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Posts Tagged ‘Gary Lauder’


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.

 

 
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.

 

 

Gary Lauder runs Lauder Partners LLC in Silicon Valley.  The firm is a private venture capital firm.

This page is not dedicated to the idea that our patent system can’t be improved; but rather that the specific changes in the “America Invents Act” would be bad for entrepreneurs and small companies.

Summaries:

One word: Bad

 

One sentence:

Due to the willful exclusion of small companies from the process, congress and the administration have crafted a bill that might mildly benefit big companies, but would drastically harm technology entrepreneurship/start-ups.

 

One paragraph:

There are many things wrong with our patent system, and many ways in which it might be improved, but this bill does not materially improve it, and would make it much harder for start-ups to obtain and enforce patents.  Unlike the Senate bill passed in March, the bill passed by the House (HR1249) in June does not fix the problem of the patent offices’s fees being diverted to help cover our federal deficit.   The change to First-to-file would be a benefit to those who would like to steal others ideas, and consequently will force entrepreneurs in the USA to have to follow the same advice that exists in Europe: file for your patents BEFORE talking with investors, potential customers or even potential co-founders.  This will stifle the open innovation model that has flourished in America.  Other changes will make it easier to accidentally lose the ability to obtain a patent (e.g. if you offer your invention for sale or publicly use it), will more easily enable an infringer to defend themselves by showing such actions prior to the plaintiff’s application, and will enable infringers to postpone the issuance of other’s patents by filing expensive post-grant review procedures…which can also cost a company more than they can afford.  The proponents have sold this bill based on superficial talking points that sound plausible, but are deceptions.  Every well-known US inventor opposes this, as does Judge Paul Michel, the US’s #1 patent judge who resigned early from his lifetime appointment in order to speak out against this.

 

Longer pieces are linked below.  URL’s are visible for ease of copying & forwarding.  Related articles are lumped together.

 

Requested action:

Please call your senators (and any others) to express your disapproval of this bill.  Their phone #’s can be found at:

http://www.reformaia.org/call

 

Gary Lauder’s writing and publications on patent reform:
One page article = 650 words: “Patently Absurd Changes Threatening Patent System” in Venture Capital Journal, 6/1/11: Reprint at: http://files.parsintl.com/eprints/23039.pdf
Magazine at: http://www.vcjnews.com/story.asp?sectioncode=32&storycode=5824547 (subscription required (free trial available))
4.7K words and most current and complete: Unpublished: “Patently Absurd: Or How to Go From the World’s Best Patent System to Worst-Than-Most in One Easy Step” 7/11/11: http://www.lauderpartners.com/PatentReform/HorrorsOfPatentReform.pdf
2K words: The Huffington Post, 3/7/11, “Patently Absurd or: How to Go From the World’s Best Patent System to Worse-Than-Most in a Single Step” http://www.huffingtonpost.com/gary-lauder/patently-absurd-or-how-to_b_832703.html (Note: comment function no longer works)
4.3K words (and a bit dated): “Venture Capital: “The Buck Stops Where?” in Medical Innovation & Business, Summer 2010, Volume 2, Issue 2, p.14 – 19 http://journals.lww.com/medinnovbusiness/Fulltext/2010/06010/Venture_Capital___The_Buck_Stops_Where_.4.aspx

Gary’s 4-minute speech at the Aspen Ideas Festival in early July:

Audio only: https://s3.amazonaws.com/ai-video/aif11_179_lauder.mp3

It’s also on YouTube, but the visuals don’t add much:

http://www.youtube.com/watch?v=d2UWz_CkiqI

 

The main reason why the administration favors it: they hired the main proponent of patent reform and made him the head of the PTO:

http://www.politico.com/news/stories/1109/29002.html

Here’s his testimony in favor of patent reform while at IBM on 3/10/09:

http://judiciary.senate.gov/pdf/09-03-10Kappostestimony.pdf

Kappos’s ongoing promotion of patent reform was in violation of Obama’s Revolving Door Ban which Kappos signed:

“I will not for a period of 2 years from the date of my appointment participate in any particular matter involving specific parties that is directly and substantially related to my former employer or former clients, including regulations and contracts.”

http://www.whitehouse.gov/21stcenturygov/actions/revolving-door

 

Why the “America Invents Act” is Bad for Startups and Bad for America by David Boundy (a patent attorney)

http://www.reformaia.org/news/why-”america-invents-act”-bad-startups-and-bad-america-david-boundy

 

Intellectual Property Watch Interview With Chief Judge Paul R. Michel On US Patent Reform, July 14, 2011

http://www.ip-watch.org/weblog/2011/07/14/interview-with-chief-judge-paul-r-michel-on-us-patent-reform/

 

This presentation is by Steve Perlman, an entrepreneur whom I have backed twice who also is an inventor in >100 patents:

http://www.rearden.com/public/110319_Patent_Reform_Isnt_1.pdf

House bill took out the PTO funding part (which was the only thing good about the bill that he referred to)

 

History of broken promises regarding fee-diversion (why the present bill doesn’t fix the problem):

http://us2.campaign-archive1.com/?u=3341ca33e54ce6ceeeb33f5a4&id=5543db524f&e=e04d76df78

 

The problem with First-to-File (FTF) for start-ups as well-described by Senator Diane Feinstein:
YouTube (20 minutes): http://www.youtube.com/watch?v=xTWTpbIx4tE
Text of her speech: http://www.patentdocs.org/2011/03/senator-feinstein-opposes-the-first-to-file-provisions-of-s-23.html
Senator Cantwell’s speech in favor of the Feinstein Amendment (7 minutes): http://www.youtube.com/watch?v=cz8BjsTZ-lc&feature=related
There is a cyber-security problem w/FTF that has been completely ignored. The best description of this threat is in the attached letter from the Inventors Network of the Capital Area to Speaker Boehner: http://www.scribd.com/doc/57945178/Letter-from-INCA-to-Rep-John-Boehner

America Invents Act (formerly Patent Reform Act of 2011) – so big business can more easily steal inventions

http://www.burdlaw.com/blog/?p=96#comment-1450

America Invents Act – the erosion of inventors’ due process protections and a legislative cover for theft of patent rights

http://works.bepress.com/cgi/viewcontent.cgi?filename=2&article=1057&context=rkatznelson&type=additional

 

Op-Ed against by Rep. Manzullo

http://washingtonexaminer.com/opinion/op-eds/2011/06/patent-reform-proposal-threatens-american-jobs

 

WP: “Patent reform measure ignited fierce lobbying effort” (exposes the vast sums the proponents are spending)

http://www.washingtonpost.com/capital_business/2011/03/25/AFzD9VkB_story.html

 

National Venture Capital Association position (against):

http://nvcatoday.nvca.org/index.php/policy/nvca-sends-letter-on-house-patent-reform-bill.html

 

Judge Paul Michel: “Rein in the Big Bank Bail-Out” 7/7/11

http://www.patentlyo.com/patent/2011/07/guest-post-rein-in-the-big-bank-bail-out.html

Andrew Ross Sorkin/DealB%k: “In a Bill, Wall Street Shows Its Clout” 7/4/11

http://dealbook.nytimes.com/2011/07/04/in-a-bill-wall-street-shows-clout/
Jonathan Massey: Section 18 of H.R. 1249 Would Bail Out Banks and Expose the Treasury to Billion-Dollar Liability
http://www.scribd.com/doc/57945157/Jonathan-Massey-Section-18-of-H-R-1249-Would-Bail-Out-Banks-and-Expose-the-Treasury-to-Billion-Dollar-Liability

 

Judge Paul Michel on Post-Grant Review (PGR): “Torpedoing Patent Rights” 7/11/11

http://ipwatchdog.com/2011/07/10/torpedoing-patent-rights/id=18022/?

 

Former Senator Birch Bayh on the misuse of EXISTING post-grant review procedures (7/11/11):

http://thehill.com/blogs/congress-blog/labor/170659-patently-unjust

 

The most comprehensive coverage even though it under-represents the proponents’ views:

http://en.wikipedia.org/wiki/America_Invents_Act

 

Small Business Organizations Urge Substantial Amendments to House Version of Patent Bill

http://www.businesswire.com/news/home/20110621005690/en/Small-Business-Organizations-Urge-Substantial-Amendments-House

http://j.mp/SB-Objection

 

Several Universities Oppose Pending “Patent Reform” Legislation

http://chronicle.com/blogs/ticker/several-universities-oppose-pending-patent-reform-legislation/34091

Detailed letter from one of those universities:

http://www.warf.org/uploads/media/WARF__HR_1249_Disfavors_Innovators_06-01-11.pdf

 

Two former Chairs of the House Judiciary Committee

http://thehill.com/blogs/congress-blog/lawmaker-news/167549-patent-reform-is-long-overdue

 

Article on how the bill won’t solve the backlog and will probably worsen it:

http://www.lexology.com/library/detail.aspx?g=aa2f3083-8e03-422c-b7b3-e13e2e5a56cf

 

Article by Chinese IP judge on prior bill that is mostly the same as this one.  Last page is perfect summary:

http://www.reformaia.org/resources/china

 

Source of information on the monies that flowed to congress associated with the bill:

http://maplight.org/us-congress/bill/112-hr-1249/990582/total-contributions

http://maplight.org/us-congress/bill/112-s-23/897262/total-contributions

 

National Small Business Assoc. (NSBA) opposition:

http://www.nsba.biz/content/4012.shtml

 

Inventor of MRI: Ray Damadian’s critique: “Patents Shrugged Redux” 6/16/11

http://www.ecommercetimes.com/rsstory/72680.html?wlc=1308294830

 

Foreign Policy Magazine: “The Prevent American Invention Act” by Clyde Prestowitz, 5/16/11

http://prestowitz.foreignpolicy.com/posts/2011/05/16/the_prevent_american_invention_act

 

Another overview article: Patent Reform Favors Corporations, Multinationals

http://www.theepochtimes.com/n2/index2.php?option=com_content&task=view&id=58714&pop=1&page=0&Itemid=1

 

Brookings article on bill that does not take a position but is revealing: “Balancing Disclosure, Protection of Trade Secrets, and Patentability in Light of Patent Reform”

http://www.brookings.edu/opinions/2011/0627_patents_villasenor.aspx

 

Two papers on the problem w/the Grace Period by Dr. Ron Katznelson:

http://bit.ly/Grace-Period-USA

How we got here: “Section 2 of America Invents Act: the undisclosed story of legislative obfuscation”:
http://works.bepress.com/cgi/viewcontent.cgi?filename=1&article=1057&context=rkatznelson&type=additional&sei-redir=1

Last year the ENTIRE issue of Medical Innovation & Business magazine was devoted to patent reform – against it.  I have never before seen an entire issue of magazine dedicated to stopping bad legislation:

http://journals.lww.com/medinnovbusiness/Fulltext/2010/06010/

(I wrote one article in it)

 

URL’s are self-explanatory:

http://gametimeip.com/2011/03/04/can-we-have-an-intellectually-honest-patent-reform-debate-in-the-house/

http://gametimeip.com/2011/04/07/patent-reform-boosters-invent-facts-to-combat-real-arguments/

http://gametimeip.com/2011/05/30/america-invents-act-un-american-patent-reform/

http://www.patentlyo.com/files/the-big-government-patent-bill.pdf

 

Hoover Institution:  6/7-13/11

The Perils of Patent Reform http://www.hoover.org/publications/defining-ideas/article/81446

Welcome to Patent Purgatory http://www.hoover.org/publications/defining-ideas/article/81626

Patent Reform Goes Haywire http://www.hoover.org/publications/defining-ideas/article/81961

File First, Invent Later? http://www.hoover.org/publications/defining-ideas/article/82096
NY Times, “Two Views of Innovation, Colliding in Washington” By John Markoff, 1/13/08 It is still quite relevant, particularly as it applies to the law of unintended consequences:http://www.nytimes.com/2008/01/13/business/13stream.html?pagewanted=print

Other relevant info on bill:

http://www.opencongress.org/bill/112-h1249

 

Congressional Research Service’s 35-page report on the bill.  One of the authors (John Thomas) was on IBM’s payroll and has shown a pattern of bias in favor:

http://pub.bna.com/ptcj/HR1249CRSJun30.pdf

http://www.bna.com/crs-updates-report-n12884902369/

John Thomas’s long association with IBM:

http://www.google.com/search?client=safari&rls=en&q=%22Thomas,+John+R.%22+or+%22John+R.+Thomas%22+IBM&ie=UTF-8&oe=UTF-8

His decade-old backgrounder on international patent law (interesting, but not opined on here):

http://wikileaks.org/wiki/CRS-RL31132

http://assets.opencrs.com/rpts/RL31132_20010831.pdf

 

Unfortunate Statement of Administration Policy

http://www.whitehouse.gov/sites/default/files/omb/legislative/sap/112/saphr1249r_20110621.pdf

 

Bill itself: http://pub.bna.com/ptcj/HR1249VotedJun23.pdf

The bill’s Grace Period language is quite confusing. Compare the bill section 102 (p. 5-9) with the existing Grace Period law:
http://www.uspto.gov/web/offices/pac/mpep/documents/appxl_35_U_S_C_102.htm

See if you can figure out the double/triple negatives.  The proponents created a deception that takes advantage of the confusion to state that the bill means the opposite of what it really says.  The colloquies on this claim the bill means the opposite of what it actually says.  Courts hold that the bill always supersedes the colloquies.
Senate Colloquy:
http://works.bepress.com/cgi/viewcontent.cgi?filename=1&article=1057

 

Web sites against:

http://www.noonhr1249.org/ (Links to excellent articles on the bill’s constitutional problems)

http://www.reformaia.org/

http://www.patentreformact.org/

http://sanepatentreform.org/

http://inventionsarejobs.org/

http://www.inventsact.org/

http://truereform.piausa.org/
http://inventorsvoice.com/

 

Hall of shame: Organizations who should have stood up for start-ups/tech entrepreneurs but have, in the words of Dante “retained their neutrality”:

The Kauffman Foundation

http://www.kauffman.org

 

The Small Business Administration

http://www.sba.gov/about-sba

 

The movie, “Flash of Genius” was based on a book about Robert Kearns, who invented the intermittent windshield wiper, and his struggle w/Ford to get paid after they ripped off his invention.  It is a perfect example of what entrepreneurs face and what we are fighting to keep.  If you have not seen it, I recommend it.

DVD: http://www.amazon.com/Flash-Genius-Greg-Kinnear/dp/B001LM64S8/

iTunes: http://itunes.apple.com/us/movie/flash-of-genius/id300387673

Amazon Instant Video: http://www.amazon.com/Flash-of-Genius/dp/B001O514F0/

Roger Ebert review (3 stars our of 4): http://rogerebert.suntimes.com/apps/pbcs.dll/article?AID=/20081002/REVIEWS/810020303/1023

Book: Flash of Genius: And Other True Stories of Invention (by John Seabrook Paperback - Sep 2, 2008)

http://www.amazon.com/Flash-Genius-Other-Stories-Invention/dp/B003R4ZHTK/

New Yorker article that tells the story (also by John Seabrook)(about 23 pages when printed out):

http://www.newyorker.com/archive/1993/01/11/1993_01_11_038_TNY_CARDS_000363341?printable=true

 

Please call your senators (and any others) to express your disapproval of this bill.  Their phone #’s can be found at:

http://www.reformaia.org/call

 

Thanks,

 

-Gary

 

 

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