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Archive for May, 2010


Patent Ignorance

 I often hear from extremely intelligent engineers that they have read all sorts of patents in the last decade that should not have been issued.  Despite their brilliance, I am usually pretty sure that they have no idea what they are talking about.  Immediately, I want to know did they read the claims?  Do they understand that the claims are not prose?  If they read the claims, did they read the specification?  These are just a few of the questions I want to ask them.  Patent law is perhaps one of the most complex area’s of law to understand.  The US Supreme Court does not understand the difference between a 101 issue (patent subject matter) and a 102/103 matter (Novelty and Non-Obviousness).  It is quite common for patent attorneys who have practice 2-4 years to confuse patentability issues with infringement issues.  It is not that these brilliant engineers and scientists are incapable of understanding these issues, it is just that they need proper training in these issues just as they needed training in physics, calculus, and their engineering courses.

Usually, when an engineer makes the comment that they know of all sorts of patents that should have not been allowed I relate a story from my time at Motorola.  While I was at Motorola we received a letter from a company in the telecommunications world suggesting that we might want to take a license to about a dozen of their patents.  For some reason the task of analyzing this request fell in my lap.  I was given access to the PhD’s in our research division to help me with my analysis.  Motorola had a very aggressive patent strategy at the time and most of these PhD’s were inventors on half a dozen or more patents.  As a result, they were both very intelligent and fairly well versed in the patent process.  I asked that this group of engineers versed in the technology associated with these patents review them and then we would get together and discuss the claims to determine if Motorola should consider taking a license to any of them.  We met a week later and I started discussing each of these patents one by one.  When I mentioned the first patent, I got a chorus explaining to me that there was no way that this company should have received this patent.  I told them to calm down and work through the independent claims with me element by element.  As I queried them about whether Motorola would use each element in the patented technology I got a lot of bored responses that everyone did that element or step.  However, after a number of these responses I would ask if the next element was used by Motorola and the group would respond “Why would they do that?”  My answer would be, “I don’t know why, but that is probably why they obtained the patent?”  Then we would move on to the next claim.  I went through this same indignation with each patent we analyzed.  However, when I forced them to read the claims carefully it turned out that Motorola was not using or planning to use any of the technology in any of the patents this company sent us.  In fairness to this group of PhD’s and the brilliant engineers I run into, many patent attorneys make the same mistake when confronted with the question of whether their client infringes a patent or whether a patent should have issued.  Our Supreme Court also makes these same mistakes. 

So forgive me when I see open source people, venture capitalists, journalists, etc. not nearly as brilliant as the engineers mentioned above saying a patent should not have issued that I am highly skeptical they have the skill or have put in the hard effort to correctly analyze the issues.  Analyzing whether an invention is patentable or whether a product or service infringes another patent is hard work.  Even those of us skilled in this area and concerned about a public debate over a particular patent issue are reluctant to spend the tremendous amount of time and effort to correctly analyze the issues involved.  In order to help people understand some of the possible mistakes they are making when analyzing patent issues, I have put together a list of logical errors below.

Error in Analyzing Patent Issues

1) Confusing infringement issues with patentability issues.

2) Confusing what the specification says versus what the claims cover.

3) Confusing whether an invention is patentable with whether it is marketable.

4) Confusing whether an invention is patentable with whether it is of interest to the academic community.

5) Confusing the purpose of the specification with the purpose of the claims.

6) Reading the claims as if they are prose and not giving each word meaning, which is like ignoring terms in an equation.

7) Reading the abstract instead of the claims.
8) Reading the claims instead of the specification.

9) Reading the specification instead of the claims.

10) Not understanding the difference between the independent claims and the dependent claims.

11) Confusing what is obvious with what is simple.

12) Using hindsight in analyzing a patent.

13) Not understanding that every invention in the history of the world is a combination of known elements.   See Understanding Patent Novelty   (A common error by the Supreme Court)

14) Ignoring the context of a word in the claims.

15) Selectively emphasizing certain parts of the claims or specification while ignoring other parts. 

16) Confusing whether your understand the invention with the patentability of the invention. 

17) Confusing the meaning of plural and singular terms in the claims. 

18) Assuming that all patents have the same scope.

Any patent attorney who has been in practice for over 10 years has seen every one of these errors from their clients and probably plenty more. 

I think that engineers and scientists should be involved in shaping patent policy.  Unfortunately, few engineers or scientists have the taken the time to truly understand how patents work before criticizing them or making broad statements that they have seen numerous patents that should not have issued.  Uninformed comments are unlikely to advance patent policy in a way that is good for the country or good for these engineers’ and scientists’ economic future.

 
Patent Bill We Can Support

According to Computer World  John Conyers Jr., a Michigan Democrat and chairman of the House Judiciary Committee, and Lamar Smith of Texas, the ranking Republican on the committee introduced a patent bill that eliminates fee diversion from the patent office.  Over the last two decades Congress has diverted over $1B in user fees from the United States Patent and Trademark Office to their pet projects.  If this sort of thing occurred in a private company, the CEO, CFO and other company officers would be thrown in jail for accounting fraud.  Not only is this moral hypocrisy on the part of Congress, but it has significantly undermined our technology start-up companies and our economy. 

This is the only Patent Bill before Congress that would not hurt small inventors and start-ups.  In fact, it would be good for both and good for the country.  Let’s hope it passes and the “Comprehensive Patent Reform” dies a timely death before it is allowed to further damage out patent system.

 
More Evidence Sarbox is Hurting Our Economy

AWall Street Journal article discusses how a number of European companies are delisting from US stock exchanges.  The article points out that cost of complying with US law is outweighs any benefits derived by being listed on a US stock exchange.  It also explains that the cost of Sarbanes Oxley is increasing, despite earlier predictions that the cost of SOX would decline over time.  The new financial reform bill does nothing to address these problem.  In fact the present financial reform bill, at over 1400 pages, is going to make it more difficult for start-ups to raise money and more costly to go public in the US.

 
Judge Michel – Economy Recovery Requires Strong Patent System

Judge Paul Michel has an excellent article in JPTOS.  Judge Michel first explains that the economy and a well functioning patent system are connect.

The primary engine of American recovery and resurgence will therefore have to be an improved patent system. Without that, both short term recovery and long-term prosperity will be stunted. By “system”, I mean primarily the Patent and Trademark Office, and the Federal courts, which along with the International Trade Commission provide the only mechanisms to monetize patent value.

Next he points out one of my main complaints about the patent publication requirements – we are giving away our technology

Because most applications must by law be published at 18 months, others, including foreign competitors, can pirate inventions for years before the patents issue, for until then patent owners have no rights.

Michel then discusses the damaging effects of fee diversion from the patent office.

In addition, the Congress must guarantee the PTO will keep all fees. Since 1992, Congress diverted over 900 million dollars in patent fees to other uses. ‘This fiscal year Congress, once again, will not allow the office to keep all the fees it expects to collect; an estimated $150-250 million will go elsewhere. Permanently ending such “fee diversion” is necessary to reviving the PTO. If Congress continues diverting fees to other purposes, raising fee levels will have little effect. In addition, is it fair that fees provided by private patent applicants finance other government activities?

Finally, he suggests PTO satellite office, which has been a hot button of mine.

What else? Let the PTO open satellite offices, in places like Detroit, and Houston, and hire unemployed engineers who are already experienced IP professionals. But again, Congressional authorization is needed. Under current law, most employees must work in Alexandria, Virginia. Congress also controls the pay structure for examiners. The General Schedule that sets pay for civil servants should not apply to the scientists and engineers in the patent office. Industry would willingly pay higher fees to enable the PTO to pay more competitive salaries to highly-skilled examiners. Congress should raise these pay levels.

 
Pikes Peak IEEE Talk

I will be speaking at the Pikes Peak IEEE dinner event on May 21.  To register click here.

“The Decline and Fall of the American Engineer”
By Dale B. Halling, Esq.

Dale Halling is a rarity among speakers. In addition to his law degree, he hold a BS in Electrical Engineering and an MS in Physics. He is a local attorney specializing in intellectual property. Mr. Halling’s presentation is based on his book “The Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation”. Mr. Halling will focus on the issues of particular interest to engineers. He will also discuss policies that would benefit engineers and help us maintain technical leadership.

 
Still Subsidizing Banks and Wall Street

The TARP bailout of Wall Street may be over but we are still bailing out the millionaires on Wall Street.  The Federal Reserve has purposely set the fed funds rate to zero in order to “recapitalize” (bail out) Wall Street and the big banks.  This is nothing more than crony capitalism, where middle class Americans are forced to bail out multimillionaires.  As if this were not bad enough the bankers on Wall Street are acting like they are genius because they can borrow money from the federal government for zero percent interest and loan it back to the government at three percent interest.  This transfer of wealth from the rest of America to the politically connected in Wall Street is not moral and it is not good for the country.  An excellent video on this point is   Huge, Ongoing Wall Street Subsidy Allows Banks to Coin Money Every Day at Savers’ Expense .

Pat Choate’s book “Saving Capitalism”  points out that middle America has bailout Wall Street at least nine times since 1980.  Many of these bailouts are framed as bailouts for a country such as Greece today or Mexico in the early 1990s, however the bailout funds are not used to help the people of Greece or Mexico they are used to pay back big banks that made bad loans.

The finance industry and Washington have conspired to steal all the wealth generated from hard working Americans.  If we want our country to be great again and our economy to grow again Wall Street has to be allowed to fail and Washington’s budget needs to be cut in half.

 

Here is some good news on the Patent Reform front.

U.S. Reps. Don Manzullo (R-IL) and Mike Michaud (D-ME) today released the following joint statement in response to today’s House Judiciary Committee hearing on the U.S. Patent and Trademark Office. Manzullo and Michaud have significant concerns with H.R. 1260, the House patent reform bill:

STATEMENT

“We commend Chairman John Conyers, Ranking Member Lamar Smith and the House Judiciary Committee for holding an important oversight hearing today on the U.S. Patent and Trademark office. An efficient and effective U.S. patent system is vital to America’s economic growth. While it’s important to routinely examine the USPTO and its operations, we are concerned that this hearing will fail to address the fact that the current House version of thePatent Reform Act of 2009 (H.R. 1260) hinders American innovation and undermines U.S. job creation by increasing patent lag times, decreasing patent quality, and making patents more difficult and expensive to obtain.

“The key to the success of American innovation has always been strong intellectual property protections, particularly for the small inventor. These innovators will be responsible for the new technologies that will reinvigorate U.S. manufacturing and reassert American competitiveness for the next generation. We encourage the Committee to promptly schedule hearings to address the valid concerns expressed by stakeholders in various sectors – including universities, manufacturing, labor, small inventors, information technology, biotechnology, nanotechnology, and agriculture – with the current version of H.R. 1260.”

 
Source of Economic Growth

What is the source of economic growth?  Trying times like these make this question even more important.  The chart on the left is particularly instructive about the sources of economic growth.  It defines what engineers call a boundary layer condition.  The chart shows per capita income from 1000 BC to 2000 AD, where income has been normalized to one for the year 1800.  The part on the left where per capita income final takes off is only true for western countries.  For instance, African countries still have incomes near or below one on this chart and incomes in Japan do not take off for almost another 100 years.

So the million dollar question is why does income take off around 1800 after millennia of going nowhere?  Let’s examine the standard answers for getting our economy growing today.  Is the reason that income takes off around 1800 because taxes suddenly get lower (or higher) around 1800?  No tax levels did not change significantly around 1800 and in fact they were lower than today until around 1900.  Tax levels averaged 10% or less of GDP during most of history.  Is it because the size of government suddenly shrunk (or grew) around 1800?  No, the size of government did not change significantly around 1800.  The size of government did not start to grow until around 1900.  Is it because we suddenly created the world’s greatest “cash for clunker program” – in other words was Keynes right we just had to stimulate demand?  Well during the period from 1000 BC until about 1800 AD is called the Malthusian period, after Thomas Malthus http://en.wikipedia.org/wiki/Malthus.  During this period humans are just like every other animal and our population expands until we are on the edge of starvation.  I am pretty sure that there was plenty of demand during this period, at least for food.  Does income suddenly take off because we figure out how to control our money supply just right?  No the tools for controlling the money supply around 1800 were pretty crude.  The only reason we are wealthier today than in 1800 or 1500 or 1000 BC is because of our technology.  If we had the same technology as our ancestors we would be no wealthier than they were.

I am not the only one to point out that increases in our level of technology are the only reason for real per capita increases in income.  Robert Solow won the Nobel Prize in economics for essentially this point.  Other economists who have study this area include Paul Romer of Stanford, Jacob Schmookler who studied the relationship between inventions and economic growth and Gregory Clark from UC Davis.  This area of economics is often called Economics 2.0 or Innovation Economics.  One of the best books on this area (other than my book The Decline and Fall of the American Entrepreneur ) is a business book, entitled The Invisible Edge.

Not coincidentally 1800 is around the time the first modern patent systems are created.  Patents are the only free market system for encouraging people to invest in inventions and technology.  Patents are legal title to your invention.  The first patent statute in the US is passed in 1790.  The US becomes the economic and technological leader of the world because of our patent system, not because of some innate Yankee ingenuity.  We are the first country in history to recognize that inventors’ have a right to their inventions.  In fact, the only place where the US Constitution uses the word “right” is with respect to patents and copyrights.[1]

Despite the overwhelming evidence for the connection between patents, technology and economic growth, some detractors are going to argue that this is just coincidence.  The chart at the right shows per capita GDP for various countries.  As already explained US per capita GDP takes off around the time we create our patent system.  Japan comes to the US and studies why we are successful around the 1860s.  Their conclusion is that the US patent system is why the US is a technological and economic powerhouse.  As a result the Japanese copy the US patent system sometime in the 1870s, which is when their per capita income takes off.  A similar situation occurs in China.  On the other hand there are numerous countries with no patent system or ineffectual patent systems that are stuck in the Malthusian trap.

Patents are the free market system for conferring legal title to inventions and encouraging investment in technology.  Increases in technology are the only way to increase real per capita income.  A strong patent system is keystone upon which economic growth is built.


[1] US Constitution, Article 1, Section 8, Clause 8.  Note the Bill of Rights are amendments to the Constitution.

 
Patents and Jobs

According to business and patent expert David Kline and Henry R. Nothhaft, CEO of technology miniaturization firm Tessera, Inc. in the Harvard Business Review:

The U.S. Patent and Trademark Office (USPTO) may be the single greatest facilitator of private sector job creation and economic growth in America. It is this agency, after all, that issues the patents that small businesses — especially technology startups — need to attract venture capital investment, develop new products and services, and serve their historic role as the primary source of almost all new net job growth in America. According to one recent study, 76 percent of startup executives say that patents are essential to their funding efforts.

 David Kline is an expert in this area.  He is author of ground breaking book, Rembrandts in the Attic , on patents in business.  He is also author of Burning the Ships  that explores how Microsoft used patents to transform their business.  According to the authors, “The costs of the forgone innovation resulting from patent delays in the many billions of dollars annually.”  I think they are underestimating the cost of patent delays. 

Please read the full article at  http://blogs.hbr.org/cs/2010/05/the_biggest_job_creator_you_ne.html

 
Director Kappos Pushes “First to File”

Director of the Patent Office, David Kappos, provided the following explanation for why we should convert from a “first to invent” to a “first to file” system at the BIO International Convention.

“Kappos’ explanation of the long odds facing a small entity claiming to be the first to invent but who filed the patent application second.  Kappos likened the odds of such a Junior Party prevailing to the odds of being bitten by a Grizzly Bear and a Polar Bear on the same day.  He then went on to say that you have to go back to FY 2007 to find a prevailing small entity Junior Party in an interference.  As Kappos explained, those who think first to invent is a benefit for small entities are living a lie, which is certainly true, but many will not like to hear that truth.”

There are two problems with this “practical” answer: 1) the first person to file is not the inventor logically or morally, and 2) the unintended consequences of a first to file system.  A system that is supposedly practical but is not just will not succeed in spurring innovation.  The real answer is to reduce the burdens associated with interferences, not to trash the morally and logically correct answer – first to invent.

A first to file system will result in many poorly thought out patent applications increasing the PTO’s workload and increasing the number of Continuations-In-Part (CIPs).  The confusion created by this system of filing early and then following up with corrected applications will result in litigation being more expensive and less certain.  In addition, this system will further bias the patent system in favor of large entities.  Large entities will use a first to file system to flood the PTO with patents to overwhelm small entities and individual inventors in the race to the patent office.  Small entities and individual inventors will never be able to compete financially in this race to the PTO.  According to the SBA, most emerging technologies are created by small entities not large entities.  As a result, we need to make sure that our patent system is friendly for small entities if we want it to encourage innovation.

The result of the first to file system along with the publication system in the rest of the world has been to create a patent system for large entities.  The number of filings by small entities in these countries is trivial compared to the number of patent filings by small entities and individual inventor in the U.S.  There is no evidence that first to file system has spurred innovation in those countries that have this system.  So the “truth” here is that the first to file system is not designed to spur innovation – it is a further attempt to bias the patent system in favor of large corporations.

 

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