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Archive for April, 2012


Below in no particular order are some of the foundational rules of patent law.  No attempt is made to prove these rules, but most should be familiar to patent attorneys.  If you disagree or are looking for an explanation feel free to comment below and I will respond.  In many cases I have already written a post related to the foundational rules.  For my analysis of the Foundation of 35 USC 103 see 5th Anniversary of KSR: Is Section 103 is Unconstitutional?

 

*Patents are a Constitutional Right

*Patents and Copyrights are the only right mention in the Constitution

*Patents are a Natural Right

*Patents are a Property Right – the basis of all property rights is creation/production and the same is true of patents.

*Trade Secrets are a Natural Right

*Patents can be viewed as a Social Contract where the inventor gives up their right to a trade secret in order to obtain a patent.

*All Inventions are a combination of known/existing elements/steps and known connections

*Patents are not monopolies  (A property right cannot be a monopoly)

*All Inventions use natural phenomena – we are not dealing in magic.

*Every element in every claim of a patent behaves in a predictable way – they do not violate the laws of physics – again we are not patenting magic.

*Claims define what the invention is.

*Every element (word) in a claim has to be given meaning – reading a claim is like reading an equation – not like reading prose.

*The definition of an Invention implies that it is Useful or has an Objective Result

*The definition of an inventor requires that they be the first person to create the invention, which results in the novelty requirement.

 
UN to Spend Trillions Trying to Create a Perpetual Motion Machine

Perhaps the UN didn’t get the message, however you would expect with all those brilliant climate scientists they would have – you can’t build a perpetual motion machine.  According to Fox News the UN has put out a report on how it is going to create a “sustainable” economy by spending trillions of your dollars.  A sustainable economy is one in which resources are infinitely reusable and there is no adverse byproducts.  It appears that the brilliant or perhaps mad scientists at the UN didn’t take thermodynamics, or they missed the lecture on entropy.  Entropy explains why you cannot build a perpetual motion machine.  It explains that every process results at least in waste heat, which means any process that uses energy cannot be 100% efficient and the economy uses energy.  For more information see Sustainability isn’t Sustainable.  The UN should quit tilting at windmills and perhaps the US should quit sustaining the UN.

PS: The UN also did not seem to get the memo from Japan’s Space program that Industrialized countries are net carbon sequesters.  The Third World owes us carbon reparations.

 
Prometheus Fall Out: The SmartGene Case

The SmartGene v. Advanced Biological Laboratories case is the first fallout from the Supreme Court’s Prometheus decision.  Advanced Biological Laboratories (ABL) owns two patents (6,081,786 6,188,988) directed to computerized methods of guiding the selection of therapeutic treatment regimens, particularly for HIV.  The patents explain that the new treatment options coming on line, the complex nature of the disease and how patients react to the disease and the use of multiple different treatments that can cause complex drug interactions results in the need for computerized system to help doctors treat their patients.  The background section points to academic papers and patents directed to expert systems on this problem.  So clearly other people felt there was a need for such a system.

The claims are directed to three expert systems on a computer and inputting data about the patient.  The computer then ranks the treatment options and provides advisory information to the doctor about the treatment options.

The courts holding was

 The patents-in-dispute do no more than describe just such an abstract mental process engaged in routinely, either entirely within a physician’s mind, or potentially aided by other resources in the treatment of patients.

The Court also finds that the patents-in-dispute are invalid under the “machine-or-transformation” or “MOT” test utilized in some of the Supreme Court and Federal Circuit precedent.

Abstract Mental Process

The claims are clearly directed to a computer.  The computer is running three separate expert systems and provides a rank list of therapeutic options and advisory information.  Computers are not abstract mental processes.  They use electricity, they cause the state of transistors to change, they cause electrons to change position.  This is not an abstract mental process.  Judge Beryl A. Howell, the judge in this case needs to have her head examined if she believes a computer is an abstract mental process.  But what can you expect from someone who got their undergraduate degree in philosophy and probably never took a science or math course in college.  For Judge. Howell’s edification, I will point out that a computer is a general purpose electronic circuit.  Software is a way of wiring this general purpose electronic circuit.  So when a software program is executed it changes the wiring of the electronic circuit and makes it a specific electronic circuit.  Wiring an electronic circuit is not an abstract mental process.  This is just another depressing example of why we need courts and judges who understand technology and patent law in resolving patent disputes.

Because so many people, including patent attorneys appear to be confused about what an abstract mental process is, I will write a claim below that would fit the definition.

 A method of solving an integral in closed form, comprising the steps of :

mentally reviewing an integral to be solved;

selecting mentally one of a plurality of techniques for solving the integral; and

applying mentally a selected technique from one of the plurality of techniques to the integral, wherein the plurality of techniques include integration by substitution and integration by parts.

MOT

The invention clearly involves a computer.  A computer is a machine.  When an instance of code is executed by a computer it is a specific purpose electronic circuit.  A specific purpose electronic circuit converts electricity into states of transistors – thus the transformation prong is also satisfied.  But an attorney who has never taken a class in physics, let alone electrical engineering would not have this basic knowledge.

 

Twitter posted their Innovators Patent Agreement (IPA) https://github.com/twitter/innovators-patent-agreement/blob/master/innovators-patent-agreement.md  with much ballyhoo yesterday.  Despite the claim that Twitter will only assert patents defensively, part 2(b) of the IPA allows Twitter to assert patents against anyone who has asserted their patents.  This will only exclude a very few companies, mainly startups.  Twitter’s stated goal is to promote innovation, but the real result if Twitter is successful will be that companies will rely on Trade Secrets.  Trade secrets decrease innovation, because the information is not shared.  Inventors cannot build on the work of previous inventors and they are more likely to waste resources rediscovering other people’s work (reinventing the wheel).  History clearly shows that when a country relies on trade secrets instead of patents, innovation is impeded.  Those countries with weak or nonexistent patent systems are not innovators and their people live on the edge of starvation.

 
Mark Cuban’s a Mythical Patent Creature

Mark Cuban has been famous for criticizing intellectual property and particularly patents.  According to IPBiz he stated on his blog that,

 Pick any country that is currently doing well, China is a perfect example. In China the Intellectual Property Laws are so weak that someone thought it was a good idea to completely replicate Apple retail stores. Compare their economy to ours. As much as I hate to compare other economies to ours, it’s worth taking a look .

 He has also criticized companies that enforce their patent rights.  But now Cuban has bought into a company, Vringo, that acquired Lycos’ patent portfolio and is now enforcing those patents, according to an excellent post on GametimeIP.  Vringo could be described as a Mythical Patent Creature (I stole this line from Patrick at Gametime IP).

This is not the full extent of Mr. Cuban’s hypocrisy.  I am sure that he has made a fortune on the IP rights he has in the Mavericks (Just think of the money we could make by rebroadcasting Mavericks games, if we didn’t have to pay for Cuban’s IP).  In addition, his argument that the countries that are doing well have weak IP rights is clearly nonsense.  Is North Korea doing well?  The start of China’s economic growth corresponds to their recognition of property rights including IP rights.  They didn’t have any IP rights during “The Great Leap Forward” when millions of people starved to death.  The current economic downturn in the US is not because our patent rights are too strong, but because they are too weak.  Patents are property rights and when patents are under attack you can bet that all property rights are under attack.  Clearly, the communist we have in the White House is not interested in strong property rights, but in fairness the Bush Administration was only ambivalent about property rights.

 
How Do You Determine if it Makes Economic Sense to File a Patent?

Just because you can obtain a patent for your invention does not mean that you should file for a patent.  So how do you determine whether it makes business sense to file a patent application on your invention?  The goal of filing a patent application is to create a barrier to entry.  There are many ways to create a barrier to entry in business.  For instance, a company’s customer list can give you an advantage over potential competitors since they will not know who the key people are in the industry.  Another barrier to entry might be your location if you are a retail store.  A gas station on at a busy intersection with easy access has an advantage over competitors that cannot be at the same busy location.  Trademarks may also provide a barrier to entry.

In order to understand the value of a patent to your business it is helpful to make an analogy to physical barriers to entry.  You probably lock the door to your house, but you know that someone can break the window and still get into your house.  So why do you lock the doors to your house?  Probably because you know that it will slow down any burglars and make it more difficult to enter your house.  As a result, you increase the chance that any burglars will either give up or move on to someone else’s house.  Note that you can always spend more money on the locks to your house, but at some point it doesn’t make economic sense.  If you spend $1 million on a safe for a $10K diamond, it doesn’t make sense.  The same thing is true for patents.  You are not trying to create a perfect barrier to entry, you are trying to increase your competitors cost and slow them down if they decide to compete with you.  For many of my clients the main goal is to make it painful enough for someone to compete with them that the potential competitor would rather buy out my client.

Thus the question is not whether you can afford to enforce a patent, or whether having a patent will eliminate all you competitors, but whether filing for a patent application or obtaining a patent will increase your competitor’s cost and slow down their entry into your market.  If you spend $10K to obtain a patent and it increases your competitor’s cost $100K and slows them down, then it probably makes sense to file a patent application.

The size of your market must also be taken into account.  The bigger your market the smaller the barrier needs to be.  For instance, a company with $5 billion a year in sales in a well defined market should file patents on almost any invention in their market space.  Vice versa the smaller the market the bigger the barrier to entry needs to be.  I have had clients walk into my office where I am pretty sure we can create an almost perfect barrier to entry, but the market is only $80k a year.  This is essentially buying a job and it makes no sense to file a patent for that size of market no matter how strong the barrier to entry.

Remember the goal of patent is to create a barrier to entry.  Just like physical barriers to entry, you should not expect a perfect barrier to entry.  For most startups, you want a strong enough barrier to entry that your competitor will buy you out rather than compete with you.

 
We’re Number 1, We’re Number 1 in Taxes

The USA now has the highest corporate tax rate in the World.  The sad point is when you add in State corporate taxes, the US was already had the highest corporate tax rate in the World.  This will hurt the US’s innovation, fewer people will invest in startups and fewer people will invest in new technologies.

The Marxists in the Administration will argue that this has no effect on whether companies invest in the US, or hire employees here, or whether people decide to start businesses in the US.  Of course, they have absolutely no evidence to back up their assertion.  In fact, all the evidence is against them.  But they will argue that we have to “invest” in our future.  This comes from an administration that believes

CONSUMPTION CREATES WEALTH.

No this is not a joke, but exactly (see Food Stamps) what the so called economists advising this administration believe.  Compared to these economists, the FLAT EARTH SOCIETY seems like they are part of the Enlightenment.  This doublethink is compounded by the idea that we are investing by giving money to Solyndra and other companies organized by Obama political cronies.  These “investments” are political investments by Obama, not investments in the US’s future.  Real investment by the government would be reducing the size and regulatory burden of the Government, see Austerity: Why it is Key for Both Short Term and Long Term Economic Growth.

Statist from both political parties will argue that the effective tax rate of many corporations is much lower than the nominal tax rate.  They neglect to mention that this only applies to large multinational companies.  These large multinational are able to escape the high corporate tax rate, because they have subsidiaries around the world and can shift income and production to low tax countries.  Raising their tax rate, just means they will move more and more of their production and income outside the US.  Large multinational companies are net job destroyers according to the Kauffman Foundation, so they should not be our focus.  Net new jobs and economic growth come from startups.  US startups do pay close to the nominal corporate tax rate and these draconian tax rates along with failure to provide an effective patent system, and regulations are killing our economy.

For a great article on this point see America has the Highest Taxes in the World.

 

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