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Why Are Individual Inventors Important To America?

Written by Raymond P. Niro
Niro, Haller & Niro
Posted: July 7, 2013 @ 9:30 am
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President Lincoln was an independent inventor and patent owner.

Historically, innovation by individual inventors has driven our economy by creating new jobs and companies. Consider the names of some individual inventors who ultimately formed companies to exploit their ideas, but who initially manufactured nothing: Westinghouse (air brake), Ford (car), Gillette (razor), Hewlett-Packard (oscillation generator), Otis (elevator), Harley (motorcycle shock absorber), Colt (revolving gun), Goodrich (tires), Goodyear (synthetic rubber), Carrier (air treatment), Noyce (Intel), Carlson (Xerox), Eastman (laser printer camera), Land (Polaroid), Shockley (semiconductor), Kellogg (grain harvester), DuPont (gun powder), Nobel (explosives), the Wright brothers (aircraft), Owens (glass), Steinway (pianos), Bessemer (steel), Jacuzzi (hot tub), Smith & Wesson (firearm), Burroughs (calculator), Houdry (catalytic cracker), Marconi (wireless communication), Goodard (rocket), Diesel (internal combustion engine), Fermi (neutronic reactor), Disney (animation), Sperry (Gyroscope), Williams (helicopter), even Abraham Lincoln who was granted U.S. Patent No. 6,469. These are individuals who, in most cases, worked alone, without government or corporate support, yet, created not just new inventions, but whole new industries that employ millions of people today.

It can be argued, of course, that most of these inventors ultimately created manufacturing companies and that companies who merely buy patents from individual inventors contribute nothing. That seems to be much of what you are hearing. But what about small companies that are struggling to compete against corporate giants and need a strong patent system to level the playing field? As the inventor of the MRI scanning machine, Dr. Raymond Damadian, observed, it’s the small companies (not giants that ship their jobs to India and China) who provide the economic spark for new jobs in America.

Damadian explained:

Few Americans realize that the great majority of new jobs created for the public are provided by small companies with fewer than 500 employees. From 1981 to 1988, companies with fewer than 500 employees contributed 11.7 million new jobs to the economy. In this period, America’s small companies generated two thirds of all new employment. … Unless new job-generating companies can emerge through patent enforcement, employment can only decline. Only enforced patents and the temporary monopolies they provide can ensure the emergence of these companies and their prospering.

American’s Forgotten Asset – Patent Law Enforcement, Saturday Evening Post (1994).

Can anyone cite what section of the Constitution or the patent law reserves the right to obtain and enforce patents exclusively for large manufacturing companies? And how can an individual or small company compete against a large company that decides to copy without concern for the cost or risk of litigation?

I recently won a case in Toledo, Ohio, against a company that manufactured its products in China and imported them into the United States with full knowledge (indeed, opinions) that it was infringing. “Who cares?” they thought. But an American jury felt otherwise, finding the infringement willful and deliberate and awarding damages in the form of a reasonable royalty on all sales. Our client was not a competing manufacturer.  But why does that matter? It owned a United States patent and paid a royalty to the inventor.

As former Chief Judge Howard Markey of the Federal Circuit said, individuals have as much right to benefit from the patent system as corporations:

The patent system encourages inventors to invent and disclose. Corporations don’t invent; people do. Yet, the patent system also encourages corporations and investors to risk investment in research, development, and marketing without which the public could not gain the full benefit of the patent system. The right to exclude conferred by a valid patent thus deserves the same respect when that right is in the hands of an individual as when it is in the hands of a corporation.

Fromson v. Western Litho Plate and Supply Co., et al., 853 F.2d 1568, 1575 (Fed. Cir. 1988).

Listen to who is promoting the anti-inventor, anti-NPE talk. Foreign companies that make nothing in the United States and a group of giant high-tech U.S. companies that ship their jobs overseas, like Apple (who created 700,000 new jobs in China, not the United States, to make its iPhone, iPad and iPod products). Sure, there are some small companies that may rightly feel victimized, but what about the small companies owned or operated by inventors? As noted above, statistics obtained from Patent Freedom show that 56% of NPE suits are brought by the original assignees of the patents involved – the inventor’s company. And that number increases to 80% if you include companies that share royalties with inventors.

One of the comments made in response to the CES article promoting the SHIELD Act perhaps said it best: “Let’s just dissolve the U.S. patent system altogether, so that large companies don’t have to [illegally] steal the little guys’ inventions…. Why should a song writer get paid for a song he doesn’t sing — isn’t he a troll too?” And isn’t that exactly what these pending bills in Congress will do? Unless you sing the song you wrote, you are put in a special category — a “troll.” Then you are punished if you lose, while a big corporation is not.

My plea to those in power is simply this: listen to both sides before you act, please. Stop categorizing all NPEs as bad. Go after abuse where it actually exists. And, please: protect American inventors and invention, not those who copy innovation.

About the Author

Ray Niro is prominent patent litigator with the firm of Niro, Haller & Niro. Mr. Niro has been trial counsel in literally hundreds of intellectual property cases, and since 1996, has won verdicts and settlements for his clients totaling more than $1 billion.

7 comments
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  1. I’m completely with you on the argument here, but don’t oversell the list of inventors! For example, Shockley worked for Bell Labs and Fermi was government funded (indeed, his reactor patent is assigned to the U.S. Gov’t – pre-Bayh Dole). It’s not like these guys did their work in the garage.

  2. Thank you, Mr. Niro. Is there anything that represents the founding ideals of America better than the independent inventor? Think about it – some guy or gal, burning the midnight oil after a long day of work, trying to turn a good idea into the American Dream. Isn’t this a major part of what has made America different than the rest of the world? And is it just coincidence that the stellar innovative history of this great nation has occurred alongside a patent and legal system that have been very different than those in the rest of the world?

    The greatest threat to a vested interest is an innovator who comes up with a better product that is patentable, gets it patented, and can protect it. Multinational corporations, many of which started with such an individual, are now bent on eliminating the threat. The America Invents Act was a big step in that direction. The next step is to pound the term “patent troll” until the independent inventor working out of a garage who sues an infringer with unlimited resources will be subject to “loser pays.”

    Multinational vested interests are taking America down a path that will destroy our ability to innovate. We really are at risk of losing the America we have so taken for granted.

  3. Yes, all hail the lone, independent inventor. Without patents, there can be no innovation of any commercial significance. The scope of what inventions are eligible for patent protection should be expanded. Patents are what made America great.

  4. Why should a song writer get paid for a song he doesn’t sing?

    Excellent metaphor

  5. The NPE narrative for attacking patents is not new – it is a tried and true method that gained political success even a century ago: the Wright Co. was branded a ‘troll’ by a committee that was set up to solve “a patent hold-up problem” in early aviation. In 1917 the committee wrote to the U.S. Attorney General:

    “Throughout the development of aeronautics to this period, the Wright Company had done very little as a building company. It had rather preferred to stand on its patents and assess royalties, leaving to others the actual development of the art of aeronautic construction. … The Curtiss Company, on the contrary, had engaged actively in airplane construction, …, had built extensive works for airplane construction and laboratories for experimental research, had likewise developed new types and forms of construction, especially in the field of the hydroairplane and flying boat.” (NACA 1917b, p3).

    See more details in an article describing how the method succeeded in gutting patent rights of early aviation inventors: The Myth of the Early Aviation Patent Hold-Up – How a U.S. Government Monopsony Commandeered Pioneer Airplane Patents. at http://j.mp/Aircraft-Patent-Logjam-Myth

  6. I hadn’t seen that article on the Wright Bros. – thanks for posting it.

  7. Patent trolls? Sounds wicked and evil, but I like to think of them as Patent Champions instead. They champion the patent rights of individual inventors or small companies that cannot afford the huge expense of a prolonged patent battle. A big company with deep pockets can simply bleed a small patent owner financially until the small patent owner is forced to give up. It is Patent Champions that keep big companies from running roughshod over the little guy.

    The pejorative term “patent troll” was undoubtedly invented by those who thought that big companies should be entitled to continue ignoring the patent rights of individual inventors and small companies.

    One argument advanced by the special interest groups that seek to emasculate the so-called patent trolls is that modern hand-held electronic devices are covered by a large number of patents. The purpose is apparently to suggest that patents are awarded for trivial variations and that a big company cannot avoid stumbling over a few patents they didn’t even know about.

    Maybe hand-held electronic devices are indeed covered by a large number of patents. Or maybe not. But one of these patents might cover a new, stronger plastic composition and be owned by the company that sold the plastic for the case. A few of the patents might cover improved integrated circuits and be owned by the manufacturers of these parts. It is not unlikely that manufacturers of many of the components have patents. But this does not mean that the patents were awarded for trivial changes or that the product is covered by such a maze of patents that it’s difficult to avoid unintentional infringement.

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