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Archive for May, 2009


The Myth that Patents are a Monopoly

A patent gives the holder the right to exclude others from making, using or selling the invention.  35 USC 154.  It does not give the holder the right to make, use or sell their invention.  A monopoly is an exclusive right to a market, such as an electric utility company.  An electric utility company has the exclusive right to sell electricity in a certain territory.  Since a patent does not even give the holder the right to sell their invention, let alone an exclusive right to a market, it is clearly not a monopoly.

 

The present proposal for patent reform, will do nothing to increase innovation, and is built on a foundation of sand.  Pat Choate’s article, Patent Reform is ‘Anything’ But completely debunks the present patent reform proposals.  So what would real patent reform look like?  Here is my list of ten real reforms that will increase innovation and spur economic growth.

1. Double the Funding of the PTO

The absurd length of time and outrageous cost necessary to obtain title (a patent) to one’s invention is a national disgrace.  If it took this amount of time and cost to obtain title to real property, we would assume you were discussing some corrupt third world country.  The major goal for the USPTO should be an average time to a first office action of six months and average pendency of 1.5 years.  Doubling the USPTO’s budget would be a good start.  I suggest the funding be pulled from transportation projects.  This would be a drop in the bucket for the pork laden transportation federal budget.  An aggressively funded patent office results in real innovation and real increases in per capita income.

 

Note that this post is based on free audio CD, titled How to Make Your Patents a WMD- Weapon of Market Domination.  If you want a free copy of the audio CD click here

So how valuable are patents?  The inventor of the air hockey game table, would have answered pretty darn valuable.  He had no competitors during the lifetime of the patent on air hockey.  Would you say that was powerful?  I think you would agree that this patent on air hockey was a Weapon of Market Domination.  Wouldn’t you like to have a patent that completely eliminated all your competition?  What do you think your margin would be in a market you completely own.  I should tell you the day the patent expired, the company that had invented air hockey had a dozen competitors. 

 
Innovation – Regulatory Road Kill?

The 90’s brought us companies such as Amazon.com, eBay, Netscape, Broadcom, and AOL to name a few.  We discovered web browsers, PDAs, universal email, voice over IP, DSL, broadband cable, cable telephony, Wi-Fi, and TiVo among others.  The 80’s brought us companies such as Dell, Compaq, Cisco, Microsoft, Qualcomm, Adobe Systems, and Genentech.  We discovered personal computers, cellular telephones, spreadsheets, and genetic engineering.  This decade we have Crocs and the iPod.  Where has American innovation gone? 

John Kao, an expert on innovation from Harvard, claims the U.S. is experiencing a brain drain as foreign scientists and engineers return to their native countries for better opportunities.  Even more alarmingly, other countries are luring away U.S. born scientists and engineers.  Much of our venture capital industry is investing their resources outside the U.S.  Those venture capital funds not invested overseas are often part of the walking dead, no longer actively investing. 

 

The short answer is yes.  However, the U.S. Patent Office tends to be more critical of software enabled inventions.  Those inventions directed to applications, such as spreadsheets, databases, etc. are the most difficult to get through the Patent Office.  In addition, it often takes 2-3 years after you apply for your patent to receive an initial response.  It can take 5-8 years to obtain a final result for your software patent.  One of the reasons it takes so long to obtain a patent for software inventions is qualified examiners who specialize in software are hard to find and even harder for the Patent Office to keep.  Another reason for the delay is the terms used in software are not highly standardized, so two patents describing similar inventions may use completely different terminology. 

 

Patent ‘Reform’ Is Anything But was written in 2007, but all the points are still valid.  This article proves that patent litigation has not exploded and the argument about the Patent Office issuing numerous bad patents is bunk.  This destroys the whole justification for the Patent Reform Bill.

The article shows how the Patent Reform Bill is the brainchild of a few large technology companies to further their agenda.  This legislation will hurt innovation in U.S., will hurt small inventors, will hurt start-up companies and further damage the U.S. economy.  The main goal of the legislation is to reduce the cost of stealing inventions, but also to further harmonize our patent laws with the rest of the world.  Over the last two centuries, the U.S. has been the world leader in innovation and our patent laws have played an important part in this record of innovation.  There is no reason to harmonize our laws with other countries that are not as innovative as the U.S.   Please see www.manufacturingnews.com/news/07/0629/art2.html for more informaton

 

            I hear variations of this question all the time.  In fact, the more education the inventor has the more likely they will ask a question like this.  Let’s start with some basics.  First, conservation of matter (matter and energy) means that no one creates something from nothing.  In addition, if you applied for a patent suggesting you had a “totally new” item in your invention you would receive a rejection from the Patent Office (USPTO).  Assume your “totally” new item was called “XYZYG”.  Since the examiner at the USPTO would not know what “XYZYG” is, they would reject your patent application as “indefinite” under 35 USC 112, second paragraph.  This part of the statute states:

 The specification shall conclude with one or more claims particularly pointing out and distinctly claim­ing the subject matter which the applicant regards as his invention. 35 USC 112, second paragraph

 

The examiner at the USPTO would state that your item “XYZYG” fails to particularly point out the subject matter you regard to be your invention.

            So does this mean that an invention which is a combination of know elements is patentable?  No.  The law requires that an invention be novel and nonobvious.  However, for most people that is not very helpful.  I ask my clients – have you used technology to solve a real problem?  If the answer is yes and no one else solved the same problem in the same way, then you probably have a patentable invention.

 
Intellectual Property Socialism: Part IV USPTO Takes Aim at Inventors

           Not to be outdone, the Patent and Trademark Office launched their own assault on inventors.  The allowance rate for patents has dropped from around 70% in 2000 down to 45% in 2008.  The allowance rate had hovered around 62%-72% for several decades and then started a precipitous drop around 2003.       

090102USPTO_ALLOWANCE_RATE

  

    

 

            Harmonization of US patent law with other patent laws around the world is another trend that started in the 1990s.  The first effort to start harmonizing US patent law with patent laws around the world, was the change in the term of a patent from 17 years from the date of issuance to 20 years from the date of filing, 35 USC 154.  The arguments for this change included harmonization with the rest of the world, the effective term of most patents is unchanged, and the change eliminates submarine patents.  Wikipedia defines a submarine patent as an informal term for a patent first published and granted long after the initial application was filed.  Like a submarine, its presence is unknown to the public; it stays under water, i.e., unpublished, for long periods, then emerges, i.e., granted and published, and surprises the relevant market.  Jerome H. Lemelson was the poster child for submarine patents.  Mr. Lemelson had patents that issued in the late 1980s and early 1990s that were based on patent applications from the 1950’s, i.e., submarine patents.  This was generally regarded as unfair, because a potential infringer would not have notice that a patent covered their product or process.  Mr. Lemelson’s most successful patents were related to machine vision.  However, many of the claims of his key patents on machine vision were held invalid in 2004.[1] 

            Other commentators have suggested that “submarine” patents were caused by the inefficiencies of the US Patent and Trademark Office (USPTO).[2]  One of the most cited of these is patent No. 5,283,641 to Mr. Lemelson.  This patent was subject to a 20 way divisional (the Patent Office required the original patent application be divided into 20 separate patent applications), which was the major cause of the delay in this patent issuing.  The term “submarine patents” first appeared in Japan and may have been an attempt to persuade the US to adopt a Japanese style patent system.  The Japanese patent system is widely viewed as unfriendly to individual inventors and small companies. 

            The next step in harmonization was the Intellectual Property and Communication Omnibus Reform Act of 1999.  This required publication of US patent applications 18 months from the filing (priority) date, expect for patent applications that explicitly requested non-publication and will never be filed in a foreign country 35 USC 122 (b).  The argument for this change besides harmonization is increased patent quality and notice to potential infringers.  By publishing patent applications, the invention would not remain hidden from the public and would add to the store of known prior art an Examiner at the Patent Office could cite against other patent applications.  Large companies that filed internationally were in favor of this change.  Large companies generally file their patent applications in foreign jurisdictions, almost all of which publish patent application at 18 months.  As a result, their patent application are published at 18 months anyway.  Small and independent inventors were against this change in the patent laws.  Independent inventors were placated with the promise that most patent applications issue around 18 months from the date of their filing anyway, so they were not giving up any significant amount of time that their inventions were kept secret. 

            While this legislation was not widely seen as anti-patent at the time, its effects have clearly been to enhance the rights of adopters of technology at the expense of creators of technology.  The publication rule is a clear violation of the social contract between the inventor and society.  Under the publication rule, society gets the advantage of the disclosure of the invention even if the inventor never receives any property rights in his invention.  Before the publication rule if an inventor felt that the scope of the claims to his invention were too narrow or not allowable, he could withdraw his application and keep his invention a trade secret.  Narrow claims are easy for a competitor to design around providing little protection in exchange for the disclosure of the invention.  In other words if the inventor did not like the deal he was offered from the Patent Office he could reject it and keep his invention a secret.  Even for inventions that can be reverse engineered once the invention is marketed, this is a better deal than the publication rule.  Under the publication rule, it is easy for competitors to find the inventor’s idea on the World Wide Web and copy the invention.  Without publication, a competitor has to spend the time and money to reverse engineer the invention.  This is significantly more costly than reading a patent application that describes the invention in “enough detail that one skilled in the art can practice the invention.”  35 USC 112.  The publication rule is perhaps the most egregious anti-patent change in the patent laws in the history of the US.  It does not promote the useful arts, since it decreases the incentive to file for a patent, which also decreases the diffusion of knowledge by the patent system.  The publication rule should be declared unconstitutional, but as we will see, it is unlikely any relief will be forthcoming from the US Supreme Court. 

            Presently there is a proposal to further harmonize our patent laws with the rest of the world by converting our patent system from a “first to invent” to a “first to file.”[3]  It is being sold as a minor change, since only about 1% of patent applications are ever involved an interference – a case to determine who is the first inventor.  In addition, the first applicant to file wins most interference cases.  However, this will further biases the patent system in favor of large corporations who can afford to file patents that are more speculative on incomplete inventions.  Individual inventors cannot afford this expense and are likely to lose out in the race to the patent office.  In addition, it is likely to result in poorly thought out patent applications and waste the US Patent Office’s resources.  Other countries’ patent systems are not designed to protect the interests of small individual inventors and start-ups. 

            The stance of the courts has turned decidedly anti-patent since 2000.  In 2006 the US Supreme Court decided eBay Inc v. MercExchange, L.L.C., 547 U.S. 388 (2006) holding that a permanent injunction should not automatically issue as part of a judgment of infringement.  A patent is a legal right to exclude, 35 USC 154, others from making, using, selling (offering for sale), or importing the invention.  It is a little known fact that a patent does not give the holder the right to use, make, sell (offer for sale) or import the invention.[4]  The Supreme Court’s eBay decision denies a patent holder’s right to exclude others and substitutes monetary damages even if the patent holder prefers to enforce their right to exclude.  The Supreme Court’s eBay decision overturned 20-25 years of jurisprudence that recognized that an injunction was the only relief a court could provide against an infringer that was consistent with a patent holder’s “right to exclude.” 

            In 2007 the Supreme Court in the Medimmune, Inc. v. Genetech, Inc., 549 U.S. 118 (2007), overturned a long-standing rule that a licensed patent user cannot file a declaratory judgment action when they have not breached the license terms.  Article III of the U.S. Constitution prohibits going to court for an advisory opinion; there must be an actual controversy between parties with adverse legal interests.  Under the Medimmune decision a patent licensee can sue the patent holder complaining the patent is invalid while claiming that they are not infringing the patent or in breach of the license.  As a result, it is a no-lose situation for a licensee to file a declaratory judgment action against the patent holder claiming the patent is invalid.  If the Licensee is successful in court, they no longer have to pay royalties to the patent holder and if they lose, they are in the same position as they were before the lawsuit was filed.  The patent holder is forced to defend their patent with nothing to gain if they win; as a result, the patent holder has no actual controversy with the licensee.  This case is clearly inconsistent with Article III of the U.S. Constitution.

            In KSR International v. Teleflex, 550 U.S. 398 (2007) the Supreme Court made it easier to find a patent invalid and harder to obtain a patent by changing the standard for obviousness.  In order to obtain a patent, the invention has to useful, novel, and non-obvious.  The Supreme Court overturned 20 years of jurisprudence associated with an objective test of obviousness.  The Supreme Court rejected any objective test of obviousness as too rigid.  This more flexible approach increases the uncertainty that an inventor will receive a patent and increases the risk that their patent will be held invalid if they have to enforce their patent against an infringer.  It also increased the costs associated with obtaining a patent and in enforcing a patent.

            As a result of these three cases the Supreme Court has denied patent holders their “right to exclude”, allowed companies that license a patent to challenge the patent they licensed at no risk and made it more difficult for an inventor to obtain a patent and enforce the patent once it is obtained.  Short of declaring the patent system unconstitutional, it is hard to see how the Supreme Court could have done more damage to the rights of inventors. 

 


[1]United States Court of Appeals for the Federal Circuit, 04-1451, Symbol Technologies, Inc. et al v. Lemelson Medical, Education & Research Foundation, LP.

 

[2] Riley, Ronald J.,  http://inventors.about.com/library/weekly/aa072897.htm

[3] H.R. 1260 and S. 515 (2009). 

[4] Because of this, it is incorrect to state that a patent is a monopoly.  A legal monopoly is a right to a market and includes both the exclusive right to sell into that market and the right to exclude others from selling into that market.  A patent does not confer the right to a market or the right to sell the patented invention.

 

            The Federal Trade Commission (FTC) with their nine no-nos with respect to patents in the 1970’s[1], signaled a major shift in policy towards patents.  These anti-patent policies reached absurd levels in the FTC consent decree against Xerox in 1975 that required Xerox to dedicate its patent portfolio to its competitors.[2]  By the late 1970’s there was widespread concern that the US had lost its economic and technological edge.  Our auto industry and our semiconductor industry were about to be overtaken and made obsolete by the Japanese and others. 

            In reaction to these concerns, our patent laws were strengthened in the 1980s.  For instance, all patent appeals were consolidated into the Court of Appeals for the Federal Circuit (CAFC) created in 1982.[3]  A number of the initial Judges on the CAFC were former patent attorneys and the court brought consistency to patent appeals.  The court also took seriously the idea that issued patents are presumed to be valid.  These changes signaled a more favorable atmosphere for patents in the 1980’s.  Before the CAFC patents were treated differently in each of the federal court circuits.  Some circuits had not upheld the validity of a patent in decades.  The new court brought a sense of stability to patent law.  The 1980’s saw a restoration of America’s economic and technological dominance in the world.   

            The Supreme Court also displayed a more favorable attitude towards patents.  In, Diamond v. Chakrabarty, 447 U.S. 303 (1980), the Supreme Court decided that genetically modified microorganisms could be patented.  In Diamond v. Diehr, 450 U.S. 175 (1981) the Supreme Court stated that while mathematical algorithms per se were not patentable, inventions incorporating mathematical algorithms that were otherwise directed to statutory matter were patentable.  These cases set the stage for two of the most significant start-up industries in the 1980’s and 1990’s, specifically the software and biotechnology industry. 

            The legislative environment was also favorable to patents in the 1980’s.  Extending the life of a patent to compensate for the delay in securing marketing authority from the FDA, became possible in 1984.  35 USC 156.  The definition of infringement was amended to include export of kits of parts to make a product, which if made in the US would be an infringement of a US patent.  35 USC 271(f).  In 1988 the definition of infringement was again expanded to include importation of products made by a process that violates a US patent, 35 USC 271 (g) and a request for marketing approval for a patented drug to be effective before the expiration of a US patent 35 USC 271 (e).  In a reaction to FTC’s nine no-nos, the Patent Misuse Reform Act was passed in 1988, that made it clear that a patent was not unenforceable if the patentee refused to license their patent or used a patent tying arrangement. 

            The 1990’s continued the pro-patent trend.  The definition of infringement was extended to acts in outer space controlled by the US in 1990, 35 USC 105, and state governments were made liable for acts of patent infringement in 1992.  In 1995 the law on obviousness for a biotechnology process was changed, so that a showing the process resulted in a new and nonobvious product is sufficient to support a conclusion of nonobviousness, 35 USC 103(b).  In 1995, the United State Patent Office officially started allowing claims to software stored on a computer readable medium.  This allowed patent claims directed to a computer disk.  As a result, a patent ower could sue a someone for owning a disk with infringing software.  This seemed to be the end of the Patent Office’s sad history of denying patent protection to software enabled inventions.     

            The culmination of this pro-patent trend was State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998).  In this case, Signature Financial had obtained a patent on a “Hub and Spoke” method of running mutual funds.  In this method, several mutual funds (or “spokes”) pool their investment assets into a single investment portfolio (the “hub”).  Software then determines the value of each fund based upon a percentage ownership of each of the assets in the hub portfolio.  This information was tracked on a daily basis, and is used to track fund share pricing and tax accountability.  State Street Bank asked the court to declare this invention unpatentable as a mere mathematical algorithm or as a business method.  They pointed out that the patent claim comprised steps that are the requirements specified in an Internal Revenue Service regulation for avoiding taxes on a partnership.  The Federal Circuit rejected the arguments of State Street Bank, and instead upheld the patent by explicitly stating that business methods can form patentable subject matter.  The court emphasized that software or other processes that yield a useful, concrete, and tangible result should be considered patentable.

            A backlash against this pro-patent trend was already forming by the late 1990s.  The main focus of the backlash was the “Amazon one click patent,” that allowed a user to order online using a single click.  Amazon.com applied for the patent in 1997 and it issued in 1999 as patent number 5,960,411.  A number of competitors had copied Amazon’s one click ordering system and shortly after the patent issued, Amazon.com sued Barnes and Noble for infringement.[4]  Industry studies showed that between sixty and sixty-five percent of online shopping baskets abandon before they checked out.  The primary reason for abandoned shopping carts seems to be buyer confusion and annoyance with the online purchasing process.  Presumably, many of those abandoned shopping carts represent lost sales.  The goal of the one click method for online shopping made the process simpler, easier and faster, thereby capturing some of that lost business.  Barnes and Noble’s Express Lane (one click shopping system) was evidently successful, since a large percentage of their customers had chosen to utilize the Express Lane rather than the shopping basket.

            Anti-patent activists started a boycott against Amazon.com because of the one click patent issue.[5]  The one click patent was the subject of many critical articles that suggested the invention was trivial, that the one click patent was obvious, that the one click process was trivial to program and that software should not be patentable.  The sad and ironic component to this controversy is that it is easy to design around the claims of the one click patent.  Design around means to invent an alternative to a patented invention that does not infringe the patent’s claims.  In this case, all Barnes and Noble or any other online retailer had to do to design around the claims of the one click patent was have a two click ordering system.  However, few of the critics of Amazon.com and the one click patent mentioned this simple solution.  Nor was there any complaint that Barnes and Noble was essentially too lazy to spend the time and effort to come up with this simple design around solution.  One of the functions the patent system promotes is alternative designs to problems[6] by creating an economic incentive to create alternative designs. 

            Most of the critics of the Amazon one click patent, either do not understand patents and the role of claims in patents or they are just openly hostile to software patents.  For example, the Free Software Foundation has a movement to end the patenting of software, believing that software patents inhibit development of software.  The Free Software Foundation never criticized Barnes and Noble for being too lazy to design around the claims of Amazon.com’s patent because they are fundamentally opposed to software patents. 

            The arguments against software patents have a fundamental flaw.  As any electrical engineer knows, solutions to problems implemented in software can also be realized in hardware, i.e., electronic circuits.  The main reason for choosing a software solution is the ease in implementing changes, the main reason for choosing a hardware solution is speed of processing.  Therefore, a time critical solution is more likely to be implemented in hardware.  While a solution that requires the ability to add features easily will be implemented in software.  As a result, to be intellectually consistent those people against software patents also have to be against patents for electronic circuits.  Of course, some of them are opposed to patents more generally; however, the historical record has shown that patents have been effective in encouraging technological development.  [7]

 


[1] Pate, R. Hewitt, “Antitrust and Intellectual Property”, American Intellectual Property Institute, 2003.

[2] Pitofsky, Robert, “Challenges of the New Economy: Issues at the Intersection of Antitrust and Intellectual Property”, American Antitrust Institute, 2000. 

[3] Warshofsky, Fred, “The Patent Wars: The Battle to Own the World’s Technology”, John Wiley & Sons Inc., 1994, p. 65.

[4] Amazon.com, Inc. v. Barnesandnoble.com, Inc., 73 F. Supp.2d 1228 (W.D. Wash. 1999).

[5] “Richard Stallman – Boycott Amazon!”. Linux Today. 1999-12-22. http://linuxtoday.com/news_story.php3?ltsn=1999-12-22-001-05-NW-LF. Retrieved on 2006-09-22.

[6] Westvaco Corp. v. Int’l Paper Co., 991 F.2d 735, 745 (Fed. Cir. 1993)

[7] Khan, Sorina B., The Democratization of Invention: Patents and copyrights in American Economic Development, 1790-1920, Cambrdge  University Press, 2005, pp. 50.

 

A country without a patent office and good patent laws was just a crab and couldn’t travel anyway but sideways and backwards“, Mark Twain- Connecticut Yankee in King Arthur’s Court 

            Starting in the late 1990’s patents came under attack from a number of companies, economists and intellectuals.  A rallying point for these anti-patent crusaders was the Amazon “one click” patent covering the use of a one-step system for ordering items online.  A number of competitors quickly copied Amazon’s one click ordering system.  Complaints against the Amazon “one click” patent included: it was not novel, it was obvious, it was a trivial invention, and it was easy to program such a system.  The anti-patent movement forced a number of changes to patent laws in the decade from 1999 to 2009.  These changes tend to reduce the benefits to the inventor and allow society to use other peoples’ inventions with less cost and risk.  In other words, these rules socialized the benefits of inventions but kept the cost private.[1]

 

Patent Theory and History

            Patents have always been an instrument of industrial policy by countries.  The first patents countries awarded were either for new inventions or as a reward for bringing new technologies to a country.[2]  The purpose of these early patents was to strengthen local industry and patents were awarded as special privileges from the Monarchy or legislature.  Countries tried other incentive systems such as annuities, cash prizes, and titles as methods to encourage technological innovation and industry.[3]  The US still uses cash prizes in the form of grants for scientific and industrial research and in the form of contests with prizes as an instrument of industrial policy.  The first modern patent system was created in the US in 1790.  A modern patent system is characterized by an examination system administered by an independent examination core that is readily accessible to all inventors – as opposed to only wealthy or politically connected inventors.  Also, such a system provides for the diffusion of knowledge.  Recent research has shown that the US patent system in 19th century met these goals.  Inventors obtaining patents in the US were from all occupations, varying economic circumstances, included men, women, and even slaves, and were dispersed geographically throughout the US.[4]

            Patents are often considered a social contract, a reward system, or a property right.[5]  The US constitution emphasizes both the industrial policy and social contract nature of patents as:

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 – Article 1, Section 8 US Constitution.

The social contract theory of patents is a trade between the inventor and society.  The inventor is given a limited term property right in exchange for disclosing how to practice their invention.  The reward system emphasizes that the inventor receives an award, such as a limited term to exclude others from using his invention.  While the property theory of patents emphasizes that, like tangible property, an inventor owns the product of his labor (physical and mental).[6]

            The US patent system was established by statute in 1790.[7]  The statute allowed an inventor to apply for a patent from the Secretary of State, Secretary of War or the Attorney General.[8]  The inventor had to provide a description of the invention, a drawing, and a model.  This information had to be sufficient for one skilled in the art to build the invention.[9]  If upon examination of the patent application the Secretary of State, Secretary of War or the Attorney General found the invention sufficiently useful and important they could issue a patent.[10]  This system was too time consuming for Secretary of State, Secretary of War and the Attorney General, so it was replaced with a registration system in 1793.[11]  However, the registration system for patents resulted in many frivolous patents, some fraud, and ultimately expensive litigation.[12]  The Patent Act of 1836 established the patent office with independent examiners.[13]  These examiners were hired based upon their skill in the technology of the inventions they examined. 

            The perceived success of the US patent system in encouraging technological development caused a number of countries to emulate the US patent system.[14]  However, in the latter half of the 19th century in Europe an abolitionist movement against patents grew.[15]  This movement argued that patents impeded competition and free trade.[16]  Holland went so far as to repeal its patent laws in 1869, however they reinstated patent rights in 1912.[17]  This anti-patent sentiment did not seem to infect the US.  However, by the 1930s antitrust concerns about patents in the US began to surface.  This backlash against patents reached its zenith with a Supreme Court judge writing “the only patent that is valid is one which this (the Supreme) Court has not yet been able to get its hands on.”[18]  The 1952 Patent Act reaffirmed the rights of inventors to obtain patents if their invention was novel and nonobvious.  The nonobvious requirement was new and appears to have been in reaction to a Supreme Court case that required “a flash of genius” in order to obtain a patent.[19]  The “flash of genius” standard was arbitrary and inventions that were the result of years of research did not fit the “flash” part of the standard.  For example, Edison’s high impedance light bulb resulted from intensive research and did not exhibit a “flash of genius”.  The general economic and technological fortunes of the US followed the attitudes towards patents.[20]  Favorable treatment of patents in the 19th century coincided with the US advance from a minor economic player into the world’s greatest industrial economy.  While, anti-patent attitudes that prevailed in 1930’s corresponded with the great depression.  The anti-patent rulings of the Supreme Court in the 1940’s gave way to a more favorable legislation towards patents encompassed in the 1952 patent legislation.  This more favorable atmosphere for patents seemed to hold through the 1950s and most of the 1960s and corresponded to strong economic and technological growth. 

 


[1] Note that the US has tried the opposite of socializing the costs, but keeping the returns private.  For instance, the US K-12 educational system is tax funded but the student keeps the returns on their education.  Another example is the recent (2008) banking scandals where any profits were kept by private investors and any losses were born by the taxpayer. 

[2] Khan, Sorina B., “An Economic History of Patent Institutions”, eh.net/encyclopedia/article/khan.patents, p. 1.

[3] Ibid, p. 4.

[4] Khan, Sorina B., The Democratization of Invention: Patents and copyrights in American Economic Development, 1790-1920, Cambrdge  University Press, 2005, pp. 9-10.

[5] Denicolo`, Vincenzo and Franzoni, Luigi Alberto, “The Contract Theory of Patents”, Societa Italiana di Economia Pubblica, 2003, p. 1.

[6] Mossoff, Adam, “Rethinking the Development of Patents: An Intellectual History, 1550-1800”, Hastings Law Journal, Vol. 52, p. 1313.

[7] Warshofsky, Fred, “The Patent Wars: The Battle to Own the World’s Technology”, John Wiley & Sons Inc., 1994, p. 38.

[8] Ibid pp. 38-39.

[9] Ibid p. 39.

[10] Ibid p. 39.

[11] Ibid p. 47.

[12] Ibid p. 48.

[13] Ibid p. 48.

[14] Khan, Sorina B., “An Economic History of Patent Institutions”, eh.net/encyclopedia/article/khan.patents, pp. 2, 9 & 15.

[15] Ibid p. 8.

[16] Ibid p. 8.

[17] Ibid p. 8.

[18] Dissent by Jackson J. in Jungerson v. Ostby and Barton Co. 335 US 560, 80 USPQ 32 (1948).

[19] Cuno Engineering v. Automatic Devices Corp, 314 U.S. 84, 51 USPQ 272.

[20] No attempt is being made for a rigorous correlation between patent attitudes and economic performance.  This is because policies often lag attitudes and the effect of policies is not immediately reflected in the economy.  In addition, a number of other variables confuse any analysis, such as the US was the only industrial country whose production facilities were essentially left intact after WWII and this contributed significantly to the US economy in the 1940s.  Despite this, there is clearly a general correlation between general patent attitudes in the country and its economic and technological performance.

 

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