State of Innovation

Patents and Innovation Economics

Election Predictions: What It Means for Patents, Startups, and the Economy

It would be quaint and naïve to believe that patent law and the patent system is unaffected by politics.  Since I am neither, let’s examine how the election results will affect patents, startups, and the economy?

Election Predictions

President: Romney.  Romney will win most of the swing states and maybe pick up a state or two that he is not expected to win.  Unfortunately, Romney is like to be George Bush III

Senate: Controlled by the Republicans 52-48

House: Controlled by the Republicans.  Republicans 240  Democrats 195


Patent System

President Obama was a mixed bag for the patent system.  The most positive thing under Obama was putting a patent attorney in charge of the patent system and firing the traitorous Jon Dudas appointed by Bush.  On the other hand David Kappos is a standard Crony Capitalist selection.  He came from a large company (IBM), promoted large company interests, including the incredibly corrupt, pork laden America Invents Act.  (I will not repeat the damning facts of the AIA here, since I have written about them extensively)

President Obama also supported the AIA, which is consistent with his support of Crony Capitalism.  The Supreme Court judges he appointed have displayed the usual ignorance of patents and property rights.  However, Republican appointees have only been marginally better, if at all, when it comes to understanding patents.

President Romney is unlikely to change this situation significantly.  Remember Paul Ryan was the one who gutted the anti-fee diversion part of the AIA.  Romney will probably appoint more pro-property rights judges to the Supreme Court, but even many of these are unlikely to understand patents or that they are property rights.  If we are very lucky, Romney will appoint judges along the vein of Richard A. Epstein (He is now too old).

Legislatively it is very unlikely that anything on the patent front will occur.

It has been rumored that Romney may appoint Darrel Issa to head the Patent Office.  This would likely be a disaster.  Mr. Issa has been a bull dog in fighting Fast and Furious and other Obama administration cover ups.  He also is an inventor.  But he supported the AIA, supported large company interests in patent issues, and clearly does not understand patent law.  If Mr. Issa wins reelection, which is projected to do, I would be very surprised if he would step down to take the Patent Office position.  President Romney should appoint a patent attorney who has had extensive contact with startups and individual inventors.  These are the groups (according to an SBA study I have mentioned multiple times) that create most of the revolutionary new technologies.

Bottom Line: If we are lucky the patent system will not deteriorate too much under Romney.  One bright spot is that the Tea Party generally considered the “First to Invent” provisions of the AIA unconstitutional.

Technology Startups

There are three or four policies specific to startups that are critical if we are ever going to see the USA lead in technological innovation again.  One is that we need a strong patent system.  That is discussed above.  Second we need the repeal of Sarbanes Oxley and probably Dodd Frank also.  I am afraid Romney and the Republicans will be happy with half measures like the JOBS Act.  Third, we need stock options to not be expensed and a return to “pooling of interest” accounting for mergers.  I seriously doubt the Republicans will take up either of these issues.

Bottom Line: Romney will make things marginally better for technology startups.  Mr. Romney came from the private equity end of Wall Street that benefited greatly when SOX essentially killed the IPO market.



President Obama is an avowed Marxist/Collectivist.  It does not matter whether you think he subscribes to the anti-suburb version or the anti-colonial version or the Keynesian version or some other version for the most part.  These policies were responsible for killing over 100 million people in the last century.  How many more people have to die before people like Obama will stop pushing this nonsense?  Or at least people will laugh them off the public stage? (Yes, Obama is guilty of killing numerous people, including Benghazi – but more importantly his wealth killing policies have killed people just as surely as smoking kills people).

President Obama is also a part of the environmentalist movement.  The policies of this group killed over 100 million people in the last century.  How long will it take before people recognize people like Mr. Obama are pushing mass murder?

Good Riddance Mr. Obama, don’t let the door hit you on the way out. 

Unfortunately Mr. Romney is likely to be George Bush III – meaning he is not so much not a collectivist, he just wants to be an efficient collectivist.  Romney is not humanist, he is just a more pragmatic environmentalist.  Romney is likely to be a technocrat who is not interested in changing the system, just turning it up a little.  The problem with this is that there is likely to be a huge financial meltdown in the West and Japan very shortly.  Unless Romney takes radical steps to avoid this, it is likely to throw the US into the second leg of the second Great Depression.  Here are just some of the things Romney needs to accomplish in the next two years to avoid a financial catastrophe:

1) Reduce Federal Spending by $1 Trillion a year.  If Obama could increase the budget by a trillion per year, why can’t we roll this back.

2) Rationalize the federal tax system.  We spend $430 Billion on tax compliance and only bring in about five times that amount.

3) Restore Patents and Property Rights.  Repeal AIA, repeal Intellectual Property and Communications Omnibus Reform Act of 1999, repeal all Supreme Court Decisions on patents since 2000, fully fund the Patent Office.  Demand that the 5th Amendment public takings apply to all government actions, including all regulatory actions and that public takings can only be for the benefit of a public purpose – specifically over ruling the KELO et al. v. CITY OF NEW LONDON et al. case.

4) Eliminate ObamaCare, put Medicare and Social Security on a sound financial basis that does not impose crushing taxes on young people.

5) Eliminate Sarbanes Oxley and Dodd Frank

6) Repeal all the regulations created since 2000.


What is wrong with the USA is summarized in the chart below:


November 2, 2012 Posted by | News, Patents | , , , , | 58 Comments

Free Kindle Version of The Decline and Fall of the American Entrepreneur

Get your free Kindle version of the book that explains why the US has lost its innovation engine – The Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation.   This offer is valid through Sunday, June 24th.   The book provides simple, inexpensive suggestions for how to rev up the US’s innovation engine.

This book explains how little known laws passed within the last decade have crippled America’s innovation.  This resulted in the stagnation in median family income that was a major contributor to the housing crisis.  The evolving sovereign debt crisis, which promises to make the housing crisis look trivial by comparison, is also being exacerbated by this dearth of innovation.  The book provides simple, inexpensive suggestions for how to rev up the US’s innovation engine.


What Reviewers are saying about The Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation. 

 “Dale Halling’s Decline and Fall of the American Entrepreneur makes a compelling case for the need to reform regulatory and other policies that hamstring entrepreneurial innovation in our country. Everyone concerned about the decline in American innovation should read this book.”

David Kline, Coauthor of “Rembrandts in the Attic” and “Burning the Ships”


I do not review books on the Net unless I find them well-written and especially informative, which certainly applies to Dale B. Halling’s The Decline and Fall of the American Entrepreneur.

Nonetheless, I do have a criticism directed towards the publisher. My copy did not contain a vita of the author, which in this case is a major omission. Mr. Halling is a physicist, lawyer and an expert on patents and entrepreneurship, all of which comes through in his book. This author delivers the goods. A vita in subsequent printings would be useful.

Mr. Halling combines two topics — the impediments to entrepreneurship that have been created by theU.S. government as an unintended consequence of its pursuit of other goals and the systemic weakening of theU.S. patent system by the U.S. Supreme Court and the Congress.

The resulting technological stagnation is a major reason theU.S. has gone from producing 25 percent of the World’s Gross Product in the mid 1990s to about 20 percent today. The loss is significant – about $3 trillion of U.S. GDP in 2009 alone.

He demonstrates in clear terms the linkages between economic growth, productivity, and income. And he lays out how technological advancement has always been the American advantage in global competition, an advantage that theU.S. is squandering.

He explains how the Sarbanes Oxley Act cut off the waves of venture investment that did so much to stimulateU.S.growth in the 1980s and 1990s, and he also explains how shifts in accounting rules as per stock options directed many of our most creative people into less than innovative activities.

His final chapter contains some straight forward recommendations that involve no direct-cost regulatory changes that would once again stimulate more innovation, investment and job creation inAmerica. Amazingly, Congress is now considering a so-called “patent reform” legislation that would further diminishU.S.innovation. The author convincingly explains how this would damageU.S.innovation. He also explains the consequences of recent Supreme Court decisions on patent law. My observation is that theRoberts Courtis the most anti-patent set of Justices inU.S.history. Once Congress understands what the Court has done, their decisions need to legislatively overturned.

In sum, this is well-written, jargon-free, 137-page book that is a quick read. It evidences smart and practical thinking by an author with real world experience. I highly recommend it.

Dr. Pat Choate, economist, former Vice Presidential running mate of Ross Perot 1996, Director of the Manufacturing Policy Institute, Phd. Economics University of Oklahoma.


The Decline and Fall of the American Entrepreneur presents the issues facing technology start-up companies in today’s environment.  The book sheds light on the underpinnings of these issues and is enthralling.  Halling’s tight, accessible and personal style make this a fast and compelling read.  His book is a political clarion call that should be heard now.

Greg Jones

Former President Ramtron International (RMTR) and CEO Symetrix Corporation.  Both companies founded on IP.


This book conclusively establishes the link between innovation and per capita income, and shows that we have recently entered into a time in which innovation is under assault.  This assault has resulted in a predictable loss of income and contributed significantly to the economic woes we are experiencing right now.  The book’s sound policy recommendations suggest a way to turn the economic ship around to set a course for a return to prosperity.

Peter Meza, Patent Attorney – Counsel Hogan & Hartson, Attorney for Alappat –  In re Alappat




June 21, 2012 Posted by | Patents | , , , , , , , , | 4 Comments

Patents Cause Economic Growth: Another Academic Study Shows

Two Singapore professor show patents result in significant economic growth.  Their paper, Patent Rights and Economic Growth: Evidence from Cross-Country Panels of Manufacturing Industries concludes “the effect of strengthening patent rights on economic growth was substantial in economic terms.” P. 16

In the abstract of the paper, they conclude:

Our results have important implications for public policy. One is that patent laws and their enforcement matter for economic growth. However, our findings also suggest that patent rights vary by country and industry. We show that patent rights have a smaller impact on economic growth in poorer countries and in less patent-intensive industries. Since patent intensive industries account for a smaller share of the economies of the poorer countries, our results imply that the welfare gain in terms of economic growth for these countries is more likely to be outweighed by the welfare loss due to lower end-usage, and hence, tip the balance towards weaker rights being socially optimal.  Abstract

The paper’s conclusion with respect to “poorer” countries being better off with a weak patent system is pure conjecture and was not part of their study.  The reason that poor countries do not see a big boost by having stronger patent laws is: 1) poor countries are technologically backward and can advance economically by copying (purchasing) existing non-patented technologies, and 2) poor countries have poor property rights systems diminishing the effectiveness of their patent systems.  A poor country is poor because of its low level of technology.  Just raising a poor countries level of technology to the same level as the United States twenty years ago would result in huge economic gains.  The reason poor countries have a lower level of technology is because they have weak property right systems that results in under investment in technology (Capital Spending).  The paper hints at this point:

Our patent rights index depended on an assumption that enforcement of patent rights was correlated with enforcement of property rights in general, as measured by the Fraser index (The Fraser Institute does a study of economic freedom for all countries once a year). P. 10

In Figure 1, we plotted the Fraser index against the GP index (Patent Strength) scaled up by a factor of two.  The two indices were highly correlated. P. 10

In other words, there is a strong correlation between the strength of property rights in general with the strength of a patent system in a country. This should not be surprising since patents are property rights in inventions.  If you did a study of arbitrary government grants or monopolies versus the strength of patents in countries, you would find they are highly uncorrelated.  Despite the nonsense that suggests that patents are monopolies.

Another interesting point in the paper:

Among 15 Western countries over several centuries, enactment of patent law was associated with higher rates of scientific discoveries, inventions, and innovations.

Hu , Albert G.Z. and Png , I.P.L., Patent Rights and Economic Growth: Evidence from Cross-Country Panels of Manufacturing Industries, August, 2010.


October 21, 2011 Posted by | -Economics, -Philosophy, Innovation, Patents | , , , , | 1 Comment

The Myth of the Sole Inventor: A Socialist Diatribe by Professor Mark A Lemley

The Myth of the Sole Inventor, By Mark A. Lemley, Stanford Law School

Professor Mark A Lemley has written a paper suggesting that sole inventors and individual genius does not exist.  Mr. Lemley teaches patent law and intellectual property law at Stanford University.  However, Mr. Lemley is not a patent attorney, does not have a technical background and as his paper proves has not understanding of technology.  Mr. Lemley’s idea of collectivist invention ignores three basic facts:

1) Groups of people are made up of individuals.

2) Every individual has to think for themselves – you cannot think for someone else, which is a source of frustration for every parent (child).

3) Throughout history the rate of invention was very slow until we introduced property rights for inventions (patents).

Lemley purposely downplays Edison’s achievement.  The fact is that Edison created the first high resistance, long lasting, incandescent light bulb.  This was a huge achievement that made electrical lighting commercially feasible.  Many “experts” with Ph.D.s from the most prestigious universities at the time said electrical lighting was impossible commercially.  Lemley also has his history wrong.  Swan was the most important inventor of the light bulb, before Edison.  He mentions Man and Sawyer, who I find no reference to in any history of the incandescent light bulb.  Lemley appears to have no regard for facts.  His analysis of the Wright brother’s achievements is similarly sloppy and just plain wrong.

Lemley’s argument that great inventions are created by multiple people simultaneously has been examined by numerous scholars and found to be incorrect.  For instance, see Jacob Schmookler and his ground breaking book, Invention and Economic Growth, which examined this issue.  People like Lemley attempt to smear together multiple inventions as being the same invention.  For instance, they see Swan’s light bulb and Edison’s light bulb as simultaneous inventions of the light bulb.  Lemley may have made this mistake because he does not have the technical background necessary to understand the issues surrounding the invention of the light bulb.  However, I suspect that Lemley is not interested in the truth, he is interested in pushing a political theory of collectivist invention.  If Lemley’s ideas held any water at all, then you would expect either: 1) the USSR/North Korea should have been one of the greatest sources of inventions in the history of the World, and/or 2) the greatest population centers would be the biggest creators of new technology.  The facts are that neither are true.  The first is self evident.  The second appears to be true until the creation of property rights for inventions.  When England and the U.S. create an effective property rights system for inventors almost all significant inventions for the Industrial Revolution are invented in the U.S. and England, even though their populations are much smaller than France, China, India, etc.

Lemley is pushing an old worn out socialist idea that individuals do not matter only the collective.  This paper is not novel and its thesis has been proven false over and over again.  But socialists do not believe in an objective reality.

The paper is an example of the intellectual and moral bankruptcy of many of our academic institutions.

The Myth of the Sole Inventor, By Mark A. Lemley, Stanford Law School

June 15, 2011 Posted by | -Philosophy, Patents | , , , , , , , | 9 Comments

Could Apple Get Funded Today?

This intriguing question and its implications for US economic policy are tackled in the groundbreaking book Great Again, by Henry R. Nothhaft with David Kline.  They answer the above query with a series of questions:

Could a twenty-year-old college dropout, just back from six months in an ashram somewhere, attract funding for a capital-intensive venture based on the manufacture (yes, the manufacture) and sale of a $2,500 consumer product unlike any that had ever been bought by consumers before?  One whose potential uses were at best unknown, and possibly nonexistent?  And one for which the total current market size was exactly zero?

Not only could Apple not get funded today, it probably could not go public. Nor would Apple have received its first patent (USPN 4,136,359) in only 20 months.  The book asks “how many of today’s Apples are not getting a chance?”

The authors use the above example to make a broader point that theUSis failing economically and technologically because of the policies we are pursuing.  They show that all net new jobs created in theUSsince 1977 (and possibly longer) were created by startups like Apple.  All increases in real per capita income are due to new technologies and most revolutionary/disruptive technologies are created by startups and individual inventors.  So what are the policies that have undermined our economy, by undermining technology startups?

The book examines five areas:

1.Role of regulations.  The Authors show that our tax policies, Sarbanes Oxley and our indifferent (some might say arrogant) regulators’ application of well meaning regulations to startups is driving them either overseas or out of business.

2. Underfunding the patent office. This is costing theUS millions of jobs and billions in GDP.  According to the authors, each issued patent is worth 3-5 jobs on average, particularly patents issued to startups.

3. Manufacturing policies in the US.  Manufacturing is key, particularly in a world that does not respect property rights in inventions, to ensuring that theUS profits fromUS innovation and not other countries.  TheUS is also losing the global battle for human talent.

4. Battle for global talent. Our restrictive immigration policies are depriving theUS of talented entrepreneurs such as Andy Grove, founder of Intel.

5. Funding for research.  The book shows that our spending on basic science and engineering is not only declining as a percentage of GDP, but the system has become short-term oriented and bureaucratic.

While this book tackles complex issues, it is a quick easy read.  It is full of interviews from entrepreneurs, venture capitalists, and technologists who built America’s technology startups over the last three decades.  Great Again provides numerous real life examples to illustrate its points.

This pioneering book shows how the US can create jobs and increase per capita income.  The policy prescriptions are based on solid science.  Just cutting government spending (balancing the budget) will not cause theUSeconomy to grow vigorously, we need pro-growth policies.  The authors are some of the few people that understand what policies are needed for the US to be GREAT AGAIN.

Great Again: Revitalizing America’s Entrepreneurial Leadership, by Henry R. Nothhaft and David Kline

April 18, 2011 Posted by | Innovation, Patents | , , , , , , , , , , , , , , , | Leave a comment

CAFC Appointments

According to IPWATCHDOG President Obama has renominated Edward C. DuMont and Jimmie Reyna to serve on the United States Court of Appeals for the Federal Circuit.  Neither of them are patent attorneys.  As I pointed out in my post Makeup of the CAFC, the number of patent attorneys on the court has been shrinking since its creation.  Neither DuMont or Reyna have a technical background.  Patent law requires both an understanding of the underlying technologies involved and an understanding of the law.  We have seen consistently bad decisions out of the Supreme Court and CAFC because they do not understand the underlying technologies.  It takes a number of years to understand patent law, it is not like other areas of the law.  For instance, most judges do not understand the very basic concept that all inventions are combinations of existing elements.  They do not understand that this follows from conservation of matter and energy.  It is not a legal concept it is fundamental principle of reality.  We need patent attorneys with strong technical backgrounds on the CAFC, if we are going to have a well function patent system in the US.


January 11, 2011 Posted by | -How to, Patents | , | Leave a comment

KSR: Supreme Ignorance by Supreme Court

Under the KSR decision (KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 416 (2007)) by the Supreme Court nothing is patentable under the sun, unless you believe in black magic.  The Supreme Court in the Bilski ( oral arguments proved that the justices do not have the competence of a first year patent law associate.  KSR shows that the justices do not understand basic physics. 

See if you can spot the errors in physics in the following statements.  “The combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.” KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 416 (2007).  “A court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions.” Id. at 417.  While the Supreme Court’s writing is not the model of clarity, the Court thinks these statements are equivalent.  The Court is saying that a patent for an invention made of known elements (prior art elements, familiar elements) and connections (according to known methods) is likely to not be patentable. 

Every real invention is a combination of known elements, unless you can violate the conservation of matter and energy – black magic.  The fact that the Supreme Court does not know this basic application of the laws of physics demonstrates that it is incompetent to rule on patent matters.  Another flaw in their logic is that if an inventor filed for a patent with an element that was completely new, then the Patent Office would reject the application, appropriately, as failing to clearly and distinctly claim their invention under 35 USC 112, second paragraph.  The fact that the Supreme Court does not understand the legal contradictions of their opinion, demonstrates that they do not understand the basics of patent law.  Continue reading

January 19, 2010 Posted by | -Law, Patents, Uncategorized | , , , , , | 12 Comments