State of Innovation

Patents and Innovation Economics

IP Theft

IP Theft: State of Innovation

IP Theft: The worst theft of our intellectual property is when our government does not protect intellectual property.  In 1975, the FTC forced Xerox to license its entire patent portfolio to all comers for a measly 1.5% royalty.  Xerox’s market share of plain paper copiers went from almost 100% to 14% in four years.  Xerox lost most of its market share to Japanese companies.  This was not an isolated incident.  According to the book The Invisible Edge (see Chapter 8), the FTC and DOJ brought more than 100 antitrust cases against companies because their patent portfolio gave them a competitive edge.  They forced U.S. companies’ to give away the technology associated with over 50,000 patents.  This IP theft of America’s intellectual property was treasonous and is being repeated today.  Note that one of the prongs of Reagan’s economic program was to strengthen U.S. patent laws.

The present patent reform proposals are all designed to weaken our patent laws by reducing damage awards, by changing our patent laws from a first-to-invent to a first-to-file, and by forcing all patent applications to be published within 18 months of being filed.  The change in how damages are calculated favor technology thieves at the expense of technology creators.  The publication and first-to-file rules favor large corporations at the expense of start-up companies and individual inventors.  The publication rule makes it easier for foreign companies to steal our technology.

The argument for the publication rule includes harmonization with other countries,  increased patent quality and notice to potential infringers.  By publishing patent applications, the invention would not remain hidden from the public and would add to the store of known prior art an Examiner at the Patent Office could cite against other patent applications.  Large companies that filed internationally were in favor of this change.  Large companies generally file their patent applications in foreign jurisdictions, almost all of which publish patent application at 18 months.  As a result, their patent applications are published at 18 months anyway.  Small and independent inventors were against this change in the patent laws.  Independent inventors were placated with the promise that most patent applications issue around 18 months from the date of their filing anyway, so they were not giving up any significant amount of time that their inventions were kept secret.

However, the result has been a wholesale give away of our technology to foreign companies.  There are companies in China and Korea that just monitor our patent publications and then steal the technology.  This is easy for them to do because a patent is only good for the nation in which it is filed and it is prohibitively expensive to file patents on an invention in every country around the world.   We should repeal the publication requirement, which allows for IP theft by competitors and foreigners.  This is not only bad policy for encouraging innovation and inventions but is a wholesale give away of our technology to foreign countries.

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