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Posts Tagged ‘America Invents Act’


Gunn v. Minton: Bad for Patent Attorneys and Patent Law

In a unanimous decision the Supreme Court ruled that State Courts have jurisdiction over malpractice cases related to patents.  Gunn v. Minton, No. 11-1118, 2013 WL 610193 (U.S. Feb. 20, 2013) .  At first glance this would appear to be an unimportant decision.  But state courts do not understand patent law.  How can they decide if there was a malpractice if they do not understand the underlying law.  Most likely the judges also will not understand the underlying technology associated with the patent either.  So what you will have is a judge that neither understands the facts or the law.  Talk about kangaroo courts.  And the AIPLA supported this nonsense.  The AIPLA has proven that it is not a defender of US patent practitioners or US patent law or the US economy.  (For more on how corrupt the AIPLA has become see Why I Quit the AIPLA – American Intellectual Property Law Association)

 

According to one malpractice attorney:

 Most patent attorneys don’t understand the crap shoot that many state courts present.  In South Carolina, it is almost impossible for a defendant to get summary judgment in a case, no matter how weak the plaintiff’s position is.  In SC, the standard is a “scintilla of the evidence.”  As a state court judge said in a seminar, “do you know how small a scintilla is?”.  Never mind that the state court rule is the same as the federal rule:  a genuine issue of material fact.

Without a doubt, the likelihood of a patent attorney being sued is much higher than if the federal courts had exclusive jurisdiction.  The time and expense incurred by a plaintiff’s lawyer in a federal case is much higher than bringing the same suit in state court.  A plaintiff’s lawyer is therefore much more likely to bring a doubtful contingency case in state court than in federal court, hoping to extract some money on a doubtful claim, or if he or she is lucky, to confuse a jury in a difficult area of law, and get a giant verdict.

Then we have the fact that few carriers will write coverage for patent practitioners. You can expect that situation to get worse.

Then, we have AIA (America Invents Act), and with new rules and first to file rules, which increases the exposure for patent attorneys.

AIPLA has taken a position that increases the risk for patent attorneys, and decreases their ability to obtain coverage.  Patent attorneys could be subject to a claim based on an application you filed 20 years ago. Since policies are claims made, patent attorneys could all end up with no coverage in years where we should be looking forward to, or are in, retirement.

The management of AIPLA is clueless, and is not the friend of patent practitioners who are not in large, big city firms.

 

 
One Year Anniversary of Patent Reform: Two Reasons Why it is Un-Constitutional

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.

 
Lawsuit Challenges AIA’s Constitutionality

According to the New York Times Article Inventor Challenges a Sweeping Revision in Patent Law, a lawsuit has been filed to challenge the Constitutionality of the “first to file” provisions of the America Invents Act (AIA).  The lawsuit was filed by Mr. Stadnyk who holds several patents related to motorcycles.  He compares his fight against the AIA to the battle against Obama Care, which I believe is very appropriate.  Both were large complicated pieces of legislation laden with special interest goddies.  Both ignored the clear meaning of the Constitution.  Given this it is surprising that Mr. Stadnyk selected an attorney who is not committed to the Constitution.  Mr. Stadnyk attorney is Jonathan S. Massey, who is a protégé of Laurence H. Tribe.  Mr. Tribe has been a leading advocate of the ‘living Constitution’ concept and believes the Commerce Clause is an open ended excuse for the expansion of government power.  Hopefully Mr. Massey will be able to argue effectively despite these leanings.  I also hope that they hire a patent attorney.  As the Supreme Court has proven over a century of confused decisions, most attorneys do not understand patent law and cannot pick it up by just reading the confused decisions of the Supremes.

I and others have argued that the First-to-File (FTF) provision of the America Invents Act (AIA) is unconstitutional.  For instance see First to File is it Constitutional, which is a open letter by a number of law professors.  The essence of the argument is that Article 1, Section 8, Clause 8, grants Congress the power to protect inventors’ rights in their creations, not the first person to file at the Patent Office.  I suspect the opponents will argue the following points:

*Standing:  Mr. Stadnyk holds a number of patents, but these are not going to be effected by the AIA.  Mr. Stadnyk may have filed a number of patent applications, but these are not going to be effected.  If I were the opponents, I would argue that only a patent application that was denied under the first-to-file rule, but would have been issued under a first-to-invent (FTI) system would be well enough developed issue to provide standing.  If they succeed with this argument it could be years before a plaintiff had standing to sue.

I think the counter argument is that any inventor whose actions have been effected (changed) because of the change in the rule should have standing.  I think this may be the most difficult argument for Mr. Stadnyk to win because it will allow the courts to avoid the difficult questions presented by this suit.

*First Inventor-to-File:  The proponents of the FTF system have argued that the AIA is really a first inventor to file.  What does that mean?  How can you be the first inventor to file?  What does the word inventor mean?  INVENTOR means the first person to create an invention.  There is no such thing as the first inventor to file.  There can only be one (one group of) inventor.  All others are just re-creators.  For example, if I, with no knowledge of Calculus, were to recreate it today that does not make me the discover of Calculus and the equivalent of Newton or Leibnitz.  Even if my discovery is close in time to the inventor’s, I am still just a re-creator.  This is no different than science or the winner of a race, or the winner of a football game.  There is only one winner and there is only one inventor.

Now advocates of the AIA will argue that the first person to create an invention is not always considered the inventor under the present system.  Under the rules of interferences the second person to create the invention can be considered the inventor, if they did it without any knowledge of the first creator’s work and if the first creator abandoned their efforts to perfect the invention or concealed the invention.  If someone abandons an invention, then it was not created or at the least it provided no benefit to world or even the inventor.  You cannot award a patent or inventorship to someone who does not tell you about their invention.  In the case of abandonment, I do not see how that person can be considered an inventor.  The other case is concealment.  In that case, the proponents of the FTF system should argue that no patent should issue not that we should change our whole system to accommodate this very rare circumstance.

 

*Alice in Wonderland Argument:  Proponents of the FTF system will argue that the word INVENTOR can mean anything that Congress decides it means.  If that were true, why write a Constitution.  IF Congress can define every word as it wishes, then it is pointless to write down a founding document.  This is a nonsensical argument, but one the statists on the Supreme Court are likely to find appealing.

*Promote the Progress of Science and Useful Arts:  Proponents of the AIA are likely to argue that the Constitutional purpose of a patent system is to ‘promote the progress of science and the useful arts’ and Congress can do anything to further that purpose.  First of all this theory confuses the purpose of the preamble with the actual right involved.  The purpose of a preamble is explanatory, but not mandatory.   This is exactly the way preambles work in patent law.  Second, the Constitution says the EXCLUSIVE RIGHTS of inventors.  It is the only RIGHT mentioned in the original Constitution and when the founders used the word right they meant natural rights.  The purpose of government is to secure these rights – see the Declaration of Independence.  The purpose of government is not to promote the progress of science and the useful arts that is the result of securing the exclusive rights of inventors (and authors).

The proponents of the AIA will not admit it, but all empirical evidence shows that a FTI system is more effective at promoting science and the useful arts than a FTF system.  This is not surprising since a FTI system rewards the creator not just the person who can game the system the best.

*Treaty Obligation:  The advocates of the AIA will argue that our treaty obligations require the US to award patents to foreigners under the FTF system.  This is true.  However, treaty obligations do not trump the Constitution.  We should renegotiate these treaties not trash the Constitution.

Conclusion

It would be nice to believe that patent law is not influenced by politics, but a century of activist Supreme Court Judges shows this is not the case.  The most egregious example was the 1949 case Jungersen v. Ostby & Barton Co., 335 U.S. 560, 572  (1949) where Justice Jackson ignored the Constitution and stated that “The only valid patent is one which this Court has not been able to get its hands on.”  None of the present Supreme Court Justices understands patent law as well as a first year patent law associate and so this case will probably turn more on politics than the law or logic.

 
Paul Ryan: Good or Bad for Patents, Tech Startups and the Economy

Congressman Paul Ryan has been selected as the vice presidential running mate of Mitt Romney.  Many in the Republican Party have hailed him as true advocate of free market principles.  Unfortunately, his voting record is much more conventional than we have been led to believe.

Congressman Ryan voted for the America Invents Act (AIA).  This Act was laden with crony capitalist gifts for Wall Street, Big Pharma, and large corporations at the expense of startups and individual inventors.  The Act was widely criticized as being unconstitutional.  This was more than enough reason to vote against the AIA, but Paul Ryan led the charge to gut the only redeeming feature of the Act – namely ending fee diversion.  When I called Congressman Ryan’s office to ask why they were doing this, they responded that it was important to balancing the budget.  REALLY, in a $3 trillion federal budget the $100M or so you are stealing from inventors is going to make the difference?  This is less than 0.1% of the federal budget.  This is less than we give to Egypt or the UN or any number of other extra-Constitutional spending.

I pointed out that the PTO was a self funded agency, meaning no tax dollars are used to fund its operation.  Diverting the money of inventors and using it for another purpose is conversion (stealing).  Their response was how is this any different than putting the fee you pay to enter a National Park going into the general treasury?  There are a number of differences.  First, when I pay a fee to enter a National Park, I immediately get the service I paid for.  In the case of patents, inventors have to routinely wait from three to ten years to get the service they paid for.   Second, National Parks were created with federal funds, but inventions are created with private funds.  Even the Patent Office was created with private funds, since it is a self funded agency and always has been.  If a private company or an attorney did what the federal government does with patent fees it would charged with fraud and conversion.  This attitude that the federal government is above the law is exactly what is wrong with our country Mr. Ryan.

Ryan is bad for patents

Congressman Ryan voted for Sarbanes Oxley.  SOX has made it impossible for startups to go public, which has made it very difficult for startups to raise money.  Historically, most of the growth and job creation of startups occurs after they go public.  The Kaufman Foundation has shown that all net new jobs since 1972 have been created by startups.  To the best of my knowledge, Congressman Ryan has not said he is in favor of repealing SOX.  This means he is bad for technology startups and bad for job creation.

Ryan is bad for startup funding

Paul Ryan is widely praised for coming up with a plan to reduce our budget deficit.  Since government spending crowds out money that could be used to fund startups, this is good.  As part of this proposal he has a plan to rein in entitlements, such as medicare, medicaid and social security.  In spite of this, Congressman Ryan voted for medicare part D.  The question is which Paul Ryan will show up if he becomes VP.

Ryan also voted for TARP, for the bailout of GM and Chrysler, for the economic stimulus of 2008 and 2009, and for extending unemployment benefits to 59 weeks.

Ryan deserves credit for advancing a fairly realistic plan to reduce the budget deficit, but even this plan does too little to cut the deficit.  It’s goal is to reduce federal spending to 20% of GDP in about four years.  It is unlikely that we have four years before we are hit with massive inflation, which will more than double our interest payments on our debt and break our budget.  In addition, his voting record shows that he is unlikely to have the backbone to follow through with even this weak proposal.

Ryan is not a fiscal Conservative

Ryan has put forth a moderate plan to rationalize our tax system.  It does not go far enough, but it is his most pro-growth proposal.

The Problem with Supply Side Proponents

Supply side proponents (SSP) such as Larry Kudlow are ecstatic with the choice of Paul Ryan.  The problem with SSPs is that they do not understand that the only way to continually increase real per capita income is to continually increase our level of technology.  This means we need to eliminate the barriers to the capital markets for technology startups.  This means we need a well functioning system of property rights for inventions.  It also means we need to reduce the tax burden on startups, reduce their regulatory burden, legal risks, and accounting rules biased against them.  But Paul Ryan does not seem to understand this and neither do most supply siders.  As a result, it is unlikely that Paul Ryan and Mitt Romney will be able to put  the US on a sustainable path to growth.

Paul Ryan will be better than Obama or Biden

Unfortunately, this is damning him with faint praise.  Don’t be surprised if Paul Ryan turns into a Bush disappointment instead of a Ronald Reagan.   (Note I hope I am wrong and have to eat my words)

 
Patents – Some Stories Make You Want to Puke

CNBC is reporting that Chinese espionage of America economic secrets is on the rise in an article entitled “Chinese Espionage on the Rise in US, Experts Warn.  According to the article:

‘The Chinese are afraid that they’re going to get stuck in a technology trap,’ said Adam Segal, a China Expert and Senior Fellow at the Council on Foreign Relations. ‘The Chinese feel that they have to rely on the West — and Japan — for critical technologies.’

Why does this make me puke?  Because we are giving away our most important technological secrets by publishing our patent applications (inventions.  This practice started in 2001.  To add insult to injury, a bipartisan group of Congressmen passed the America Invents Act, which further weakens the property rights of our inventors by shifting us to a first to file system from a first to invent system, which had been the practice in the US since 1789.  (For more information on how the AIA disadvantages American inventors in the United States see How the American Invent Act Changes Patent Law, by David Boundy)  Why should the Chinese worry about stealing technology from the United States when our government forces our inventors to give it away?

If the United State government was serious about protecting the technology of American business, they would not publish patent applications, they would have fully funded the Patent Office, and they would have demanded reciprocal patent rights (reciprocity) like we have with copyrights.  Here is how explained reciprocity for patent in my post Real Patent Reform.

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.

Our government is not interested in protecting the rights and economic future of Americans and this article by CNBC is a joke.

 
Virtual Patent Marking

The America Invents Act (AIA) has changed the rules for marking products with patents.  The law allows you to “mark” you product by providing a website that explains which patents cover which products.  This is a positive step to move the patent system into the 21st century.

The reason for marking you product with a patent number is that it provides “constructive notice” to infringers of your patent.  Damages for patent infringement accrue from the date of actual or constructive notice to the infringer.  As a result, the damages you may recover will be larger the sooner an infringer is deemed to have notice of your patent.

From a practical point of view, having a website explaining which patents cover which products is significantly easier and less expensive than marking the actual product or the product’s packaging.  If it is not too expensive to also mark your product or its packaging I would suggest that inventor’s do both.

 

Here is how Section 16 of the AIA reads:

(a) VIRTUAL MARKING.—

(1) IN GENERAL.—Section 287(a) of title 35, United States Code, is amended by striking ‘‘or when,’’ and inserting ‘‘or by fixing thereon the word ‘patent’ or the abbreviation ‘pat.’ together with an address of a posting on the Internet, accessible to the public without charge for accessing the address, that associates the patented article with the number of the patent, or when,’’.

(2) EFFECTIVE DATE.—The amendment made by this subsection shall apply to any case that is pending on, or commenced on or after, the date of the enactment of this Act.

 

 
Obama’s Fundamental Change Means – US is No Longer the LAND OF THE FREE

The Heritage Foundation has just released its Index of Economic Freedom.  The US has fallen to 10th place in the rankings.  It appears the President Obama’s idea of fundamentally remaking the US is to no longer have the US the LAND OF THE FREE.

Fixing our economy and our unemployment problem is a straight forward case of increasing our ranking of economic freedom.  The Heritage Foundation put out an excellent video explaining the results of a declining level of economic freedom.

The passage of the America Invents Act is part and parcel of losing our economic freedom.  It had a number of special provisions for Wall Street and big Pharmaceutical companies.  It weakened the rights of startups and individuals in their inventions.  This has made it more difficult for inventors and startups to raise capital.  Technology startups are the driving force behind new jobs and high quality jobs.

 
Complainer in Chief: US Business Lazy

According to a Fox News story, President Obama: U.S. Gotten a Bit “Lazy” on Attracting Businesses, “President Obama said that the United States has gotten a “little bit lazy” when it comes to bringing in new businesses in to the states”.  He said some of the advantages of the US are its stability, and its innovative free market culture.

I guess I am just a little confused how a 2300 page health care law provides stability or how the government taking over 1/7th of the economy is free market?  How is a patent law (AIA) written by large companies to entrench their position furthering our innovation?  How does Dodd Frank also over 2300 pages further the free market?  Or contribute to stability?  How does interfering with Boeing’s decision to move to South Carolina result in stability?  How is that a free market?

Of course Obama is such a narcissist that he would never look at his own idiotic policies and how they are causing the slowdown in American business.  It is doubtful that Obama really wants the US to be successful.  So, his speech was really an exercise in DOUBLESPEAK.  1984 predicted the future it just took twenty five years longer than Orwell thought.

 

 
Forbes Explains How America Invents Act will Hurt Tech Entrepreneurs

This excellent article shows that when Canada changed from a first-to-invent system to a first-to-file system, it was bad for individual inventors, technology start-ups, and Canadian venture capital.  The article then quotes a UK study showing how the European system is not encouraging innovation.  The article notes that the America Invents Act will effectively eliminate the one year grace period for inventors, which is particularly important for startups.  The new post grant review will allow large companies to tie up entrepreneurial companies in expensive litigation for years.  The post grant procedure has been used effectively in Europe to stifle startup competitors by large companies.  Unfortunately, one of the supposed benefits of the Act was to stop fee diversion.  The Patent Office is completely funded by user fees and Congress has taken (stolen) these fees to support other Congressional pet projects.  The result of fee diversion is that it now takes four or more years on average for a patent to issue.  This pendency time results in the patent often issuing long after the commercial opportunity has passed the company by.  If it took 3 to 4 years to obtain title to your car or house after you bought it, you would think you were living in a third world country.  However, this is what happens in the patent world everyday and the America Invents Act does not solve this problem.  The author concludes that Congress should be careful that the America Invents Act not become the equivalent of Sarbanes Oxley.

This article was written by Gary Lauder is Managing Director of Lauder Partners, a Silicon Valley-based venture capitalist and co-inventor of a dozen patents. More info on this issue can be found on his Web site.

 

 
Mark Twain on the America Invents Act

It is strange to see how Americans’ attitudes have changed toward the patent system.  Mark Twain, who was probably representative of what intelligent Americans’ felt about their country at the time, writes extensively about the patent system.  In the book, Innocents Abroad, he explains the virtues of our country and moral decay of Europe by contrasting the patent system to the preservers of art.  Remember Twain was first and foremost an artist and he held this opinion.  He states:

The Popes have long been the patrons and preservers of art, just as our new, practical Republic is the encourager and upholder of mechanics.  In their Vatican is stored up all that is curious and beautiful in art; in our Patent Office is hoarded all that is curious or useful in mechanics.  When a man invents a new style of horse-collar or discovers a new and superior method of telegraphing, our government issues a patent to him that is worth a fortune; when a man digs up an ancient statue in the Campagna, the Pope gives him a fortune in gold coin.  We can make something of a guess at a man’s character by the style of nose he carries on his face.  The Vatican and the Patent Office are governmental noses, and they bear a deal of character about them. (Emphasis added)

In the last fifteen years we have extended the copyright term to be almost infinite, we have criminalize willful copyright infringement and we have had numerous government programs to protect intellectual property, which always means copyrights and perhaps trademarks, but not patents.  Alternatively, we have spent the last fifteen years stealing the fees inventors pay to the patent office, we have forced the publication of U.S. inventors’ patent applications for the world to see and steal, we have vilified the actions of our greatest inventors such as Edison, calling them trolls and some have even suggested that Edison really made incremental improvements on other people’s inventions, and called inventor’s monopolists.  Twain would be horrified by our capitulation to Europe enshrined in the America Invents Act.  It says something about our character that we are following in the Popes footsteps.

 

 
The Federal Government’s Contempt for Patent System and Constitution

The Solyndra scandal  demonstrates the Federal Government’s complete contempt for the Patent Office and the Constitution.  The bankruptcy of Solyndra means that the federal government will have to pay out $535 million in loan guarantees.  This means a single, politically connected company is going to absorb over half the shortfall in the Patent Office funding over the last two decades.  If that money had been spent on the Patent Office it would have benefited thousands of companies and creating millions of jobs.  Instead, this $535 million resulted in the employment of about 500 employees over a couple of years.

The right of inventors to their inventions, patents, is guaranteed in Article 1, Section 8, Clause 8 of the Constitution.  The only rights mentioned in the original Constitution are the rights of inventors and authors.  Congress has stolen over $1 billion in user fees from the patent office in the last two decades.  The Patent Office is the only self funded agency in the federal government.  This theft represents a tax on innovation and jobs.  It now takes 3 years on average to obtain a patent and in areas of more complex technology it is not unusual for it to take 5-10 years to obtain a patent.  If it took that long to obtain title to your house or car or stock you would think you were living in a third world country.  Justice delayed is Justice denied.

The federal government thought it was a lot more fun to play venture capitalist for a green energy company than fulfill its Constitutional duties.  Nowhere in the Constitution is the Federal Government given the power to play venture capitalist and this company is in no way is related to our national defense.  This is a stark case of how far our government has strayed from the Constitution.  They are funding companies without legal authority to do so and stealing user fees from the Patent Office which is their Constitutional responsibility.

The only way to increase our real per capita income is to increase our level of technology.  In the United States that means we have to invent.  Without a patent most technology startup companies cannot obtain funding.  Without funding they do not create the new technologies that create high quality jobs and increase our standard of living.

 

 

Greta Van Susteren and the mainstream news, who have probably never thought about patents, are pointing out the disgusting special interest deals in the American Invents Act.  See IS CONGRESS PASSING A BILL TO COVER UP FOR $214 Million MALPRACTICE OF LAW FIRM: Wilmer Hale? Why the SPECIAL TREATMENT ? (you know why).

 
Patent Reform Briefing to Senate Staff

There a number of youtube videos on the USBIC Briefing on Senate Consideration of House Patent Reform Bill H.R. 1249.  These videos provide invaluable insights into the America Invents Act.  Below I highlight some of the interesting points.

See http://www.youtube.com/watch?v=EPS9ORdD9DQ&NR=1

http://www.youtube.com/watch?v=As6bCYbp7d4&feature=related

 

Judge Michel, “I can guarantee you that if I went into private practice I could hold up any patent for almost a decade in post grant proceedings, it would never get to trial in the district court.”  The value of patents will plummet because of this, since they are not enforceable for almost a decade.

Judge Michel

The funding problem not being solved is the biggest problem.  The patent office will likely lose at least $100M next year.  The continuing resolution funding bill this years has killed the Patent Offices’ budget to hire examiners, fix their IT infrastructure, and create a satellite office.  It is inevitable that there will be another continuing resolution funding bill this year.  The 15% increase in Patent Office fees are going to be nothing but a tax on inventors.

First to file system: large corporations already act under this system.  But, this will hurt small companies and start-ups.  The advantages of first to file, if any, are more than offset by the funding issue and the post grant procedure.

The idea that this bill will create jobs is a joke.  If you want to create jobs, you need to clear the backlog of 1.2 million patent applications.  Passing this bill will slow down the process of granting patents, so it will not create jobs.

First purpose of patents is to disseminate technology information

Second purpose of patents is to incentivize investment.

Delays and backlog have increased during the time that Congress has been considering patent reform.

Fee diversion began in 1992.  In 2010 there was over $50M in fee diversion and in 2011 $85M, and it is likely that over $600M will be stolen from the patent office in 2012.  Without access to fees, the Patent Office will become a job killing agency, not a job creating agency.

The patent system isn’t broken, the patent office is broken because of the diversion of patent fees.

Fatal defects of the legislation includes section 18 (business method patent – Wall Street giveaway), section 14 (no patents on tax strategies), parts of section 5 (prior commercial use – trade secret protection system), parts of section 6 (post grant review).

Thomas Edison got his patent on the light bulb in 3 months.  It now takes on average over 3 years to obtain a patent and many patents 5-10 years to issue.

 

Gary Lauder

Small business, startups, and investors have not been heard on this issue.  Many Venture Capitalists are not aware of the changes that are occurring.

Every famous living inventor is against this bill, including Dean Kamen – inventor of the segway, Steve Perlman – inventor of quicktime.

The national venture capital organization, IEEE, National association of seed and angel funds is against the bill, all of which represent small companies and small company innovation and do not have the money for lobbying.

Kappos lobbied for these same changes when he was at IBM.  This is a violation of the administrations revolving door rules.

Misrepresentations of what the bill says or will do: Include we need first to file because small companies cannot afford interference proceedings.  Interference proceedings happen 0.01% of the time or less, but interference proceedings are replace by more expensive derivation proceedings.  These proceeding require you to present evidence that was stolen from you.  So if you got hacked, you have to prove you got hacked and who hacked you.  There is not right of discovery under this America Invents Act.

First-to-file’s worst effect is on companies between the ages of zero to one.  The derivation proceeding make it almost impossible for these startups to prevail, because of the time, expense, and lack of discovery.

The rest of the worlds patent systems do not work.  They do not encourage startups or individual inventors. The advice to startup is that they need to apply for patent before they talk to investors, but they need investment to afford to apply for patents and before they talk to customers and potential employees.  There is 10 times more angel and venture capital investors in the U.S. per capita than in Europe.

This bill is also going to an enormous boon to cyber criminals, because IP will be worth more money.

Venture capital has declined by an order of magnitude since 2000.  Since 2007 it has declined by a factor of four.  If this bill passes the shrinkage in venture capital will accelerate.

 

Pat Choate

Ph.d economist, former vice presidential running mate of Ross Perot.  Dr. Choate has written extensively on the theft of America’s intellectual property and is the foremost expert on this issue.

We have run out of policy tools.  The way we worked ourselves out the 1970s was inventing a new economy and that is how we are going to have to work our way of this economic downturn. The companies that create all net jobs are startups.  Technology is way increase real per capita income.  The fastest way to kill creative destruction is to kill the patent system.  This is a bill to Europeanize the American patent system.  This effort has been going on since 1980.  This patent bill was written by IBM and 14 corporations.  In Europe, individual inventors get 0.6% of all patents  This bill will choke off American innovation and this will be obvious within 2-3 years of passage.

http://www.youtube.com/watch?v=9zwqypPYXcQ&feature=related

 

Valerie Gaydos

Angel Investor and founder of CEO Growth Capital.  http://www.youtube.com/watch?v=r3Q8H3vuuN0&feature=related

 

There is much more on Youtube.

 

 
What Would Real Patent Reform Look Like?

I have written a number of times on what real patent reform would actually accomplish.  One of the major problems with our patent system is that your rights stop at the border.  This is different than any other property right.  For instance, if I drive my car across the border into Canada, I still own my car.  If I drive my book across the border into Canada I still own both the physical version of my book and the copyrights to my book.  But, if I drive my invention across the border I no longer own my invention.  This situation existed for copyrights 150 years ago and it was recognized that there was no logical reason for copyrights to end at a countries border and it discouraged the publication of domestic authors.  The same is true of patents.

I suggest a system of reciprocity in which an inventor who obtains a patent in Canada, for example, has patent rights in the U.S. and vice versa.  This would decrease the duplication of efforts across patent offices around the world and significantly reducing the present backlog in the U.S. patent office.  More importantly, it would increase the value of a patent and increase the chance of obtaining funding for technology startups.

A friend of mine, Jim Lauffenburger, explains in practical terms why this important.  His company has found trade secrets to be a much more useful tool, because of the lack of patent reciprocity.

It is interesting that in my company, EM Microelectronics, the best method for protection is definitely keeping a secret, not filing for patent protection. (And keeping those secrets is extremely challenging and difficult.)

Why, you ask?
Because we are unable to enforce patent protection in Asia, and unable to prevent literal copying.

We spend man-decades of highly skilled (and expensive) engineering time to design a new IC. The IC goes into mass production in some successful product. It gets rapidly reverse engineered in Asia. Nearly direct copies of the part soon appear, and can be priced at only silicon-cost, without the huge development costs.

We visited several of these Asian “design centers” to ask them how they do it, under the guise of possibly utilizing their services. But even that guise was not really necessary, because they were proud of their “design method”: They do a layer-by-layer stripping and micro-photographs, and create a direct schematic from that. They convert the digital logic into standard cells, and then re-Place-and-Route using “their own IP” (the standard cells). For the analog portions, they use the layers as-is, but rotate or flip them 90 degrees so that it looks different. Then end result is what they claim is their own IC and their own IP, and it looks quite a bit different from our ICs. But, during that entire process they were simply “turning the copy crank”; not actually designing anything from concept.

Fighting this copying at a trademark level won’t work (it looks different). Fighting this at a patent level is extremely time consuming and expensive.

Thus, the only way to fight it is to try to hide features and make very special implementations that don’t work correctly in a layer-by-layer copy. (This of course, is very difficult, and expensive, and MUST be kept fully secret.)

This shows (to me) once again, that most of our law (and society) only works if the we all generally agree on the moral and ethical basis undergirding our actions and laws. Once that is lost, chaos follows. (And “messes get created” by all the reams of laws generated to try to make up for the lost ethical basis.)

While Jim’s company has made a logical decision under the present law, part of the reason for having a patent system is to encourage the spread of technical information.  Trade secrets inhibit this dissemination of technical information and slow down technological and economic progress.  The America Invents Act does nothing to solve this problem.

 

 
Congress About to Pass the ‘Leahy-Smith Trade Secret Protection Act of 2011′

GUEST POST

by
Neil Thomas, Esq.
Silver Spring, MD 20902

On September 6, 100 U.S. Senators began final voting on the ‘Leahy-Smith America Invents Act of 2011′ which will stifle U.S. innovation, growth of new American businesses, and long-term job growth in America.

This legislation should more appropriately be called the ‘Leahy-Smith Trade Secret Protection Act of 2011,’ because it will encourage and reward keeping America’s innovation and new discoveries secret.  This concept of secrecy attacks the very foundation of our patent system put into place by our Founding Fathers.  Our entire patent system has, for over 220 years, been based on the concept of individuals disclosing new ideas so society will advance more quickly.

The very purpose and the fundamental mechanism that makes the patent system work so well, is in a word, ‘disclosure’…of new ideas and discoveries.

Our Founding Fathers saw that sharing new discoveries and innovation would promote progress in America.  They had seen in history how keeping new ideas secret had retarded the progress of civilization.  Historically that is what governments, craftsmen, merchants, academics, and scientists frequently did.  The problem naturally with secrets is that one inventor does not provide the seed for others to come up with even better ideas and improvements.  As a result, many secret processes have been either retarded or even totally lost over the ages because they were protected as such and died with their creators.  Society loses that considerable benefit.

From the making of violins by Stradivarius; to the Chinese keeping the making of fine porcelain a trade secret; for more than two thousand years the Chinese keeping the secret of silk the most zealously guarded secret in history; and, the making of concrete, known to the Romans, being lost for almost 2000 years.

Patents are not designed to benefit the inventor so much as to benefit society as a whole; patents are designed to encourage inventors to disclose their new ideas to the public.  Think about it for a second, if you had a good idea, you might want to keep it a secret if you could.   If I have a good idea, let’s say for a new formula for making iron harder, i.e. making steel, why do I want to share it with a competitor, cause he’ll just copy it.  So we think to ourselves, how can we keep our ideas secret so others don’t find out.  That might be good for you and me, for a while at least, but that would have an adverse effect on society and the economy as a whole.

Our Founding Fathers saw the need to give inventors a reason to disclose their ideas to the public instead of keeping them secret.  They did that by giving an inventor an exclusive right to his idea for a limited time, i.e. a patent, if the inventor would disclosed their idea publicly.  They even put it in the Constitution , “The Congress shall have power… To promote the progress of science and useful arts, by securing for limited times to…inventors the exclusive right to their respective…discoveries. “  ( U.S. Const. Art. 1, Sec. 8, Clause 8 )

That is why the ‘useful arts,’ science, technology, and commerce have exploded since the birth of the American patent system; literally a million ideas have come forth.  As a consequence, patents have protected new ‘start-up’ companies with new inventions so they can grow and create jobs.   Our patent system has been a major factor in America becoming the greatest economic success in history and the envy of the world…at least until recently.  American inventions have created new jobs and prosperity in America for over 220 years.  Where would America be without the: steam engine, telegraph, telephone, airplane, electric light, television, radio, copying machine, etc.?

But now the game is about to change…in a huge way.

Not only will patents now be open to more challenges under this new law, the whole concept of disclosing inventions appears to have totally eluded Congress.   Congress is now going to encourage and reward secrecy .  Beginning September 6, 100 U.S. Senators will vote on the ‘America Invents Act of 2011′ which will totally turn the patent system our Founding Fathers created upside-down and undo 220 years of success by encouraging and rewarding ‘trade secrets.’

They do that with something they call ‘prior user rights’ (Sec. 5) which says that if you have an idea, and if you can build, use it and keep it secret for a year, someone with a patent can’t sue you for patent infringement , and you can keep on using it…forever.  And just keeping something secret will certainly a lot less cheaper than going through years of time, expense and uncertainty getting and enforcing a patent under this new law about to be passed.
If you can make it through the first year, there doesn’t seem to be much of a downside for secrecy.  In fact there are many advantages to ‘hiding’ inventions  First, you’re protected from any successful patent litigation; you don’t have to go through the cost, work and uncertainty of getting a patent; you don’t have to go through years, and years of enforcing and defending a patent; and you certainly ought to be able determine the value of your idea much easier than the value of a patent.
With this new law Congress is about to pass, Congress will make obtaining and enforcing a patent much more difficult, risky and expensive.  Under this new law, the value of patents will become more uncertain because of all the new challenges and procedures they will be subjected to; and a lot of companies, particularly smaller ones with limited resources, are going say to themselves, “we’re better off just hiding our new ideas, cause we’re going to be protected anyway, and it’s going to be a lot less costly and time consuming than applying for and trying to enforce a patent.”

For small companies without $ millions of financial resources to litigate a patent against the big companies for years, the choice becomes even easier.   Why get a patent if you can’t afford to enforce it?

And ‘prior user rights’ will ironically add more uncertainty to the value of patents, because no one will know for sure what ‘trade secrets’ are out there to detract from the value of a patent.

In fact, if I’m a venture capitalist looking for investments, I’m going to see a whole lot less risk in investing in ‘trade secrets’ than in patents.  Why?  Because the value of the ‘trade secret’ is pretty easily determined once you get past the first year, which by the way costs very little; all you have to do is to tell time and you’re pretty much home free; whereas a patent can be challenged endlessly, and will be open to a lot of time-consuming and expensive questions under this new law.

These fools in Congress are killing the golden goose.   Not only is this a total contradiction of the Founding Father’s intent and 220 years of patent precedent, it is guaranteed to stifle U.S. innovation, growth of new American businesses, and long-term job growth in America.

This ill-conceived ‘prior user rights’ provision will encourage many new manufacturing, industrial, business, chemical, computer, biotechnology, nanotechnology, and medical “processes,” “machines” and “compositions” to be hidden from the wealth of knowledge of our society .  That list pretty much covers all of burgeoning technologies as I see it.

I’m interested to see how this slows down biotechnology research and development in particular.

Unfortunately for the public, Congress has jumped on a speeding train that is out of control, and it doesn’t appear that anything can stop it at this point… even reason.

What a mess they are creating!

 

 

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