State of Innovation

Patents and Innovation Economics

Supreme Court Alice v. CLS Decision

The long awaited decision by the Supreme Court in Alice v. CLS Bank came out on June 19, 2014, while I was away giving a talk at Atlas Summit 2014, which is why this post has been delayed.  Even in the statement of the question presented in the case the Court got it wrong:

The question presented is whether these claims are patent eligible under 35 U. S. C. §101, or are instead drawn to a patent-ineligible abstract idea.

Abstract ideas are not an exception to section 101, despite a long line of nonsense by the court.  Every invention is an abstract idea in that it describes a class of things, not a specific instance.  The failure (purposeful) of the Court to define what they mean by an “abstract idea” has resulted in an incomprehensible standard.

An abstract idea is a thought or conception that is separate from concrete existence or not applied to the practical.  From this definition, it is clear that if an inventor were to describe an “abstract idea” it would be a section 112 issue, not a 101 issue.  In this case, Alice describes and claims a concrete existence that is applied to the practical problem of settlement risk that saves billions of dollars a year.  Note using any rational definition of abstract idea, means it would not be a “process, machine, manufacture, or composition of matter.”  Therefore the abstract ideas exception is just redundant.  But the Court is unable to think logically, so instead of applying the statute, they make up the law as they go along.

In any event, we need not labor to delimit the precise contours of the “abstract ideas” category in this case. It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here. Both are squarely within the realm of “abstract ideas” as we have used that term.

Biliski did not claim or describe “risk hedging” and Alice did not describe “intermediate settlement” any more than the patent for the LASER described “light making.”  The Court’s characterization of these inventions with two word tag lines is intellectually dishonest.

Note the Court admits that they refuse define what they mean by abstract idea.  Failure to define one’s terms is the hallmark of charlatans and tyrants.  The Court’s statement means that no one can know what will be considered an abstract idea until the Supreme Court rules.  This is a judicial power grab.

Below the Court tries to justify what is clearly an absurd position.

The fact that a computer “necessarily exist[s] in the physical, rather than purely conceptual, realm,” Brief for Petitioner 39, is beside the point. There is no dispute that a computer is a tangible system (in §101 terms, a “ma­chine”), or that many computer-implemented claims are formally addressed to patent-eligible subject matter. But if that were the end of the §101 inquiry, an applicant could claim any principle of the physical or social sciences by reciting a computer system configured to implement the relevant concept.

But what petitioner characterizes as specific hardware—a “data processing system” with a “communications controller” and “data storage unit,” for example, see App. 954,958, 1257—is purely functional and generic. Nearly every computer will include a “communications controller” and “data storage unit” capable of performing the basic calculation, storage, and transmission functions required by the method claims.

A computer is a machine and those are covered by 101.  The Court is intellectual dishonest or just plain stupid when they state “an applicant could claim any principle of the physical or social sciences by reciting a computer system configured to implement the relevant concept.”  Alice never said any such thing, but because the Justices are incompetent in reading claims and computer technology, they ignore the claims and description, and come up with their own characterization.

Here they again prove they cannot read the claims and instead paraphrase them, of course ignoring any part they find inconvenient.

The representative method claim in this case recites the following steps: (1) “creating” shadow records for each counterparty to a transaction; (2) “obtaining” start-of-day balances based on the parties’ real-world accounts at exchange institutions; (3) “adjusting” the shadow records as transactions are entered, allowing only those transactions for which the parties have sufficient 8resources; and (4) issuing irrevocable end-of-day instructions to the exchange institutions to carry out the permitted transactions. See n.2, supra.

The Court then proceeds to suggest that there is some sort of balancing test to 35 USC 101.

The former “would risk disproportionately tying up the use of the underlying” ideas, id., at ___ (slip op., at 4), and are therefore ineligible for patent protection. The latter pose no comparable risk of pre-emption, and therefore remain eligible for the monopoly granted under our patent laws.

Balancing tests are inherently unconstitutional.  A nation of laws is based on Natural Rights and clearly delineated laws.  A balancing test turns that into a nation of men.  Judges like them because they are the “men” so it is an inherent power grab.  The Constitution requires the Rights of Inventors be secured.  It does not allow for judicial balancing of inventors’ rights.

The Court then ignores the 1952 Patent Act and deconstructs the claims, which not only violates 35 USC 103, but is illogical (every invention is a combination of existing elements – conservation of matter and energy).  In addition, it brings back the discredited idea of “inventive concept”, which the 1952 Patent Act specifically was directed at eliminating.

To answer that question, we consider the elements of each claim both individually and “as an ordered combination” to determine whether the additional elements “transform the nature of the claim” into a patent-eligible application. Id., at ___ (slip op., at 10, 9). We have described step two of this analysis as a search for an “ ‘inventive concept’”—i.e., an element or combination of elements that is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.” Id., at ___ (slip op., at 3).

It would be nice if the Justices could actually read a statute.

The following statement shows the intellectual dishonesty of the court.

A claim that recites an abstract idea must include “additional features” to ensure “that the [claim] is more than a drafting effort designed to monopo­lize the [abstract idea].” Id., at ___ (slip op., at 8–9). Mayomade clear that transformation into a patent-eligible application requires “more than simply stat[ing] the [ab­stract idea] while adding the words ‘apply it.’Id., at ___ (slip op., at 3).

Alice’s patent application never said any such thing.  The Justices should be impeached for this sort of outrageous characterization.

Here again, the Justices prove they have no idea how to read a claim.

On their face, the claims before us are drawn to the concept of intermediated settlement, i.e., the use of a third party to mitigate settlement risk. Like the risk hedging in Bilski, the concept of intermediated settlement is “ ‘a fundamental economic practice long prevalent in our system of commerce.’” Ibid.; see, e.g., Emery, Speculation on the Stock and Produce Exchanges of the United States, in 7 Studies in History, Economics and Public Law 283, 346–356 (1896) (discussing the use of a “clearing-house” asan intermediary to reduce settlement risk).

The claims are not drawn to anything.  This is just an attempt to ignore the limitations of claims to smear the invention.  The LASER is a part of the fundamental practice of creating light that has been known before for millions of years.  Does that mean it should not have been patentable?

 

Conclusion

The bottom line on this case is the Court is opposed to patents that cover financial products.  Alice and Biliski are Wall Street protection act decisions.  It is impossible to draw any conclusions broader than the Court will not allow patents on financial products.  This is not logic and it is not law.  It is time that we withdraw the Supreme Court’s jurisdiction over patent cases.  Not one of the Justices or their aides are legally or factually competent to be patent attorneys, and the consequences of their incompetence are just too high.

 

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July 2, 2014 Posted by | -Law, -Philosophy, Patents | , | 5 Comments

Everything Wrong With Patent Law Can Be Found in the Koontz Case

At first glance the Koontz v. St. Johns River Water Management District case does not appear relevant to patent law.  It is a Fifth Amendment regulatory takings case revolving around wetlands and private property.  But as I will explain in more detail below the underlying problem in both these cases is a lack of understanding of property rights.  The facts of the Koontz case according to Fox News are

 Coy Koontz in the 1970s bought a parcel of land, the majority of which later was classified a wetland. When he sought a permit to develop a portion of it in the 1990s, the Florida agency in charge of the area said Koontz would need to take steps to remediate the damage he would cause.

Koontz offered to give the agency 11 of the 15 acres, in exchange for a permit to develop the remaining land. In addition, the state government said he would need to undertake other improvements. Options ranged from numerous changes to the original plot to paying for enhancement of 50 government-owned acres miles away from the Koontz plot.

Though Koontz continued to offer the 11 acres, he refused to go along with the government’s other requirements and decided to sue.

Antonin Scalia’s comments at oral argument illustrate this lack of understanding of property rights.  “I can’t see where there’s a taking here,” Scalia said, adding, “Nothing’s been taken.”  Ronald Reagan must be rolling over in his grave – he appointed Scalia (For more of  Scalia’s outrageous thoughts see The Soviet Union’s Constitution Was ‘Much Better Than Ours’).  Scalia’s thought process, as best I can understand it, is that Koontz still has legal title to his land and his land is still there – it was not taken.  Judge Scalia seems to not understand the difference between property rights, possession, and the object.  (For more information click here)  Property rights define a relationship between a person and an object or thing.  When Mr. Koontz acquired title to the land, it did not have lien or an easement that required him to give up a part of land or pay for the enhancement of government land.  The government changed his rights in the land.  The Fifth Amendment states “nor shall private property be taken for public use, without just compensation.”  Mr. Koontz right to develop his property and his right to enjoyment of his property have clearly been altered without compensation.  The government has taken these rights in his land for public use, so it is clearly a taking.

Scalia has also shown an appalling lack of understanding of patent law and it is because he does not understand property rights.  Property rights derive from the fact that a person owns their self and therefore they own those things they create.  Patents are property rights that the inventor gets because they created a new invention.

Mr. Koontz attorneys work for the Pacific Legal Foundation.  This group does good work protecting economic freedom, but they also do not understand property rights either.  At least one of their lead attorneys believes intellectual property should not exist – see Another Confused Libertarian on Intellectual Property .  These people believe that property rights exist or should exist only because they result in more optimum economic outcomes.  Really, they should call they them ‘property privileges’ or ‘property expediencies.’  Their commitment to so-called property rights only lasts until they are convinced they know what better to do with your property.

So what we have is a case in which the supposed defenders of property rights do not understand them.  What do you think the likely outcome will be?

 

Patent and Property Rights

When the so-called defenders of property rights, believe they are just a political expediency that produces the best outcome for the collective, you can bet they will never support patents, which are property rights in an invention.  I have seen patent attorneys attempt to use this line of reasoning with patents.  They are happy to have people characterize patents as a monopoly, but think this is irrelevant because they can show patents are good for the economy.  These people do not understand the philosophical battle over patents or the definition of a monopoly.  They believe that because the anti-property rights crowd believe in monopolies for electrical and water systems, they will be in favor of monopolies for inventions.  However, they forget that in the electrical and water systems case the anti-property rights crowd supports this because it increases government power, not for the bogus efficiency argument.  But patents increase the power of the individual, not the state.  So it does not matter how well you can show that patents are important for economic growth and improve everyone’s life, they will not favor it because it increase the power of private citizens.

Property rights are derived from the right to own oneself.  If you do not own yourself, you are not free and do not live in a free society.  If you own yourself, then you own that which you produce, including inventions.  The patents are monopolies argument is without any merit from a historical, definitional, and empirical point of view.  Understanding that patents are property rights is the key to both solving the patent problem and the Koontz case.

 

For more on patents and monopolies see.

 

Monopoly/Rent Seeking vs. Property Rights/Intellectual Property .

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

Patents: Monopoly or Property Right a Testable Hypothesis

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

More on the Myth that Patents are Monopolies.

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

Property Rights, Possession and Objects

This post explains the difference in the concepts of property rights, possession, and objects.  Most economists and patent detractors confuse these concepts.  The origin, definition, and legal basis of property right are explained.

 The Myth That Patents are a Monopoly 

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

 

January 25, 2013 Posted by | -Legal, News, Patents | , , , , | 5 Comments

Prometheus Fall Out: The SmartGene Case

The SmartGene v. Advanced Biological Laboratories case is the first fallout from the Supreme Court’s Prometheus decision.  Advanced Biological Laboratories (ABL) owns two patents (6,081,786 6,188,988) directed to computerized methods of guiding the selection of therapeutic treatment regimens, particularly for HIV.  The patents explain that the new treatment options coming on line, the complex nature of the disease and how patients react to the disease and the use of multiple different treatments that can cause complex drug interactions results in the need for computerized system to help doctors treat their patients.  The background section points to academic papers and patents directed to expert systems on this problem.  So clearly other people felt there was a need for such a system.

The claims are directed to three expert systems on a computer and inputting data about the patient.  The computer then ranks the treatment options and provides advisory information to the doctor about the treatment options.

The courts holding was

 The patents-in-dispute do no more than describe just such an abstract mental process engaged in routinely, either entirely within a physician’s mind, or potentially aided by other resources in the treatment of patients.

The Court also finds that the patents-in-dispute are invalid under the “machine-or-transformation” or “MOT” test utilized in some of the Supreme Court and Federal Circuit precedent.

Abstract Mental Process

The claims are clearly directed to a computer.  The computer is running three separate expert systems and provides a rank list of therapeutic options and advisory information.  Computers are not abstract mental processes.  They use electricity, they cause the state of transistors to change, they cause electrons to change position.  This is not an abstract mental process.  Judge Beryl A. Howell, the judge in this case needs to have her head examined if she believes a computer is an abstract mental process.  But what can you expect from someone who got their undergraduate degree in philosophy and probably never took a science or math course in college.  For Judge. Howell’s edification, I will point out that a computer is a general purpose electronic circuit.  Software is a way of wiring this general purpose electronic circuit.  So when a software program is executed it changes the wiring of the electronic circuit and makes it a specific electronic circuit.  Wiring an electronic circuit is not an abstract mental process.  This is just another depressing example of why we need courts and judges who understand technology and patent law in resolving patent disputes.

Because so many people, including patent attorneys appear to be confused about what an abstract mental process is, I will write a claim below that would fit the definition.

 A method of solving an integral in closed form, comprising the steps of :

mentally reviewing an integral to be solved;

selecting mentally one of a plurality of techniques for solving the integral; and

applying mentally a selected technique from one of the plurality of techniques to the integral, wherein the plurality of techniques include integration by substitution and integration by parts.

MOT

The invention clearly involves a computer.  A computer is a machine.  When an instance of code is executed by a computer it is a specific purpose electronic circuit.  A specific purpose electronic circuit converts electricity into states of transistors – thus the transformation prong is also satisfied.  But an attorney who has never taken a class in physics, let alone electrical engineering would not have this basic knowledge.

April 21, 2012 Posted by | -Law, Patents | , , , , | Leave a comment

Mayo v. Prometheus: An Update

The Supreme Court will hear arguments in this case on December 8, 2011.  This case is about whether Prometheus’ patents (6,355,623 & 6,680,302) claim patent eligible material under 35 USC 101.  Section101 is a bit obscure, but logically anything that is not found in nature (separate from man) and that solves an objective problem is an invention.  Ultimately, section 101 is a threshold question of whether the subject of the patent is an invention. The novelty requirement, section 102, is not asking whether the subject of the patent is an invention, but whether the applicant is the inventor.  The nonobviousness requirement, section 103, is really the outgrowth of judicial activism (see Non-Obviousness: A Case Study in Judicial Activism).  The only logical basis for the nonobviousness requirement is that you have to be more than just the inventor to deserve a patent.  This is a violation of the Constitution, Article 1, Section 8, Clause 8, but I digress.  Section 112 of the statute is about whether the applicant fulfilled their part of the social contract.  The only question before the Court is whether the patents are directed to an invention.

The patents claim methods for determining the optimal dosage of thiopurine drugs used to treat gastrointestinal and non-gastrointestinal autoimmune diseases.  Thus, the questions in this case are whether determining optimal dosages of thiopurine drugs to treat autoimmune diseases exists in nature separate from man and whether this solves an objective problem?  Clearly, determining optimal dosages does not exist in nature for any drug and the patent solves the objective problem of determining the optimal dosages of thiopurine drugs for autoimmune diseases.  CASE DISMISSEDThis case is straight forward and should never have been granted certiorari by the Supreme Court. I have previously written about this case at Mayo v. Prometheus – Supreme Court Grants Cert (Again).

I consider it bad news that the Supreme Court granted certiorari in this case, because they have gotten so many patent cases wrong in the last five years.  Their understanding of patent issues would make a first year patent associate blush.  However, the last patent case they decided, Stanford University v. Roche Molecular Systems, showed some signs for hope.

Mayo has attempted to obscure the issues, by blurring the differences between section 101 & sections 102 & 103.  For instance “Mayo argues that the claims’ physical steps should be disregarded because they are old in the art.” (p. 1 Prometheus Brief)  Whether these steps are new or old is totally irrelevant to the 101 question.  This question is only relevant to the question of novelty and non-obviousness.  But even with respect to the question of novelty and non-obviousness this statement is non-sense.  It is a violation of both logic and legal precedent.  Every invention ever created is a combination of known elements (steps) because of conservation of matter and energy – you cannot create something from nothing.  From a legal precedent point of view, this is an attempt to reinstitute the point of novelty test, which was always nonsense because it violates conservation of matter and energy.

Mayo also attempts to argue that Prometheus has patented a law of nature.  This is absurd – the optimal dosage for an individual human being of thiopurine drugs, is a law of nature?  Admittedly, I am not an expert in pharmacology but there is no way that determining an individual dosage for a specific person is a law of nature.  Mayo knows this is non-sense, so they attempt to make the argument respectable by again disregarding parts of the claims.  A law of nature would be something like the absorption rate of a drug into a cell is based on certain factors.  An application of that law of nature, for instance to tailor a drug so it has a faster or slow absorption rate is an invention.

Mayo then puts forth the fraudulent argument that every patent should be evaluated by the courts as to whether it “promotes science and the useful arts.”  First, of all the preamble to Article 1, Section 8, Clause 8 is not limiting and never was meant to be limiting.  It is standard knowledge to every patent attorney that preambles are not meant to be limiting.  The Constitutional clause uses the word “RIGHT” and by right the Founding Fathers meant “natural rights”, which are not subject to some utilitarian purpose. The right to Life, Liberty, and the Pursuit of happiness are not subject to some utilitarian goal, they are unalienable – inherent in being a human being.  The fraudulent nature of this argument can be seen in the fact that its proponents never suggest that every trashy novel, movie, or painting should not receive copyright protection because it does not advance science and the useful arts.

Mayo then puts forth another argument made by every parasite – namely that patents are a monopoly.  This is just nonsense.  Patents are a property right not a monopoly. The statute defines patents as a personal property right and patents meet all the tests of a property right.  Namely, 1) Does the right arise because the person created something?  Creation is the basis of all property rights.  The law is just recognizing the reality that the person is the creator and without that person the creation would not exist.  This is consistent with Locke’s Natural Rights and Ayn Rand’s Objectivism. 2) If someone else was the creator would they have received the right in the creation? This ensures that the right does not arise from political favoritism. 3) Is the right freely alienable?  Freely alienable means that right can be sold, transferred, divided, leased, etc.  This is a key feature of property rights. Patents fit all three criteria and are property rights.

Mayo then puts forth the PATENTABLY absurd argument that the patent system could be replaced by government funding of inventions.  The absurdity of this argument can be summed up in one word – SOLYNDRA. First of all, the Supreme Court does not have the authority to make the decision to scrap the patent system and replace it with government funding.  This argument by Mayo borders on delusional.  Even Congress does not have the right under the Constitution to eliminate patents that would require a Constitutional Amendment.

Mayo has neither the facts or the law on its side so its approach is to purposely confuse the issues and to outright lie.  Mayo should be ashamed to have its name associated with the parasitic attempt to rob the invention of others.

 

November 8, 2011 Posted by | -Law, Patents | , , , , , | Leave a comment

BILSKI: the Good, the Bad, and the Ugly

First, the decision that Bilski’s claims were not considered to be patentable subject matter is not surprising.  The Supreme Court’s hostility to the Bilski patent was evident in oral argument.

THE GOOD

It is not surprising that the most patent friendly Justice (based on the opinions in this case) is Justice Kennedy.  President Ronald Reagan, who was the last president to understand the importance of patents to economic growth, appointed him.  For more information see National Inventor’s Day.  The so-called “conservative” justices on the court could learn a lot by reviewing Reagan’s understanding of patents and how they fit into his economic program.

No categorical rule was proclaimed against business method patents.

Section 101 similarly precludes the broad contention that the term “process” categorically excludes business methods. The term “method,” which is within §100(b)’s definition of “process,” at least as a textual matter and before consulting other limitations in the Patent Act and this Court’s precedents, may include at least some methods of doing business. p. 10.

The Court acknowledges that the “machine or transformation test” might inhibit patents on software.

The machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age—for example, inventions grounded in a physical or other tangible form. However, there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age.  As numerous amicus briefs argue, the machine-or-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals. p. 9.

The Court acknowledges, (Kennedy), that there is no good definition of a business method patent.  I have made a similar observation in Bilski, Software Patents and Business Method Patents.

The following passage provides a ray of hope that the Court may someday reach a proper analysis of section 101:

that the term “process” categorically excludes business methods. The term “method,” which is within §100(b)’s definition of “process,” at least as a textual matter and before consulting other limitations in the Patent Act and this Court’s precedents, may include at least some methods of doing business. See, e.g., Webster’s New International Dictionary 1548 (2d ed. 1954) (defining “method” as“[a]n orderly procedure or process . . . regular way or manner of doing anything; hence, a set form of procedure adopted in investigation or instruction”). The Court is unaware of any argument that the “‘ordinary, contemporary, common meaning,’” Diehr, supra, at 182, of “method” excludes business methods. Nor is it clear how far a prohibition on business method patents would reach, and whether it would exclude technologies for conducting a business more efficiently. p. 10.

THE BAD

The concurring opinions (Stevens, Ginsburg, Breyer, Sotomayor) (Breyer, Scalia) show that most of the Justices want a categorical rule against business method patents.  However, they fail to provide a definition of a business method patent.  Because the Justices refuse to provide a definition, it is likely that different Justices mean different things by a business method patent.  The only clue as to what they mean by a business method patent is either a way of organizing people or a patent related to finance or money.  I explain why excluding finance and money from patentable subject matter is flawed at Is Money and Abstract Idea.

The Opinion leaves behind a confused set of Jurisprudence on Section 101.  Steve Kunin’s AIPLA presentation is excellent at pointing out the nonsense of the Court’s previous opinions on point.

The Opinion seems to overturn State Street, which was the most intelligent statement of section 101 by our Courts.

THE UGLY

The Court confuses statutory subject matter 101 with Novelty 102 and Non-Obviousness 103.  For instance, Justice Kennedy writes:

In light of these precedents, it is clear that petitioners’ application is not a patentable “process. Claims 1 and 4 in petitioners’ application explain the basic concept of hedging, or protecting against risk: Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class. p. 15.

Whether Bilski claims a well known economic practice is irrelevant to a 101 analysis.  Confusing and blending the different sections of the patent statute is a consistent problem of the Supreme Court,  and first year patent law associates.

The Court again proves that they do not understand that every invention is a combination of known elements and that pointing out that one of the elements is known provides no insight about a patent.  Specifically the Court writes,

These claims attempt to patent the use of the abstract idea of hedging risk in the energy market and then instruct the use of well-known random analysis techniques to help establish some of the inputs into the equation.

For more information see   Non-Obviousness: A Case Study in Judicial Activism.

All of the opinions of the Court embrace the myth that a patent is a monopoly.  A patent is a property right.  Just as individuals have property rights in land or automobiles.  Property rights are derived from Locke’s theory of Natural Rights. This is completely consistent with patents.  For more information, please refer to, The Myth that Patents are a Monopoly: and Scarcity – Does it Prove Intellectual Property is Unjustified? .  The Court would be wise to consult the preeminent  philosopher on Capitalism: see Ayn Rand on Intellectual Property.

The Court repeats the familiar myth about the Preamble to the Patent and Copyright clause of the Constitution.  We know this is a red herring, because the Court and other proponents of this theory never discuss that a trashy novel which does not “promote the Progress of Science and useful Arts” should not receive Copyright protection.  In addition, the same argument is made with respect to the second amendment and the Court clearly rejected this interpretation.  It is Intellectual Fraud to suggest that the Preamble is meant to limit the “rights” of inventors and authors.  For more information see  Levine & Boldrin Argue the U.S. Should End the Patent System .

The Court repeats well known myths about the economics of patents.  For instance, the Court writes patents

can discourage research by impeding the free exchange of information, for example, by forcing people to avoid the use of potentially patented ideas, by leading them to conduct costly and time-consuming searches of existing or pending patents, by requiring complex licensing arrangements, and by raising the costs of using the patented methods. Although [e]very patent is the grant of a privilege of exacting tolls from the public. p. 43.

The Court does not understand that inventions are the only method of increasing real per capita income and are property rights not monopolies. By forcing people to invent instead of copy or perform redundant research we increase our wealth and protect property rights.  For more information see Source of Economic Growth.

SCARY

Nonetheless, not every new invention or discovery may be patented. Certain things are free for all to use. “Bonito Boats, Inc. v. Thunder Craft Boats, Inc.

Really, the Constitution states that Congress is to secure “for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  What part of “Right” do the Justices not understand? The Constitution does not allow Congress or the Supreme Court to decide which inventions ought to receive patent protection.  This complete disregard for the Constitution shows that this Supreme Court is hostile to patents and has no intention of doing their Constitutional duty of securing the Rights of inventors.

June 29, 2010 Posted by | -Law, Patents | , , , , | 3 Comments

Why Investors Need to Pay Attention to the Bilski Decision

A significant portion of the value of stocks is represented by intangible assets.  According to Ocean Tomo, Patent Attribution to Equity Returns , 75% of the value of the S&P 500 is intangible assets.  The Bilski case in front of the Supreme Court could significantly affect the value of these intangible assets.

Bilski is a case about whether certain types of technology are patentable subject matter.  The patent in this case was directed to a financial system for hedging commodities risk.  However, the Supreme Court may use this case to undermine patents related to software and business methods.  If the Court does significantly limit the patentability of software based inventions, the value of the intangible assets of many of these companies will be significantly reduced.  (For more information on the Bilski case see, Bilski, Financial Patents, and the Financial Crisis , and Bilski, Software Patents and Business Method Patents .

The most important intangible asset of most companies is their patents.  The nadir in this country’s legal atmosphere for patents occurred in the 1970s.  It is not surprising that the chart above shows 1975 as the year when companies had the lowest percentage of their value represented by intangible assets.   According to the book, The Invisible Edge , the FTC & DOJ used antitrust law to force US companies to give away the technology associated with over 50,000 patents.  The result was the U.S. transferred its cutting edge technology to Japan and many U.S. companies found themselves unable to compete with the Japanese.  The book cites a MITI study that substantiates that most Japanese companies took advantage of this traitorous policy by the U.S. government to catch up with U.S. companies technologically.  This policy also resulted in reduced research and development spending.  Continue reading

January 26, 2010 Posted by | -Law, Patents | , , , , , , , , | 2 Comments

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 (https://hallingblog.com/2009/11/10/bilski-case-reveals-supremes-ignorance/) 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

Is Sarbox Constitutional?

Is Sarbox Constitutional?

The Supreme Court is reviewing whether the Public Company Accounting Oversight Board created by Sarbanes Oxley is Constitutional.

According to Yahoo Finance,

“A small Nevada accounting firm and an anti-tax group brought the challenge to the 2002 Sarbanes-Oxley law, arguing that the board created by the law violates the Constitution’s separation of powers mandate because the president cannot appoint or remove its members.”

“The board wields too much, unchecked power, Michael Carvin, the challengers’ lawyer told the court.”

I have discussed the untold damage Sarbanes Oxley has caused to U.S. innovation.  For more information see Sarbanes Oxley – the Medicine is Worse than the Disease and Sarbanes Oxley – the Medicine is Worse than the Disease-2 .

The Supreme Court in recent history has rarely found that there has been an unconstitutional delegation of power.  It is possible that Board may violate the Administrative Procedure Act, but I do not believe that this is the issue before the Supreme Court.  Even if the Supreme Court were to rule that the Board is unconstitutional, this is unlikely to significantly reduce the damage caused by Sarbox.  The good news is that Sarbox seems to be under attack on a number of different fronts.

December 7, 2009 Posted by | Uncategorized | , , , , | Leave a comment