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Category: Patents


OECD Patent Quality Measurement – Confusing Patent Quality with Innovation

This study confuses patent quality with invention quality, Science and technology: falling patent quality hits innovation, says OECD.  The report makes sweeping statements about the decline in patent quality over the last two decades and suggests this is because of the rush to file patents on every minor improvement.[1] .  I can receive a high quality patent for a minor (non-ground breaking) invention.  The two questions are unconnected.  If the study has any meaning, it is about whether the world is creating revolutionary or disruptive inventions- not about the quality of the patents being issued.  If the report had clearly stated that they are concerned with a general lack of innovation, I would agree with this point.  After all, I wrote a book about this, The Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations. I show that the reasons why we are falling behind technologically are because we have weakened our patent laws and because of laws like Sarbanes Oxley.  Weakening our patent system makes it harder for inventors with revolutionary or disruptive technologies to raise capital and increases the risk to investors.  Sarbanes Oxley makes it almost impossible to go public in the United States, which increases the time necessary to obtain a return when investing in technology startups.  Startups are the source of most new revolutionary technologies according to the SBA.

Because this report is going to be trumpeted by anti-patent crusaders, I will address the patent quality issue.  The video on the report states that OECD has come up with a “new” way to measure patent quality, but neither the video or the text explains the methodology clearly.  By reviewing multiple articles it appears that their methodology quantifies patent citations and looks only at the top 1% of patents by the number of citations for that patent.  It appears that there are fewer citations for the top 1% of patents than the previous decade.  From this, they conclude that there is a 20%  overall drop in quality.  I assume this means there are 20% fewer citations for the top 1% of patents.

First of all, patent citations do not measure patent quality; but they may measure the importance of an invention.  Patents are cited in later patents for a variety of reasons.  I know many large companies purposely cite their own patents to inflate these numbers even when the earlier patents have little or nothing to do with the present patent application.  Second, by only looking at the top 1% of patents the study has arbitrarily defined its population.  Is there any justification for this population?  Can they show that this population is a good indicator of patent quality  or subsequent technological progress?  Did they look at a representative group of these patents’ file histories and claims?  Third, this could be an indicator that there is no  dominate technology driving the economy.  In the 1990s, the economy was driven by the internet and most new technology was revolving around this phenomena.  As a result, it is likely that you would have more patents citing each other.  Fourth, does this study take into account the global economic decline that started in 2000?

The broad conclusions of the study are not supported by its methodology.  How do they jump from their definition of the top 1% of patents to suggesting people are filing patents on too many minor inventions?  Here is an example of one of the statements from the report that seems totally unconnected to its conclusions:

Patents from inventors in the United States, Germany and Japan are the most highly cited, which suggests they are true innovations being used by many firms in their products to generate further innovations.

But while these countries produced about 70% of the top 1% of highly cited patents between 1996 and 2000, their share had fallen to 60% five years later.

There is no one metric that can probably capture patent quality, however I have looked at a number of metrics and they do not support the OECD conclusion.  I measure my metrics over a longer timeframe, the metrics have  broader measures, showing the trend relating to patent quality over the long term has increased.

Probably the most important macroeconomic metric for patents is the amount of research and development (R&D) spent per patent.  As the chart below shows, the amount of R&D spent per patent

has increased from around $1.2 Million per patent to around $4 Million per patent.  The chart shows the total amount of money spent on R&D by the U.S., according to the National Science Foundation, and the number of patents issued to U.S. inventors per year,according to the U.S. Patent and Trademark Office.  One potential limitation to the data is that the amount of money spent on R&D is probably representative of large corporations.  Small entrepreneurial start-ups are less likely to be accurately recorded in these surveys.  This may account for part of the downward trend between 1985 and 2000.

How does this compare to other research?  According to a paper by the Federal Research Bank of San Francisco[1], real industrial R&D has been growing at 3.7% per year between 1953 and 2000, while the number of patents per capita has been growing at 1.7% per year over the same period.[2] See the chart below.

The paper notes that the number of citations received by the average patent has increased over the last couple of decades.  From 1975-1999, the number of citations per patent has increased by around 3.3% per year according to the paper.  This suggests that the value of the average patent has increased and that the “size of the technological change codified in the average patent is increasing.”
Another patent quality metric is the GDP per patent ratio.  An increasing amount of GDP per patent should indicate that the quality of patents is increasing, since the number of patents for a given amount of economic activity is decreasing.  The chart below shows that this is indeed the case.

last 60 years.  Note:  the chart used GDP in chained 2005 dollars from the Department of Commerce.

As the U.S. transitioned from an industrial economy to an information economy we would expect that the number of patents per worker increased.  Indeed,  it seems likely that in an information society we can expect that the percentage of workers devoted to inventive activities to increase.  An information society is likely to have more of its GDP tied to inventive activities and patents.  As result, it would only be natural that the number of patents per worker would increase and the number of patents per dollar of GDP would increase.  There is no reason to suggest that the number or patents per dollar (inflation adjusted) spent on R&D would decrease in an information society, however that is what the data shows.  This is most likely a result of the U.S. patent system increasing the threshold for obtaining a patent and becoming less friendly to independent inventors and small businesses.  This would mean that the U.S. patent system is becoming more like the European and Japanese patent systems.  Neither of these patent systems are friendly to independent inventors or small businesses.  This may not seem relevant, but numerous studies have shown that independent inventors and small business are much more likely to develop and patent important or significant inventions.  For instance, the paper “An Analysis of Small Business Patents by Industry and Firm Size” by the SBA, states that “small firm patents tend to be more significant than large firm patents, outperforming them in a number of categories including growth, citation impact, and originality.”[1]

 

Conclusion

The amount of R&D per issued US patent has increased fourfold , or 3.7% per year over the last 50 years.  The number of citations per patent increased 3.3% per year over the 25 year period form 1975-1999.  These metrics suggest that the quality of patents issued by the USPTO (United States Patent and Trademark Office) have increased over the last 50 years, contrary to the results reported by other researchers.  In addition, the critics of US patent quality have selected to compare the US patent system to Europe’s and Japan’s, both of which have proven hostile to small entities.  Since small entities are key to the US’s technology innovation, it would be folly to compare our system to theirs.

Here is another post, Patent Quality Myth, on point.

 

Science and technology: falling patent quality hits innovation, says OECD.


[1] Anthony Brietzman and Diana Hicks, “An Analysis of Small Business Patents by Industry and Firm Size”,  Small Business Research Summary, No 335, November 2008.

 

 


[1] Note that if true the AIA will just make this trend worse, since the AIA effectively eliminates the one year grace period.  This means inventors will have to rush to file before they have had time to perfect their inventions.  In addition, the most innovative group of inventors are individuals and startups which are disadvantaged by the AIA and therefore will file fewer patents.

[1] Wilson, Daniel, “Are We Running Out of New Ideas” A Look at Patents and R&D”, FRBSF Economic Letter, Number 2003-26, September 12, 2003.

[2] Note that the R&D per  patent chart uses total R&D expenditures while the FRBSF chart uses Industrial R&D.

 

 
Flawed Study by Boston University Used to Justify Infringement

The Private and Social Costs of Patent Trolls, Boston University School of Law Working Paper No. 11-45, by James E. Bessen, Michael J. Meurer, and Jennifer Laurissa Ford.

Patrick Anderson at GametimeIP wrote and excellent analysis of this paper entitled,  Did Serial Infringers Commission “Academic” Patent Study To Support Widespread Infringement? He notes that the authors’ thank the “Coalition for Patent Fairness”, which is the group of large companies like Cisco, Microsoft, Dell, etc. who have been pushing to weaken our patent laws for years.  He believes it is unlikely that their support was limited to “atta boys.”

Next Patrick shows that the methodology used by the authors is flawed.  He points out three major flaws:

First, and perhaps even more importantly, the basis for the conclusion rests on the laughable assertion that “reaction of the [accused infringer] firm’s share price during the days following the filing of [a patent infringement] lawsuit” is by any means a valid proxy for estimating the “private losses” of companies so accused.  Second, the authors imply that monies paid by infringers but not reaching “small inventors” has somehow been entirely wasted, without benefit.  Finally, the researcher’s objectivity is compromised–not only by the apparent close relationship with companies routinely accused of appropriating inventions belonging to others–but by the way they present their findings to the reader. In particular, the authors disparage an entire class of patent owners based on reasons entirely beyond the patent owner’s control.

Please read the full article.

 

The Private and Social Costs of Patent Trolls , Boston University School of Law Working Paper No. 11-45, by James E. Bessen, Michael J. Meurer, and Jennifer Laurissa Ford.

 

 
Forbes Explains How America Invents Act will Hurt Tech Entrepreneurs

This excellent article shows that when Canada changed from a first-to-invent system to a first-to-file system, it was bad for individual inventors, technology start-ups, and Canadian venture capital.  The article then quotes a UK study showing how the European system is not encouraging innovation.  The article notes that the America Invents Act will effectively eliminate the one year grace period for inventors, which is particularly important for startups.  The new post grant review will allow large companies to tie up entrepreneurial companies in expensive litigation for years.  The post grant procedure has been used effectively in Europe to stifle startup competitors by large companies.  Unfortunately, one of the supposed benefits of the Act was to stop fee diversion.  The Patent Office is completely funded by user fees and Congress has taken (stolen) these fees to support other Congressional pet projects.  The result of fee diversion is that it now takes four or more years on average for a patent to issue.  This pendency time results in the patent often issuing long after the commercial opportunity has passed the company by.  If it took 3 to 4 years to obtain title to your car or house after you bought it, you would think you were living in a third world country.  However, this is what happens in the patent world everyday and the America Invents Act does not solve this problem.  The author concludes that Congress should be careful that the America Invents Act not become the equivalent of Sarbanes Oxley.

This article was written by Gary Lauder is Managing Director of Lauder Partners, a Silicon Valley-based venture capitalist and co-inventor of a dozen patents. More info on this issue can be found on his Web site.

 

 

CBS Denver is reporting that Denver is in the running for one of three patent satellite offices.  However, this likely to be a Pyrrhic victory even if Denver is selected.  In all probability Congress will not pass a budget, which means that they will pass a continuing resolution bill that will freeze the Patent Office’s budget at 2010 levels.  The user Fees from the Patent Office will be stolen (diverted – in Orwellian terms) and there will not be enough money to setup a satellite office in Denver.

 

 
Another Study Showing Economic Growth is Connected to Patents

This empirical study investigates the dynamic link between patent growth and GDP growth in G7 economies by Josheski, Dushko and Koteski, CaneGoce Delcev University-Stip, Goce Delcev University-Stip.  Here are some interesting quotes from the paper.

Technological change has been regarded as a major source of long-run productivity growth (Romer, 1990, Grossman and Helpman, 1991), with innovation no longer being treated as an exogenous process.

Johansen’s procedure for cointegration showed that long run multipliers are positive between the patent growth and GDP growth in G7 economies.  Granger causality test showed that patent growth Granger cause GDP growth in G7 countries.  Unrestricted VAR showed that there exists positive relationship between patent growth and GDP growth at two or three lags.

 

 
Mark Twain on the America Invents Act

It is strange to see how Americans’ attitudes have changed toward the patent system.  Mark Twain, who was probably representative of what intelligent Americans’ felt about their country at the time, writes extensively about the patent system.  In the book, Innocents Abroad, he explains the virtues of our country and moral decay of Europe by contrasting the patent system to the preservers of art.  Remember Twain was first and foremost an artist and he held this opinion.  He states:

The Popes have long been the patrons and preservers of art, just as our new, practical Republic is the encourager and upholder of mechanics.  In their Vatican is stored up all that is curious and beautiful in art; in our Patent Office is hoarded all that is curious or useful in mechanics.  When a man invents a new style of horse-collar or discovers a new and superior method of telegraphing, our government issues a patent to him that is worth a fortune; when a man digs up an ancient statue in the Campagna, the Pope gives him a fortune in gold coin.  We can make something of a guess at a man’s character by the style of nose he carries on his face.  The Vatican and the Patent Office are governmental noses, and they bear a deal of character about them. (Emphasis added)

In the last fifteen years we have extended the copyright term to be almost infinite, we have criminalize willful copyright infringement and we have had numerous government programs to protect intellectual property, which always means copyrights and perhaps trademarks, but not patents.  Alternatively, we have spent the last fifteen years stealing the fees inventors pay to the patent office, we have forced the publication of U.S. inventors’ patent applications for the world to see and steal, we have vilified the actions of our greatest inventors such as Edison, calling them trolls and some have even suggested that Edison really made incremental improvements on other people’s inventions, and called inventor’s monopolists.  Twain would be horrified by our capitulation to Europe enshrined in the America Invents Act.  It says something about our character that we are following in the Popes footsteps.

 

 
Mark Lemley’s Socialist Theory of Invention

Professor Mark Lemley has asserted that inventions are really created by society and the idea of individual inventors coming up with important inventions is a myth.  I have shown that the broad macroeconomic facts do not support his theory.  Now John Howells and Ron Katznelson have written a paper showing the specific facts Lemley uses to support his thesis are just plain wrong.  Dr. Katznelson has a Ph.D. in electrical engineering and is a highly successful inventor and entrepreneur, unlike Professor Lemley who does not have a technical background and is not a patent attorney.  This makes Dr. Katznelson eminently qualified to examine Lemley’s assertion of multiple simultaneous invention.  Dr. Howells also has a technical background.  A common mistake of non-technical people, who do not understand a technology, is to group two inventions together that are distinct and both important.  For instance, they may consider the invention of AM radio, FM radio and superheterodyne receivers as all the invention of the radio.  However, each of these inventions is both distinct and highly significant.

Howells and Katznelson explain, “that Lemley has most of his facts wrong, misstates the holdings of several court cases, and misunderstands the commercial realities that surrounded implementation of these technologies.”  They show the Lemley does not clearly define each invention.  As the paper explains “under patent law‘s formal definition, the word invention refers to a single idea—Edison‘s high resistance filament, the Wright brothers’ wing-warping, Watt‘s steam engine condenser, etc.”  Anyone with even an elementary familiarity of patents knows that simultaneous inventions are very rare.  The Patent Office has a procedure (soon to be extinct) to determine which of two or more people are the true inventors of an invention.  These cases are extremely rare involving around 0.01% of all patent application filed.

As an example of Lemley’s gross negligence of the facts, with respect to Edison’s invention of the high resistance incandescent light bulb, the authors show that a court found:

It is very clear to us that, in the original application for the patent sued on, the applicants had no such object in view as that of claiming all carbon made from fibrous and textile substances as a conductor for an incandescing electric lamp. Nothing on which to base any such claim is disclosed in the original application. We have carefully compared it with the amended application, on which the patent was issued, and are fully satisfied that, after Edison’s inventions on this subject had been published to the world, there was an entire change of base on the part of Sawyer and Man, and that the application was amended to give it an entirely different direction and purpose from what it had in its original form. (emphasis added)

But Lemley ignores this part of the history and asserts that this is a case of simultaneous invention.

The actual invention of Sawyer and Man was:

improvements were directed at having a lamp filled with an absorbent of carbonic acid gas, a spring-loaded feeder feeding a vertical carbon pencil upwards as it was consumed and a design for cheap carbon pencil renewal with easy sealing and exhausting of air. Lemley neglects to tell us that despite these improvements, and even after Edison’s invention, many of the [Sawyer & Man] lamps failed to last more than a few hours.

Lemley also ignores that :

the electrical resistance of these (pre-Edison) lamps was typically only a few Ohms and thus required large currents to power them, rendering power losses through long distribution wires prohibitive. Lemley also neglects to tell us that Sawyer & Man‘s light bulbs could not be used effectively more than a few feet away from a generator, and therefore had little commercial practicality

Please read the whole paper, A Critique of Mark Lemley’s “The Myth of the Sole Inventor” http://bit.ly/Lemley-Critique.  I will leave you one final quote from the paper.

One can only speculate how much longer it would have taken someone else to come up with Edison‘s idea had it not been for Edison‘s reliance on the patent system and the revenue it protected to support his research and development over the two years that he spent on inventing his incandescent electric lamp.

 

 

This case is directed to a method of delivering copyrighted material over the web.  It provides some interesting quotes related to software and web based inventions.

“[I]nventions with specific applications or improvements to technologies in the marketplace are not likely to be so abstract that they override the statutory language and framework of the Patent Act.” Research Corp., 627 F.3d at 869.

The digital computer may be considered by some the greatest invention of the twentieth century, and both this court and the Patent Office have long acknowledged that “improvements thereof” through inter-changeable software or hardware enhancements deserve patent protection. Far from abstract, advances in computer technology—both hardware and software—drive innovation in every area of scientific and technical endeavor.

The eligibility exclusion for purely mental steps is particularly narrow. See Prometheus Labs., 628 F.3d at 1358 (noting that claims must be considered as a whole and that “the presence of mental steps [in a claim] does not detract from the patentability of [other] steps”).

Perhaps this is the beginning of a resurgence of rationality with respect to 35 USC 101 and software.

 

 
The Federal Government’s Contempt for Patent System and Constitution

The Solyndra scandal  demonstrates the Federal Government’s complete contempt for the Patent Office and the Constitution.  The bankruptcy of Solyndra means that the federal government will have to pay out $535 million in loan guarantees.  This means a single, politically connected company is going to absorb over half the shortfall in the Patent Office funding over the last two decades.  If that money had been spent on the Patent Office it would have benefited thousands of companies and creating millions of jobs.  Instead, this $535 million resulted in the employment of about 500 employees over a couple of years.

The right of inventors to their inventions, patents, is guaranteed in Article 1, Section 8, Clause 8 of the Constitution.  The only rights mentioned in the original Constitution are the rights of inventors and authors.  Congress has stolen over $1 billion in user fees from the patent office in the last two decades.  The Patent Office is the only self funded agency in the federal government.  This theft represents a tax on innovation and jobs.  It now takes 3 years on average to obtain a patent and in areas of more complex technology it is not unusual for it to take 5-10 years to obtain a patent.  If it took that long to obtain title to your house or car or stock you would think you were living in a third world country.  Justice delayed is Justice denied.

The federal government thought it was a lot more fun to play venture capitalist for a green energy company than fulfill its Constitutional duties.  Nowhere in the Constitution is the Federal Government given the power to play venture capitalist and this company is in no way is related to our national defense.  This is a stark case of how far our government has strayed from the Constitution.  They are funding companies without legal authority to do so and stealing user fees from the Patent Office which is their Constitutional responsibility.

The only way to increase our real per capita income is to increase our level of technology.  In the United States that means we have to invent.  Without a patent most technology startup companies cannot obtain funding.  Without funding they do not create the new technologies that create high quality jobs and increase our standard of living.

 

 

Greta Van Susteren and the mainstream news, who have probably never thought about patents, are pointing out the disgusting special interest deals in the American Invents Act.  See IS CONGRESS PASSING A BILL TO COVER UP FOR $214 Million MALPRACTICE OF LAW FIRM: Wilmer Hale? Why the SPECIAL TREATMENT ? (you know why).

 
Patent Reform Briefing to Senate Staff

There a number of youtube videos on the USBIC Briefing on Senate Consideration of House Patent Reform Bill H.R. 1249.  These videos provide invaluable insights into the America Invents Act.  Below I highlight some of the interesting points.

See http://www.youtube.com/watch?v=EPS9ORdD9DQ&NR=1

http://www.youtube.com/watch?v=As6bCYbp7d4&feature=related

 

Judge Michel, “I can guarantee you that if I went into private practice I could hold up any patent for almost a decade in post grant proceedings, it would never get to trial in the district court.”  The value of patents will plummet because of this, since they are not enforceable for almost a decade.

Judge Michel

The funding problem not being solved is the biggest problem.  The patent office will likely lose at least $100M next year.  The continuing resolution funding bill this years has killed the Patent Offices’ budget to hire examiners, fix their IT infrastructure, and create a satellite office.  It is inevitable that there will be another continuing resolution funding bill this year.  The 15% increase in Patent Office fees are going to be nothing but a tax on inventors.

First to file system: large corporations already act under this system.  But, this will hurt small companies and start-ups.  The advantages of first to file, if any, are more than offset by the funding issue and the post grant procedure.

The idea that this bill will create jobs is a joke.  If you want to create jobs, you need to clear the backlog of 1.2 million patent applications.  Passing this bill will slow down the process of granting patents, so it will not create jobs.

First purpose of patents is to disseminate technology information

Second purpose of patents is to incentivize investment.

Delays and backlog have increased during the time that Congress has been considering patent reform.

Fee diversion began in 1992.  In 2010 there was over $50M in fee diversion and in 2011 $85M, and it is likely that over $600M will be stolen from the patent office in 2012.  Without access to fees, the Patent Office will become a job killing agency, not a job creating agency.

The patent system isn’t broken, the patent office is broken because of the diversion of patent fees.

Fatal defects of the legislation includes section 18 (business method patent – Wall Street giveaway), section 14 (no patents on tax strategies), parts of section 5 (prior commercial use – trade secret protection system), parts of section 6 (post grant review).

Thomas Edison got his patent on the light bulb in 3 months.  It now takes on average over 3 years to obtain a patent and many patents 5-10 years to issue.

 

Gary Lauder

Small business, startups, and investors have not been heard on this issue.  Many Venture Capitalists are not aware of the changes that are occurring.

Every famous living inventor is against this bill, including Dean Kamen – inventor of the segway, Steve Perlman – inventor of quicktime.

The national venture capital organization, IEEE, National association of seed and angel funds is against the bill, all of which represent small companies and small company innovation and do not have the money for lobbying.

Kappos lobbied for these same changes when he was at IBM.  This is a violation of the administrations revolving door rules.

Misrepresentations of what the bill says or will do: Include we need first to file because small companies cannot afford interference proceedings.  Interference proceedings happen 0.01% of the time or less, but interference proceedings are replace by more expensive derivation proceedings.  These proceeding require you to present evidence that was stolen from you.  So if you got hacked, you have to prove you got hacked and who hacked you.  There is not right of discovery under this America Invents Act.

First-to-file’s worst effect is on companies between the ages of zero to one.  The derivation proceeding make it almost impossible for these startups to prevail, because of the time, expense, and lack of discovery.

The rest of the worlds patent systems do not work.  They do not encourage startups or individual inventors. The advice to startup is that they need to apply for patent before they talk to investors, but they need investment to afford to apply for patents and before they talk to customers and potential employees.  There is 10 times more angel and venture capital investors in the U.S. per capita than in Europe.

This bill is also going to an enormous boon to cyber criminals, because IP will be worth more money.

Venture capital has declined by an order of magnitude since 2000.  Since 2007 it has declined by a factor of four.  If this bill passes the shrinkage in venture capital will accelerate.

 

Pat Choate

Ph.d economist, former vice presidential running mate of Ross Perot.  Dr. Choate has written extensively on the theft of America’s intellectual property and is the foremost expert on this issue.

We have run out of policy tools.  The way we worked ourselves out the 1970s was inventing a new economy and that is how we are going to have to work our way of this economic downturn. The companies that create all net jobs are startups.  Technology is way increase real per capita income.  The fastest way to kill creative destruction is to kill the patent system.  This is a bill to Europeanize the American patent system.  This effort has been going on since 1980.  This patent bill was written by IBM and 14 corporations.  In Europe, individual inventors get 0.6% of all patents  This bill will choke off American innovation and this will be obvious within 2-3 years of passage.

http://www.youtube.com/watch?v=9zwqypPYXcQ&feature=related

 

Valerie Gaydos

Angel Investor and founder of CEO Growth Capital.  http://www.youtube.com/watch?v=r3Q8H3vuuN0&feature=related

 

There is much more on Youtube.

 

 

According to IPwatchdog, the bill passed without any amendments.  This means there is no meaningful protection that the Patent Office will receive all its user fees.  The director of the Patent Office, David Kappos, had the chance to ask Congress for a bill that just ensured full funding for the Office only, but instead he fought for the full bill wanted by his former employer – IBM.  What we got instead was one of the biggest job killing, innovation killing, pieces of legislation since Smoot Hawley bill that does not assure full funding for the Patent Office.

 
What Would Real Patent Reform Look Like?

I have written a number of times on what real patent reform would actually accomplish.  One of the major problems with our patent system is that your rights stop at the border.  This is different than any other property right.  For instance, if I drive my car across the border into Canada, I still own my car.  If I drive my book across the border into Canada I still own both the physical version of my book and the copyrights to my book.  But, if I drive my invention across the border I no longer own my invention.  This situation existed for copyrights 150 years ago and it was recognized that there was no logical reason for copyrights to end at a countries border and it discouraged the publication of domestic authors.  The same is true of patents.

I suggest a system of reciprocity in which an inventor who obtains a patent in Canada, for example, has patent rights in the U.S. and vice versa.  This would decrease the duplication of efforts across patent offices around the world and significantly reducing the present backlog in the U.S. patent office.  More importantly, it would increase the value of a patent and increase the chance of obtaining funding for technology startups.

A friend of mine, Jim Lauffenburger, explains in practical terms why this important.  His company has found trade secrets to be a much more useful tool, because of the lack of patent reciprocity.

It is interesting that in my company, EM Microelectronics, the best method for protection is definitely keeping a secret, not filing for patent protection. (And keeping those secrets is extremely challenging and difficult.)

Why, you ask?
Because we are unable to enforce patent protection in Asia, and unable to prevent literal copying.

We spend man-decades of highly skilled (and expensive) engineering time to design a new IC. The IC goes into mass production in some successful product. It gets rapidly reverse engineered in Asia. Nearly direct copies of the part soon appear, and can be priced at only silicon-cost, without the huge development costs.

We visited several of these Asian “design centers” to ask them how they do it, under the guise of possibly utilizing their services. But even that guise was not really necessary, because they were proud of their “design method”: They do a layer-by-layer stripping and micro-photographs, and create a direct schematic from that. They convert the digital logic into standard cells, and then re-Place-and-Route using “their own IP” (the standard cells). For the analog portions, they use the layers as-is, but rotate or flip them 90 degrees so that it looks different. Then end result is what they claim is their own IC and their own IP, and it looks quite a bit different from our ICs. But, during that entire process they were simply “turning the copy crank”; not actually designing anything from concept.

Fighting this copying at a trademark level won’t work (it looks different). Fighting this at a patent level is extremely time consuming and expensive.

Thus, the only way to fight it is to try to hide features and make very special implementations that don’t work correctly in a layer-by-layer copy. (This of course, is very difficult, and expensive, and MUST be kept fully secret.)

This shows (to me) once again, that most of our law (and society) only works if the we all generally agree on the moral and ethical basis undergirding our actions and laws. Once that is lost, chaos follows. (And “messes get created” by all the reams of laws generated to try to make up for the lost ethical basis.)

While Jim’s company has made a logical decision under the present law, part of the reason for having a patent system is to encourage the spread of technical information.  Trade secrets inhibit this dissemination of technical information and slow down technological and economic progress.  The America Invents Act does nothing to solve this problem.

 

 
America Invents Act Update: Senate Passes Cloture Vote

The Senate passed the cloture vote on the America Invents Act by 93-5 with two senators abstaining.  The nay votes were cast by Coburn (R-OK), DeMint (R-SC), Johnson (R-WI), Lee (R-UT), and Paul (R-KY).  It appears likely that the Senate is going to cram this job killing, multinational corporation special interest legislation through.

The United States was the first country to recognize an inventor’s rights in their invention.  See Article 1, Section 8, Clause 8.  Conservatives are fond of talking about American Exceptionalism.  Our patent law was unique in the history of the world.  It was what drove the incredible ingenuity and made the United States the economic and technological leader of the world.  This bill is designed to protect the first person to file, not the rights of inventors.  As a result, it is not the creative inventors that will obtain patents but their multinational bureaucrat competitors.  These large corporations are notorious for killing disruptive technologies that threaten their existing product lines.  If this bill passes, American Exceptionalism will die with it.

 

 

Gametimeip makes an interesting point about the America Invents Act:

The sheer size of the bill (150 pages) is massive compared to other legislation, such as the original patent act (9 pages), the Civil Rights act of 1963 (28 pages), and the National Labor Relations Act of 1935 (9 pages).

Paraphrasing Mark Twain: Congress did not have time to write a short, good piece of legislation, so they wrote long, bad piece of special interest legislation.  This is beginning to be quite a trend in Congress.  Write massive pieces of legislation that even the legislators do not read before voting on them.  No wonder our economy is in a depression.

 

 

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