State of Innovation

Patents and Innovation Economics

Yale Law Professor’s Attack on Patents: A Comedy, Farce and Tragedy All Rolled into One

An article on Cato Unbound entitled, “What’s the Best Way to Fix the Patent System’s Problems?” by law professor Christina Mulligan, argues for two different solutions of what she perceives are problems with software patents.  One solution advocated by Eli Dourado is to eliminate all software patents (See CATO and Mercatus Center: Another Flawed Study on Patents).  The other solution, advocated by John F. Duffy, is a more rigorous application of the obviousness standard.  Ms. Mulligan comes down on the side of Eli Dourado’s solution of eliminating patents on software.

What is amazing is that Ms Mulligan never even addresses the inherent contradiction that if you are going to eliminate patents of software you have to eliminate all patents on electronics.  Of course this may be because Ms. Mulligan does not have a technological background, she is not a patent attorney nor is she legally or factually competent to be a patent attorney.  Software is a way of wiring an electronic circuit.  Any invention implemented in software executed on a computer can be implemented in hardware (i.e., an electronic circuit) as any competent electrical engineer knows.  In fact, this is exactly what happens when software is executed, it is converted into a series of voltage levels that open and close switches in a general purpose electronic circuit called a computer to create a specific electronic circuit.

Ms. Mulligan quotes the clearly incorrect statement that:

Many software patents are merely mathematical formulas or abstract ideas and should not be considered patentable subject matter because they remove too much “raw” material from the public domain.

This statement confuses two separate points.  One point is that many software patents are merely mathematical formulas or abstract ideas.  The second point is that software patents remove too much raw material from the public domain.  The idea that any software patent is a mathematical formula is complete and obvious nonsense to anyone who has worked with computers.  While it is true that software often uses mathematical formulas, so do electronic circuits, radar, rockets,  mechanical systems, chemical processes, in fact almost every area of technology.

Ms. Mulligan does not define what she means by an abstract idea.  In one sense every invention in the history of the world is an abstraction.  Inventions define a class of things.  For instance the invention of the incandescent light bulb is not a specific incandescent light bulb, but the class of these objects.  The only logical definition of an abstract idea is “a thought or conception that is separate from concrete existence or not applied to the practical”.  Every invention that meets the requirements of 35 USC 112 first paragraph is not an Abstract Idea, since this section requires that the invention be described in a manner so one skilled in the art can practice the invention.  Something that can be built and used (practiced) is concrete and applied, therefore it is not an abstract idea.  Clearly software patents are not abstract ideas because they are concrete and applied to a problem of life.  If they did not solve a problem of life, then no one would care, because no one would want to practice their invention.

The second point is that they remove too much raw material from the public domain.  This is a bald statement without any support.  In fact, patents do not remove any material from the public domain.  They secure the property rights of an inventor to their invention that did not exist before they created the invention.  To suggest that this removes anything from the public domain would make even the most strident Marxist blush.

Ms. Mulligan attempts to use Ayn Rand in support of her position.

Even Ayn Rand sidestepped suggesting a length for intellectual property terms, stating that if intellectual property “were held in perpetuity . . . it would lead, not to the earned reward of achievement, but to the unearned support of parasitism.

Of course she forgets to mention that Rand stated “Patents and copyrights are the legal implementation of the base of all property rights: a man’s right to the product of his mind.”[1]  You can see from this statement that it is very unlikely that Ayn Rand would have supported Ms. Mulligan’s position.

More importantly, all property rights are term limited.  A dead person cannot own property.  Property is a legal (moral) relationship between a person and something.  Once the person is dead they cannot have a legal relationship to something on this Earth that would be a contradiction.  There is only a question of what happens to property relationship when someone dies.  But no property rights go on forever.

Ms. Mulligan also ignores the obvious Constitutional problems with a law prohibiting patents on software or any other group of inventions.  Article 1, section 8, clause 8 requires that the right of inventors to their inventions be secured.  There is no basis under the Constitution to discriminate between securing the rights of inventors for chemical inventions, but not to software inventions for instance.  Ms. Mulligan may argue that the preamble to article 1, section 8, clause.8[2] is a limit on patents, but this is a clear misinterpretation of a preamble under legal construction.  Preambles are never considered limiting in law.  In addition, if the founders intended such a limitation then they would have said Congress can take whatever steps they believe will promote the sciences and useful arts.

Ms. Mulligan’s arguments do not stand up to scrutiny.  Part of the problem may be that Ms. Mulligan is not a patent attorney.  But some of the problems are so outrageous, especially for someone who is a Yale Law professor that the only conclusion is that she has a political agenda.

The United States of America created the strongest patent system in the world.  Most of the greatest inventors in the history of the world, Edison, Tesla, Bell, etc. lived and worked in the United States.  In less than 100 years, they created the most technologically sophisticated country ever.  Almost every modern product you use today was subject to a patent or a patented processes at some point.  Your cell phone is the subject of hundreds of patents.  The same is true of your computer, the Internet, the power system, the medicines your take, the car your drive, even your glass windows (Venice patent system), even cement.  For Ms. Mulligan to suggest that patents on software or anything else inhibit the progress of technological is an extraordinary claim and requires extraordinary evidence.[3]  Ms. Mulligan has failed to provide even a scintilla of evidence and logic for her position.


[1] Rand, Ayn, Capitalism: The Unknown Ideal, Signet, New York, 1967, p. 130.

[2] “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”

[3] Thomas Paine.

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November 20, 2014 Posted by | -Philosophy, News, Patents | , , , , | 8 Comments

CATO on Software Patents

The CATO Institute attacks patents in an article entitled What Is a Software Patent?, by Christina Mulligan.  The article argues that the word “process” in the patent statute should be limited to those processes that have an effect on matter.  The article suggests that this would eliminate the “wrong” kind of patents.  Software is not patentable, per se, software is a set of written instructions and are just bad prose.  When people use the term “software inventions” they are talking about executing the software in hardware (electronic circuits).  What the software does is define the connections or wire the general purpose electronic circuit that we call a computer.  This special purpose electronic circuit consumes energy, generates heat, causes electrons to move – in short, it has an effect on matter.  The whole premise of the article is based on a lack of understanding of what software is.  Logically, the article has to address the issue that all “software inventions” are electronic circuits and therefor the article’s position requires that it explain why certain electronic circuits should be patentable and other electronic circuits should not be patentable. It should be noted that the author is not a patent attorney, has never written a patent or a claim, nor does she appear to have a technical background.  While this is not absolutely required, it leads to the obvious mistakes made in this article.

The Constitution requires Congress to protect the rights of inventors to their inventions.  There is no justification for the distinction made in this article.  An invention is a human creation with an objective and repeatable result.  For instance, the incandescent light bulb always puts out light when electricity of the right voltage and current is applied.  Art is a human creation with a subjective result.  Software enabled inventions are clearly a human creation and they have a repeatable, objective result.  The first patent ever issued in the US was for a Method of making potash and it was a method of doing business.  The inventor was not making potash as a hobby, he planned to make a business of it.  The label of “business method patent” is thrown around commonly, but never defined as it is not in this article.  All patents are about a method of doing business.

The article ends with praise for Mark Lemley.  Another law professor who is not a patent attorney, is not legally or factually competent to be a patent attorney, has never written a patent, has never written a patent claim, but somehow knows that we should not use “functional claiming.”  Mr. Lemley does not even know what functional claiming is.  What he appears to mean is that the claims should have to include every little step or element in the invention.  This would mean that if you were writing a patent about cell phones, you would have to claim the individual transistors.  Patent law had determined that this made no sense and as long as, for instance, heterodyne receivers were well known you could claim the heterodyne receiver without claiming the individual transistors or even explaining the invention to this level of detail.  Patent law is right on this point and Lemely and the author are clearly wrong.

As a patent attorney, with a BSEE, an MS in Physics and twenty years of practicing patent law, it would be nice if CATO, when discussing patents and patent policy would actually include those who are factually and legally competent to be patent attorneys in technical discussions about patent law, including defining what software is.

 

Disappointed

Dale B. Halling

 

What Is a Software Patent?, by Christina Mulligan.

September 30, 2014 Posted by | -Philosophy, News, Patents | , , | 4 Comments

CATO and Mercatus Center: Another Flawed Study on Patents

The paper, The True Story of How the Patent Bar Captured a Court and Shrank the Intellectual Commons, has a number of errors that show its conclusions are flawed.  The author’s errors in a related article, entitled How Many Jobs Does Intellectual Property Create? were well documented by Adam Mossoff and Mark Schultz in Intellectual Property, Innovation and Economic Growth: Mercatus Gets it Wrong.  This paper’s title purports to show the Court of Appeal for the Federal Circuit has been captured by patent attorneys, but never actually provides any evidence to support this assertion.  Below I will detail a number, but not all the other errors in this paper.

 

1) The article states.  “Just as other property rights internalize the social benefits of improvements to land, automobile maintenance, or business investment, patents incentivize the creation of new inventions, which might otherwise be undersupplied.”

This is the utilitarian model of property rights.  The US was not founded on the Utilitarian model it was founded on natural rights, which are incorporated the Declaration of Independence and into Blackstone’s Commentaries which formed the basis of US common law for the first century of the US. In fact, Blackstone specifically states that patents and copyrights are property rights based on Locke’s formulation.  See The Second Treatise of Civil Government; 1690; John Locke; CHAP. IX., Of the Ends of Political Society and Government.

There is no such thing as balancing test for property rights as implied by the author, this is a Utilitarian formulation of property rights.

 

2) The article states.  “A single, politically captured circuit court with exclusive jurisdiction over patent appeals has consistently expanded the scope of patentable subject matter. This expansion has resulted in an explosion of both patents and patent litigation, with destructive consequences.”

The myth of an explosion in patent litigation has been debunked many times.  As pointed out in the article The “Patent Litigation Explosion” Canard,

“First, it’s simply untrue. Award-winning economist, Zorina Khan, reports in her book, The Democratization of Invention, that patent litigation rates from 1790 to 1860 fluctuated a lot, but averaged 1.65%. Today’s patent litigation rates are around 1.5%. As Yoda would say: patent litigation explosion this is not, hmm, no. In fact, for three decades in Khan’s study patent litigation rates were higher than today’s litigation rate. From 1840-1849, for instance, patent litigation rates were 3.6% —more than twice the patent litigation rate today.”

Also see Massive Litigation Spike in Response to America Invents Act and The America Invents Act at Work – The Major Cause for the Recent Rise in Patent Litigation

Second there has not been an explosion in the number of issued patents.  The number of patents issued to US inventors in 1980 were 37,355 and in 2011 there were 108,626 that is a 3.5% increase in the number of patents per year, hardly an explosion in the number of issued patents.

The research and development cost  per patent has increased from around $1.2 Million per patent to around $4 Million per patent from 1955 to 2005 and GDP per patent over the same time period in constant dollars has increased from 60 million per patent to around 170 million per patent.  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.  The number of citations per patent increased 3.3% per year over the 25 year period from 1975-1999.

 

3) The article states.  “As early as 1951, Simon Rifkind, a former federal judge in New York City, warned in a prescient essay that then-current proposals to create a specialized patent court would lead to “decadence and decay.”

This was the time period in which a Supreme Court Justice in 1948 would write “the only patent that is valid is one which the Court has not been able to get its hands on.”  Jungerson v. Ostby and Barton Co., 355 US 560.  This was also when the Supreme Court was applying its “flash of genus standard to patents.”  If Rifkind meant that it would result in courts that did not have this utter disdain of patents he was right.  However, this is hardly an objective measure.

 

4) The article states.  “Using a dataset of district and appellate patent decisions for the years 1953–2002, economists Matthew Henry and John Turner find that the Federal Circuit has been significantly more permissive with respect to affirming the validity of patents.”

Well given the Supreme Court’s attitude the only patent that is valid is one which the Court has not been able to get its hands on that is hardly a surprise.  One of the first things that Reagan did upon becoming president, was to create the Court of Appeals for the Federal Circuit.  This court does hear all patent appeals and actually had about half the Justice that were actually trained in patent law.  In order to be legally or factually competent as a patent attorney you have to have a technical background in science or technology, which none of the present Supreme Court justices have.  In addition, patent attorneys have to pass a separate bar exam that has one of the lowest pass rates in the US.  Patent law is a highly technical and specialized area, just like quantum mechanics is highly specialized and technical.  You would not ask an English professor how to solve a problem in quantum mechanics and expect anything sensible.  The same is true for patent law.

 

5) The chart in the article is a lie.  It shows the number of patents linearly, which would show any compound growth as an exponential.  In fact the number of issued patents has grown at a rate 3.5% from 1980 to 2011, hardly an explosion.

 

6) The article states.  “They estimate that patentees are three times more likely to win on appeal after a district court ruling of invalidity in the post-1982 era. In addition, following the precedents set by the Federal Circuit, district courts have been 50 percent less likely to find a patent invalid in the first place, and patentees have become 25 percent more likely to appeal a decision of invalidity.”

The 1970s was a period of time in which several appeals circuits had not upheld the validity of a patent in 25 years.  The FTC had a policy of nine no-nos of what you could not do with your patent without running afoul of the antitrust laws.  It is hardly surprising that Reagan and Congress wanted to strengthen the property rights of inventors.

 

7) The article states.  “The U.S. Supreme Court reversed the Court of Customs and Patent Appeals, holding that mathematical algorithms (and therefore software) were not patentable subject matter.”

Here the Supreme Court showed their complete ignorance of what a computer is and what software does.  Any electrical engineer knows that any device implemented in software can be implemented in hardware.  In fact, software just wires an electronic circuit (computer) to create an application specific device.  Engineers choose between these options based on the need for flexibility and lower cost (software) and speed (hardware) and have several choices in between.

In order to be logically against software patents, one has to be against all patents for electronic circuits.  This is the sort of nonsense you get from a court that does not understand the underlying technology.

 

8 ) The article states.  “State Street Bank v. Signature Financial Group (1998), the Federal Circuit broadened the criteria for patentability of software and business methods substantially, allowing protection as long as the innovation “produces a useful, concrete and tangible result.”

35 USC 101 states “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”  A computer implemented invention is a new and useful machine and useful process.  Seems like the Federal Circuit got it right.

 

9) The article states.  “The GAO estimates that more than half of all patents granted in recent years are software-related.”

The GAO counted any invention that includes some sort of software, firmware, or related.  Let’s see, a procedure to sequence DNA would probably use a machine that had software or firmware and therefor met the GAO’s definition.  A chemical patent that used any computer controlled machinery would count as a software patent under this definition.  Today most transmission systems are computer controlled and therefore meet this definition.  This standard is so loose as to meaningless.

 

10) The article states.  “While more patents have not resulted in faster economic growth, they have resulted in more patent lawsuits.”

This statement will take some unpacking.  First of all the 1980s and 1990s saw significantly faster growth than the 1970s, which had a significantly weaker patent system.  Second of all the patent laws were weakened starting in 2000 with the Patent Act of 2000.  This trend has continued to this day.  In 2002, we passed Sarbanes Oxley which made it almost impossible for startups to go public, which starved startups and VCs of capital.  Economic growth did not start to fall off until around 2000.  So actually the data is consistent.  Weaker patent laws are associated with weaker economic growth.  Third, the patent system cannot function in a socialist system.  The US by CATO’s estimate takes 60% of the GDP today.  What does it mean to own your patent in a world where the EPA can take your land at any time, in which the eminent domain can be used to take your property for a project that promises higher tax revenue, a world in which the government publishes your invention for the whole world to see before they provide you any patent protection, a world in which the government does not accept any limits to tax you or regulate you?  The author is right that a patent system cannot cause economic growth in the USSR, which tried to implement a patent system.  A patent system is based on a system of property rights.  Since 2000 we have created a patent system that supports crony socialism (capitalism), not surprisingly our inventors and entrepreneurs are not creating economic growth.

The macroeconomic evidence is overwhelming for patent systems creating growth.  Those countries with the strongest patent systems are the most inventive and have the greatest technological dispersion and are the wealthiest in the world.  While those with the weakest patent systems do not contribute any inventions and have very poor technological dispersion and are some of the poorest countries in the world.

 

I for one am very disappointed that the CATO Institute would publish such a poorly researched and reasoned article.

 

 

 

[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.

September 10, 2014 Posted by | -Law, -Philosophy, News, Patents | , | 1 Comment

Another Libertarian Argument Against Patents Bites the Dust

Libertarians and Austrians, including such organizations as the CATO Institute, Von Mises, and the Wall Street Journal, have put forth a number of arguments against patents and intellectual property.  These arguments include that ideas (an invention is not just an idea, but I will let that go) are not scarce and therefore patents are not real property rights, patents are monopolies, patents inhibit the growth of technology, patents require the use of force to enforce one’s rights, patents are not natural rights and were not recognized as so by Locke and the founders, among other arguments.  I have discussed most of these arguments earlier and will put the links in below.  One of their favorite fall back arguments is that patents limit what I can do with my property.  For instance, a patent for an airplane (Wright brothers) keeps me from using my own wood, mechanical linkages, engine, cloth, etc. and building an airplane with ailerons (and wing warping).  This according to the libertarian argument is obviously absurd.  After all it is my property.  Here is an article Scarcity, Monopoly, and Intellectual Property on the Von Mises website where you can see almost every variation on the arguments mention above either in the article itself or in the comments.

Can I do whatever I want to with my property, or are there restrictions?  Well when I buy a book, a movie, or a song, it does not give me the right to make unlimited copies of them.  I have a property right in the physical book, but not the rights (copyrights) to make copies.  Of course, many Libertarians think copyrights are absurd also, so let’s look at another example.  Let’s assume you own your house and land outright.  Does that give you the right to do whatever you want to with you land?  Most likely, your land has easements for utility lines, such as water, gas, sewer, electricity.  You are not allowed to do anything that interferes with those easements.  You might object that I don’t own the easement, so this is a bad example.  So let’s say you own a bulldozer, does that give you the right to bulldoze my apple orchard and build a house there?  It is your property after all and according to the libertarian argument you are allowed to do whatever you want to with your property.  You might object, that of course the libertarians did not mean that you could take advantage of my property to build on.  Of course that begs the question, what is property?  If a patent and copyright are property rights, then this is exactly the same situation.  Another example where you are prohibited from doing something with your property, is in the case of water drainage.  In particularly wet areas of the US you are prohibited from moving the earth on your land so water drains onto your neighbors property more freely – and no this is not an EPA rule, this is common law property rights.  In parts of the country where water is scarce you are prohibited from damming up water on your land.  If you buy land in a residential neighborhood you are prohibited from setting up a pig farm.  Just because I own a gun, doesn’t give me the right to go around shooting people.  The libertarian argument that patents are not real property rights because they prevent others from doing something with their property fails even the most cursory review.

One of the common themes that runs throughout all Libertarian arguments against patents is that Libertarians’ do not seem to know what property rights are, or how they arise.  Here is a post on point, Property Right, Possession, and Objects; this post not only explains the proper basis of property rights, but why the Libertarian point that property requires possession is a fallacy.  Libertarians have failed to provide a clear definition of what property rights are and how they arise.  In fact, most anti-patent libertarians believe property rights are a useful social convention for distributing scarce resources.  This is interesting, because they can become so adamant about what is their property.  But nothing in this concept of property has anything to do with RIGHTS.  If another, better system comes along for distributing scarce resources, then your property is gone.

Property rights do not give the owner the right to do whatever they want with their property.  The source of property rights is creation, not the idea that it is a socially useful convention.  Patents recognize the metaphysical fact that the inventor is the creator of his invention and are completely consistent with other property rights in prohibiting an owner of other property from using it to build his invention.

 

 

Below is a list of other Libertarian arguments against patents and why they fail.

 

Inventions are not scarce:

Scarcity – Does it Prove Intellectual Property is Unjustified? 

 

Patents are monopolies

Patents: Monopoly or Property Right a Testable Hypothesis 

If patents are a monopoly, as some suggest, then it should led to certain outcomes.  A close examination shows that none of the supposed monopoly effects result from granting patents.

 

Monopoly/Rent Seeking vs. Property Rights/Intellectual Property

This post explains the characteristics of a monopoly and a property right and poses three questions to show the difference.  Patents fit all the characteristics of a property right and none of a monopoly.  Note that professional license, such as a law license has some of the characteristics of a monopoly.

 

More on the Myth that Patents are Monopolies 

This post contains a number of quotes from philosophers explaining that patents are not monopolies.

 

The Myth That Patents are a Monopoly 

This post compares the definition of a monopoly to the rights obtained with a patent.  It shows that the rights obtained with a patent do not confer a monopoly.

 

Patents are Natural Rights 

This post traces the ideas of Locke and William Blackstone to show patents and copyrights are natural rights.

 

Patents inhibit the growth of technology:

Source of economic growth

This post shows that those countries with the strongest patent systems are the technological leaders of the world Patents: Monopoly or Property Right a Testable Hypothesis

 

Patents require the use of force

This is one of the more absurd arguments by libertarians.  All property rights are enforced by the government’s use of force.  If someone trespasses on your land or steals your car, the government threatens or uses force to get it back.  The same is true for patent, which are property rights in inventions.

 

April 20, 2014 Posted by | -Philosophy, Patents | , , , , , , , | 2 Comments

How to Fix the Economy: USA falls to 17th on Index of Economic Freedom

Ever wonder why the US has a record number of people on food stamps now, why the median family income is declining, why the labor participation rate is the lowest since Jimmy Carter?  You need look no farther than the fact that the US has fallen from 2nd or 3rd in 2000 in the Cato/Fraser index of economic freedom to 17th.  It is not just our economic freedom we are losing as the NSA and IRS scandals make clear.  This is not just an academic exercise either.  As the report makes clear longevity, access to medical care, education opportunities etc all deteriorate with a declining of economic freedoms.

The irony of this report is that the CATO Institute has been inconsistent at best about supporting property rights, which is the key issue underlying economic freedom.  CATO has adopted a utilitarian basis for “property rights” that suggests they are just a useful artifact for efficiently distributing scarce resources.  So in fact, they do not support property rights but property grants or privileges.  This also means that they are confused that patents are not property rights.  Patents are the single most important property right to economic growth, especially in a developed country.  CATO is therefore in the position of being for property rights at an empirical level, but arguing against them on a philosophical level.  Interestingly this also means that CATO is inconsistent about supporting our Constitution, which requires that Congress secure the rights of inventors to their inventions.  No wonder the US is an economic basket case.

September 30, 2013 Posted by | -Economics, Innovation, News, Patents | , , , | Leave a comment

Google: ‘You Didn’t Invent That’

In a replay of President Obama’s famous “You didn’t build that”, speech Google is arguing that if the collective adopts a technology then it becomes part of the public domain.  Google’s present attack is against Apple who is asserting that Google’s Andriod phones have violated a number of Apple’s patents.  In a letter to the Senate Judiciary committee, Kent Walker, head legal council for Google explained their theory as

 While collaborative [Standards Setting Organizations (SSOs)] play an important part in the overall standard setting system, and are particularly prominent in industries such as telecommunications, they are not the only source of standards. Indeed, many of the same interoperability benefits that the FTC and others have touted in the SSO context also occur when one firm publishes information about an otherwise proprietary standard and other firms then independently decide (whether by choice or of necessity) to make complementary investments to support that standard in their products. … Because proprietary or de facto standards can have just as important effects on consumer welfare, the Committee’s concern regarding the abuse of SEPs should encompass them as well.

 The quick translation of what Google is arguing is that the patents of Apple (or whoever else gets in their way) are invalid if Google decides to adopt these technologies.  Of course, Google is not doing this for its own benefit, Nooo this is in the interest of “consumer welfare.”  Perhaps we should confiscate Google’s profits in the interest of consumer welfare – the consumer would be better off if Google’s profits were distributed to all its consumers.

Google’s argument comes straight out of Atlas Shrugged.  Rearden Metal was too valuable for one company to own, so for the welfare of the people every steel company was given the right to make Rearden Metal.

Ayn Rand said patents were the laws recognition of the source of man’s creative ability – his mind.  She also felt that patents or the debates surrounding them were like a Canary in a coal mine, they indicate the intellectual and moral direction of a country.  She complained that the so called defenders of the free market often did not even understand the nature of the debate, particularly when it came to patents.  We can see this in the Von Mises Institute’s, CATO Institute’s and Reason Magazine’s attack on patents.

 

Other terrifying indicators of where we are headed include:

Myriad Genetics Patent Case:  The ACLU has argued that breast cancer patients’ needs for Myriad’s technology trumps Myriad’s property rights in the technology.

America Invents Act:  This bill was riddled with special interest give aways to Wall Street, pharmaceutical companies, and foreign inventors over US inventors

Mayo v. Prometheus Supreme Court Decision:  Where Justice Beyer rules that only black magic is patent eligible .

News: Patent are portrayed as monopolies; Demanding that you get paid for someone using your inventions, gets you labeled a patent troll; the constant drumbeat that the Patent Office hands out bad patents – without any supporting evidence, by people who do not understand how to read the claims of a patent.

There is a moral decay going on in the United States and the World, but it has nothing to do with a lack of devotion to Christianity.  It is an attack on the reason, logic, and the mind and in the law that means attacking patents and intellectual property. 

July 21, 2012 Posted by | copyrights, News, Patents | , , , , , , , , , | Leave a comment

Wall Street Journal Proves its Patent Ignorance

In an article entitled “Could Morse Have Patented the Web? Under today’s loose standards, the telegraph inventor might own the Internet” , dated March 26, 2012, the Wall Street Journal demonstrates their incredible ignorance of patent law.  The article states, “The standards for patents are so low that simply having an idea often justifies a patent.”  Obtaining a patent takes at least several years to obtain and tens of thousands of dollars.  It is the most expensive, time consuming, and most examined property right before you obtain title of all property rights.  In addition, when Morse obtained his patent the requirement that a patent cover a non-obvious invention did not exist.  This by itself makes it more difficult to obtain a patent today than in Morse’s day.  The author’s ignorance of patent law embodied in the above statement is monumental.

But the ignorance does not stop with this statement, the article goes on to state that:

 “The patent explosion began in the mid-1990s, when the U.S. Court of Appeals for the Federal Circuit ended the requirement that patents specifically define inventions.”

First of all the U.S. Court of Appeals for the Federal Circuit never did any such thing.  The requirement for specifically defining one’s invention in a patent has not changed since at least the 1952 patent act.  Second there has been no explosion in the number of issued patents in the US to US based inventors.  The numbers of patent issue to US based inventors has been flat for at least a decade, see chart below

 

 

 

 

and by every objective measure (GDP/patent, R&D/Patent, Population/patent) the quality of patents is increasing – see Patent Quality Nonsense.

The article then quotes a forthcoming article from the CATO Institute that it is impossible for a software company to determine if they are infringing an existing patent.

 They estimate that there are 600,000 firms producing patent-eligible software and 40,000 software patents granted each year. They say this comes to “24 billion new patent-firm pairs each year that could produce accidental infringement.

Since the total number of issued patents since 1836 is just over eight million this is complete nonsense and academic fraud.  The exaggeration of the authors from the CATO Institute and Yale Law School is criminal.  Both of the authors of this study should be fired and never given another academic job.  But so low is the state of our academic research no one will question their outrageous assertions.

Companies do market research on competitors in the software space and clearly do not feel overwhelmed by the “24 billion” new pairs of potential products.  Most software companies I know are very good at narrowing down their market research and the same applies to patents.  Companies spend huge sums on market research, but complain about spending a little money to determine if they are violating someone’s property rights.  In fact, most companies never do check to see if their products are likely to infringe a patent.  This is like starting construction on a building without checking that you have clear title to the land.  We would not tolerate or glorify the stupidity in the case of real property, so why should we do so in the case of patents?

Finally, to the point that Morse could have patented the Internet this again shows the author’s ignorance of patent law.  Patents cover an invention.  Anything that incorporates that invention infringes the patent.  For instance, if I have a patent on a microprocessor and you incorporate a microprocessor into your cell phone you infringe my patent.  I am not asserting that I invented the cell phone, I am asserting that I invented the microprocessor and you are infringing my patent by incorporating it into your cell phone.  According the Supreme Court’s decision Morse did invent a system for repeating electromagnetic signals so they could be sent over long distances.  Repeaters are still used to amplify electronic signals, including signals sent over the Internet.  So if Morse’s patent were still valid (they expired around 150 years ago), then yes the Internet would likely have infringed his patent – according to the Supreme Court’s characterization.  This would not mean that Morse was asserting he invented the Internet.  Note that the inventor of the transistor, the inventors of error correction codes, the inventor of microprocessors, the inventor of electronic amplifier circuits, and many, many more would be in the same hypothetical situation – but of course this is meaningless since their patents expired years ago.  All this proves is that all inventions build on earlier inventions and the author of this article’s ignorance of how patents work, knows no bounds.

 

Could Morse Have Patented the Web? Under today’s loose standards, the telegraph inventor might own the Internet” , dated March 26, 2012, the Wall Street Journal

March 29, 2012 Posted by | -Philosophy, News, Patents | , , , , , , | 1 Comment

CATO & Reason Demonstrate Ignorance of Property Rights – Patents

The CATO Institute are reiterating the findings of the flawed paper 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.  This paper looks at lawsuits filed by NPE (Non-Practicing Entities) and the subsequent drop in the stock price of the company being sued.  The paper suggests that this loss of wealth is all “deadweight” loss, since little of the money ends up with the original inventors of the technology.  This last part is an intellectually dishonest slight of hand.  The authors make no attempt to determine if the cases are meritorious.  If the firms are infringing a valid patent, then the filing of the lawsuit represent the cost to society of deterring the theft of inventions.  This cost discourages further theft by companies.  If half the patent lawsuits (by cost) are meritorious then the net cost of these lawsuits is zero.  Unless you assume that the cost of protecting property rights has no value, which I am afraid is the ultimate problem with anti-reason people at Reason Magazine and CATO.  Neither of these organizations seems to understand property rights.

This lack of understanding of property rights causes multiple errors in both the paper and CATO’s and Reason’s analysis of this issue.  For instance, once you understand that patents are property rights you understand the purchase of patents by investors is not different that the purchase of a building from the builder.  The profits by the subsequent purchaser of the building are not “DEAD WEIGHT” costs and neither would a lawsuit by the purchaser to demand rent for someone squatting in their building.  When the (paying) occupancy rate for buildings is high this encourages the building of new structures.  The same is true for patents – when owners of patents receive good returns on their assets then inventors create more of these assets.

Unfortunately, the CATO Institute has become hopelessly lost on the issue of property rights.  They have adopted the Utilitarian point of view that property rights are just an efficient way of allocating scarce resources.  Professor Adam Mossoff has commented on this nonsense.  Mossoff states that Jeremy Bentham’s ideas are at the root of Libertarian’s attack on IP.  Bentham basic philosophy was Utilitarianism – the greatest good for the greatest number. Bentham stated that the reason for property rights was because of scarcity and conflict resolution not natural rights.  Mossoff then points out that the followers of Bentham argue that there is no conflict between people using the same ideas like there is with land.  Ideas can be copied and used endlessly.  This argument fails for because there is a conflict when a physical embodiment of the idea (invention) is created. The copier has clearly limited the return for the inventor and patent law only prohibits the physical embodiment.  I discuss the fallacies behind the scarcity theory of property at my post Scarcity: Does it Prove Intellectual Property is Unjustified and Scarcity -2 and Scarcity –3.  Mossoff points out that this is the philosophical point of view used by the Cato Institute and the Von Mises Institute to attack patents (IP).

Utilitarianism’s “greatest good for the greatest number” always leads to totalitarianism.  It also never leads to the purported goal.  The reason for this is that utilitarianism is merely a justification for short term actions.  Once something has been produced, it always looks like the greatest good is to redistribute the creation.  However, this is clearly only true in the short term.  In the long term it is clear that this always destroys the economy.  This is the theory behind the USSR, North Korea, and all socialist states.  As Ayn Rand pointed out you only need open your eyes to see that these countries do not produce the greatest good for the greatest number.  This is because stealing the product of one’s mind (mental labor is labor) is no different than banning free speech.  It stifles the mind, which source of all economic progress (values).

The CATO Institute’s article is under the header “Regulation.”  This again demonstrates that the CATO Institute does not know the difference between property rights and regulations.  Here are three easy questions for Libertarians, Socialists, and Economists to determine if a right is a monopoly (rent seeking) or a property right.

1) Does the right arise because the person created something?

2) If someone else was the creator would they have received the right in the creation?

3) Is the right freely alienable?

Patents meet all the tests of property rights.  They are not a regulation.  Enforcing property rights does not result in dead weight costs.

Another great article on this issue can be found at Gametimeip entitled Myopic Patent Cynicism.

February 3, 2012 Posted by | -Economics, -Philosophy, Patents | , , , , , , , | 1 Comment