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Posts Tagged ‘patent reform’


The Economist Weights In on Patent Deform

The Economist in an article entitled The spluttering invention machine repeats a number of lies associated with patent reform.  For instance, they repeat the Patent Thicket theory for which there is absolutely no empirical evidence.  You would expect that a magazine like the The Economist would at least do a little research on the topic.  Here are some of the errors in the article.

 

PATENT THICKET

This Article repeats the Patent Thicket theory (too many patents inhibit innovation).  Every single empirical study has found little or no evidence for the Patent Thicket theory.  For instance see R&D, Invention and Economic Growth: An Empirical Analysis, by Professor Hulya Ulku and Ted Buckley, Ph.D., The Myth of the Anticommons, Bio, www.bio.org (2007) and Epstien, Richard A., Kuhlik, Bruce N., Is there a Biomedical Anticommons, Regulation, (Summer 2004), pp. 54-58.  You would expect an organization like the Economist to do their homework before they repeat these myths.

However, there is plenty of evidence that a lack of a patent system or a weak patent system inhibits innovation and economic growth.  For instance, North Korea has no patent system and has absolutely no innovation.  Those countries that first adopted a modern patent system have been the most innovative.  When the patent system was under attack in the US in the 1970s the US suffered stagflation.  For more information see The Source of Economic Growth.

 

PATENT QUALITY

This Article also repeats the myth of low patent quality in the US.  By every objective measure the quality of patents has been increasing, including GDP per patent, R&D spending per patents, and number of citations per patent.  See Patent Quality Nonsense and The Patent Quality Myth.  It is disappointing that the Economist repeats these diatribes against patents without even a cursory check of the facts.

 

PATENT REFORM: America Invents Act

The main problem with the US patent system is the long pendency time.  This is a result of the underfunding (stealing of user fees) of the Patent Office.  Suffice it to say that correcting this situation is not the major thrust of this legislation.  The main point of this legislation is to weaken the US patent system, by the addition of oppositions and the weakening of the US grace period, so that it easier for large corporations to steal the inventions of startups and independent inventors.

 

 
David Boundy’s Excellent Analysis of the First to File Issues

David Boundy, a well known well respected patent attorney, provided the following analysis of the first to file issues in a comment on the blog Patently O.

The problem here is that the Big Company proponents of the bill and the small company folks are talking past each other, and both are right on different pieces.

The section of the bill titled “first to file” has two completely distinct effects — (1) changing the § 102(g) tie-breaker rule, for deciding between two near-simultaneous patent applications directed to the same invention, and (2) weakening the §§ 102(a)-(f) grace period, the deadline for filing a patent application.

The proponents  are correct that first-to-file vs first-to-invent as a tie-breaker between two near-simultaneous patent applications for the same invention yields no significant difference in the outcome, but first-to-file (if the bill changed only the § 102(g) tie-breaker rule) is almost certain to yield significant cost-savings and efficiencies.

The answer is — so what. The § 102(g) tie-breaker rule affects just over one hundred patent applications per year.

The small business folks are concerned about the other part of the same section, the §§ 102(a)-(f) grace period, the deadline for filing a patent application. The grace period is a make-or-break issue for small companies and startups, that need the extra time to seek investors, test their inventions, and the like. The grace period rule is a far larger issue — it affects hundreds of thousands of inventions per year, largely by taking away the time to investigate, think, and make careful efficient economic decisions, and decide not to file patent applications to inventions that turn out to be duds. Those applications are not filed today, but will be filed under Patent Reform, costing small companies about $1 billion per year. And they will bog the PTO under 50,000 to 100,000 more applications, most of which are written in haste, and most of the incremental applications directed to inventions that would have dropped out of the system with more time to think.

The weak grace period of S.23 creates an impossible catch-22 for small companies. Under patent reform, entrepreneurs won’t be able to discuss their ideas with potential investors or other strategic partners until after a patent application is filed because of the risk of losing all patent rights. On the other hand, many entrepreneurs don’t have the money available to file patent applications until after they have funding in hand. This circular dependency will make it impossible to proceed. Current law gives small companies a way out of this deadlock: they take advantage of the grace period to discuss their ideas with investors and partners while they work to get their company running, and file patent applications once investors come on board. But the changes in S.23 create commercially-unacceptable risks for companies that must seek outside investors and partners unless the inventor can find the many thousands of dollars to file a patent application first. That change in the grace period is just fine for multinationals like Kodak, IBM, GE, the big Pharma’s, etc. but for small companies and startups, it’s simply unworkable.

(Note well, all patent attorneys not working in-house—-a weak grace period will send your malpractice premiums through the roof.)

Two economists at McGill University (one of Canada’s two premier universities) studied the economic effects on Canadian inventors and companies when Canada made the same switch in 1989. They found that Canada’s shift to essentially the same weak grace period as in S.23 created no significant benefit, but selectively disadvantaged small companies and domestic-focused companies, and favored large multinational companies. The McGill authors specifically noted that the adverse effects on the U.S. would be larger than they were in Canada, because of the U.S.’s larger fraction of small companies, and larger reliance on our domestic markets.

The data are pretty clear on both sides. The change in § 102(g) tie-breaker rule makes sense, and change to the § 102(a)-(f) grace period rule will be destructive to the U.S. economy. The latter effect is far larger.

Call your representatives, and call your clients and ask them to call your representatives.   All that is required for the triumph of evil is for good men to do nothing

The two key papers, analyzing empirical data from Canada and Europe, are

Lo & Sutthiphisal, “Does it Matter Who Has the Right to Patent: First-to-Invent or First-to-File? Lessons from Canada,” April 2009, NBER Working Paper No. w14926, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1394833

Boundy & Marquardt, Patent Reform’s Weakened Grace Period: Its Effects On Startups, Small Companies, University Spin-Offs And Medical Innovators, “Medical Innovation & Business Journal, vol. 2 no. 2 (Summer 2010) http://journals.lww.com/medinnovbusiness/Citation/2010/06010/Patent_Reform_s_Weakened_Grace_Period__Its_Effects.6.aspx

 
Senator Feinstein: First-Inventor-to-File a Ruse

According to Broadbandbreakfast.com, Senator Feinstein nailed it!

“I think this is really a battle between the small inventors beginning in the garage, like those who developed the Apple computer that was nowhere, and who, through the first-to-invent system, were able to create one of the greatest companies in the world,” Feinstein said. “America’s great strength is the cutting-edge of innovation. The first-to-invent system has served us well. If it is not broke, don’t fix it. I don’t really believe it is broke.”

Feinstein discussed the importance of the first-to-invent standard in the United States at length, as well as the importance of the associated “grace period” to independent inventors.

She said that the changes sought in the current legislation would make it much harder for inventors to prove that they were the first to come up with an idea.

“Another problem with the bill’s first to file system is the difficulty of proving that someone copied your invention,” she said.

“Currently, you as a first inventor can prove that you were first by presenting evidence that is in your control–your own records contemporaneously documenting the development of your invention,” she continued. “But to prove that somebody else’s patent application came from you under the bill, was “derived” from you, you would have to submit documents showing this copying. Only if there was a direct relationship between the two parties will the first inventor have such documents.

If there was only an indirect relationship, or an intermediary–for example, the first inventor described his invention at an angel investor presentation where he didn’t know the identities of many in attendance–the documents that would show “derivation”–copying–are not going to be in the first inventor’s possession; they would be in the second party’s possession. You would have to find out who they talked to, e-mailed with, et cetera to trace it back to your original disclosure. But the bill doesn’t provide for any discovery in these “derivation proceedings,” so the first inventor can’t prove their claim”

Feinstein also dismissed the arguments for a change in the system, noting that there are only 50 proceedings a year at the United States Patent and Trademark Office that dispute who created a new invention first.

That is a minuscule number considering that there are about 480,000 patent applications a year.

 

 

According to Tech Daily Dose, 20 conservative groups voiced their opposition to the so called Patent Reform bill in the Senate.  Here is their letter.

“Dear Speaker Boehner, Senators Reid and McConnell, and Rep. Pelosi:

We are writing to ask that you prevent the passage in this Congress of patent legislation that hampers U.S. competitiveness and threatens American jobs by undermining property rights. With our economy in crisis and millions of Americans out of work, this is the wrong time to jeopardize our recovery by passing legislation to remove incentives for innovation and commercialization of new products and processes.

Now being discussed is so-called “patent reform” legislation, like that offered by Rep. John Conyers and Senator Leahy in the 111th Congress, which would cripple most of America’s smaller inventors, research consortia and universities, and even the larger industrial firms that depend on patents. Downgrading patent rights — which are fundamental property rights — will hamper innovation and domestic manufacturing. Unfortunately, some Members of Congress are poised to move ill-considered patent legislation through the House and Senate this year. Diminishing patent rights would be dangerous to the future of our economy and our country’s global leadership, and must be stopped.

The Federal Government does many things that exceed its constitutional authority and hamper our free- enterprise system. In contrast, issuing patents is one of the few things specifically mentioned in the Constitution. According to Article 1, Section 8: “The Congress shall have Power . . . [t]o 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.” The Founders understood that protection of intellectual property was vital to innovation and progress. President Washington urged the first Congress of the United States to pass laws encouraging American innovation. James Madison wrote in the Federalist Papers, “The utility of this power will scarcely be questioned.” Yet, today it is being threatened in the Senate and the House – at the behest of a minority of large technology companies.

Sadly, the Federal Government has fallen down in its patent responsibilities and has become a bottleneck to genuine innovation. According to the United States Patent & Trademark Office (USPTO), the average patent applicant must wait 25 months before his or her application is first acted upon. The logical remedy to this problem is to fully fund the USPTO, allowing it to set user fees and keep them to run USPTO efficiently and effectively, rather than letting them be diverted to other parts of the government. In recent years, approximately $700 million originally allocated to the USPTO has been used for general government spending, causing a huge backlog of approximately 720,000 patent applications. This is the situation that must be reformed immediately.

Instead, some in Congress – again following the lead of several large IT companies — want to make it easier to infringe patents, easier to challenge patent rights in administrative proceedings and in the courts, and more expensive for inventors to defend their patents. By creating a new, expensive procedure to challenge the validity of a patent throughout its life, the benefits to patent-holders become far less certain. Incentives to seek patents are severely weakened, and venture capitalists face much higher risks when backing new ideas. The cumulative effect of such “reforms” would be to raise barriers to innovation and dis-incentivize commercialization of those ideas. Changes along these lines will certainly not help us to remain economically competitive in the world economy, which is why officials in China and India have hailed the proposed “reforms” as helpful to their economic interests.

Additionally, some of these so-called reforms have been proposed in the name of “harmonization” with foreign law. Frankly, this notion is misguided. Our competitors should have to “harmonize up” to our superior intellectual property regime, rather than our having to weaken our patent system and “harmonize down” to their levels. Does the United States really need to be “harmonized” with a calcified European system or the impossibly unfair Japanese system, not to mention the Chinese system, where intellectual property theft is a way of life? Such “patent reform” will lead to the plundering of American intellectual property and the loss of American factories and jobs to overseas competitors.

The proposed reforms really benefit large, established corporate market players at the expense of U.S. economic growth. Start-up companies drive innovation and job creation. About one-third of all patent applications are made by independent inventors, small companies, universities, and nonprofit research groups. Some larger IT companies, however, which ironically benefited greatly from the current patent system when they were start-ups, fear having their market positions disrupted or constrained by new ideas outside their control. They want current law rewritten to make challenges to patents easier and more frequent after they are granted.

This phony, market-distorting “patent reform” is bad for America. We ask that you stop any such legislation from reaching the floor and protect the property rights enshrined in the Constitution. Our nation’s economic future depends on your cooperation.”

Phyllis Schlafly
Eagle Forum
Kevin L. Kearns
US Business and Industry Council
Morton Blackwell
Chairman, Weyrich Lunch
Colin A. Hanna,

 
Patent Deform Act of 2011: Approved by Senate Committee

So called Patent Reform is a bad idea that just will not die.  This is the sixth year in a row where this idea has been brought to the floor of the Senate or House.  While some of the most offensive provisions have been eliminated, it is still a bill designed to weaken our patent system and help large companies at the expense of startups and individual inventors.  For instance, the bill still contains “First-to-File” provision.  A first to file system will result in many poorly thought out patent applications increasing the PTO’s workload and increasing the number of Continuations-In-Part (CIPs).  The confusion created by this system of filing early and then following up with corrected applications will result in litigation being more expensive and less certain.  In addition, this system will further bias the patent system in favor of large entities.  Large entities will use a first to file system to flood the PTO with patents to overwhelm small entities and individual inventors in the race to the patent office.  Small entities and individual inventors will never be able to compete financially in this race.  According to the SBA, most emerging technologies are created by small entities not large entities.  As a result, we need to make sure that our patent system is friendly for small entities if we want it to encourage innovation.

In addition, the bill expands post grant oppositions.  This again stacks the deck in favor of large corporations who can afford to fight these oppositions.  It is likely that post grant oppositions will be used by large corporations to bankrupt startups.  If we are going to have post grant oppositions we need to make patents incontestable, like trademarks, after a certain period of time.  See Making Patents Incontestable

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 & End Fee Diversion:  Congress should repay the over $1B it stole from inventors with interest.  It should also end fee diversion, which if Congress was subject to Sarbane Oxley would land them in jail.

4) Regional Offices for PTO:  This would ensure steady funding of the PTO, increase examiner retention, and ensure that the PTO is not so Washington biased.

5) Repeal eBay:  This decision is a 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.  This is not an issue of equity, it is an issue of enforcing the right associated with a patent.

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 


 
American Inventors for Patent Reform

AIPR has provided an excellent analysis of the numerous problems with the present “Patent Reform” bill.  There analysis is reproduced below:

S.515 and HR.1260, the Patent Reform Act: the weak grace period harms startups, small businesses  and university spin-offs, and will strangle millions of jobs

The Patent Reform Act weakens the one-year grace period, in  way that sharply tips the patent system in favor of large companies and companies with substantial offshore business, and against small companies, startups, university and other research spin-offs, and companies requiring FDA approval, and U.S. employees of international companies.  Small companies’ patents will be invalidated.   The costs of the patent system for small entities will increase, and venture capital investments in startups will decrease, by about $1 billion per year.  Because of multiplier effects, within a few years, the reduction in business formation that starts immediately will, within a few years, destroy about $100 billion per year of economic activity.

Current law gives an inventor one year to communicate outside a single firm, to openly raise capital, to assemble strategic partners, and to field test.  Under current law, the grace period allows a year to sort good inventions from bad, before significant resources must be committed to the patent process.  The current grace period lets companies gather information for a year so they can make good business, patenting, and investment decisions during the most difficult part of an invention’s lifetime, the early stage transition from the lab to commercialization.

The proposed amendment to the grace period is unworkable and unusable in practice.  The bill proposes that all disclosures of the invention within a year before the filing date bar will bar a patent, unless the true inventor can show “the subject matter was obtained directly or indirectly from the inventor.”  While this sounds facially reasonable, given the methods of proof available, this grace period is useless as a practical matter, because the bill provides no access to discovery of the facts that inventors will need to prove their cases.  Inventors will be forced into premature “use it or lose it” decisions, to file a patent application today or run a high risk of losing the option forever.

Further, the bill is ambiguous.  One key term, “disclosure,” is undefined.  Because the PTO must interpret statutes as adversely as possible in order to force issues to the Federal Circuit, the PTO will be required to interpret the new law to excuse only printed publications prepared with the care and expense of a full patent application.  ALL testing, offers for sale, public demonstrations, etc. will be patentability bars, with NO grace period, until the courts straighten this out.  That will take at least seven years.  It might be never, if the courts read the new law the way some big companies have advocated.

  • The situations that destroy patent rights arise suddenly, with no opportunity for a small company to recover.  The bill reflects the way large companies do business, but penalizes small companies:
  • The bill sharply favors companies that can do all of their financing, R&D, pre-launch marketing, etc. in house—but creates unacceptable risks for companies that must disclose their inventions or business plans in order to get investors or partners
  • Other countries that converted to a patent system like S.515 have lost their startup and small companies – the Patent Office admits it has never considered Canada, which made almost the same change, and had experienced no net benefit, only a shift from small companies to large
  • Because patent rights become so fragile, small company inventors must operate as if there were no grace period at all.  That raises huge costs:
  • Businesses have to conduct their affairs based on the information available today.  The bill assumes that businesses have perfect foresight knowledge, and can make good decisions without the information that accumulates over the grace period year of current law.
  • Under existing law, patent rights are largely determined by ordinary business activities.  A business doesn’t have to spend extra money just to speculatively protect patent rights.  Under the new weak grace period law, a business has “use it or lose it,” at great expense and risk of error.
  • The statute forces companies to spend money on patent attorneys far earlier, when most startups have the least money available, even on inventions that turn out to be worthless over the year.
  • Best estimates from other countries, whose laws are similar to S.515, are that inventors will have to file 100,000 to 200,000 more patent applications per year, a cost of about $ 500 million to $1 billion per year.
  • Venture capital investments will fall significantly if small companies are forced to spend money on patent applications for inventions that turn out to be worthless, and that are not filed under current law, but must be filed under S.515’s “forced to file”
  • This surge of patent applications will overwhelm the Patent Office, worsening backlog.   Many of these applications will go abandoned after the Patent Office bears its highest cost, the cost of examining an application for the first time.   The Patent Office’s fee structure is backloaded toward issued patents, so that the Office will receive only 20% or so of its fee income for doing 70% of the work.
  • “Harmonization” and international patent protection (the main rationales given by the proponents) are relevant to only a tiny minority of small entities
  • Why would we want to “harmonize” toward economies that have less than half the U.S. rates of startup formation and R&D investment?
  • Startups succeed or fail depending on their U.S. markets.  International patents are irrelevant to most startups.
  • The House bill provides that this provision only goes into effect when other major countries change their laws to harmonize toward a middle ground.  S.515 removes this quid pro quo. S.515 can’t achieve any benefit if it doesn’t require other countries to move our direction.

OTHER RESOURCES

Letter of the Small Business Coalition on Patent Legislation to SBA Administrator Karen Mills, (December 15, 2009) at http://www.connect.org/news/pdf/Coalition-Letter-to-SBA-Dec-15-09.pdf, on behalf of National Small Business Ass’n, CONNECT (San Diego small businesses), American Innovators for Patent Reform (coalition of inventors, researchers, engineers, entrepreneurs, etc.), Professional Inventors Alliance (independent inventors), National Ass’n of Patent Practitioners (patent attorneys, a majority of whom represent small businesses), IP Advocate (university faculty inventors)

David Boundy and Matthew Marquardt, Patent Reform’s Weakend Grace Period: Its Effects on Startups, Small Companies, University Spin-Offs, and Medical Innovators, Medical Innovation & Business, Summer 2010, 2:2 pp 27-37, http://journals.lww.com/medinnovbusiness/Fulltext/2010/06010/ Patent_Reform_s_Weakened_Grace_Period__Its_Effects.6.aspx

 

Here is some good news on the Patent Reform front.

U.S. Reps. Don Manzullo (R-IL) and Mike Michaud (D-ME) today released the following joint statement in response to today’s House Judiciary Committee hearing on the U.S. Patent and Trademark Office. Manzullo and Michaud have significant concerns with H.R. 1260, the House patent reform bill:

STATEMENT

“We commend Chairman John Conyers, Ranking Member Lamar Smith and the House Judiciary Committee for holding an important oversight hearing today on the U.S. Patent and Trademark office. An efficient and effective U.S. patent system is vital to America’s economic growth. While it’s important to routinely examine the USPTO and its operations, we are concerned that this hearing will fail to address the fact that the current House version of thePatent Reform Act of 2009 (H.R. 1260) hinders American innovation and undermines U.S. job creation by increasing patent lag times, decreasing patent quality, and making patents more difficult and expensive to obtain.

“The key to the success of American innovation has always been strong intellectual property protections, particularly for the small inventor. These innovators will be responsible for the new technologies that will reinvigorate U.S. manufacturing and reassert American competitiveness for the next generation. We encourage the Committee to promptly schedule hearings to address the valid concerns expressed by stakeholders in various sectors – including universities, manufacturing, labor, small inventors, information technology, biotechnology, nanotechnology, and agriculture – with the current version of H.R. 1260.”

 
First-to-File vs. First-to-Invent

My good friend, Gene Quinn, of IPWatchdog, has am interesting post on the present patent reform bill.  http://www.ipwatchdog.com/2010/04/04/kappos-round-table-listening-continues-on-campus-of-uspto/id=10002/

His post brings up several interesting points.

Interferences & Independent Invention

If there were only 55 interferences last year, how come all the people calling for patent reform state that independent invention happens all the time?  If independent conception of inventions are so common you would expect a lot more interferences.  While I would grant you that the PTO is very reluctant to declare interferences, even taking this into account it shows very little independent invention.  So all the people calling for patent reform claiming that technological progress is inhibited because they are not allowed to practice their independent inventions appear to be disingenuous at best.  What is more likely is that they have not independently derived these inventions and they just do not pay a license fee to the true inventor.

First to File vs. First to Invent

The proposed solution for the first to file conversion is the scaled down one year grace period.  Your post clearly points out the limitations of this provision – namely it only protects the inventor against bar issues, but does not protect them from thieves that file a patent before the true inventor.  This does nothing to preserve our patent system for independent inventors or start-up companies.  No one with any resources and knowledge will rely on this scaled down one year grace period.  Within a decade of having passed this reform, people will argue that the one year grace period is meaningless and we should just move to a true first to file system.  Given the cost of filing a patent this will be the nail in the coffin of American Entrepreneurialism.  The patent system will just be for large entrenched companies who create incremental inventions.

Cost of Interferences

Your argument sounds logical.  Since most independent inventors cannot afford the cost of an interference, we will just get rid of them.  This correctly identifies the problem, but proposes an unjust solution.  A just solution is to reduce the cost, time, and formalism associated with interferences.  Logically, the inventor is the first one to conceive of the invention and reduce it to practice.  We need a system that is just and practical.  A practical system that is not just will lead to unintended consequences.  For instance, the publication requirement has led to our patent system giving away our technology to the rest of the world.  The practical answer was to publish our patent application and conform with the rest of the world.  The just and practical answer was to fund the PTO fully, eliminate needless formalities to patents and have patents issue in under one year.  The just and practical answer would have ensured that the US stayed the technological leader of the world and therefore economically vibrant.  Our present economy is the result of the sin of being practical but not just.

24 Month Provisional

While I am not inherently against this proposal, I can just hear the critics screaming “submarine patents.”  Extending the time to 24 months from 12 months that a provisional patent application allows the applicant to file a regular patent application sounds like a practical solution, however the better answer would be to streamline the process of applying for a patent.  We should work to reduce the time it takes to obtain a patent, reduce the cost it takes to obtain a patent, and reduce arbitrary rules required to obtain a patent that add no real value to the patent system.

Real Patent Reform

Nothing in the present patent reform proposal does anything to solve the real problems faced by inventors.  Instead of agreeing to a less bad patent reform bill, which should trash this bill and start over.  The number one issue that has to be in any patent reform bill is to stop fee diversion.  Fee diversion is fraud pure and simple.  If Congress had to live up to Sarbanes Oxley, they would all be in jail.  We need to repeal KSR.  Any objective system of patentability is better than a subjective standard for entrepreneurs and businesses.  (Only a judge or a trial lawyer thinks a subjective test is just).  For more on real patent reform see Real Patent Reform.

 
Patent Reform and Independent Inventor

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.

I disagree that patent reform is good for independent inventors or the US economy.

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.

 
Book Review By Pat Choate: Understanding How to Get the U.S. Economy Moving Again

This is a copy of Pat Choate’s review of The Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation.  Dr. Pat Choate, economist, former Vice Presidential running mate of Ross Perot 1996, Director of the Manufacturing Policy Institute, Phd. Economics University of Oklahoma.

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 the U.S. government as an unintended consequence of its pursuit of other goals and the systemic weakening of the U.S. patent system by the U.S. Supreme Court and the Congress.

The resulting technological stagnation is a major reason the U.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 the U.S. is squandering.

He explains how the Sarbanes Oxley Act cut off the waves of venture investment that did so much to stimulate U.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 in America. Amazingly, Congress is now considering a so-called “patent reform” legislation that would further diminish U.S. innovation. The author convincingly explains how this would damage U.S. innovation. He also explains the consequences of recent Supreme Court decisions on patent law. My observation is that the Roberts Court is the most anti-patent set of Justices in U.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.

 

Here is another article , “The Case for Market Based Patent Reform” pushing patent reform.  This article repeats many of the myths of those people who want to weaken our patent system.  For instance, it repeats the myth that there is a patent quality problem.  All the studies that purport to scientifically show that there is a patent quality problem have flawed methodologies.  For more information see Patent Quality Myth .  What we have in this country is a small number of large companies that have made a business out of infringing (stealing) other peoples’ patents.

 

Scott A Shane, a professor of entrepreneurial studies at Case Western, has an article in the NY Times, explaining that the current patent reform proposals will hurt the interests of start-up companies.  Please read the full article.  Shane shows how the proposed changes in the way damages are calculated for patent infringement would encourage large firms to infringe the intellectual property of start-ups.

 

Given a Voice on Patent Reform by AIPR,

Inventors Send a Clear Message

Researchers, Engineers and Patent Professionals Fear that

Weaker Patents Will Make America Less Competitive

New York, NY, June 4, 2009 – A non-profit organization, American Innovators for Patent Reform (AIPR), has been formed to give a voice to American innovators – inventors, scientists, engineers, researchers, small companies, investors, patent owners and intellectual property service providers – in the ongoing debate on patent reform.

 

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