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Patent Verdicts We Planned For


Written by: Manus Cooney
The American Continental Group
Posted: August 30, 2012 @ 3:21 pm

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News analysis and op-ed pieces following the $1 billion jury decision in Apple v. Samsung have been filled with reactive statements critical of the US patent system.  Apple’s enforcement of its patents may “literally choke innovation” cried one law professor. Others have asserted that holding Samsung accountable for its theft of Apple’s property will prove harmful to consumers.  A critic of the decision said that cases like this will require competitors to innovators like Apple to be much more mindful of patents and to “try to avoid or secure rights to [patents]” before bringing a product to market.

What the critics have not explained is how making it easier for a foreign company like Samsung to steal US-born innovation is in our long-term national interest.

Only a few weeks prior to the Apple decision, another American jury handed down a $1 billion judgment in another patent infringement case brought by another American company against a competitor.   In that case (which the media ironically paid little attention to), Monsanto – the world’s leader in sustainable agriculture – prevailed in an infringement action involving the theft of its revolutionary seed technology.  Just as Apple’s vision and risk-taking in the consumer electronics market revolutionized the industry, Monsanto bet the company on its seed technologies and transformed the business of agriculture.  The verdicts in these two cases should not be treated as outliers.  Rather, they should be accepted by Americans as foreseeable and desired outcomes of a pro-IP industrial policy America has embraced for decades.

In their excellent book The Invisible Edge, IP business strategists Mark Blaxill and Ralph Eckardt help put today’s patent policy debate into some historic and patriotic perspective.   Throughout the 1960s and 1970s, misguided antitrust policies led government regulators to muscle US innovators like Xerox into effectively giving away their patents to competitors.  In the pursuit of promoting more competition, US antitrust regulators directed and supervised a fire sale of America’s technological wealth; effectively gift-wrapping homegrown innovation and donating it to developing economies like Japan thereby making possible the success of companies like Canon, Toshiba, and Sharp.  Antitrust ruled the roost and enforcement of IP by US companies took a back seat.

Although it was too late for Xerox, Blaxill and Eckardt describe how a new industrial policy began to develop in the late 1970s that required the US to strengthen protection of IP in order to: 1. encourage domestic innovation and 2. provide US innovators with the tools needed to defend against unfair foreign competition.   Over a period of decades, the US drove the world’s IP policy agenda and led by example enacting TRIPS, The Trade Act of 1974, The Bayh-Dole Act, and many other IP-strengthening and innovation spawning reforms.  This shift in policy also led the US to press for worldwide acceptance and adoption of strong IP polices as well.   The US essentially bet long on the importance of IP to its economy; effectively negotiating away tariffs on textile and other imports in exchange for foreign adoption of IP laws.

Today, American companies lead the world in industries where technology is important and – not coincidentally – most of that technology has been patented.   If managed properly, our IP advantage gives American companies greater say about where the fruits of US  innovation – profits and jobs – wind up.   Like it or not, in a world where the US is not a dent on domestic manufacturing, IP is increasingly critical to our future prosperity.

China – which realizes that India, Vietnam, and other nations could soon take the manufacturing jobs it took from the US – has more recently begun to realize the importance of IP to their economic interests.  Chinese Premier Wen Jiabao has said, “The competition of the future world is a competition for intellectual property rights.”

The pro-IP policies that the US embraced and advanced over a period of decades are bearing fruit and helped safeguard the innovation that Apple and Monsanto brought to their respective industries.  Whether the amounts awarded in each of this month’s decisions survive appeal is not as important as the fact that both decisions sided with legitimately aggrieved inventors.  The fact that average Americans, sitting as jurors, safeguarded that system is equally significant.   Apple and Monsanto gambled and invested in breakthrough technologies without anyone at a federal government agency or law school guaranteeing them success.  They created markets which, heretofore, did not exist which have generated wealth, jobs, and consumer gain.

At a time when the US policymakers rightly continue to view our Nation’s economic future as one tied to innovation, the Apple and Monsanto cases are important reminders of the role strong intellectual property policies play in fostering, encouraging and protecting that innovation. In both the Apple and Monsanto cases,  the infringers – both determined to be willful infringers – sought to shortcut and skip years of research by essentially copying or using the inventions of others – without payment or permission.  We should be loath to grant credence to the blogosphere activists, advocates for international wealth redistribution, and technology implementers who decry a broken US patent system.  Of course the US patent system has its share of problems and inefficiencies.  But the modest costs and inefficiencies should be measured against what the current patent system assures the American economy of – a continuing flow of capital to innovation.

Advancing policies that promote iPhone knock-offs that have a short term cost benefit for consumers today may mean less jobs for those same consumers tomorrow.

About the Author

Manus Cooney is a Partner at The American Continental Group, where he leads the firm’s IP Policy Group. He is a former Chief Counsel of the Senate Judiciary Committee. Coonney is one of Washington’s leading IP public policy consultants and lobbyists. He provides clients with strategic public policy planning, execution, and representation before federal agencies and Congress.


4 comments
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  1. Manus,

    I noticed this quote from the second linked article:

    “Software patents are clogging the system at every possible point,” says Christal Sheppard, an assistant professor of law at the University of Nebraska College of Law. “This could be the bellwether case that goes to the Supreme Court to decide what invention in the 21st century really means for software.”

    With all due respect, Professor Sheppard is simply anti-patent. Why shouldn’t software be patent-eligible? It performs the same function that hardware used to do, only with more flexibility. In fact, the current technological revolution is in data processing related to software.

    As you correctly point out, do we want America to give away every technological advantage we’ve got relative to the rest of the world? For example, I can recall how NTP was demonized when it sued RIM and got over $600 million. But let it be known that NTP was the small American company while RIM was the much larger Canadian company. Law academia in the U.S. needs to have a reality check as to what IP means to American businesses and especially innovative small American businesses.

  2. EG –

    I had the good fortune to work with Christal Sheppard when she worked on the House Judiciary Committee. Still, I disagree with her suggestion that Americans should leave it to the Supreme Court to “decide what invention means.” But her quote is is telling in that it demonstrates the extent to which the patent critics believe the Courts – populated by judges and clerks who read the same newspapers and attend the same conferences we do – will continue to advance their policy reform agenda.

    On RIM-NTP, rather than come to the conclusion that patents do and should matter more to its business and revisit the long term viability of its technology-implementor-is-the-innovator business model, RIM embraced its patent victimization status and spent years trying to weaken US patent law. Regardless of where one is on the NTP case, it might be interesting to consider where RIM might be today had it really focused on innovating its products post NTP. I stil have a Blackberry and was an early adopter thereof back in the day. But, my next upgrade – like most everyone else seems to have done – will probably involve a platform change.

  3. Manus-

    Thanks for the interesting analysis, which I believe cuts right to the heart of the matter in a very concise manner, using very few but eminently true words. There Does exist a trade-off between patent rights, which might increase consumer prices, but only slightly in my view, and the lack of patent rights, which will result in nearly nobody deciding to play the game at all. Ipso facto, no I-Phones invented at all in the first place if they didn’t think they might prevail at the end of the day.

    It seems as if some here in the US are finally starting to understand how important IP actually is and could be, which is why I find some of the SCOTUS decisions so potentially damaging, since they don’t seem to understand why or how badly it might affect things in the future. Some of their decisions might take years to *correct*, and meanwhile US inventors will be losing important patent rights and/or profits. They seem to be testing their triumvirate sort of powers, where they challenge Congress to usurp their powers, which they of course will eventually. Congress writes the laws, and the courts try to interpret them to the best of their abilities.

    I was unaware that you used to be the counsel for the Senate Judiciary Committee, and I am wondering when that happened to be? Also, I very much appreciate your efforts to oppose the previous patent reform efforts of 2007 and 2009, which I think you might agree were much more onerous than the current AIA legislation. I still don’t like the multiple ways to challenge supposedly valid US patents, but then again I am an independent inventor who doesn’t like to see his patent rights devalued if it can be avoided.

    Best regards,
    Stan~

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