The Economist has printed another of their fantasy articles on patents entitled “A question of utility.” Gene Quinn has written a great article showing the numerous inaccuracies in The Economist’s article entitled “What ‘The Economist’ Doesn’t Get about Patents.” The Economist article argues that patents were irrelevant to the industrial revolution. Mr. Quinn shows the fallacy of this statement, but I want to amplify on what he said. The industrial revolution started in England and the United States, which were the two countries with functioning patent systems. The industrial revolution was not about industry but about a continuous invention revolution as the book “The Most Powerful Idea in the World” illustrates. Modern ‘New Growth Economics’ has shown that the only way to increase real per capita incomes, is to increase our level of technology and that means creating new inventions.
My new book Source of Economic Growth tackles these important questions specifically it answers these two questions: 1) What is the source of real per captia increases in wealth? And 2) What was the cause of the industrial revolution? I provide overwhelming evidence that new inventions are the only way to increase real per capita incomes and property rights for inventions, i.e., patents, are the only way to provide a high enough level of inventing to escape the Malthusian Trap and enter the Industrial Revolution.
David Kappos and Gene Quinn argue that the present patent reform bill is good for independent inventors and small entities. See Kappos Trying to Sell Patent Reform to Independent Inventors.
1) Damages – I believe that the patent reform bill still has the provision that reduces damages for infringing. As long as this provision is in the patent reform bill it will damage small inventors and the US economy.
2) First-to-File: I understand and have made the point that very few cases are won by the second to file. However, a first-to-file system is a first step in eliminating the inventor from the patent process. The next step will be to issue patents to entities, why name the inventors since we are not serious about the true inventors anyway. A first to file system is a fraud. It rewards not inventors but people who are skilled at gaming the system.
This is similar to the publication rule. Most patent applications were being published at 18 months anyway and if you did not want to foreign file you could avoid publication. But publication is a breach of the social contract between the inventor and society. Society gets the benefit of disclosure but the inventor may never receive his part of the bargain. Note that immediately after this breach pendancy times expanded and the allowance rate fell off a cliff. Ron Katznelson has done a study showing that pendancy times always expand, usually by a factor of two, when a country adopts publication.
3) Publication: I believe that the present bill requires the publication of all patent applications. As stated above this is a clear breach of the social contract between the inventor and society. Publication discourages people from inventing and filing for patents. If an invention can be kept a trade secret, more people will chose this right to the detriment of everyone. I have been advising more clients to consider trade secret protection. We tried the trade secret route in the middle ages and the level of innovation was pitiful. If an invention cannot be kept a trade secret, investors will be less willing to back a company whose inventions are known to the whole world before the company even gets protection in their own country.
Real Patent Reform
Here are my suggestions for real patent reform that would not only help small inventors but the US economy.
1) Repeal Publication: This would restore the social contract
2) Repeal KSR: A subject standard of patentability just increases costs and uncertainty associated with the patent process. KSR makes bureaucrats the ultimate arbiter of what is patentable instead of logic.
3) Repay PTO: Congress should repay the over $1B it stole from inventors with interest.
4) Regional Offices for PTO: This would ensure steady funding of the PTO and increase examiner retention
5) Repeal eBay: This decision is logical absurdity. If a patent gives you the right to exclude, then if you win a patent infringement case you must be able to enforce your only right – the right to exclude
6) Eliminate “Combination of Known Elements”: The fact that the Supreme Court does not understand that every invention in the history of the world is a combination of known elements is pinnacle of ignorance. Have they ever heard of “conservation of matter and energy”?
7) Patent Reciprocity: If you drive your car across the border into Canada you do not lose title to your car. If you take your manuscript across the border into Canada you do not lose the copyright to your manuscript. But, if you take your invention across the border into Canada, you lose your patent protection and anyone can steal the invention – not the physical embodiment, but the underlying invention.
Patent reciprocity would automatically provide patent rights in a foreign country when you obtained a patent in the US and vice versa. This idea was first proposed by the US in the mid 1800s according to B. Zorina Kahn’s book “The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920“. Unfortunately, the idea died and since then patent rights have been part of the convoluted process of trade negotiations.
Patent reciprocity would significantly increase the value of patents and increase the value of research and development. As a result, it would spur investment in innovation. Reciprocity would increase the valuation of technology start-up companies in all countries that participated. It would also increase per capita income.
Gene Quinn in IPWatchdog.com has an excellent article (please read the whole article) on the Myraid Genetics case. Mr. Quinn explains the absurdity of the claims by the ACLU. But the part his article I want to focus on is the assertion by many critiques of “gene patents” that the Patent Office is issuing patents on naturally occurring genes. As Mr. Quinn’s excellent article shows the claims are clearly not directed to naturally occurring genes – see below.
US Patent No. 5,693,473 is being challenged, and claim 1 states (in relevant part):
1. An isolated DNA comprising an altered BRCA1 DNA…
US Patent No. 5,709,999 is being challenged, and claim 1 states (in relevant part):
1. A method for detecting a germline alteration in a BRCA1 gene…
US Patent No. 5,710,001 is being challenged, and claim 1 states (in relevant part):
1. A method for screening a tumor sample from a human subject ….
US Patent No. 5,753,441 is being challenged, and claim 1 states (in relevant part):
1. A method for screening germline of a human subject…
US Patent No. 6,033,857 is being challenged, and claim 1 states (in relevant part):
1. A method for identifying a mutant BRCA2 nucleotide sequence… Continue reading
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