Many people have speculated that Saverin is making this move for tax reasons, but he has lived in Singapore for years.  Singapore is one of the few countries that understands the value of inventors, entrepreneurs, and engineers/scientists.  In the US we keep weakening out patent system, making it harder to raise capital, and then taxing startups to death.  We have the highest corporate tax rate in the industrialized world.  Do the politicians blame themselves for this exodus of talent from the US – NO.

I have written on this subject several times – see the posts below.

US Brain Drain

Phil the Ex-Pat

Exodus From the US 

This next chart shows that while the number of applications has grown, the number of issued patents has not kept up.  (US inventors only)

This last chart shows the ratio of issued to filed patent applications (US inventors only)

*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.

PS: The UN also did not seem to get the memo from Japan’s Space program that Industrialized countries are net carbon sequesters.  The Third World owes us carbon reparations.

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.

 Pick any country that is currently doing well, China is a perfect example. In China the Intellectual Property Laws are so weak that someone thought it was a good idea to completely replicate Apple retail stores. Compare their economy to ours. As much as I hate to compare other economies to ours, it’s worth taking a look .

 He has also criticized companies that enforce their patent rights.  But now Cuban has bought into a company, Vringo, that acquired Lycos’ patent portfolio and is now enforcing those patents, according to an excellent post on GametimeIP.  Vringo could be described as a Mythical Patent Creature (I stole this line from Patrick at Gametime IP).

This is not the full extent of Mr. Cuban’s hypocrisy.  I am sure that he has made a fortune on the IP rights he has in the Mavericks (Just think of the money we could make by rebroadcasting Mavericks games, if we didn’t have to pay for Cuban’s IP).  In addition, his argument that the countries that are doing well have weak IP rights is clearly nonsense.  Is North Korea doing well?  The start of China’s economic growth corresponds to their recognition of property rights including IP rights.  They didn’t have any IP rights during “The Great Leap Forward” when millions of people starved to death.  The current economic downturn in the US is not because our patent rights are too strong, but because they are too weak.  Patents are property rights and when patents are under attack you can bet that all property rights are under attack.  Clearly, the communist we have in the White House is not interested in strong property rights, but in fairness the Bush Administration was only ambivalent about property rights.

In order to understand the value of a patent to your business it is helpful to make an analogy to physical barriers to entry.  You probably lock the door to your house, but you know that someone can break the window and still get into your house.  So why do you lock the doors to your house?  Probably because you know that it will slow down any burglars and make it more difficult to enter your house.  As a result, you increase the chance that any burglars will either give up or move on to someone else’s house.  Note that you can always spend more money on the locks to your house, but at some point it doesn’t make economic sense.  If you spend $1 million on a safe for a $10K diamond, it doesn’t make sense.  The same thing is true for patents.  You are not trying to create a perfect barrier to entry, you are trying to increase your competitors cost and slow them down if they decide to compete with you.  For many of my clients the main goal is to make it painful enough for someone to compete with them that the potential competitor would rather buy out my client.

Thus the question is not whether you can afford to enforce a patent, or whether having a patent will eliminate all you competitors, but whether filing for a patent application or obtaining a patent will increase your competitor’s cost and slow down their entry into your market.  If you spend $10K to obtain a patent and it increases your competitor’s cost $100K and slows them down, then it probably makes sense to file a patent application.

The size of your market must also be taken into account.  The bigger your market the smaller the barrier needs to be.  For instance, a company with $5 billion a year in sales in a well defined market should file patents on almost any invention in their market space.  Vice versa the smaller the market the bigger the barrier to entry needs to be.  I have had clients walk into my office where I am pretty sure we can create an almost perfect barrier to entry, but the market is only $80k a year.  This is essentially buying a job and it makes no sense to file a patent for that size of market no matter how strong the barrier to entry.

Remember the goal of patent is to create a barrier to entry.  Just like physical barriers to entry, you should not expect a perfect barrier to entry.  For most startups, you want a strong enough barrier to entry that your competitor will buy you out rather than compete with you.

The Marxists in the Administration will argue that this has no effect on whether companies invest in the US, or hire employees here, or whether people decide to start businesses in the US.  Of course, they have absolutely no evidence to back up their assertion.  In fact, all the evidence is against them.  But they will argue that we have to “invest” in our future.  This comes from an administration that believes

CONSUMPTION CREATES WEALTH.

No this is not a joke, but exactly (see Food Stamps) what the so called economists advising this administration believe.  Compared to these economists, the FLAT EARTH SOCIETY seems like they are part of the Enlightenment.  This doublethink is compounded by the idea that we are investing by giving money to Solyndra and other companies organized by Obama political cronies.  These “investments” are political investments by Obama, not investments in the US’s future.  Real investment by the government would be reducing the size and regulatory burden of the Government, see Austerity: Why it is Key for Both Short Term and Long Term Economic Growth.

Statist from both political parties will argue that the effective tax rate of many corporations is much lower than the nominal tax rate.  They neglect to mention that this only applies to large multinational companies.  These large multinational are able to escape the high corporate tax rate, because they have subsidiaries around the world and can shift income and production to low tax countries.  Raising their tax rate, just means they will move more and more of their production and income outside the US.  Large multinational companies are net job destroyers according to the Kauffman Foundation, so they should not be our focus.  Net new jobs and economic growth come from startups.  US startups do pay close to the nominal corporate tax rate and these draconian tax rates along with failure to provide an effective patent system, and regulations are killing our economy.

For a great article on this point see America has the Highest Taxes in the World.

But the ignorance does not stop with this statement, the article goes on to state that:

 “The patent explosion began in the mid-1990s, when the U.S. Court of Appeals for the Federal Circuit ended the requirement that patents specifically define inventions.”

First of all the U.S. Court of Appeals for the Federal Circuit never did any such thing.  The requirement for specifically defining one’s invention in a patent has not changed since at least the 1952 patent act.  Second there has been no explosion in the number of issued patents in the US to US based inventors.  The numbers of patent issue to US based inventors has been flat for at least a decade, see chart below

and by every objective measure (GDP/patent, R&D/Patent, Population/patent) the quality of patents is increasing – see Patent Quality Nonsense.

The article then quotes a forthcoming article from the CATO Institute that it is impossible for a software company to determine if they are infringing an existing patent.

 They estimate that there are 600,000 firms producing patent-eligible software and 40,000 software patents granted each year. They say this comes to “24 billion new patent-firm pairs each year that could produce accidental infringement.

Since the total number of issued patents since 1836 is just over eight million this is complete nonsense and academic fraud.  The exaggeration of the authors from the CATO Institute and Yale Law School is criminal.  Both of the authors of this study should be fired and never given another academic job.  But so low is the state of our academic research no one will question their outrageous assertions.

Companies do market research on competitors in the software space and clearly do not feel overwhelmed by the “24 billion” new pairs of potential products.  Most software companies I know are very good at narrowing down their market research and the same applies to patents.  Companies spend huge sums on market research, but complain about spending a little money to determine if they are violating someone’s property rights.  In fact, most companies never do check to see if their products are likely to infringe a patent.  This is like starting construction on a building without checking that you have clear title to the land.  We would not tolerate or glorify the stupidity in the case of real property, so why should we do so in the case of patents?

Finally, to the point that Morse could have patented the Internet this again shows the author’s ignorance of patent law.  Patents cover an invention.  Anything that incorporates that invention infringes the patent.  For instance, if I have a patent on a microprocessor and you incorporate a microprocessor into your cell phone you infringe my patent.  I am not asserting that I invented the cell phone, I am asserting that I invented the microprocessor and you are infringing my patent by incorporating it into your cell phone.  According the Supreme Court’s decision Morse did invent a system for repeating electromagnetic signals so they could be sent over long distances.  Repeaters are still used to amplify electronic signals, including signals sent over the Internet.  So if Morse’s patent were still valid (they expired around 150 years ago), then yes the Internet would likely have infringed his patent – according to the Supreme Court’s characterization.  This would not mean that Morse was asserting he invented the Internet.  Note that the inventor of the transistor, the inventors of error correction codes, the inventor of microprocessors, the inventor of electronic amplifier circuits, and many, many more would be in the same hypothetical situation – but of course this is meaningless since their patents expired years ago.  All this proves is that all inventions build on earlier inventions and the author of this article’s ignorance of how patents work, knows no bounds.

Could Morse Have Patented the Web? Under today’s loose standards, the telegraph inventor might own the Internet” , dated March 26, 2012, the Wall Street Journal