State of Innovation

Patents and Innovation Economics

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.


April 8, 2013 Posted by | News, Patents | , , , | Leave a comment

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.

September 18, 2012 Posted by | -Law, Patents | , , , , | Leave a comment

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.


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.

September 4, 2012 Posted by | -Philosophy, News, Patents | , , , , | Leave a comment

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)

August 15, 2012 Posted by | -Economics, Innovation, News, Patents | , , , , , , | 3 Comments

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.

July 10, 2012 Posted by | -Economics, News, Patents | , , , , | Leave a comment

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:


(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.


February 9, 2012 Posted by | -How to, -Law, Patents | , , , | Leave a comment

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.

January 13, 2012 Posted by | -Economics, Patents | , , , | Leave a comment

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.


November 13, 2011 Posted by | -Economics, Innovation, News, Patents | , , , , , , | Leave a comment


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