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Archive for February, 2011


According to Tech Daily Dose, 20 conservative groups voiced their opposition to the so called Patent Reform bill in the Senate.  Here is their letter.

“Dear Speaker Boehner, Senators Reid and McConnell, and Rep. Pelosi:

We are writing to ask that you prevent the passage in this Congress of patent legislation that hampers U.S. competitiveness and threatens American jobs by undermining property rights. With our economy in crisis and millions of Americans out of work, this is the wrong time to jeopardize our recovery by passing legislation to remove incentives for innovation and commercialization of new products and processes.

Now being discussed is so-called “patent reform” legislation, like that offered by Rep. John Conyers and Senator Leahy in the 111th Congress, which would cripple most of America’s smaller inventors, research consortia and universities, and even the larger industrial firms that depend on patents. Downgrading patent rights — which are fundamental property rights — will hamper innovation and domestic manufacturing. Unfortunately, some Members of Congress are poised to move ill-considered patent legislation through the House and Senate this year. Diminishing patent rights would be dangerous to the future of our economy and our country’s global leadership, and must be stopped.

The Federal Government does many things that exceed its constitutional authority and hamper our free- enterprise system. In contrast, issuing patents is one of the few things specifically mentioned in the Constitution. According to Article 1, Section 8: “The Congress shall have Power . . . [t]o 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 Founders understood that protection of intellectual property was vital to innovation and progress. President Washington urged the first Congress of the United States to pass laws encouraging American innovation. James Madison wrote in the Federalist Papers, “The utility of this power will scarcely be questioned.” Yet, today it is being threatened in the Senate and the House – at the behest of a minority of large technology companies.

Sadly, the Federal Government has fallen down in its patent responsibilities and has become a bottleneck to genuine innovation. According to the United States Patent & Trademark Office (USPTO), the average patent applicant must wait 25 months before his or her application is first acted upon. The logical remedy to this problem is to fully fund the USPTO, allowing it to set user fees and keep them to run USPTO efficiently and effectively, rather than letting them be diverted to other parts of the government. In recent years, approximately $700 million originally allocated to the USPTO has been used for general government spending, causing a huge backlog of approximately 720,000 patent applications. This is the situation that must be reformed immediately.

Instead, some in Congress – again following the lead of several large IT companies — want to make it easier to infringe patents, easier to challenge patent rights in administrative proceedings and in the courts, and more expensive for inventors to defend their patents. By creating a new, expensive procedure to challenge the validity of a patent throughout its life, the benefits to patent-holders become far less certain. Incentives to seek patents are severely weakened, and venture capitalists face much higher risks when backing new ideas. The cumulative effect of such “reforms” would be to raise barriers to innovation and dis-incentivize commercialization of those ideas. Changes along these lines will certainly not help us to remain economically competitive in the world economy, which is why officials in China and India have hailed the proposed “reforms” as helpful to their economic interests.

Additionally, some of these so-called reforms have been proposed in the name of “harmonization” with foreign law. Frankly, this notion is misguided. Our competitors should have to “harmonize up” to our superior intellectual property regime, rather than our having to weaken our patent system and “harmonize down” to their levels. Does the United States really need to be “harmonized” with a calcified European system or the impossibly unfair Japanese system, not to mention the Chinese system, where intellectual property theft is a way of life? Such “patent reform” will lead to the plundering of American intellectual property and the loss of American factories and jobs to overseas competitors.

The proposed reforms really benefit large, established corporate market players at the expense of U.S. economic growth. Start-up companies drive innovation and job creation. About one-third of all patent applications are made by independent inventors, small companies, universities, and nonprofit research groups. Some larger IT companies, however, which ironically benefited greatly from the current patent system when they were start-ups, fear having their market positions disrupted or constrained by new ideas outside their control. They want current law rewritten to make challenges to patents easier and more frequent after they are granted.

This phony, market-distorting “patent reform” is bad for America. We ask that you stop any such legislation from reaching the floor and protect the property rights enshrined in the Constitution. Our nation’s economic future depends on your cooperation.”

Phyllis Schlafly
Eagle Forum
Kevin L. Kearns
US Business and Industry Council
Morton Blackwell
Chairman, Weyrich Lunch
Colin A. Hanna,

 
Fundamentals of Economic Science: An Objectivist Approach

Ayn Rand stated in, Capitalism: The Unknown Ideal, that

Political economy was, in effect, a science starting in midstream‘

 

Economics has ignored the unique features of its principle resource – Man.[1] We are going to avoid that problem, by first examining the unique nature of homo sapiens.  But before we look into the unique nature of man, let’s examine what it means to be a science.  It is my premise that economics is objective and therefore can be a hard science[2], based on empirical observation, logic, and reason.  There are some who would say that economics cannot be a hard science because we cannot setup isolated experiments to test hypotheses.  However, the same can be said of geology and astronomy, both of which are considered hard sciences.

All science is based on certain fundamental empirical observations.  One of these fundamental observations is that reality is objective.  This means that reality exists independent of any person’s belief, hope, faith, or desire.  The evidence for this proposition is overwhelming and includes all the incredible advances in physics, chemistry, biology, geology and the applied sciences (engineering).

 

Fundamental Observation: Reality is Objective[3]

Ayn Rand would state this fundamental observation as:

 

Reality exists as an objective absolute—facts are facts, independent of man’s feelings, wishes, hopes or fears.[4]

 

The second fundamental observation of science is that reality is understandable or discoverable using observation, logic, and reason.  In science, we follow logic and reason even if it seems counterintuitive.  For instance, the implications of special and general relativity predict that clocks on GPS (Global Position Satellites) satellites will run at a different rate than clocks on earth.[5] This appears counterintuitive, but empirical evidence shows that this is true and failure to account for this difference will result in meaningful navigational errors.

 

Fundamental Observation: Reality is understandable or discoverable using observation, logic, and reason

 

Ayn Rand would state this fundamental observation as:

 

Reason (the faculty which identifies and integrates the material provided by man’s senses) is man’s only means of perceiving reality, his only source of knowledge, his only guide to action, and his basic means of survival.[6]

 

If economics is going to be a science, it must be based on these two fundamental observations/assumptions.  Some people may object that science is based on observations.  All logical systems are based on either observations or assumptions.  For instance, Euclidean geometry is based on the assumption that a line goes on forever and two parallel lines never intersect.  Spherical geometry is not based on these assumptions.  It assumes that a line will wrap around on itself.  In science we do not arbitrarily pick the starting point, we use observations.

 

Definition: Economics is the study of how man transforms things to meet their needs.

 

Keeping Rand’s admonishment about the state of economics in mind, we now turn our attention the unique nature of man.  Aristotle and Rand define man as a rational animal.  The genus is animal.  The unique nature of animals and all life is that it thrives on negative entropy.[7] The species in the definition of man is that he is rational.  In the context of economics, the important part of being rational is that man invents.  No other animal invents.  In Atlas Shrugged invention plays a major role in the story.  The major character John Galt is an inventor as is Hank Reardon.

 

Man’s unique reward, however, is that while animals survive by adjusting themselves to their background, man survives by adjusting his background to himself.[8]

 

The first need of every person is to stay alive.  This means that life is a fight against entropy, the second law of thermodynamics.  Entropy is normally defined as the measure of the disorder of a system.  Entropy was discovered as part of thermodynamics and it explains that a perpetual motion machine is impossible.  Entropy always increases in a closed system.  Luckily for us, the Earth is not a closed system.  For instance, we receive energy from the Sun.  The only way to increase order is by the input of energy.  Life represents increasing order and therefore just to sustain life at its present level requires energy.  Edwin Schrödinger, Nobel Prize winning physicists, proposed this idea in his 1944 book, What is Life.[9]

 

Fundamental Observation: Life is a fight against entropy

 

Plants create this energy by photosynthesis.  They convert carbon dioxide into sugars (energy) using light.  They use this energy to create order.  Animals eat plants or other animals and use the energy to create order.  Note that when animals eat plants or other animals, they are increasing the disorder of the plants and animals they eat.  Thus, there are two general mechanisms that increase the entropy of life forms, 1) internal and 2) external.  Internal mechanisms are those that result from the failure to consume enough calories (energy) and aging.  Animals require oxygen, water, and food in that order to survive.[10] Without oxygen, the animal cannot oxidize enough sugar (fat, protein) to survive – overcome entropy.  Without water, the animal’s cells are unable to absorb energy and expel wastes.[11] As a result, the animal does not receive sufficient energy to overcome entropy.  Aging is a process of increasing disorder – entropy.  This disorder is caused at least in part by disorder in genetic information.[12] External mechanisms include being eaten or attacked by other living organisms, diseases, accidents (for animals), and the elements.

In general, living organisms use energy to overcome entropy first and then to increase their size.  However, some animals also create simple shelters or seek shelter to ward off the entropy increasing effects of the elements and predators.  Rain, sun, hail, snow, heat, and cold all contribute to the increase in entropy of living organisms (disorder).  A living organism dies when its entropy increases above a certain level.  Life has two main methods of overcoming the effects of the second law of thermodynamics: 1) food (energy) consumption and 2) shelter creation (inhabitation).

A species of life becomes extinct when the species as a whole reaches a certain level of entropy either because it cannot consume enough energy or because external mechanisms increase its entropy to the extinction level.  A species reaches the Malthusian Trap when increases in population of the species results in the total required energy (food) to support the population is greater than supply of food.  Or stated in the laws of physics, the total available energy is less than the energy required to overcome the total entropy of the species’ population.  Most life forms exist in the Malthusian Trap, including humans until the Industrial Revolution.  Evolution is life’s way of determining which species is best at overcoming entropy.

Homo sapiens also consume food and create shelter to overcome the effects of entropy.  Unlike other living organisms, homo sapiens organize their environment to minimize the effects of entropy.  For instance, humans have invented agriculture to increase their supply of food (energy) and therefore order.  Humans also harnessed the physical strength of animals, created internal combustion machines, electric lights, electricity, washing machines, tractors, computers, the internet, email, lasers, fiber optics, etc.  All of these are inventions.  Humans alter their environment by creating inventions.  This is different from every other animal.  This should not be surprising, since the distinguishing characteristic of homo sapiens is their ability to reason.  Man is a rational animal according to Aristotle’s classical definition.[13] Being rational is the distinguishing characteristic of humans.  Man uses his reason to alter his environment (invent) and increase order for himself.  Invention is the unique way in which man is able to create order – this is the fundamental observation of economics.

 

Fundamental Observation of Economics: Man’s unique ability to increase order (wealth) is his ability to invent.

 

Ayn Rand’s way of explaining this is:

 

Nothing can raise a country’s productivity except technology[14]

 

Inventing first results in the increased success of the species.  Homo sapiens populated most of the world in less than 500,000 years because of this unique ability.  As long as the rate of technological progress is slower than the growth in population, man is stuck in the Malthusian Trap.  Sometime around 1800 in Europe and the United States, the rate of invention exceeded the rate of growth in population and man escaped the Malthusian Trap at least in the West.[15] When man escapes, he is no longer subject to biological evolution.  As far as we know, homo sapiens are the only species to ever escape the Malthusian Trap.

Trade enhances man’s ability to invent.  By trading the products of each others’ inventions both trading partners can specialize and end up wealthier.  David Ricardo explained how both parties are better off because of trade using the example of England trading cloth for Portuguese wine:

 

England may be so circumstanced, that to produce the cloth may require the labour of 100 men for one year; and if she attempted to make the wine, it might require the labour of 120 men for the same time.  England would therefore find it in her interest to import wine, and to purchase it by the exportation of cloth.  To produce the wine in Portugal, might require only the labour of 80 men for one year, and to produce the cloth in the same country, might require the labour of 90 men for the same time.  It would therefore be advantageous for her to export wine in exchange for cloth.  This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced with less labour than in England.[16]

 

Using the example above, if England produces twice as much cloth as it needs, it has invested 200 man hours.  If Portugal produces twice as much wine as it needs it has invested 160 man hours.  Now if England and Portugal trade their excess cloth for the excess wine, England has invested 200 man hours for all its cloth and wine, while Portugal has invested 160 man hours for all its cloth and wine.[17] If England had produced both all its cloth and all its wine locally, then it would have invested 220 man hours for the same goods.  This means that England requires 10% more man hours if it does not trade.  If Portugal had produced both all its cloth and all its wine locally, then it would have invested 170 man hours for the same goods.  This means that Portugal requires 6.25% more man hours if it does not trade.

Trade is a rational activity and humans are the only animals to engage in trade of non-like items and trade between non-related individuals.[18] Classical economics has focused on trade and the related supply and demand curves instead of the role of invention in economics.  This might have occurred because the beginning of classical economics was in reaction to the Mercantile system and its limitations on trade.  Adam Smith’s book, The Wealth of Nations, is often seen as a refutation of the Mercantile system.  Matt Ridley, in his book, The Rational Optimist, has suggested that trade is the key to creating wealth.  This emphasis on trade has been misplaced.  Invention proceeds trade.  If everyone produces the same thing, then there is no reason to trade.  It is only because someone has invented a new product that trade becomes a rational choice.  For instance, one group of people may have invented a process for skinning animals and using them as clothing.  They may have traded this with people who had access to flint and invented a system for making simple axes.  Invention has to proceed production, which has to proceed trade logically.  Of course, without trade the value of invention is severely diminished.

In summary, life is a fight against entropy.  Economics is the study of how man transforms things to meet their needs.  The unique way in which humans meet their needs is to invent.  Only by inventing can humans increase their level of wealth.

 


[1] Rand, Ayn, Capitalism: The Unknown Ideal, Kindle Edition, location 126-128, 2011.

[2] Hard sciences include physics, chemistry, and biology, as opposed to “soft science”, such as psychology, sociology, and political science.

[3] Even the bizarre results of quantum mechanics are repeatable and independent of the observer’s hopes, desires, faith, opinion.

[4] The Ayn Rand Institute, Introducing Objectivism, http://www.aynrand.org/site/PageServer?pagename=objectivism_intro, 2/0/11.

[5] Real-World Relativity: The GPS Navigation System, http://www.astronomy.ohio-state.edu/~pogge/Ast162/Unit5/gps.html, October 3, 2010.

[6] The Ayn Rand Institute, Introducing Objectivism, http://www.aynrand.org/site/PageServer?pagename=objectivism_intro, 2/0/11.

[7] Wikipedia, What is Life?, http://en.wikipedia.org/wiki/What_is_Life%3F_(Schrödinger), Edwin Schrödinger, 10/6/10

[8] Rand, Ayn, For the New Intellectual, p. 15.

[10] There are few exotic life forms that do not need oxygen, but all require energy to overcome entropy.

[11] BNET, Physiological Effects of Dehydration: Cure Pain and Prevent Cancer, http://findarticles.com/p/articles/mi_m0ISW/is_2001_August/ai_78177228/, 10/6/10.

[12] Hayflick, Leonard, Entropy Explains Aging, Genetic Determinism Explains Longevity, and Undefined Terminology Explains Misunderstanding Both, PLoS Genetics, http://www.plosgenetics.org/article/info:doi/10.1371/journal.pgen.0030220, 10/7/10.

[13] The Philosophy of Aristotle, Adventures in Philosophy  http://radicalacademy.com/philaristotle4.htm, 10/7/10.

[14] “The Moratorium on Brains” The Ayn Rand Letter, I, 3, 5.

[15] This should more accurately be stated that the rate of growth in productivity due to the introduction of new technologies exceeded the rate of growth in population.

[16] Ridley, Matt, The Rational Optimist: How Prosperity Evolves, Harper Collins, New York, 2010, p. 75.

[17] This example ignores the cost of transport the wine and cloth, but it illustrates the general concept.

[18] Ridley, Matt, The Rational Optimist: How Prosperity Evolves, Harper Collins, New York, 2010, p. 56.

 

 
Science or Religion: Environmental Doomsday Theories

A fundamental difference between religion and science is that a scientific theory is testable, while a religion is not.  Religion ignores facts and believes in faith.  All environmental doomsday theories are religions, not science.  This is true no matter how much they disguise their religion with scientific jargon or call what they are doing a science.

Before I examine some of these environmental doomsday theories, let’s look at another pseudo science.  Creationists say creationism is a science and they attempt to include scientific jargon, including their attempt to show probabilistically human life is impossible.  One version of this idea is that given the number of base pairs in the human genome and that even if one of them were wrong humans would not exist, it is therefore impossible that their was not a Devine hand.  Of course, it turned out that much of the genetic material is irrelevant and that there are redundancies in the encoding of the human genome.  Did the Creationist admit defeat?  No, because it’s a religion not a science.  The same is true of Global Warming (Climate Change), Global Cooling, Malthus, Club of Rome Limits of Growth, Population Bomb, Nuclear Winter, etc.  None of these hypothesis are testable.  The proponents cannot name a single test that would prove their hypothesis incorrect.

Limits of Growth

In this post, I will only discuss the ideas related to some limit to human prosperity.  The idea that humans are doomed to starve to death was first proposed by Thomas Malthus in 1798.  Human population was about 1 billion when Malthus wrote this and today we have a population of about 7 billion.  In 1800 a much larger percentage of people were at risk of starving to death than today.  Nevertheless this did not stop Paul Ehrlich from writing The Population Bomb in 1968 warning of mass starvation in 1970s and 1980s.  When Erhlich wrote The Population Bomb the world had population of about 3.5 billion.  Of course, Ehrlich turned out to be wrong, just as Malthus had.  Note that Mr. Ehrlich also believed we faced imminent Global Cooling at the time, now he is apostle for Global Warming.  How many times can a person be wrong?  Has Ehrlich admitted that his earlier hypothesizes were clearly incorrect?  No.  Have the mass starvation proponents admitted their ideas are incorrect?  No, because their theories are not science they are a religion.  No facts will convince them to give up their irrational argument that we are about to run out of food.  See Earth Economist: The food bubble is about to burst.  The argument in this article is that we are about to run out of water for agriculture.  This is nonsense.  The amount of water on the Earth is essentially the same as it was a billion years ago.  Water has never been where we want it or necessarily in the form we want it.  This is not a resource problem, this is an infrastructure/invention problem.

Club of Rome

This was a book commissioned by the Club of Rome.  The Club of Rome is a think tank and the book “Limits of Growth” was published in 1972 and based its predictions on a computer model.  This model did not include the Internet, Personal Computers, email, genetic engineering, heart transplants, etc.  The model did not include the single way that humans increase wealth – inventions (new technologies).  The book was widely criticized by people such as Robert Solow, Nobel Prize economist, as having a weak base of data.  The book has recently been updated.  I bet it still does not take inventions into account.  The Club of Rome’s prophecies have been no better than Paul Ehrlich.  Is there any fact that if true would prove this hypothesis wrong?  No, because this is a religion not science

All these doomsday prophecies are religions.

 

Limiting Freedom

All these proposals demand that human freedom be limited to deal with these doomsday religious theories.  This makes them somewhat self-fulfilling prophecies.  The way human’s create wealth is by the use of their mind and the ability to act on their thoughts.  Or as Ayn Rand said in Capitalism” The Unknown Ideal, “reason is man’s means of survival.  Limiting freedom, limits the ability of people to create wealth.  For more information see Sustainability isn’t Sustainable.

 

While Ronald Reagan pandered to the religious right, he still nailed this issue.

Only when the human spirit is allowed to invent and create, only when individuals are given a personal stake in deciding economic policies and benefiting from their success — only then can societies remain economically alive, dynamic, progressive, and free. Trust the people.

 

 
Déjà vu All Over Again: Undoing the Reagan Revolution

The situation in Egypt is reminding me of the Iranian situation in 1979.  The reason the situation in Egypt is occurring is because the world economy has fallen apart and the people of Egypt are facing declining economic prospects.  Egypt is a socialist country, so the economic prospects have been mediocre at best, but with the decline in the world economy the prospects for the average person in Egypt have plummeted.  Already there is a Google executive missing in Egypt and I see the situation evolving along the lines of Iran in 1979.  Is this just random coincidence or is something more going on.  In 1979 we had a progressive (they should be called regressives, socialists, communists, Marxists, statists or just plain freedom haters) president who ruined our economy and apologized for America around the world.  Today we have a freedom hating president (progressive) who has spent the first two years apologizing for the U.S.  During the 1970s progressives (yes Nixon was a progressive – see wage and price controls) had spent the decade destroying the U.S. and world economy.  During the last decade progressives (yes Bush was a progressive – see Medicare Prescription Drug Program the biggest entitlement since Medicare) have spent the decade destroying the U.S. and world economy.  Luckily for the U.S., the Reagan revolution occurred and the U.S. had two decades of strong economic progress, won the Cold War, and pushed back socialism (freedom hating) around the world.  Unfortunately, it now appears that all the progress of the Reagan Revolution has been undone.  Here are the analogies between the U.S. before Reagan and presently.

Weak Patent System

It is a little known fact that a major part of Reagan’s economic plan included strengthening our patent system.  He started a process where our patent system was strengthened by a number of initiatives over the next 17 years.  Another little known fact is that we have consistently weakened out patent system since 2000.  We broke the social contract with inventors in 2000 when we agreed to publish patent applications at 18 months from filing even if the patent had not issued.  The social contract for patents is that in return for telling the public how to practice the invention the inventor receives a limited term property right.  By publishing how to practice the invention without having granted a patent, the public is receiving the benefit without fulfilling it side of the bargain.  Before 2000 patent applications were secret until they were allowed.  If an inventor felt he was not receiving adequate protection for his invention, he could withdraw the application and keep his invention a trade secret.  There have been a number of other changes to our patent laws that have weakened inventor’s property rights in their inventions.  This is exactly the situation the U.S. was in before Reagan became president.

Taxes

Reagan significantly lowered our marginal tax rates, unlike the very minor changes made by President Bush.  In exchange for lowering the marginal tax rates the tax code was simplified and most deductions were eliminated.  Now we have a very complicated tax code, where the alternative minimum tax (AMT) now hits many middle class families.  Our marginal tax rates appear low, but the phasing out of deductions makes it much more onerous than it first appears.  Finally, the complexity of the tax code has grown to being even more burdensome than in the 1970s.

The ads on TV for “tax fixing” firms remind us that our government is at war against its own citizens.  In a truly free country, there would be no market for these firms.

Lawyer Ads

Much like the 1970s we now are being bombarded by tort lawyers looking to get rich off of other people’s misery.  In the 70s it was plane crashes, diving boards, ambulance chasers, and perceived environmental concerns.  Today it is “bad drugs”, ambulance chasers (some things never change), and asbestos.  In the 70s these lawyers killed off diving boards, killed off the nuclear (not nucular President Bush) power, and almost killed off the private aviation business.

Unions

Before Reagan unions were draining the life out of our corporations.  They received oversized pay checks and imposed productivity killing rules.  Today public sector unions have pay packages that are much larger than their private sector workers who are paying them.  The retirement packages are outrageous paying retirees six figure pensions to people who have committed felonies and are in prison.

 

The Reagan Revolution has completely undone.  Are we better off today now that Reagan’s agenda has been completely subverted?  Will regressives (freedom haters) admit the damage they have done to the world, freedom, and the US?

 

 
Patent Deform Act of 2011: Approved by Senate Committee

So called Patent Reform is a bad idea that just will not die.  This is the sixth year in a row where this idea has been brought to the floor of the Senate or House.  While some of the most offensive provisions have been eliminated, it is still a bill designed to weaken our patent system and help large companies at the expense of startups and individual inventors.  For instance, the bill still contains “First-to-File” provision.  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.  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.

In addition, the bill expands post grant oppositions.  This again stacks the deck in favor of large corporations who can afford to fight these oppositions.  It is likely that post grant oppositions will be used by large corporations to bankrupt startups.  If we are going to have post grant oppositions we need to make patents incontestable, like trademarks, after a certain period of time.  See Making Patents Incontestable

Real Patent Reform

Here are my suggestions for real patent reform that would not only help small inventors but the US economy.

1) Repeal Publication: This would restore the social contract

2) Repeal KSR: A subject standard of patentability just increases costs and uncertainty associated with the patent process.  KSR makes bureaucrats the ultimate arbiter of what is patentable instead of logic.

3) Repay PTO & End Fee Diversion:  Congress should repay the over $1B it stole from inventors with interest.  It should also end fee diversion, which if Congress was subject to Sarbane Oxley would land them in jail.

4) Regional Offices for PTO:  This would ensure steady funding of the PTO, increase examiner retention, and ensure that the PTO is not so Washington biased.

5) Repeal eBay:  This decision is a logical absurdity.  If a patent gives you the right to exclude, then if you win a patent infringement case you must be able to enforce your only right – the right to exclude.  This is not an issue of equity, it is an issue of enforcing the right associated with a patent.

6) Eliminate “Combination of Known Elements”:  The fact that the Supreme Court does not understand that every invention in the history of the world is a combination of known elements is pinnacle of ignorance.  Have they ever heard of “conservation of matter and energy”?

7) Patent Reciprocity:  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 


 
Reagan’s 100th Birthday

While Reagan’s economic plan is generally thought of as just reducing taxes, he was a strong supporter of policies that encourage invention.  He strengthened the patent system by creating the Court of Appeals for the Federal Circuit.  All patent appeals were consolidated into the (CAFC) created in 1982. 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.

As Reagan’s quote below shows, he understood the connection between a strong patent system and a strong economy and more generally a strong U.S.  Today 96% of Americans believe innovation is critical to the success of the US as a world economic leader.  Zogby Poll, January 2010 and strong patent laws are critical to providing incentives for inventors.  Unfortunately, since 2000 we have weakened our patent system.  See Intellectual Property Socialism.

Ronald Reagan proposed National Inventors Day at February 11 in 1983.  February 11 was chosen because it is Thomas Alva Edison’s birthday.  Reagan’s proclamation was:

Almost two hundred years ago, President George Washington recognized that invention and innovation were fundamental to the welfare and strength of the United States. He successfully urged the First Congress to enact a patent statute as expressly authorized by the U.S. Constitution and wisely advised that “there is nothing which can better deserve your patronage than the promotion of science . . .” In 1790, the first patent statute initiated the transformation of the United States from an importer of technology to a world leader in technological innovation.

Today, just as in George Washington’s day, inventors are the keystone of the technological progress that is so vital to the economic, environmental, and social well-being of this country. Individual ingenuity and perseverance, spurred by the incentives of the patent system, begin the process that results in improved standards of living, increased public and private productivity, creation of new industries, improved public services, and enhanced competitiveness of American products in world markets.

In recognition of the enormous contribution inventors make to the nation and the world, the Congress, pursuant to Senate Joint Resolution 140 (Public Law 97 – 198), has designated February 11, 1983, the anniversary of the birth of Thomas Alva Edison, one of America’s most famous and prolific inventors, as National Inventors’ Day. Such recognition is especially appropriate at a time when our country is striving to maintain its global position as a leader in innovation and technology. Key to our future success will be the dedication and creativity of inventors.

Now, Therefore, I, Ronald Reagan, President of the United States of America, do hereby proclaim February 11, 1983, as National Inventors’ Day and call upon the people of the United States to observe this day with appropriate ceremonies and activities.

In Witness Whereof, I have hereunto set my hand this 12th day of Jan., in the year of our Lord nineteen hundred and eighty-three, and of the Independence of the United States of America the two hundred and seventh.

 

 

 
Unemployment: The Big Lie

The U3 unemployment number fell to 9% according to the Bureau of Labor Statistics.  This change in the unemployment rate was not due to increases in the number of people being employed, it was due to the number of people who have quit looking for a job.  According to the Associated Press the U.S. added 36,000 net new jobs last month.  This is not enough to even keep up with the growth in population.  Even this meager number is suspect, since the number of net new jobs has consistently been revised downward in the last several months.  If we want to create jobs, we need policies that encourage job creation.  Here is a straightforward list of policy changes that would create jobs.

1) Repeal Obama Care

This legislation has created uncertainty about the cost of insuring employees.  Note that over 700 employers and unions have asked for waivers.

2) Fully Fund the Patent Office

High quality, high paying jobs are created by new businesses built on new technologies.  The backlog of unexamined patents at the Patent Office is keeping many start-ups from receiving funding.  According to the Kauffman Foundation, all net new jobs are created by new business.

We should also strengthen our patent laws.  For more information see Larry Kudlow: Chinese Economy Relies of Stealing US Intellectual Property.

3) Repeal Sarbanes Oxley and the Frank Dodd Financial Reform Act

New companies require financing to create jobs.  Traditional banks mainly fund low tech companies that create low paying jobs.  High quality, high paying jobs are created by new businesses built on new technologies and require financing (usually equity) that is not provided by traditional banks.

 

4) Radically Cut Government Budgets and Taxes

Government budgets have grown to over 44% of the economy (about 26% at the Federal level) and this takes money and resources away from the private sector.  Taxes obviously increase the cost of doing business.  The higher the cost of doing business the fewer employees that will be hired.

 

 
Patent Ombudsman Program: A First Review

I have a patent case that appeared to be going nowhere and a client who did not want to wait for the appeal process.  As a result, we decided to try the Ombudsman Program.  The facts are that we had filed four separate responses (one RCE) and had three telephone interviews in this case.  We also filed a Notice of Appeal with a Pre-Appeal Brief.  The case was reopened after the Pre-Appeal Conference.

The inventor is highly educated and well respected in the area of technology of the invention.  The inventor has several other patents in this area of technology and is over 65 so we filed a Petition to Make Special.  The company is a typical start-up that is looking to raise additional financing in order bring the invention to the market.  Having an issued patent would provide a huge boost to their fund raising efforts.  This funding would provide jobs and the technology will save billions of dollars a year to the U.S. economy.  This is exactly the sort of company that drives employment in the U.S. according to the Kauffman foundation.  Their study showed that all net new jobs in the U.S. are created by new companies – to see the study click here.  High paying, high quality jobs are mainly created by companies with new technology.

I was concerned that the Ombudsman Program may not be able to help me, since it is clear that it is not designed to circumvent the normal examination process.  The essence of the problem was failure to follow the requirements for compact prosecution.  In the first telephone interview, I explained that our technology was able to cut a channel in the substance without creating enough heat to change the state of the material surrounding the channel.  All the prior art not only generates enough heat to change the state of the material it is a goal of the prior art to generate this heat and cause the change in the state of the material.  During the first telephone interview, the Examiner and the SPE told me the claims were just TOO BROAD.  Of course, no such rejection exists under the law and the Ombudsman program should be able to deal with this issue.  While Jon Dudas may have thought this was valid rejection, he was not a patent attorney and his ignorance of patent law and technology would fill whole libraries.  In an attempt to work with the Examiner, I added additional structure to the claims.  Some of this structure made it even more clear that we were not heating the material and changing its state.  I was told that the changes looked good and it was likely we would receive a Notice of Allowance, but they could not make any promises.  The next Office Action cited a new reference that again purposely generated enough heat to change the state of the material.  This process was repeated three times.  This sort of switch and bait process where the applicant amends the claims based on an interview to only be shot down in the next Office Action became standard under the Dudas’ regime.  In many cases, the only reason the applicant agreed to the amendment was to obtain allowance, not because they agreed with the Examiner.  These amendments to the claims should be considered contingent on allowance.  Otherwise they should be withdrawn.

Only once was a prior art reference not in the category of purposefully generating heat while cutting to change the state of the material, but it was even more irrelevant to the invention.  Then we filed a Notice of Appeal with a request for a Pre-Appeal Conference.  The result of the Conference was to reopen prosecution with another reference that again purposely generated enough heat to change the state of the material.  That was when we decided to try the Ombudsman Program.

I sent my issue into the Ombudsman form and was quickly contacted by an Ombudsman.  Our telephone conversation was very cordial and they said that they would contact the SPE.  This process took awhile because it was around the holidays.  Eventually, I received a call from the SPE.  The SPE has not reviewed the case, they had no idea of the issues involved, and instead of listening to me they quickly starting arguing about the case.  The SPE even went so far as to call our invention “MAGICAL” because the claims state that we generate essentially no heat during the cutting process.  This was not only rude it is wrong.  I have a MS in physics and I clearly understand that any frictional engagement is going to generate heat.  However, we have viewed this procedure with an infrared camera with sensitivities down to 1/10th a degree and the surrounding material does not appear to heat up at all.  The phrase about generating essentially no heat is clearly true and is in context of the prior art which generates enough heat to change the state of the material.  In order to change the state of the material it must be heated around 32 degrees Celsius above its standard operating temperature.  The most likely reason we do not generate any measurable amount of heat in the cutting operation is that the cutting tool starts at ambient room temperature, which is below the operating temperature of the material being cut, and the material is relatively soft so the cutting process takes very little time and does generate much frictional heat.  In the end, all I got was another useless interview the SPE.  I could have done this without contacting the Ombudsman.

Conclusion – Is it worth it to use the Ombudsman Program?

1) It is possible I asked too much of the Ombudsman Program, but I should have told this in the initial conversation with the Ombudsman.

2) The Ombudsman program should be able to at least demand that Examiner and SPE comply with the requirements for compact prosecution.  This is a procedural issue which is the type of issues the Ombudsman Program is suppose to deal with.  It is also a huge problem with Examiners trained under the Dudas’ regime.  The Ombudsman should be able to demand that the Examiner and SPE clearly explain why they keep citing new art with each new Office Action.  If the Examiner and SPE cannot explain this to the satisfaction of the Ombudsman, the Ombudsman should have the authority to demand that no new art be introduced in the case.

Note that the excuse by Examiners and SPEs that changes to the claims required an additional search is usually not valid.  The Examiner is suppose to perform their search based on the specification, not the claims.  None of the changes to the claims in this case in anyway change the basic thrust of the invention.

3) I have another case where an Office Action after the Appeal has raised the same issues that were decided on Appeal.  This would be a perfect case for the Ombudsman program to demand the Examiner and SPE comply with the law and not reargue issues already decided, but based on my present experience I doubt I will contact the Ombudsman program.

4) It would be nice for the PTO or anyone reading this to post any successes they have had with the Ombudsman Program so that we all know what issues they are capable of solving.

 

 

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