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Protecting the U.S. Patent System


Written by Dan Leckrone
Posted: December 23, 2012 @ 9:30 am
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A wide variety of credible sources confirm the existence of an inexorable link between the profound historical uniqueness of the American Patent System, the rate and quality of American innovation, the rate and quality of American business and job creation, and the profound historical uniqueness and evolution of the American economy.

Accordingly, changing the US Patent System has measurable and profound effects on the American economy just as surely as changing the Tax Code, the Antitrust Laws, or Trade Policy is routinely relied-upon public policy tools for regulating the American economy.

The verdict is not yet in on the constitutionality of the major changes mandated by the 2011 America Invents Act (AIA) as is reflected in the Constitutional challenge discussed in here and here. More importantly, however, is the fact that the smallest and most innovative entities which create most of the new jobs in America already know that the AIA will undermine the US Patent System, and adversely impact their innovation and their job creation in America. It is imperative that we all understand the impact of the implementation of the AIA in 2013 and particularly the ability of large deep-pocketed Multinational Mega-Techs to game the system in the areas of post-grant review, business-method patents, and enforcement. This should be a year where we take control of the AIA implementation and fix the problematic aspects of the law.

Instead, however, the Multinational Mega-techs that succeeded in undermining our Patent System under the guise of “patent reform” resulting in the AIA are already aggressively agitating for even more adverse changes in our nation’s Intellectual Property laws that will further devalue American patents and hobble the American economy.

Over the past several months, these Multinational Mega-Techs — the same folks that had previously disguised themselves as a Coalition for Patent Fairness (“CPF”) and leveraged the AIA into law with their multi-billion dollar Treasuries — have created the “ITC Working Group” and launched a new attack on the US Patent System by lobbying Congress to emasculate the US International Trade Commission (“ITC”). They are pressuring Congress to revoke the statutory authority which enables the ITC to punish and prohibit the importation of products which infringe patents protecting proprietary technology developed by non-practicing entities (NPEs) such as individual inventors, research institutions, and myriads of small R&D companies —any entity whose business model does not involve the manufacture of tangible products.

Particularly instructive are are the ITC’s analysis and report on the “Facts and Trends”, the CPF/Working Group’s spin version of those Facts, and a description of the political pressure the CPF/Working Group is bringing to bear on elected representatives.

Evaluating the relative merits of the attack on the ITC and the Patent System in general requires an understanding of the accuracy of the allegations and information disseminated by the CPF/Working Group attackers. Dissecting their convoluted allegations of fact and law is beyond the resources and capacity of most folks who are not forced to by their involvement in the day-to-day fight for self preservation. However, every American is a Stakeholder in the American economy and therefore a Stakeholder in the Patent System which protects the innovation which fuels the job creation which is the engine of the American economy. And every Stakeholder has the resources and the capacity to understand a staggering record of abusive misconduct, to understand the motives of these attackers, and to evaluate the relative likelihood that their allegations and assertions are accurate or simply self-serving disinformation disseminated to obfuscate and mislead.

Research by prominent economist and Patent System expert Pat Choate during the battle against the AIA quantifies and documents two of the tangible and quantifiable manifestations of the arrogant and abusive business strategies pursued by the 15 CPF companies — having to defend serial Anti-Trust cases, and having to defend serial Patent Infringement lawsuits.

Dr. Choate’s research reveals the monumental stream of judgments, fines, penalties, felony convictions, prison sentences, lawyers’ fees, and wasted management time which results from the arrogant disregard of the Anti-Trust laws by these 15 CPF’ers — felony convictions and prison sentences were avoided in at least one case by a plea bargain which sent a number of other executives to Federal prison. This litany of horribles dwarfs the costs the CPF’ers incur in defending the Patent Infringement cases which result from their misappropriation of technology owned by others — the costs which the CPF’ers so loudly decry in their effort to camouflage their myopic agenda of taking down the US Patent System.

More specifically, from 1996 through 2008 these 15 CPF’ers were sued for Patent Infringement 730 times and paid about two-thirds of all infringement awards by American Courts for a total of only about $4bn, a mere one-tenth of one percent (0.001) of their revenue. During this same thirteen-year period, these 15 CPF’ers had to defend 641 anti-trust cases resulting in judgments, fines, penalties, felony convictions, prison sentences, and defense costs which imposed orders-of-magnitude greater cost burdens on their shareholders, as well as another huge cost burdens on US taxpayers who had to pay for the enforcement — to say nothing of the many small-guy casualties the CPF’ers crushed and left in their wake.

About the Author

Dan Leckrone began his career as a trial lawyer, first in criminal cases as a Captain in the Army’s Judge Advocate General’s Corp serving as the Prosecutor and Chief of Military Justice for the II Corps Tactical Zone in the Republic of Vietnam, and later in business litigation and insurance defense. After seven years, he began his focus on the development and implementation of strategies for the management of the legal affairs of technology-based companies. He became heavily involved in the development and management of multi-national, intellectual property portfolios, the structuring of multi-national joint ventures for the development and use of technology, and the organization and management of complex multi-national litigation. Before founding The TPL Group in the late 1980s, he served as Vice President-Law of Memorex International, General Counsel Domestic of Memorex Corporation, and a “time-shared” Chief Legal Officer for a host of technology-based start-up companies in Silicon Valley.

 


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Posted in: Authors, International Trade Commission, IP News, IPWatchdog.com Articles, Patents, US Economy

7 comments
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  1. Hi Don-

    Why nobody else has responded seems a bit scary to me. I tried, tooth and nail, to oppose both the 2007 and 2009 efforts at patent reform, as they would like to say. Both of those efforts were much more draconian than the currently contemplated *America Invents Act* and it’s eventual implementation, which is still currently pending of some technical corrections, as it were.

    The really sad part of it, was that an erstwhile respected member of the IP community went very far out of his way to shut my efforts down, on just a mere suspicion. Why couldn’t he have just picked up his phone and called me if he was suspicious of anything?

    None of that though, as it might tip his precious hand I suppose. I ended up with about 230 signatories to my letter from independents and practitioners to Congress, but it would have been more like 500 if Ron hadn’t interfered. With the help of a staffer, I was able to file the letter in both the House and Senate records, replete with confirmation letters from both entities.

    The 2009 bill passed in the House, but stalled out in the Senate fortunately. His whole reasoning for shutting me down, was that I had been corresponding with the Innovation Alliance seeking help, and that about three words in my letter didn’t say exactly what he wanted them to. He even had the temerity to call me up one day, and ask me how much I had been paid by whoever to try to help patent reform along. I was totally stunned. Et Tu Brute’, and all like that…. It Might have worked, but control freaks don’t like anything they might not be able to snuff whenever they want to.

    And then again, there is the America Invents Act of 2011. Almost nobody understood the economics involved, wherein tech companies could easily spend 100 Million, to perhaps prevent a billion dollar loss even 4 years down the road. How much profit do they need, and at what expense? Your 1/10th of one percent estimate is spot on, but most are incredulous when I try to tell them that. For less than one percent of more profit, they would gladly mostly destroy the patent rights of smaller entities, or otherwise make them just go away? I don’t think I would call that America’s finest hour by any stretch of the imagination. What next? De-fang the ITC so they can import whatever they like with no repercussions?

    Stan~

  2. Dan – Thanks for writing this. I’m surprised it got published here.

  3. “I’m surprised it got published here.”

    Randy,

    Why are you surprised? Unless I’m missing something, this article is quite negative about the AIA (the Abominable Inane Act). And I think I can speak for Gene that he’s not an AIA fan (nor am I).

  4. I agree with EG.

    This forum often publishes a variety of viewpoints, and not only those with which Gene Quinn agrees with. The only time people “get in trouble” here is when they post irresponsibly and without accountability.

    I find that the people who are quickest to “bash” this site are also those who have no desire to actually engage in a true conversation regarding patent law. There are plenty of other forums where you can post whatever views you want with little or no thought (or ability to support those views). I find it refreshing to visit here and see great articles, interviews with key players in the patent world, and, in my view, a reasonable guard against the junk that pollutes too many other forums.

    Thank you Gene for another great year of patent law coverage and discussion!

  5. Anon-

    I would like to second your viewpoint. I haven’t found the depth and breadth of patent law coverage that Gene presents anywhere else, and the thoughtful and well-informed discussions here are second to none, as far as I am concerned.

    PS to Dan- Sorry to have gotten your first name wrong in my earlier post, and my reference to Ron was in regards a Ron R. that was trying to hinder my attempts.

  6. I went and looked up the Michel article, which still rings as true as ever as regards patent reform here in the US. I would submit that US patent law didn’t require any modernization at all, but just needed to be toned down to the point that others in the world would seem to like it a little better. Is that an improvement? I am not very sure at all.
    http://www.ipwatchdog.com/2011/07/10/torpedoing-patent-rights/id=18022/

    I think it is very safe to say that Cheif Judge Michel knows whereof he speaks, after having spent about 30 years adjudicating similar issues.

    Stan~

    Best regards,
    Stan~

  7. Stan in your Link, ex-Chief Judge Michel writes about Europe:

    “….best solution is to drop Post Grant Review. It does not work well in Europe”

    You tell us that Paul Michel “knows whereof he speaks”. On that quote, sorry, he doesn’t.

    Mind you, if he had instead written that the EPO system of opposition to duly issued patents will not work well if translated into the USA, I would have agreed. stan, do you think, that’s what he meant to say?

    But then again, he’s an ex-Chief Judge. Presumably he chooses his words carefully, and says what he means.