a half-century lull between when incandescent light technology was first patented and when it finally became widely accessible to the American public.
Ms. Shaver complains how long it took to disseminate this technology in the US. Did the electrical light technology disseminate faster in China or India or Saudi Arabia, which had did not patent rights at the time. No. In fact, this technology was disseminated faster in the USA than anywhere else in the world, which had the strongest patent protection in the world. But this does not fit Ms. Shaver’s narrative and so she ignores these clear facts.
Ms. Shaver proves her complete ignorance of both the technology underlying the incandescent light bulb and her lack of understand of the function of claims in a patent when she states,
Even today, British schoolchildren are taught that Joseph Swan, not Thomas Edison, won the race to invent the light bulb.
What children are taught is not relevant to understanding of how patent law works. There is a difference between the historian and the patent attorney. If Ms. Shaver had consulted a patent attorney, which she is not, she would have learned that Swan invented a low resistance, short lived light bulb that had no commercial application and Edison had invented a high resistance, long lived light bulb, with immense commercial potential. But I doubt Ms. Shaver, whose prelaw education was in Sociology could even understand why a high resistance incandescent light bulb was so important. For those of you who do not have a technical background a low resistance filament meant that you needed copper cables with very large diameters to even light a city block. The cost of these large copper cables meant Swan’s incandescent light bulb was limited to being a laboratory curiosity.
Ms. Shaver then makes this bewildering statement.
Once electric light was ready for commercialization, many companies competed with Edison’s in the marketplace. Compared to his rivals, however, Edison was particularly successful in litigating his patents.
Perhaps this was because Edison was the inventor of the light bulb and many other things that made it practical invention, including inventing an improved dynamo, fusing systems, electrical connectors including the standard light bulb socket still used today. Why does Ms. Shaver believe Edison invented these? So his competitors could steal his inventions? To help out his competitors? Of course, Edison litigated when his competitors stole his technology. Ms. Shaver clearly does not understand the role of property rights in free society. She also does not understand merit or cause and effect. According to Ms. Shaver, failing to share your property with people who did not produce it is anti-competitive. A phrase she uses several times in the paper.
Ms. Shaver then goes on to discuss the concept of “Patent Racing” by Mark Lemley. Professor Lemley is neither a patent attorney nor does he have a technical background. According to Mr. Shaver, Lemley shows
In case after case, Lemley’s article illustrates, multiple inventors, working on the same technological problem, have arrived at the same solution at nearly the same time.
Mr. Lemley’s lack of understanding of both the underlying technologies and the law shows he has no idea of what an invention is. His conclusions about simultaneous inventions is not supported by the facts or the literature. For more information, see the economist’s Jacab Schmookler’s book, Inventions and Economic Growth, where he examined this nonsense of simultaneous inventions.
Professor Lemley’s lack of technical knowledge leads to his lack of understanding of the difference between inventions. For instance, he does not understand the difference between a patent for a low resistance incandescent light bulb and a high resistance light bulb. He does not understand the difference between a patent on high resistance light bulb and a socket for connecting a light bulb to an electrical distributions system. According to Mr. Lemley these are all simultaneous inventions. Mr. Lemley is another complete charlatan, who pretends to undertake academic research, but is actually is a propagandist who would make Joseph Goebbels proud.
Then Ms. Shaver suggests that the invention of the light bulb was inevitable.
From the perspective of market incentives and of technological groundwork already laid, therefore, a commercially practical light bulb may have been a near inevitability.
If it was inevitable why did the invention of the light bulb occur in the US and not in France or Russian or Ecuador? Why did it occur in the nation that had the strongest patent laws protecting the rights of inventors? Ms. Shaver ignores the obvious.
Ms. Shaver’s ignorance and arrogance knows no bounds, she states:
Despite all this support in the historical record, Lemley’s theory of patent racing has been vehemently disputed by business professor John Howells and his co-author, Ron D. Katznelson. These critics specifically take issue with Lemley’s use of the light bulb as an example of incremental invention. They argue that Edison’s contribution in fact “unlocked the field,” cannot be placed on a par with contributions by any other inventor, and was deserving of a “pioneer” patent. My own closer examination of the light bulb case puts me on the side of Lemley rather than his critics.
Ron Katznelson has a PhD in electrical engineering and has been the founder of numerous, successful technology startups. Ms. Shaver has a degree in Sociology and Law and Professor Lemley also does not have a technical background. Basically Ms. Shaver and Mr. Lemley are completely unqualified to make this determination. Her opinion is without any basis. She knows this so she does not actually support her conclusion, she just asserts it.
Ms. Shaver admits that “lamp patents were not respected” but she complains about the subsequent litigation. She seems to believe that the legal system should support theft in the name of “competition.”
Ms. Shaver goes on to apply her conclusions to the smart phone industry. On the one hand she praise cooperation between competitors and on the other hand she suggests a dominate player is anticompetitive. Isn’t cooperation anticompetitive also Ms. Shaver? Once again Ms. Shaver has shown she is not interested in logic, reason, or a well functioning patent system. She is interested in using any propaganda that will stick to suggest patents are evil monopolies. Ms. Shaver complains that patents lead to monopolies, but ignores the overwhelming evidence that startups rely on patents to protect themselves from larger competitors. For instance, see Tesla whose patent on alternating current allowed Westinghouse to challenge Edison. Countries that have the strongest patent system have the most dynamic markets with new competitors challenging incumbent firms. Weak patent systems not only entrenches the large dominant companies she rails against, but destroys innovation.
This paper is a farce and Ms. Shaver is propagandist pretending to be a scholar. If Yale Law School had one shred of integrity it would fire Ms. Shaver immediately.
Illuminating Innovation: From Patent Racing to Patent War, by Lea B. Shaver, Yale Law School, Washington and Lee Review http://ssrn.com/abstract=1658643
Lea Bishop Shaver
Below in no particular order are some of the foundational rules of patent law. No attempt is made to prove these rules, but most should be familiar to patent attorneys. If you disagree or are looking for an explanation feel free to comment below and I will respond. In many cases I have already written a post related to the foundational rules. For my analysis of the Foundation of 35 USC 103 see 5th Anniversary of KSR: Is Section 103 is Unconstitutional?
*Patents are a Constitutional Right
*Patents and Copyrights are the only right mention in the Constitution
*Patents are a Natural Right
*Patents are a Property Right – the basis of all property rights is creation/production and the same is true of patents.
*Trade Secrets are a Natural Right
*Patents can be viewed as a Social Contract where the inventor gives up their right to a trade secret in order to obtain a patent.
*All Inventions are a combination of known/existing elements/steps and known connections
*Patents are not monopolies (A property right cannot be a monopoly)
*All Inventions use natural phenomena – we are not dealing in magic.
*Every element in every claim of a patent behaves in a predictable way – they do not violate the laws of physics – again we are not patenting magic.
*Claims define what the invention is.
*Every element (word) in a claim has to be given meaning – reading a claim is like reading an equation – not like reading prose.
*The definition of an Invention implies that it is Useful or has an Objective Result
*The definition of an inventor requires that they be the first person to create the invention, which results in the novelty requirement.
The SmartGene v. Advanced Biological Laboratories case is the first fallout from the Supreme Court’s Prometheus decision. Advanced Biological Laboratories (ABL) owns two patents (6,081,786 6,188,988) directed to computerized methods of guiding the selection of therapeutic treatment regimens, particularly for HIV. The patents explain that the new treatment options coming on line, the complex nature of the disease and how patients react to the disease and the use of multiple different treatments that can cause complex drug interactions results in the need for computerized system to help doctors treat their patients. The background section points to academic papers and patents directed to expert systems on this problem. So clearly other people felt there was a need for such a system.
The claims are directed to three expert systems on a computer and inputting data about the patient. The computer then 
ranks the treatment options and provides advisory information to the doctor about the treatment options.
The courts holding was
The patents-in-dispute do no more than describe just such an abstract mental process engaged in routinely, either entirely within a physician’s mind, or potentially aided by other resources in the treatment of patients.
The Court also finds that the patents-in-dispute are invalid under the “machine-or-transformation” or “MOT” test utilized in some of the Supreme Court and Federal Circuit precedent.
Abstract Mental Process
The claims are clearly directed to a computer. The computer is running three separate expert systems and provides a rank list of therapeutic options and advisory information. Computers are not abstract mental processes. They use electricity, they cause the state of transistors to change, they cause electrons to change position. This is not an abstract mental process. Judge Beryl A. Howell, the judge in this case needs to have her head examined if she believes a computer is an abstract mental process. But what can you expect from someone who got their undergraduate degree in philosophy and probably never took a science or math course in college. For Judge. Howell’s edification, I will point out that a computer is a general purpose electronic circuit. Software is a way of wiring this general purpose electronic circuit. So when a software program is executed it changes the wiring of the electronic circuit and makes it a specific electronic circuit. Wiring an electronic circuit is not an abstract mental process. This is just another depressing example of why we need courts and judges who understand technology and patent law in resolving patent disputes.
Because so many people, including patent attorneys appear to be confused about what an abstract mental process is, I will write a claim below that would fit the definition.
A method of solving an integral in closed form, comprising the steps of :
mentally reviewing an integral to be solved;
selecting mentally one of a plurality of techniques for solving the integral; and
applying mentally a selected technique from one of the plurality of techniques to the integral, wherein the plurality of techniques include integration by substitution and integration by parts.
MOT
The invention clearly involves a computer. A computer is a machine. When an instance of code is executed by a computer it is a specific purpose electronic circuit. A specific purpose electronic circuit converts electricity into states of transistors – thus the transformation prong is also satisfied. But an attorney who has never taken a class in physics, let alone electrical engineering would not have this basic knowledge.
The Supreme Court ruling in Mayo Collaborative Services v. Prometheus Labs., Inc. (Supreme Court 2012) was released on March 20, 2012 and they held unanimously against Prometheus and invalidated two patents under 35 USC 101. My title may be a bit salacious, since the holding in the case does not limit patents to just black magic, it limits them to magic. The holding on p. 4 states:
The steps in the claimed processes (apart from the natural laws themselves) involve well-understood, routine, conventional activity previously engaged in by researchers in the field. P. 4
And adds:
The three steps (of the claim) as an ordered combination adds nothing to the laws of nature that is not already present when the steps are considered separately. P. 10
Logically, the Supreme Court is saying that known steps or elements in combination with a law of nature is not patent eligible. First every invention ever made involves steps (elements) that were known individually before the invention, and laws of nature. You cannot create something out of nothing. Section 112 means that you have to be able to describe 
your invention in terms known to those skilled in the art. Thus the Supreme Court’s holding means that any invention that satisfies 112 is unpatentable under 101. The only inventions that will satisfy 101 are those that violate laws of nature or involve creating something out of nothing – or magic.
Get out your cauldrons-
For the lawyers in the audience this case reintroduces the point of novelty test nonsense.
I have written extensively about this case in the following posts and will not reiterate my earlier points.
Justice Breyer: Patent Ignorance
Mayo v. Prometheus – Supreme Court Grants Cert (Again)
But for those not familiar with the case here is a little background
The patents (6,355,623 and 6,680,302) claim methods for determining the optimal dosage of thiopurine drugs used to treat gastrointestinal and non-gastrointestinal autoimmune diseases. Thus, the questions in this case are whether determining optimal dosages of thiopurine drugs to treat autoimmune diseases exists in nature separate from man and whether this solves an objective problem? Clearly, determining optimal dosages does not exist in nature for any drug and the patent solves the objective problem of determining the optimal dosages of thiopurine drugs for autoimmune diseases.
Ayn Rand discussed this exact issue in Atlas Shrugged. James Taggart is discussing Rearden Metal with his wife:
”…’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(Jim Taggart’s Wife) 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?’” Kindle Location 5796-5802
These exact questions could be asked of the Supreme Court. All these other steps were available to other people, but no one else discovered how to use thiopurine to safely treat Crohn’s disease. In fact, the Supreme Court admits as much.
. . . and it has been difficult for doctors to determine whether for a particular patient a given dose is too high, risking harmful side effects, or too low, and so likely ineffective. p. 4
The reality is that this Supreme Court is anti-patent and anti-property rights. The opinion states patents are monopolies in three spots and mentions rent seeking in one spot, but it does not mention that the Constitution clearly states that inventors have a RIGHT to their invention and it does not state that patents are property rights. This case is just another example that the anti-property rights and anti-Natural Rights crowd is in control of our government. This case will have long term negative ramifications for the US economy. The US is losing its technological advantage because it believes that inventors should work for free. Note that Singapore is taking another path and trying to figure out how to strengthen their patent laws (see Singapore and the US Divergent Patent Policies)
Forbes magazine has an excellent article that provides the real facts behind the so called patent litigation explosion entitled “No, the Patent System Is Not Broken.” The article explains:
“The truth is that today’s patent litigation rate is less than half what it was in the mid-nineteenth century, a period widely recognized as the golden age of American innovation.”
The article puts today’s patent litigation rates in context.
According to Lex Machina’s authoritative “Database of U.S. Patent Litigation 2011,” the number of patent suits filed between 2001 and 2010 has held steady at less than 3,000 per year. Only about a hundred of these cases actually went to trial each year
To put it in even broader historical context, the estimated 100 patent suits currently filed in the smartphone industry is actually less than one-fifth the number of suits filed during the first “Telephone Wars” of Alexander Graham Bell’s time. Back then, the American Bell Telephone Company and its successor, AT&T, litigated a whopping 587 patent cases alone.
Perhaps even more importantly the article explains that a strong patent system creates a division of labor between inventors and manufacturers. According to Adam Smith the division of labor is key to increasing our wealth.
“The growth of market trade in patents raised the returns to invention and encouraged a division of labor whereby technologically-creative individuals increasingly specialized in their comparative advantage—invention,” observed Lamoreaux and Sokoloff. “It was the expanded opportunities to trade in patented technologies that enabled the independent inventors of this golden age to flourish—and that stimulated the growth of inventive activity more generally.”
By 1865 the per capita patenting rate in the U.S. was triple that of Britain, and the vast majority of those citizen-inventors were what we now call “non-practicing entities,” or NPEs, who licensed their patents to others to commercialize into new products. Indeed, patent and legal records from the nineteenth century indicate that more than two-thirds of the 160 so-called “great inventors” of the Industrial Revolution, including Thomas Edison, were NPEs.
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