A patent reform bill is currently pending in Congress (Senate S. 23 and its House counterpart H.R. 1249) titled the “America Invents Act.” The bill proposes radical changes to the existing patent system that would impede innovation. Moreover, the bill contains ambiguous language that tends to confuse the reader, and is likely to confuse users of the patent system.
In particular, the bill attempts to draw a line of demarcation between “inter partes review” of a patent, on the one hand, and “post-grant review” on the other. The fly-in-the-ointment is that “inter partes review” occurs after grant, and is thus “post-grant.” Conversely, “post-grant review” is “inter partes” since it involves multiple parties, namely the patent owner and a third-party opponent. Accordingly, the bill is confusing since words appearing in one section are interchangeable with, and confusingly similar to, words in another.
In reality, the “post-grant review” proposal appears to be modeled after an analogous opposition procedure in place in Europe. Both procedures require the opposing party to submit a petition against the patent within a fixed number of months after the patent’s grant, or lose the opportunity to oppose using those procedures.
Significantly, other countries already tried European-style oppositions. In fact, Japan, China and South Korea implemented patent oppositions more than a decade ago. Within the decade, these efforts to mimic the European protocol all failed, and the procedures were abolished.
In Europe, there are no administrative alternatives to the opposition procedure. Hence, there’s no risk of redundancy in the European system, nor of confusion among users of the system. In contrast, Japan, China and South Korea have a separate administrative option, which still exists, called an “invalidation trial.”
The invalidation trial is comparable to the separate administrative option already available in the U.S. Patent Office, namely inter partes re-examination. The lesson we should learn from these Asian countries’ negative experiences with European-style oppositions is that introducing such a procedure is likely to confuse users of the system. Confusion among users of the patent system tends to stifle innovation.
Another provision of the bill would change our system from “first-to-invent” to “first to file.” That change might suit those who believe they can win a race to the U.S. Patent and Trademark Office. However, a race is not what Article 1, Section 8, Clause 8 of the Constitution envisions, nor is it what the Patent Act of 1836 formerly required or what the Patent Act of 1952 currently requires.
To the contrary, an “inventor” is not the person who is most fleet-footed in a race to the PTO, but rather the one who actually makes the invention first, unless the first party has “abandoned, concealed or suppressed it.”
A first-to-file system will demotivate inventors who believe that they do not have sufficient resources to win the race to the PTO. Demotivation of inventors tends to impede and stifle innovation. Such demotivation is the last thing that our nation needs, given the current state of the economy.
Another provision of the bill would undermine the incentive force associated with the constitutional mandate to “promote the…useful Arts” by tacitly encouraging each patent applicant to decrease the quality and quantity of disclosure of the invention in their patent applications.
Specifically, this provision would eliminate the penalty of unenforceability or invalidity that currently can be leveled against patentees in litigation for failing to disclose the best aspects of their invention in the patent application.
By virtue of this proposed change, a patentee’s failure to provide “best mode disclosure” of their invention would not be usable as a defense against patent infringement.
Although the best-mode requirement would technically remain “on the books,” it would have a hollow ring to it since there would be no risk of judicial penalty for failure to comply with the requirement.
Without the risk of sanctions, patent applicants may decide that it is in their best interest not to comply with the requirement, irrespective of their patent attorney’s counsel to the contrary. The likely result will be a diminution in the quantity and quality of information provided.
Reduced disclosure in patent applications will impede innovation by causing the patentee’s competitors to have to “reinvent the wheel” in order to piece together details about the invention that were left out of the patent application in order to keep those details a trade secret.
In conclusion, the proposed bill will diminish innovation and should not be enacted. If enacted, the resulting statute is likely to be repealed, but only after a huge waste of time, effort and taxpayers’ money.
Dale L. Carlson is a partner at Wiggin and Dana in New Haven, Conn., an adjunct professor of patent law at Quinnipiac University School of Law in Hamden, Conn. and immediate past president of the New York Intellectual Property Law Association, the largest regional IP law association in the country.
I met with a couple of Congressional aides today and it looks like there will be debate on the amendments Wednesday (6/15/11) and Thursday and the vote on the America Invents Act (H.R. 1249 & S.23) by the end of the week. The only reason for the rush must be that the Bill continues to lose support and the big companies pushing this Bill want it crammed through before opposition can coalesce.
Other amendments include the Paul Ryan and Hal Rogers proposal to cut the provision to stop fee diversion. Some Conservative groups have supported this idea under the idea that stopping fee diversion is violation of the US Constitution. The argument is that stopping fee diversion takes the power of the purse away from the Congress. This argument is nonsense. The PTO is and always has been a totally self funded agency. When you apply for a patent you write a check to the PTO, not to the General Treasury. When the funds are deposited into the General Treasury it puts Congress in the position of a trustee. A trustee has oversight power, but does not have the power to spend that money on other programs. When it spends PTO money on other programs it is committing fraud and theft. If Congress was private entity, all Congressmen would all go to jail for converting funds. When different (less stringent) rules apply to those in government than those in the private sector, then you have tyranny.
I was asked my opinion on giving the PTO fee setting authority. I am mixed. If the idiot, Jon Dudas former Director of the Patent and Trademark Office, had had fee setting authority, it would have terrified me the damage he could have done to the patent system. Of course, fee setting without the end of fee diversion is completely meaningless. So I see this issue with ambivalence at best.
Now is the time to put pressure on your Congressman. Please call you them and tell them to vote NO on the America Invents (not) Act.
According to the Wall Street Journal, “two powerful House Republicans, Rep. Hal Rogers (R., Ky.), chairman of the Appropriations Committee, and Rep. Paul Ryan (R., Wis.), chairman of the Budget Committee, called this week for changes in the legislation that would restrict the patent office’s ability to keep its own fees.” Ending fee diversion was the only positive part of the America Invents (Not) Act, HR 1249, S. 23). Representatives Rogers and Ryan should be condemned for this action. Congress is in the position of trustee of the Patent Office funds and if Congress were subject to Sarbanes Oxley Mr. Ryan & Mr. Rogers would be in jail today along with the rest of Congress. This makes the America Invents Act a complete farce. Ending fee diversion was always a little bit is not red herring as the next Congress could always just change this law.
When the government creates laws that do not apply to the government, just private citizens, this is the essences of tyranny. Rep. Ryan who is suppose to be a fiscal conservative and watching out for taxpayer dollars, is advocating the theft of inventor fees. If that is what the Tea Party and Paul Ryan consider being fiscally conservative, then it is clear that everyone in Washington believes that you have no right to the money you earn.
The Data Treasury story (reproduced below) shows that Patent “Deform” (America Invents [not] Act) is just a scheme for large international companies to steal American inventors’ technology. Data Treasury was a startup formed in 1998. Large Wall StreetBanks colluded to steal Data Treasury’s technology and forced Data Treasury out of business. Instead of just going away quietly, Data Treasury fought back by filing a patent infringement lawsuit. When they had some initial success in the courts, the banks responded by trying to use their pals in Congress to change the patent laws so they would not have to pay Data Treasury. In fact, the America Invents (not) Act, presently being considered by the House, contains a special provision attacking the Data Treasury patents. It allows Wall Street banks to attack “business method” patents, the very same patents that they are already infringing. This doesn’t extend to any other industry— only the financial industry- another Wall Street giveaway.
In my post Wall Street is Un-American I show that the interests of Wall Street and multinational companies are not aligned with the American people and this is just one more example. Data Treasury also exposes the Patent Troll myth. Data Treasury intended to be an operating company, but the theft of its technology made it impossible to compete in the marketplace against larger, better financed, entrenched, colluding competitors. As a result, they were forced seek restitution in the courts instead of competing in the marketplace. How many Data Treasury type companies did not receive funding because investors were scared away by this example of the uncertainty of property rights in technology (patents) in theUnited States? While Data Treasury is still a separate company, if Data Treasury had been forced to sell their patents, would justice be served by allowing these large international banks to steal American technology? In this case, it is clear that Data Treasury would be an operating company but for the theft of their technology.
This case also shows why the America Invents (not) Act will weaken the United Stateseconomy. HR1249 and passed S23’s provisions will weaken inventor’s property rights in their inventions. This will make it much more difficult to compete with established companies. As a result, startups will be much less likely to obtain funding. It has been shown that large, established companies are not the creators of emerging technologies, in general, and HR1249 and passed S23’s will significantly reduce funding for the startups and individual inventors who are the creators of emerging technologies. (See Invention – A Financial Analysis). Increases in our level of technology (inventions) is the only way to increase our per capita standard of living. This bill will cause the American standard of living to decline precipitously.
Some people excuse the theft of other people’s inventions, because they say patents are monopolies and anticompetitive. This is like arguing that property rights in, for example, cars is a monopoly and prosecuting car thieves inhibits competition in the market. There is no such thing as a “free market” separate from property rights. Creation is the foundation of property rights and patents are awarded to the creators of inventions – which, by the way, is why the America Invents (not) Act, HR1249 and passed S23’s, is Un-Constitutional.
Here is the Data Treasury story:
IT ALL BEGAN ONE NIGHT IN THE SUMMER OF 1994.
President Clinton was early in his first term as our nation’s president, the media’s obsession with O.J. Simpson was just beginning, and WebCrawler, the Internet’s first true search engine, had been up and running for a little more than three months.
Carl Gulbrandsen is the Managing Director of the Wisconsin Alumni Research Foundation (WARF) and wrote this excellent analysis of five problems with the America Invents (not) Act.
The reform proposed in this legislation includes the most significant changes to the U.S. patent law in over a century — and they are not good changes. There are five major changes proposed which individually and in concert weaken patents and make it more difficult and expensive for universities to obtain, maintain, license and enforce patents.
First, the proposed legislation moves the U.S. patent system from a first to invent system to a first inventor to file system. The Association of University Technology Managers (AUTM) Letter states that this enables “U.S. inventors to compete more effectively and efficiently in the global marketplace.” How does moving from a first to invent, which has been part of the U.S. patent system from its beginning, to a race to the patent office make U.S. inventors more competitive? It doesn’t; moving to a first to file system favors large businesses and in particular, well-financed, large foreign businesses over innovators. Operating effectively in a first to file system requires financial and staffing resources that are generally not available to universities or other small entities. Most universities today need a licensee willing and able to pay the patent cost before an application is filed. Under a first to file system, that will often mean the university loses the race.
Second, the proposed legislation weakens the grace period that has been such an important and valuable right for U.S. inventors. For universities the grace period has been particularly important. Under present law, the inventor need not do anything affirmative other than having made the invention to be entitled to the grace period. The inventor is entitled to swear behind any prior art created during the grace period and still be entitled to obtain a patent. Under the proposed law, the inventor must affirmatively disclose the invention to be entitled to a grace period. Thus under the proposed law, a disclosure of the invention not made by the inventor or another acting on information from the inventor will act as a bar even if within a year of filing the application. Moreover, if the purpose of the proposed legislation is harmonization with the rest of the world, then the disclosure grace period is effectively non-existent. A disclosure before filing acts as an absolute bar in most jurisdictions outside the United States so the grace period only becomes useful if one does not intend to file globally.
Third, the proposed legislation effectively shifts the constitutional balance between trade secrets and patents to favor trade secrets. Under present law, a person needs to choose between protecting an invention through trade secret and filing a patent application. If the inventor chooses trade secret, the law today holds that the inventor abandons his right to obtain a patent. Under section 35 U.S.C. section 102(c), a person is barred from receiving a patent if that person has abandoned the invention. The proposed legislation does away with section 102(c), so if this proposed legislation becomes law, a person can keep the invention a trade secret until it becomes clear that it would be better to have a patent and then file a patent application effectively extending that person’s competitive advantage 20 years.
Fourth, the proposed legislation further shifts the constitutional balance in favor of trade secrets by expanding prior user rights. Under present law, a patent owner holding a patent covering a trade secret that is not a business method can sue the trade secret user, and if successful, receive just compensation including in some circumstances an injunction. Under the proposed legislation, the trade secret owner could assert the prior user defense and if successful receive a free, paid-up license under the patent for the patented invention and any products made using the patented invention. In essence, the trade secret holder receives a free ride on the rights of the patent owner and what was thought by the patent owner to be exclusive rights as required by the Constitution becomes non-exclusive. Of course, if the trade secret owner is a large company able to control the market, the patent rights may become commercially worthless to the patent owner. As open environments, universities ordinarily do not deal in trade secrets, which is one of the reasons why WARF has consistently opposed expansion of prior user rights. AUTM, until the letter of May 17, was a partner in opposing expansion of prior user rights, but now has shifted sides for reasons stated in the AUTM letter — reasons we believe are largely political and not in the best interests of universities.
Fifth, the proposed legislation adds more opportunities to challenge the validity of patents. Today, patent validity can be challenged through reexamination (ex parte and inter partes) and through infringement litigation. Currently, it is more difficult to challenge a U.S. patent than a foreign patent, which we believe is good for U.S. universities and for U.S. innovation because it means that U.S. patents are considerably stronger than foreign patents. Strong patents are critical to start-up companies trying to raise venture dollars. Strong patents are also good for licensing. The proposed legislation, however, adds both a post grant review procedure where patents during the 12 months following issuance can be challenged on any grounds and an enhanced inter partes reexamination procedure. The net result is valuable patents will be more subject to challenge which increases costs for the patent owner, weakens the value of the patent, and makes it more difficult to license or raise capital funds necessary to starting a company and creating jobs.
As stated above, each of these changes acts to weaken our patent system to the disadvantage of innovators and especially university innovators. Taken together, these changes strike a terrible blow to innovation in the United States. Times are hard enough as is to start a company. The last thing investors want is uncertainty, which is exactly what will happen if this proposed legislation becomes law.
This uncertainty is enhanced by legitimate questions of the constitutionality of this law. In shifting the constitutional balance, the expansion of prior user rights runs counter to the constitutional purpose of our patent law which is to promote the progress of the useful arts by securing for a limited time exclusive rights to the inventor in return for disclosure of the invention. It also fails to respect the express limitations in Article 1, Section 8, clause 8 of the U.S. Constitution. The movement to a first inventor to file from the present first to invent system may also be constitutionally prohibited. Any patent reform that runs counter to the constitutional text and underlying purpose will face legal challenges that will call into question the validity of any patents granted under that legislation. These concerns decrease the value of patents, make it more difficult to license and increase the cost of enforcement, which impacts innovators disproportionately more than large companies.
We encourage you to take a hard look at the legislation in light of what you and your offices are trying to do to commercialize university inventions. I believe this proposed legislation strikes at the heart of what we are all trying to do and I am convinced it will make our jobs significantly more difficult. We have attached materials that add additional information to the comments made above. If you share our concerns, now is the time to act. The Chairman of the House Judiciary Committee has stated publicly that he expects H.R. 1249 will be scheduled for consideration by the full House of Representatives during the middle of June. Please ask your congressional representatives to oppose the bill or if you cannot do that directly, ask your governmental affairs people to do so for you. Feel free to provide a copy of this letter to anyone you believe will be interested and helpful. For example, provide a copy of this letter to the start-up companies you are working with, other local entrepreneurs and venture capitalists and ask that they oppose this legislation for the reasons stated in this letter. Any assistance at all that you can provide will be very much appreciated. Thank you for taking the time to read and carefully consider this letter.
This article is from the Golden News explains the problems with the America Invents Act.
Senator Coons recentlywrote about a looming crisis in America — a record backlog of patent applications at the U.S. Patent and Trademark Office. While Senator Coons is 100% correct about the importance of innovation to our economy, and about the foolishness of continuing to allow this backlog of patents to cripple American job creation, he is 100% wrong about H.R. 1249, the America Invents Act. Unfortunately, the authors of this bill are using the funding issue and the patent backlog crisis to implement radical changes on our patent system, which is the very engine of American job growth. This unconstitutional legislation will create new problems for our nation’s inventors, entrepreneurs and our economy.
In the name of harmonizing our laws with other countries, Congress is about to dramatically diminish the patent protections offered to American innovators over the history of our Republic. If this globalist maneuver succeeds it will severely weaken our patent system and America will have lost the value of its greatest asset: the creative genius of our people. This is no joke. S. 23 has already passed the Senate, and H.R. 1249 has passed the House Judiciary Committee. If enacted into law, provisions of this legislative onslaught will put America’s inventors at the mercy of multinational corporations and state-sponsored cyber thieves.
This pending legislation mandates patents not be awarded to the inventor of new technology, but instead to the “first entity to file” for a relevant patent.
The first language suggested by the authors of this legislation left out “inventors” altogether, but once this blatant attack became clear, the authors added the word “inventor” to “First Inventor to File” in order to confuse anyone not closely following this bill. This word-game is arrogant and insulting. Anyone filing can claim to be an inventor. There is, in reality, only one inventor. To claim otherwise, as this legislation does, will lead to injustice. The U.S. government will have setup the rules to allow Chinese probers, for example, to file the paperwork, pay a fee, and legally steal America’s creative genius. The “real inventor” is of no concern to this proposed system. CHINA WANTS TO CHANGE THE PATENT RULES TO HELP INFRINGERS FILE FIRST. This is totally out-of-sync with American tradition and contrary to our fundamental law; and it’s being changed to HARMONIZE our strong protections with weaker protections in Europe, Japan.
The second deadly component of this pending patent legislation is that it adds onto the process a whole new review, also known as a legal challenge, to a patent after it is issued. Again, the victimization of American inventors is obvious. Multinational corporations, and even just regular foreign companies, will be able to tie-up a patent owner in court, and pile monstrous expenses on the inventor to defend the patent they have been granted. And unless the inventor is already wealthy, he or she will be forced to sell at bargain prices. It happens overseas all the time. It will happen to our guys when patent law is harmonized.
Make no mistake, this pending legislation is being pushed by the globalist corporate elite who have sought to dismantle America’s patent system for decades. Today, their dream is closer than ever to becoming our nightmare. They present this legislation as if it merely tweaks our patent system, instead of attacking it. Senator Coons wasn’t yet in Washington the last time this legislation came to the floor, so he doesn’t remember the last assault on our nation’s innovators, or the ones before that. We stopped this attack before, and we must do it again! This legislation poisons the long-term health of American competitiveness and national security.
Congress needs to hear from the working people of this nation rather than the multinational corporations, who could care less what this bill will do to the future of America.
All of my colleagues, on both sides of the aisle, should oppose this unconstitutional overreach, which will undermine our future, and pass legislation that fully funds the patent office with our current patent laws in place. Only then can we reduce the backlog of patent applications while maintaining the strength of our patent system by fully protecting inventors from infringers at home, and from around the world.
This case, TEWARI DE-OX SYSTEMS, INC., v. MOUNTAIN STATES/ROSEN, L.L.C., in Texas shows the damage done by the publication rule for patents applied for a patent on a method of extending the shelf life of meat in a retail setting on May 8, 2003. The patent application was published on April 15, 2004 (earlier than 18 months because it was based on a provisional). In March of 2005 Tewari approached Mountain States on how they could increase the shelf life of meat products. Mountain States signed a Non-Disclosure Agreement (NDA) and Tewari explained how their process extended the shelf life of meat. Subsequently, Mountain States started practicing Tewari’s process. Tewari sued Mountain States for theft of their trade secrets. Mountain States claimed no trade secret existed at the time of the NDA because Tewari’s patent application had already been published and the court agreed.
If theU.S.had not adopted the publication rule, Tewari’s process would have been (probably) a trade secret. It is likely that Tewari eventually found that it was just too expensive to fight the “rejection equals quality” mentality of the Patent Office at the time they would have been arguing their case, although I did not examine the prior art. But, because of the publication rule Tewari did not have this choice. (If they did not foreign file, they could have opted out of publication, but the rules make this onerous.) As a result, Mountain States was free to steal Tewari’s trade secrets. This allowed a large company to free load off of the efforts of an innovative startup. Even if Tewari was legitimately denied a patent, it most likely would have had a defensible trade secret. Note that the Tewari’s patent application was published before they received their first office action. Tewari had no opportunity to determine if it was going to get a fair deal from the patent office before their invention was publicly disclosed to the world. The publication rules were sold under the theory that most patent application issue within 18 months. Now days the pendency time for the first office action is 25.2 months – seven months after the patent application is published.
Tewari was denied the rights to their intellectual property because of the publication requirement. A large, lazy, non-innovative company was the benefactor of this theft. This undermines investment in start-up technology companies that create most emerging technologies and provide high quality, high paying jobs. The publication requirement should be abolished.
Dear fellow patent attorney:
I need your immediate assistance to help defeat a particularly bad patent bill now in its final stages of consideration by the U.S. Congress. You have seen the blogs and emails explaining how the America Invents Act (formerly the Patent Reform Act of 2011) will dismantle our carefully-balanced patent system, the system that has made America the innovation engine for the world. The bill is bad forAmerica, bad for your clients, and bad for you as a patent attorney. Other countries innovate at half our rate. The multinationals want to “harmonize” our laws with those unsuccessful systems for their own convenience. This bill imposes about $1 billion in costs by taking away options that domestic American businesses use, to save a comparatively trivial amount for the Patent Office and a small number of multinational corporations.
The appendix to this letter outlines the proposed law and how it will significantly damage our clients, our profession, and our country.
Because this bill has passed the full Senate and the House Judiciary Committee, it could be enacted within weeks. The big multinational corporations have plowed untold sums of money into lobbying, and have the bill they want. It’s essential that Congress hear from domestic American businesses and inventors, and hear from them now. Congress desperately needs to learn from small businesses and startups how they actually use the patent system to create new products, jobs, and wealth.
Congress is on recess until May 2, and your Representative will be in your district. This is your best opportunity to inform your Representative that this bill will destroy American jobs by making it impossible for startups, small companies, and university spinoffs to protect the inventions they create, to obtain the funding they need to commercialize their inventions, and to earn the profits they need to grow new R&D-intensive businesses.
Go to www.house.gov to find your Representative’s contact info. To schedule a meeting, many offices will want you to FAX in a request letter. Second best is a phone call to your district office (not the D.C. office). Third best—and far less effective, but better than nothing—is an email. www.reformaia.org can help you with some of these contacts.
Ask your clients to join you at a meeting, or at a minimum, to call or write. This letter is accompanied by a “script” you can give to clients for them to make their calls. Your representative should simply vote the bill down—overall, the bill does more harm than good, regardless of any other changes that might be incorporated.
If you live in Ohio, call Governor Kasich’s office, (614) 466-3555. Point out that the governor’s $700 million Ohio Third Frontier jobs program cannot work, and that the Innovation Ohio Loan Fund will be not be repaid, if the federal Patent Act is changed to deter investment in university spin-offs and startups, and to make it harder for new businesses to succeed.
Please take the opportunity to meet or phone, or at least email your Representative. (A phone call has several times the weight of an email, and a meeting will have many times the impact of a phone call). You will be more likely to get a personal meeting, and you will have far more impact, if you as an attorney bring one or two of your clients with you. Stay away from patent jargon, because the person you talk to will almost certainly know nothing about patent law. It’s crucial that you discuss the effects of the bill in terms of destruction of innovation, jobs, start-up businesses, and the like, issues that a Representative or staffer can relate to. Urge your clients to join you for a meeting.
It’s crucial to act now. Please help preserve our gold standard patent system, one of the biggest engines of job growth in the U.S., and part of the reason U.S. attorneys can create so much more value for their clients than our counterparts in the countries to which Congress proposes to “harmonize.”
Vice President, Assistant General Counsel Intellectual Property at a well-known financial services firm, in Boston MA
APPENDIX: HOW THE AMERICA INVENTS ACT CHANGES PATENT LAW
The bill tilts the playing field in favor of multinational corporations and market incumbents. The bill shifts from today’s emphasis on disclosure and disruptive innovation to favor trade secret and market incumbency, in the following ways.
- The § 102(a) grace period is totally repealed. Every inventor will be in a race against all other possible disclosures—no inventor will have the time to perfect and test an invention before filing. All companies will be forced to file before an invention is fully understood or tested. That will be expense for your clients and trouble for you as an attorney, and reduce patent quality.
- Inventors, entrepreneurs, and startups use the grace period of § 102(a) to meet with investors, do the trial-and-error of R&D, and test their inventions. Under today’s law, the implied obligations of confidentiality in conversations with investors and early-stage partners give sufficient protection to permit these ordinary business activities. The bill repeals all these protections, and replaces them with a flimsy grace period that creates unacceptable risk of loss of patent rights, that no business can rely on—though adds strong protections for large companies that can raise all their financing, and do all their manufacturing and testing in-house. Inventors won’t be able to talk to investors without a patent, and won’t be able to file an application without an investor.
- The bill states that an inventor can recover patent rights if he can prove that all other disclosures originated with the inventor—but the bill neglects to create a procedural forum for showing derivation in cases where the leak is not embodied in a patent application, or where the leak neglects to attribute the original inventor. As a practical business matter, the bill leaves no commercially-feasible grace period, an integral part of U.S. patent law since 1839.—you will have to file every application as soon as possible, often long before the invention is ready.
- Today’s law gives Americans several advantages over foreign inventors (under the “Hilmer rule”). The bill removes these advantages, and instead places American inventors at a disadvantage to foreign inventors. Consider this fact pattern:
- A German inventor files a patent application in Europe, and later in the U.S. under a bilateral treaty
- Shortly after the German’s first filing, an American files a patent application in the U.S. on a similar (not identically the same) invention, and then under the same treaty in Europe
Under the proposed legislation, the German’s patent application will be prior art that blocks the American in the U.S. If we switch them around, so that the American files first, then the American does not block the German in Europe. The bill does not “harmonize” the law, and the difference disfavors Americans.
- The bill provides that all disclosures within and by a single company do not create bars. This is great for multinational companies, with large in-house staffs, but totally useless for a startup or small company that has to partner with outsiders. Startups use and need the options and protections of current law, but the new bill cuts them away.
- A single offer for sale or public demonstration one day before filing a patent application will irretrievably destroy patent rights, if the poorly-drafted language is interpreted literally.
- The § 102(b) grace period is cut back—it no longer protects against activities by third parties, but only the inventor’s own activities.
- A new “post grant review” procedure allows a competitor, at a time of his own choosing, to start a half‑million dollar proceeding against a patent holder that has threatened no one. Existing, more modest versions of this procedure have already put companies out of business.
- As a patent attorney, you will no longer have time to do a good job preparing a patent application, you’ll be “forced to file” prematurely. This will expose you to risks and destroy your weekends. Poor initial applications will drive up post-filing prosecution costs. The stricter and earlier filing deadlines will place you at a blocking point for many of your clients’ business activities, harming your client relationships. Where good patent attorneys are allies in creating value for businesses today, the bill will move you to being a cost—at a much lower billing rate.
The bill destroys commercial certainty and corrupts the incentives in the system:
- Various statutory requirements that an applicant act “without deceptive intention” are repealed—in the future, applicants will have incentive to act with deceptive intent.
- Key terms of art are redefined—you’ve spent a career learning the meaning of “on sale” and “public use,” but the legislative history fundamentally redefines these terms. It will take decades for courts to establish new precedent to provide any meaningful commercial certainty.
- The Metallizing Engineering “secret commercial use” bar is repealed—a company will be able to use an invention as a trade secret, and then spring a patent on the public years later. That favors market incumbents, but makes innovation harder for everyone else.
- The “best mode” requirement is reduced to a sham: a patentee will be permitted to disclose only a fictitious embodiment, while holding the best as a trade secret.
- The bill gives companies the right to patent and repatent inventions for years, to keep them locked up, neither using them nor permitting them to be used, for far longer than 20 years.
- Several aspects of the “first-inventor-to-file” provision—the ones that give patents to second inventors, and to companies that kept inventions in secret for years before filing patent applications—violate constitutional limits on Congress’ authority—years more litigation and commercial uncertainty.
- The Act allows Wall Street banks to attack “business method” patents that they are infringing. This doesn’t extend to any other industry, only business methods—another Wall Street giveaway.
The bill is out of committee—further amendments are unlikely. It is literally impossible to alter the bill to meet the needs of startups through an amendment strategy at this late date. The multinationals and their congressional allies smell victory. They see no reason to allow any weakening of their preferred bill through amendments favoring small businesses. The only option at this point is to vote it down.
Typical inventor activities that no longer “work”
Most startups, and many inventions at established companies, go through at least one of two “stories.” They’re reasonable commercial practice under today’s law, but not under the bill:
- An entrepreneur with nothing but an idea typically has to present his idea to dozens of venture capitalists and potential manufacturing or marketing partners, without formal confidentiality agreements, to get a company started. (VC’s never sign confidentiality agreements for first meetings.) This works under today’s law, because of the implied obligation of confidentiality and the protection of § 102(a), but under the bill, these conversations will create commercially-unacceptable risks to the investor and partner. U.S. inventors will be under the same “Catch-22” as European inventors—unable to talk to potential investors until a patent application is filed, but unable to file a patent application without an investor. Startups will die before being born.
- Companies that need a long “invention incubation” period—trial and error, conceive, test and discard, until finding the “magic combination” of techniques—use the § 102(a) grace period to do their R&D in confidence, and file patent applications only when it’s clear which inventions are valuable, and how they work. Under the bill, a company will have to file a continuous stream of patent applications, many directed to inventions that are dumped under current law. This will increase patent costs remarkably.
Almost every startup goes through one of these two, many through both, as new companies create new wealth and new jobs under today’s law. Inventors wait to file quality patent applications until they have quality inventions. America’s unique and strong right to file in the future, after the inventor and investor know whether the invention is valuable, makes business easy, and prevents wasted costs for inventions that prove worthless.
The “America Invents Act” revokes this historic right. Property rights turn on non-business legal technicalities created to satisfy bureaucrats, technicalities that will cost $1 billion annually. The bill requires a company to file premature, hasty, and expensive patent applications on every baby-step idea to preserve rights against third parties who are dabbling in the field without intent to develop a commercial product. The America Invents Act makes these two stories nonviable for startups—because the authors “didn’t think” about them, or didn’t want to.
In 2010, the Kauffman Foundation and Census Bureau released two studies on job creation. Both found that “net job growth occurs in the U.S. economy only through start up firms.” If creating new jobs is Congress’s Job One, then killing the America Invents Act is a good place to start.
The proponents’ arguments do not survive scrutiny
Proponents suggest that the bill does away with complex and costly interferences. That’s true, but irrelevant. Under 100 applications per year end up in interferences. In contrast, the change to today’s “§ 102(a)” grace period affects commercial decisions and raises costs for hundreds of thousands of inventions per year, during the time before filing, by giving inventors and patent attorneys time to get it right the first time. Because the Patent Office has no insight into the pre-filing process of invention, it simply hasn’t taken into account the realities of invention incubation and the costs of its proposal. Further, the proposed replacement, “derivation proceedings,” are the most costly disputes in patent law in those jurisdictions where they exist.
Second, proponents argue that provisional applications will be a cheap way to preserve rights. But that isn’t true under the new law. Under current law, a cheap provisional is useful to show conception and diligence. But under Patent Reform, a provisional application only provides legal benefit if prepared with full § 112 ¶ 1 care and completeness. For a typical startup invention, the cost in attorney fees and inventor time for a provisional application is $10,000 or more—a formidable barrier to an entrepreneur’s first conversation with an investor.
Third, proponents argue, “The bill locks in rights if you publish a disclosure of the invention.” But all companies rely on secrecy for their future plans. No company publishes its most sensitive and advanced technology years before introduction. This argument ignores business reality.
I have been wondering about the number judges on the Court of Appeal for the Federal Circuit who were practicing patent attorneys. I was surprised that I could not easily find this information. Here is what I found (I believe this information is accurate, but if I am mistaken please let me know). According the CAFC’s website there are 16 judges and five of them are patent attorneys. Six of the judges have technical backgrounds. I think this is pitiful. However, all six of the judges on senior status do not have technical backgrounds and are not patent attorneys. Thus, among the active judges five of 10 are patent attorneys and six of ten have technical backgrounds. It appears that the court is moving in the right direction. The newest judge is Kathleen M. O’Malley who does not have a technical background and is not a patent attorney. The CAFC website plays up her experience with patent cases, but I am skeptical that this makes up for the right technical background or real experience in patent prosecution for the reasons stated below.
The CAFC has jurisdiction over most patent appeals. According to the CAFC website 39% of its cases relate to intellectual property – 36% of which are patent cases. It might be argued that since only 36% of their cases are related to patents, then it makes sense that only 36% (50% of active) of the judges should be patent attorneys. I would argue this is incorrect. First of all, we have plenty of federal judges without technical backgrounds. It is not necessary to populate the CAFC with judges that do not have technical backgrounds to provide balance to the makeup of our federal judges. In fact, the exact opposite is true. Second, it is easy for a judge with a technical background to pick up and new area of law, but it is almost impossible for a judge without a technical background to understand the technical concepts associated with genetic engineering, XML, spread spectrum, organic chemistry or numerous other areas of technology. We perpetuate a myth that the facts are decided at the trial level, so the judges at the appeal level do not have to understand the underlying technology to reach a correct decision. However the judges on the Supreme Court prove over and over again that their ignorance of basic technology and science results is bad decisions. See Bilski: The Good, the Bad, and the Ugly http://hallingblog.com/2010/06/29/bilski-the-good-the-bad-and-the-ugly/ and KSR: Supreme Ignorance by Supreme Court http://hallingblog.com/2010/01/19/ksr-supreme-ignorance-by-supreme-court-2/. As a result, I believe that we need significantly more patent attorneys as judges on the CAFC.
|Judge||Patent Attorney||Technical Background|
|Newman||Yes||Yes – Ph.D|
|Lorie||Yes||Yes – Ph.D|
|Gajarasa||Yes||Yes – BSEE Patent Examiner|
|Linn||Yes||Yes – BEE|
|Prost||No||Yes – BS|
|Moore||Yes||Yes – MSEE|
* Senior status.
The following additional information was provided by stepback.
PAULINE NEWMAN, Circuit Judge: … She served as patent attorney and house counsel of FMC Corp. from 1954 to 1969 and as research scientist, American Cyanamid Co. from 1951 to 1954. Judge Newman received a B.A. from VassarCollegein 1947, an M.A. from ColumbiaUniversityin 1948, a Ph.D. from YaleUniversityin 1952 and an LL.B. from New York University School of Law in 1958. From http://www.cafc.uscourts.gov/index.php?option=com_content&view=article&id=126:pauline-newman-circuit-judge&catid=1:judges&Itemid=24. Not surprisingly I have often believed Judge Newman is the most intelligent judge on the CAFC.
KIMBERLY A. MOORE, Circuit Judge: … was an Associate at Kirkland & Ellis from 1994 to 1995. From 1988 to 1992, Judge Moore was employed in electrical engineering with theNavalSurfaceWarfareCenter. Judge Moore received her B.S.E.E. in 1990, M.S. in 1991, both from the Massachusetts Institute of Technology, and her J.D. (cum laude) from theGeorgetownUniversityLawCenterin 1994.
RICHARD LINN, Circuit Judge: … was a Partner and Practice Group Leader at theWashington,DClaw firm of Foley and Lardner from 1997 to 1999. He was a Partner and head of the intellectual property department at Marks and Murase, L.L.P. from 1977 to 1997. Judge Linn served as Patent Advisor, United States Naval Air Systems Command from 1971 to 1972, was a Patent Agent at the United States Naval Research Laboratory from 1968 to 1969, and served as a Patent Examiner at the United States Patent Office from 1965 to 1968 … He received a B.E.E. from Rensselaer Polytechnic Institute in 1965, and a J.D. from Georgetown University Law Center in 1969.
ARTHUR J. GAJARSA, Circuit Judge: … was a partner in theWashington,DClaw firm of Joseph, Gajarsa, McDermott and Reiner, P.C. from 1987 to 1997. Since 2003, Judge Gajarsa has been an Adjunct Professor at theGeorgetownUniversityLawCenter. From 1980 to 1987, he was a Partner in the law firm of Wender, Murase and White. From 1978 to 1980 he was a Partner in the law firm of Gajarsa, Liss, and Conroy and from 1971 to 1972 … received a B.S.E.E. from Rensselaer Polytechnic Institute in 1962, an M.A. from Catholic University of America in 1968, and a J.D. fromGeorgetownUniversityLawCenterin 1967.
Steve Forbes, publisher of Forbes Magazine, was a strong defender of the US patent system. He followed in the footsteps of one of his hero’s, Ronald Reagan, who made strengthening the US patent system a major part of his economic reform. For more information see Reagan’s 100th Birthday.
Now Forbes (the magazine) pushes an anti-intellectual, anti-free market, anti-patent point of view as evidenced in the opinion piece Google’s Conundrum: Buy The Patents Or Pay The Lawyers? The author belongs to that Luddite group that wants to categorize patents as monopolies. Patents are property rights. Property rights derive from the act of creation or more specifically invention in the case of patents. Monopolies are the result of political calculations and have nothing to do with creation.
The author then goes on to state:
When Prime Minister Tony Blair and President Clinton suggested imposing restrictions on patents in the field of genetics, publicly traded bio-tech firms experienced a predictable mini-crash. The impact of their recommendation would not have been as violent if the patents had shorter lives than twenty years.
Of course if the property rights in one’s invention was weaker before you suggested making it even weaker, it would have less impact on the value of the companies owning these assets. This is like saying the value of a company will decrease less when nationalization is proposed if the tax rate were higher. For instance, if the tax rate were 100% then it would not affect the value of company at all if politicians proposed nationalizing the company. The author Reuven Brenner, is an economics professor at McGill University according to Wikipedia. You would think that a professor would not make these obvious logical errors – the sort of errors that would make even an undergraduate paper on the topic receive a C or lower.
As if this gaff were not enough the professor then asks:
What would happen if the life of patents was shortened?
Prices of patented goods would decline and there would be less piracy
Yes and the price of all goods would decline if we would just get rid of property rights. Of course, no one would produce anything and the same is true of weakening patents. Innovation will come to a virtual standstill. History shows that without secure property rights in inventions, innovation grows so slow that humans are stuck in the Malthusian Trap. See The Source of Economic Growth.
As for there being less piracy that is like saying there would be less car theft if we did not give people title to their cars. This is not Alice in Wonderland Mr. Brenner. Words have meaning and even if there is not a law against piracy, it is still piracy.
Mr. Brenner continues with his Socialist line of reasoning by arguing, “Phillips’ initial success in Holland and throughout Western Europe was due to copying Edison’s lamps without paying any royalties to the Edison interests.” Stealing always enriches the thief, but it does not create wealth it redistributes it and destroys it. How many invention was Edison or some other inventor unable to fund because Phillips stole Edison’s inventions?
Mr. Brenner should be aware that since Robert Solow’s famous paper on economic growth it is clear that all per capita growth is due to increases in technology. Most new technologies are created by start-ups that require property rights in their inventions (patents) in order to secure capital. (See SBA Study). In addition, all net new jobs in the US are created by start-ups according to the Kauffman Foundation. If the US wants to create high quality, high paying jobs it needs strong property rights for inventions.
The America Invents Act is bad for the US economy and I will be posting principled statements explaining its flaws. Rep. Don Manzullo has shown the courage to be an independent thinker and not to blindly follow the lead (money) from large corporations that want a system that makes it easier for them to steal other people’s technology.
“I am deeply concerned that ‘The America Invents Act,’ which was introduced today as H.R. 1249, will stall American innovation and send more of our jobs overseas. This legislation reflects an approach to patent reform that stalled previously, in 2007, in the face of massive opposition from American innovators.
“Like its Senate counterpart (S. 23), the House bill includes an unfortunate provision that would shift America’s current patent system – where the first person to conceive of an invention is granted a patent – to a ‘first to file’ system that would turn our system into a foot race to the Patent Office.
“The U.S. has always awarded a patent to the first inventor to come up with an idea, even if somebody else beat them to the Patent Office. The Constitution, in fact, mandates that inventors have exclusive right to their discoveries. This is a system that produced game-changing inventions from people like Samuel Morse, Alexander Graham Bell and Dr. Ray Damadian. Despite that track record, some people are now insisting that the U.S. should ‘harmonize’ with the rest of the world. With all due respect to our friends and allies abroad, I would not trade America’s record of innovation for that of any of those first-to-file countries.
“The bill would also devastate small inventors by effectively eliminating the one-year ‘grace period’ that U.S. inventors currently have. This grace period is critical to small inventors, who can use that year to develop their invention, seek investors and raise funds to begin the expensive patent application process.
“The House bill also fails to provide appropriate safeguards, like those included in S.23, for the controversial new administrative post-grant review process it proposes. Current law already provides two separate administrative tracks to challenge a patent within the PTO, and this bill proposes to add a third ‘post-grant review’ process. Any additional layers of administrative review must be accompanied by safeguards that will diminish the potential for abuse, particularly by infringers with deep pockets and other third parties.
“Moreover, the bill also establishes a transitional review proceeding at the PTO that would affect certain financial service business method patents. Subjecting patent holders who have proven the validity of their patents, both administratively within the PTO and at trial, to a new type of retroactive challenge seems like unnecessary harassment.
“Many of America’s inventors and innovators are alarmed over these fundamental changes to our patent system, and we must hear them out and address their concerns. I urge the House Judiciary Committee to listen to stakeholders of all sizes and perspectives and to find a truly consensus approach to modernizing our patent system. I look forward to working with my colleagues on and off the Committee to craft legislation that will support and encourage all of our American innovators.”
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
This is one the best ideas I have heard for improving our patent system. It was proposed by Gene Quinn of IPWatchdog. The idea is that after a certain period of time a patent becomes incontestable, meaning it cannot be challenged on validity grounds. This idea is similar to the idea of incontestability for trademarks or quite title suits for real property. Quite title suits recognize that having endless open questions about the title to property reduces its economic value and results in under-investment and under-productivity for that asset. The same is true for patents.
Incontestability could be part of a package that strengthens inter parties reexamination to allow appeals to the CAFC. Here is the way I envision it working. Five years from publication a patent would become incontestable. This would eliminate the defenses of lack of novelty, obviousness, on-sale bar, inequitable conduct, inventorship, best mode, utility, and statutory subject matter issues. This would increase the value of the property right. The evidence associated with these issues is often years old when raised in an infringement suit and not reliable. All these issues would have to be open for inter parties reexamination. However, there would have to be safeguards that inter parties reexamination is not just a fishing expedition to increase your competitor’s costs. As a result, all PTO (Patent Office) and court fees would have to be paid by the challenger. If a challenge to a patent is unsuccessful the challenger will have to pay the patent holder’s attorney’s fees. The reverse is not true. The patent holder has already paid to have the invention examined by the patent office. This would eliminate a lot of the costs and discover associated with patent lawsuits, which should result in faster, less expensive litigation. Justice delay is justice denied.
How would this affect the defenses of latches, equitable estoppel, and patent misuse. Latches should be limited to the statutory timeframes in 35 USC 286. Equitable estoppel is not appropriate in patent law. No one should be able to argue that they relied on the patent holder’s representations that are not in writing. We have many areas of law where agreements (representations) have to be in writing to be enforceable and this should be one of them. Patent misuse as it pertains to antitrust violations should not be a defense. All antitrust attacks on patents are based on a misunderstanding (misrepresentation) that patents are a monopoly not a property right. Exercising a legal property right should never result in an antitrust violation.
Critics may argue that it could be years before a company is confronted with a patent and the potentially infringing company may not even have existed when the five year incontestability period expired. This may be true, but we do not want companies creating me-too products or reinventing the wheel. If the company is building on the patent to create a new invention, then they should do their homework and determine if they are likely to infringe a patent. It is a waste of resources for companies to reinvent a patented invention. No longer should we reward purposeful ignorance.
Incontestability for patents is based on the same reasons we have for incontestability in trademarks and quite title suits for real property. It would reduce the number of issues in litigation, making patent litigation quicker and less expensive.
A good friend pointed this case out as an example of why software patents do not result in innovation. Here is my response:
Let’s unravel a number of issues:
1) Is this lawsuit frivolous?
3) What is the empirical evidence of whether strong or weak patents for software result in more funding, more products, and more employment?
1) Is this lawsuit frivolous?
I have not studied this case in enough detail to know the answer. The outrage over the Amazon one click patent was complete misplaced. The Amazon one click patent was a real invention, there was not a mountain of prior art that the critiques claimed, and it was copied and much more successful than previous techniques. The one click patent not only simplified the ordering process, it was more secure, and customer preferred it. The level of outrage about lawsuits is more about politics than about logic. By the way all Barnes and Noble had to do to avoid the patent was put in two clicks. I have heard no outrage about how lazy they were to not even write code that had two clicks.
Unfortunately the software industry has the habit of rewriting code, which is inefficient, instead of buying previously developed code. Despite the open source communities attempt to wrap themselves in the innovation flag, much of what they do is rewrite code that has already been written. This is not innovation, it is not productive, it is narcissism. In addition, many companies follow the policy of purposeful ignorance. Meaning they purposely do not have their engineers look for prior art to supposedly avoid willful infringement. We should not reward purposeful ignorance and we should not encourage people to reinvent the wheel.
Note that when Fritz Haber invented the process of fixing nitrogen the competitor of Bosch said he should never have received a patent. He went one to win the Nobel Prize in Chemistry and this invention is the main reason we are not presently starving. Again, the level or outrage is a tactical decision, it is not a reasoned argument.
2) Is the present system for litigating (obtaining) patents an intelligent way to resolve these issues?
There are a number of problems with the way our patent system is implemented. Why do we have judges who do not understand patent law and do not understand the underlying technology (facts) deciding this cases. They are ignorant on the law and the facts. In addition, we have made it so expensive to litigate in federal court that justice is secondary (tertiary) to the cost of litigation. Many large companies use this fact to pursue a policy of efficient litigation. You should not confuse the problems with the system of adjudicating the conflict with the value of the underlying property right. My clients have been the victims of this absurd lottery system. But. they have also been the victims of big companies who believe in efficient infringement.
In my opinion, we need a set of special courts that hear patent cases. The amount of discovery should be significantly limited, because this is the big cost of these lawsuits. Perhaps we should implement a loser pays system. The timeframe should be significantly limited, such as one year to the end of trial. We should also limit the number of issues. For instance, only infringement and prior art validity should be considered. Arguments by the defense of inequitable conduct are mainly made to increase the cost to the patent holder and to allow the defense to go on a fishing expedition. The threshold for inequitable conduct needs to be much higher. Many of the things claimed to be inequitable conduct are not, they are excuses to steal other people’s inventions.
Patents on software also suffer from a couple of problems. One is that we decided not to allow patents for software back in the 70s. As a result, the patent office does not have a good base of prior art. This means they are going to make more mistakes in both allowance are rejecting these kinds of inventions. Second, the time (4-10 years) that it takes to get a patent, particularly one on software, through the patent office causes all sorts of problems. These problems are not inherent to software. They are the result of purposeful decisions. Why has Congress taken (stolen) a billion dollars of user fees from the patent office? If it took 2-10 years to obtain title to your house and the risk of losing your property in court was high, would you say that we should not have property rights in real property? Or would you say the process of obtaining and defending these rights flawed. The problem is not with the property right it is with the implementation.
3) What is the empirical evidence of whether strong or weak patents for software result in more funding, more products, more employment?
Every study on this issue is overwhelming. It shows that software investment, products, and employment all took off as it became clear that you could obtain a patent on software –see the 1990s. When the open source began to successfully attack software patents, the number of product stagnated, the number of software employees stagnated, and investment in software stagnated – see this decade.
If a lack of patents was the key to software innovation, then North Korea, Libya, Nigeria should all be bastions of software innovation. The anti-software patent crowd argument is about emotion not logic.
Supporters of the present Patent Reform Bill often argue:
Congress has not substantively altered patent law for more than 50 years. The patent system is simply not up to the challenges of the 21st century and is handicapping the American knowledge economy. John Conyers – Roll Call July 12, 2010.
The last comprehensive re-write of patent laws occurred more than 50 years ago, decades before the modern technology revolution had begun.
The argument that our patent laws have not been update in more than fifty years is a BIG LIE. Here are a partial list of changes in patent law in the last thirty years.
Requirement of Maintenance Fees
This was a backhanded way of instituting a working requirement. The U.S. hads rejected a working requirement throughout our history. Working requirements for patents undermine the inventor’s right in their invention and are common among third world countries that do not protect an inventor’s rights in their invention.
Provision made for third parties to cite prior art to USPTO. 35 USC 301
Court of Appeals for the Federal Circuit created. 35 USC 141, 28 USC 1295.
Arbitration of disputes relating to patent infringement or validity authorized 35 USC 294.
Possibility of extending patent term to compensate for delay in securing marketing authority from FDA to sell new drugs for humans. (Waxman Hatch Amendments)
Protection from finding of obviousness over work of co-employees etc. 35 USC 103 (c).
Clarification that to be a joint inventor the inventors did not have to work together or each be an inventor of subject matter of every claim. 35 USC 115(a).
Statutory Invention Registration scheme introduced 35 USC 157.
Definition of infringement amended to include exports of kits of parts that can be used to make a product which if made in the U.S. would be an infringement of a U.S. Patent.  35 USC 271(f)
Possibility of extending patent term to compensate for delay in securing marketing authority from FDA to sell new drugs for animals. 35 USC 156
Definition of infringement amended to include importation into the United States of products made abroad by a process covered by a U.S. patent and to reverse the burden of proof in certain cases of alleged infringement of a process patent. (Process Patents Amendment Act) 35 USC 271(g), 35 USC 287, 35 USC 295.
Definition of infringement amended to include application to FDA for marketing approval of a patented drug to be effective before the expiration of the patent but to remove from patent infringement acts relating to collecting data for use in submissions to the FDA for marketing approval of a drug etc. 35 USC 271(e).
Patent Misuse Reform Act made it clear that patent was not unenforceable for misuse on the basis that patentee had refused to license the patent or on the basis of tying arrangements unless the patentee had market power in the relevant market. 35 USC 271(d).
Extension of definition of patent infringement to acts in outer space on a “space object or component thereof under the jurisdiction or control of the United States”. 35 USC 105
Extension of right to prove prior invention to acts carried out in NAFTA countries (35 USC 104)
Extension of right to prove prior invention to acts carried out in WTO countries (35 USC 104)
Introduced the possibility of filing provisional patent applications. 35 USC 111(b) and 119(e)
The term of a patent is chanted to twenty tears from its earliest filing date (instead of seventeen years from grant). 35 USC 154
This was passed in part to harmonize our laws with other countries. A major justification for changing our patent laws over the last 15 years has been to harmonize with other countries. The other countries have done nothing to harmonize with our laws and their patent laws have not been nearly as effective at encouraging invention.
The other reason this provision was passed was because of problems associated with the delay in issuing patents. Instead of solving the delay in the Patent Office, we changed the term of patents.
Definition of infringing acts extended to include offers for sale and acts of importation. 35 USC 271
Change in burden of proof in cases where infringement of process patent is alleged. 35 USC 295
Protection of biotechnology processes from finding of obviousness if it is for the production of new and nonobvious product. (35 USC 103 (b))
Removal of remedies for infringement of patents for surgical processes. (35 USC 287(c))
The Court of Appeals for the Federal Circuit in State Street Bank v. Signature Financial. holds that there is no prohibition in U.S. law on patents for business methods as long as they are new, useful and non-obvious.
See the Bilski case
The Intellectual Property and Communications Omnibus Reform Act of 1999 is passed. This law makes a number of amendments to the United States Patent Law and also includes provisions intended to curtail cybersquatting and to deal with satellite home viewing and rural local television signals. The changes to the United States Patent Law include providing for early publication of patent applications where equivalent applications are published abroad, the protection of inventors using the services of invention promotion services and first inventor (prior user) defense for prior users of business methods. Other changes were also made to the US Patent Law. You can learn more by referring to the following articles: US Patent Law Amendments 1999 and United States – 1999 – 2000 Revisions of the Patent Law and Rules.
The Publication Law was a huge change in our patent laws – it was also a breach of the social contract between the inventor and society. Harmonization was again the justification for this change that destroyed the fundamental basis of our patent laws.
Amendments relating to re-examination practice to try to make this option more useful and to clarify the law on the effect of a third party’s prior PCT application on a later-filed U.S. application.
This is another provision to harmonize our patent laws with other countries.
Jon Dudas appointed as Director of the Patent and Trademark Office (PTO). He institutes Rejections equals Quality.
Mr. Dudas is not a patent attorney, never passed the patent bar, never filed for a patent, never worked for a technology company. But, like many of our government bureaucrats he knew more than anyone. During his tenure he almost completely destroyed our patent system. His actions were traitorous.
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.
This case was based on a mischaracterization by the Supreme Court that enforcing patent rights is an injunction and an equitable remedy. In a patent case, an order that the infringer stop infringing is enforcing the inventor’s patent rights, it is not an equitable remedy.
Medimmune, Inc. v. Genetech, Inc., 549 U.S. 118 (2007), Supreme Court overturns a long-standing rule that a licensed patent user cannot file a declaratory judgment action when they have not breached the license terms.
KSR International v. Teleflex, 550 U.S. 398 (2007) the Supreme Court makes it easier to find a patent invalid and harder to obtain a patent by changing the standard for obviousness from an objective standard to a subjective standard.
In re Bilski, Supreme Court changes the standard of patentable subject matter, from everything under the sun made by man to a confused standard. The Court stated the machine or transformation test is not the sole test but many of the Justices wanted a categorical rule against business methods.
How can anyone suggest that the last comprehensive changes to our patent laws were fifty years ago??
I want to thank Ladas and Perry. Much of the information about the patent law changes was found at the Ladas and Perry website http://www.ladas.com/Patents/USPatentHistory.html
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