State of Innovation

Patents and Innovation Economics

Wall Street Journal Proves its Patent Ignorance

In an article entitled “Could Morse Have Patented the Web? Under today’s loose standards, the telegraph inventor might own the Internet” , dated March 26, 2012, the Wall Street Journal demonstrates their incredible ignorance of patent law.  The article states, “The standards for patents are so low that simply having an idea often justifies a patent.”  Obtaining a patent takes at least several years to obtain and tens of thousands of dollars.  It is the most expensive, time consuming, and most examined property right before you obtain title of all property rights.  In addition, when Morse obtained his patent the requirement that a patent cover a non-obvious invention did not exist.  This by itself makes it more difficult to obtain a patent today than in Morse’s day.  The author’s ignorance of patent law embodied in the above statement is monumental.

But the ignorance does not stop with this statement, the article goes on to state that:

 “The patent explosion began in the mid-1990s, when the U.S. Court of Appeals for the Federal Circuit ended the requirement that patents specifically define inventions.”

First of all the U.S. Court of Appeals for the Federal Circuit never did any such thing.  The requirement for specifically defining one’s invention in a patent has not changed since at least the 1952 patent act.  Second there has been no explosion in the number of issued patents in the US to US based inventors.  The numbers of patent issue to US based inventors has been flat for at least a decade, see chart below





and by every objective measure (GDP/patent, R&D/Patent, Population/patent) the quality of patents is increasing – see Patent Quality Nonsense.

The article then quotes a forthcoming article from the CATO Institute that it is impossible for a software company to determine if they are infringing an existing patent.

 They estimate that there are 600,000 firms producing patent-eligible software and 40,000 software patents granted each year. They say this comes to “24 billion new patent-firm pairs each year that could produce accidental infringement.

Since the total number of issued patents since 1836 is just over eight million this is complete nonsense and academic fraud.  The exaggeration of the authors from the CATO Institute and Yale Law School is criminal.  Both of the authors of this study should be fired and never given another academic job.  But so low is the state of our academic research no one will question their outrageous assertions.

Companies do market research on competitors in the software space and clearly do not feel overwhelmed by the “24 billion” new pairs of potential products.  Most software companies I know are very good at narrowing down their market research and the same applies to patents.  Companies spend huge sums on market research, but complain about spending a little money to determine if they are violating someone’s property rights.  In fact, most companies never do check to see if their products are likely to infringe a patent.  This is like starting construction on a building without checking that you have clear title to the land.  We would not tolerate or glorify the stupidity in the case of real property, so why should we do so in the case of patents?

Finally, to the point that Morse could have patented the Internet this again shows the author’s ignorance of patent law.  Patents cover an invention.  Anything that incorporates that invention infringes the patent.  For instance, if I have a patent on a microprocessor and you incorporate a microprocessor into your cell phone you infringe my patent.  I am not asserting that I invented the cell phone, I am asserting that I invented the microprocessor and you are infringing my patent by incorporating it into your cell phone.  According the Supreme Court’s decision Morse did invent a system for repeating electromagnetic signals so they could be sent over long distances.  Repeaters are still used to amplify electronic signals, including signals sent over the Internet.  So if Morse’s patent were still valid (they expired around 150 years ago), then yes the Internet would likely have infringed his patent – according to the Supreme Court’s characterization.  This would not mean that Morse was asserting he invented the Internet.  Note that the inventor of the transistor, the inventors of error correction codes, the inventor of microprocessors, the inventor of electronic amplifier circuits, and many, many more would be in the same hypothetical situation – but of course this is meaningless since their patents expired years ago.  All this proves is that all inventions build on earlier inventions and the author of this article’s ignorance of how patents work, knows no bounds.


Could Morse Have Patented the Web? Under today’s loose standards, the telegraph inventor might own the Internet” , dated March 26, 2012, the Wall Street Journal


March 29, 2012 Posted by | -Philosophy, News, Patents | , , , , , , | 1 Comment

America Invents Act Will Not End Fee Diversion – Paul Ryan Thinks Stealing From Inventors is A-OK

According to the Wall Street Journal, “two powerful House Republicans, Rep. Hal Rogers (R., Ky.), chairman of the Appropriations Committee, and Rep. Paul Ryan (R., Wis.), chairman of the Budget Committee, called this week for changes in the legislation that would restrict the patent office’s ability to keep its own fees.”  Ending fee diversion was the only positive part of the America Invents (Not) Act, HR 1249, S. 23).  Representatives Rogers and Ryan should be condemned for this action.  Congress is in the position of trustee of the Patent Office funds and if Congress were subject to Sarbanes Oxley Mr. Ryan & Mr. Rogers would be in jail today along with the rest of Congress.  This makes the America Invents Act a complete farce.  Ending fee diversion was always a little bit is not red herring as the next Congress could always just change this law.

When the government creates laws that do not apply to the government, just private citizens, this is the essences of tyranny.  Rep. Ryan who is suppose to be a fiscal conservative and watching out for taxpayer dollars, is advocating the theft of inventor fees.  If that is what the Tea Party and Paul Ryan consider being fiscally conservative, then it is clear that everyone in Washington believes that you have no right to the money you earn.

June 8, 2011 Posted by | -Law, Patents | , , , , , , , , , , , , | 2 Comments

More Evidence Sarbox is Hurting Our Economy

AWall Street Journal article discusses how a number of European companies are delisting from US stock exchanges.  The article points out that cost of complying with US law is outweighs any benefits derived by being listed on a US stock exchange.  It also explains that the cost of Sarbanes Oxley is increasing, despite earlier predictions that the cost of SOX would decline over time.  The new financial reform bill does nothing to address these problem.  In fact the present financial reform bill, at over 1400 pages, is going to make it more difficult for start-ups to raise money and more costly to go public in the US.

May 20, 2010 Posted by | -Economics, Innovation | , , , , , , | 1 Comment

WSJ: Big Business Creates Jobs Too

According to the Wall Street Journal Article Big Business Creates Jobs Too, “ignoring the important role that big business plays in job creation is a short-sighted mistake.”  The author also states

It is actually within large companies that an entrepreneur can find, already in existence, much of what it takes to insure a venture’s success. This includes the capital required to fund startup costs, the marketing presence to create a near-instant reach to customers, and the standing required to gain trust of both vendors and customers.

While it is true that large companies innovate, on a per employee basis they are much less innovative see SBA report on point.  In addition, the reason for our economic woes are not that the government has failed implement policies that support large companies, but that it has implemented polices that inhibit technology start-ups.  Only technological innovation results in real per capita increase income.  The Wall Street Journal article is misleading at best.

Unfortunately, since 2000 we have passed a number of laws and regulations that are killing innovation in the US.  The incredible innovation of the 90s was based on technology start-up companies built on intellectual capital, financial capital, and human capital.  All three of the pillars have been under attack since 2000.  Our patent laws have been weakened reducing the value of intellectual capital.  Sarbanes Oxley has made it impossible to go public reducing financial capital for start-ups and the FASB rules on stock options have made it harder to attract human capital to start-ups.  The Decline and Fall of the American Entrepreneur: How Little Known Laws and Regulations are Killing Innovation, explains these problems in more detail.

January 8, 2010 Posted by | -Economics, Innovation | , , , , , | Leave a comment