What Trump Needs To Do About Patent Policy in Order to Promote Economic Growth

By Neal Solomon
January 4, 2017

Economic growth gearsBarack Obama left the patent system in far worse shape than when he entered the presidency. The Patent and Trademark Office (PTO) is controlled by patent critics with an extreme anti-patent bias. Small entities and, particularly, independent inventors, are an endangered species. Investment in innovation is at an all-time low. Productivity growth that results from investment in innovation is at a multi-generational low. As a consequence of extreme mismanagement of the patent system, and its consequent productivity growth declines, economic growth is poor.

The patent system is at the root of economic productivity and growth. The U.S. constitution establishes a system for providing an “exclusive right” for a limited time in order to supply an incentive to invent and discover new things. Socialists on the left and market incumbents on the right never liked the idea of supplying tools for competition, so they have persistently attacked the patent system.

The result of attacks on the patent system has been a concerted critique of key elements for protecting patent rights. These have included enabling the PTO to attack patent validity in a second window, attacking classes of inventions such as software and medical diagnostics, limiting access to the courts, increasing costs of enforcement by several magnitudes and restricting patent remedies. The totality of these attacks on the patent system, enabled in large part by the expenditure of vast sums to influence policy by technology incumbents in order to protect their historic monopoly profits, has been to fundamentally alter a democratized patent system to one that requires substantial capitalization. The net effect has been decline of investment in innovation particularly by small entities that require patents as a key tool for competition.

What can be done?

Actually, the incoming administration can do a great deal to supply equilibrium to a patent system that has been badly injured by misguided policies. First, it must be acknowledged that a patent is a form of private property. This is clearly recognized in a Republican convention platform plank. From this recognition, it is essential to restore patent rights with a strong remedy for infringement, regardless of the identity of the patent holder. In particular, an injunction needs to issue in a finding of an infringed patent. The courts can work out the details of supplying an injunction for a small component in a larger system by appropriately narrowing the injunction. The CAFC needs to move away from an inflexible interpretation of eBay and enable innovators to obtain injunctions in appropriate circumstances. The new administration can greatly influence this change.

Second, anyone should be able to get access to the courts in order to enforce an infringed patent. American courts should allow a patent holder access to a jury in a reasonable time of less than two years. Venue decisions should be decided as a result of a balance of factors that are fair to both sides in a dispute.

Third, the Trump administration must be very clear that legislation involving the patent system must be pro-patent, not the anti-patent legislation designed and bought by tech incumbents to perpetuate their advantages and harm competition.

Fourth, the Trump administration must enforce the antitrust laws. In particular, enforcement against the large tech incumbents needs to promote competition. Someone needs to hold their feet to the fire to obey the law and Trump is the guy to do it. Market entrants need a level playing field supplied by effective antitrust enforcement.

Fifth, the Trump administration needs to clean house at the PTO. Director Lee has appeared more like a fox in charge of the chicken coop than a legitimate manager. CAFC rules need to be applied to examinations involving software patents; some units, with a 20% or less grant rate or frozen due to ineptitude, need to be reorganized.

The PTO needs to become pro-patent again. In order to do so, it needs to be friendly and cooperative, not hostile or disparaging, to patent applicants.

The greatest need for change, of course, needs to occur in the Patent Trial and Appeal Board (PTAB), which has been totally out of control for years and has badly damaged its credibility. The PTAB needs new management with a new set of rules to administer a fair and balanced patent review policy.

The PTAB needs a high bar to establish a patent review institution. Preferably, all patent review institutions should be ordered by Federal District Court judges. This requirement assumes that there is proper standing in order to request a patent review.

Since the presumption of patent validity is paramount, a high standard of clear and convincing evidence should be applied to patents in both Federal District Court and the PTO. Similarly, the Phillips standard should be applied to patent reviews in both the courts and the PTO. Otherwise, there are incoherent outcomes.

The PTAB needs to implement a mechanism to enable amendment of patents that are reviewed in order to adapt the claim language if prior art suggests a need for narrowing claims. Alternatively, a time-efficient claim amendment off-ramp can be instituted.   The original language and the legislative history of the AIA were quite clear on this.

Serial challenges to patents must be severely restricted. Abusive patent challengers must pay a patent holder’s attorney’s fees, with challengers required to pay non-refundable scaling fees based on the number of institution requests. The PTAB should not be the compliant pet of big tech companies that have a history of serial infringement.

Patent reviews have been expensive and deadly, illustrating a one-way risk that puts patent holders in peril at limited cost to infringers. This asymmetry has made patents a liability and not an asset.

When patents are expensive and cumbersome to defend, the incentive to invest in innovation is greatly diminished. The consequences of this have included the perverse disincentive by large companies to invest in innovation since they can free ride.

The combination of these elements for the incoming administration to improve the patent system can have dramatic effects of supplying incentives to invent and protect innovation that will have long lasting positive effects on productivity growth. Strong patents promote competition, which is healthy for the economy. Rather than rely only on temporary policy changes, such as short-term tax cuts, these proposed changes to the patent system will stimulate long lasting economic growth.

Evidence shows that strong patent policies – such as those under both Presidents Reagan and Clinton – will result in long-term economic growth. What are we waiting for?

The Author

Neal Solomon

Neal Solomon is CEO of Advanced System Technologies Inc. A prolific inventor of technologies involving semiconductors, communications, data management, imaging, robotics and healthcare, he holds degrees from Reed College and the University of Chicago.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 26 Comments comments.

  1. Paul Morinville January 4, 2017 11:41 am

    I see the consensus of articles making the case that the PTAB just needs to be adjusted and we’ll all be OK again. That makes no sense to me at all and that should be obvious to anyone watching this election.

    Obama set up the PTAB to benefit large incumbent social media and internet companies. He did this in exchange for donations and favors.

    Now comes Trump. the consensus belief is he is going to make patents great again. This he will do in the PTO including the PTAB.

    When Trump leaves, who will replace him? What will that new president do?

    If you are in an investor in patents, can you know? If you cannot know, how will you value the patent? If you can’t value the patent because the next president could crash the value, will you invest?

    PTAB’s must be eliminated. they cannot be fixed.

  2. step back January 4, 2017 12:15 pm

    Paul @2

    Fully agree.

    The PTAB is Congress’ love child, not the President’s.

    I doubt that his royal pre- or post-inauguration Greatness Rejuvenator gives even a moment’s thought to inventors and patents.

    Inventors are merely peasants to be exploited for the greater good of the Greatness Rejuvenator just like carpenters, roofers and any other makers / builders of real things.

  3. Edward Heller January 4, 2017 4:43 pm

    Agree with repeal. Trying to bandage a gangrenous wound is not going to solve the problem. Admit the the whole venture regarding involuntary post grant reexamination and reviews is wrongheaded. They do not strengthen the patent system, nor do they reduce litigation costs or any of the other propaganda put out by the efficient infringer lobby. These proceedings only weaken the patent system by heavily driving up costs to the patent owner while patent term wastes.

    If the patent owner needs to fix something in his patent, he already has the option of reissue. But just in case we do not remember this, the whole point of dependent claims is to protect against unforeseen prior art that may invalidate the broader independent claims. Further, the wise patent owner uses continuation practice to gradually broaden his claims by removing limitations that prove unnecessary.

    The system prior to reexaminations and post grant reviews worked quite well for patent owners. The new system is torture, pure H*ll. It really does not work for the small fry inventor or startup; end-runs Hatch-Waxman, and, because of lack of standing, is prone to abuses of all kinds.

  4. Prizzi's Glory January 4, 2017 11:10 pm

    To drain the swamp the data from SAWS (a program that goes back to 1995) and similar programs must be made public. From the few FOIA documents that we have seen, the USPTO was violating the implicit contract of fact to perform a valid examination when an applicant pays patent examination fees.

    If a doctor violates his implicit contract of fact to perform a valid medical examination upon accepting a patient’s payment, he at least commits fraud and depending on patient outcome may commit something worse from malpractice to depraved indifference murder.

    In other cases, under SAWS patent officials including APJs and examiners lied on official government documents and in conspiracy. These are federal criminal offenses. Until there is an independent prosecutor appointed and a thorough investigation of criminal activities that results in indictment and trials, the USPTO simply won’t function properly.

    If Trump is really going to drain the swamp, the USPTO is an important swamp to drain.

  5. A. Nony Muss January 5, 2017 5:26 am

    “Barack Obama left the patent system in far worse shape than when he entered the presidency.” Er, should the writer resume his medication? Has he forgotten that Senators Leahy (D) and Smith (R) are the ones who proposed the legislation and got it through, and the incumbent President merely signed it? Does he think that Bush (Jr or Sr) or Clinton would have refused? No, the fault lies with Congress with its ignorance of patent law and with a Supreme Court that is spectacularly clueless in that regard. The writer might well be correct that trying to patch things up is tantamount to applying Band-Aids(R) to a corpse, and that a fundamental rethink is needed.

  6. Mark Summerfield January 5, 2017 6:14 am

    Good luck getting Trump to take any interest in patent policy.. This is a man who appears to believe that he can manage foreign policy via Twitter. The nuances of patent law and innovation policy are beyond his capacity. You folks need to keep working on lobbying Congress. Trump is not your ally. He is a solipsist, and possibly the least intelligent person ever to be elected to the office of President. The American people have made their bed, and now they have to lie in it. The first step is to recognise that the conventional methods of influencing the Executive are unlikely to be effective under a Trump administration.

  7. Benny January 5, 2017 6:54 am

    Mark Summerfiled,
    Wise words.

  8. Prizzi's Glory January 5, 2017 7:44 am

    I guess we should all start tweeting and try to get a buzz that will get attention from Trump.

  9. EG January 5, 2017 8:41 am

    Hey Neal,

    Another great article, absolutely on target.

  10. Bemused January 5, 2017 9:48 am

    Mark Summerfield:

    First, thank you for providing the perspective from the Clinton Foundation.

    Second, the lack of clarity in Trump’s position in the patent system doesn’t mean he’s disinterested in protecting American intellectual property. All that shows is that Trump’s macro focus is in fixing the economy and that he’s going to leave the day to day matters to his appointees. You should pay close attention to who Trump appoints to oversee the US patent system to better understand the direction of this incoming administration.

    Finally, do try to restrain yourself from using the articles comments section to attack the president-elect. That’s not the point of this blog or the reason that patent professionals read these articles. Your candidate lost; get over it.

    B

  11. FRANK lUKASIK January 5, 2017 9:49 am

    The First-to-File change and the Expiration of Patents for non-payment of Maintenance Fees were challenged in the Supreme Court \, which dismissed the Petition (Lucree v. U.S.).

  12. Chris Gallagher January 5, 2017 10:06 am

    Neal..agree with EG.
    If anyone one knows how to get this Solomon post to the Trump transition team please pass it along. Neal’s agenda is a roadmap toward “Making the USPTO Great Again”

  13. Adrian January 5, 2017 10:16 am

    Thanks Neal, I shared this with the San Diego Inventors Forum.
    Paul you are right on – PTAB’s must be eliminated.
    Mark, it was certain Hillary would not change the laws Obama put into motion.
    Now there is a good chance.
    I agree with repeal.

  14. Ron Hilton January 5, 2017 11:45 am

    We should see postive changes if Trump listens to his son Donald Trump Jr., who demonstrated a very balanced and well-informed view of patent reform in this article four year ago:

    http://dailycaller.com/2012/05/01/defending-innovation-in-america/

    I agree with everything in this article, with one major addition: we also need to improve patent quality. Bad patents give ammunition to the anti-patent crowd.

  15. Mark Summerfield January 5, 2017 4:42 pm

    Bemused, I am Australian. I don’t/didn’t have a candidate. Just calling it how I see it from the other side of the world.

  16. Bemused January 5, 2017 5:10 pm

    Mark Summerfield,

    Then you have even less of a reason to post on here your personal views about “how you see it” regarding an American president elect.

    B

  17. Night Writer January 5, 2017 7:00 pm

    @14 Ron Hilton: interesting that Trump junior can articulate fairly complex issues with some balance. I don’t agree with him regarding “trolls.” I think it is a static view and I think that patents should be able to be monetized.

    The problems with the system are patent quality (easily fixed with better searches); litigation imbalance in that you can file a complaint for almost nothing, but it costs 100’s of thousands of dollars to respond to the complaint with the counter claims; and, the Scotus case law that needs to be wiped away along with the PTAB and Fed. Cir.

    The reality is that the anti-patent judicial activist have blurred all the laws and added bizarre tests that have no grounding in reality.

  18. Night Writer January 5, 2017 7:01 pm

    @15 Mark: I thought your comments were good. But, I would add not only are we going to have to lie in our bed, but we have made the bed for the rest of the world too. I am sure you will feel the Trump effects almost as much as we do.

  19. Ron Hilton January 5, 2017 11:16 pm

    Night Writer @ 17 I agree with everything you said, but would be interested in how you would improve prior art searches and why you think it would be easy. My preferred solution in that regard is crowd-sourced search, which I suppose is easy, but not inexpensive (Article One charges about $25K I think). However that is much less expensive than litigation and the like. Rather than require all applicants to undergo an expensive search like that, it could be required on a post-grant right-to-sue basis. In other words you have had an examination or reexamination based on the crowd-sourced search before you can bring an infringement lawsuit.

  20. Mark Summerfield January 5, 2017 11:37 pm

    @18 Night Writer

    The policies and actions of the US (government and otherwise) inevitably affect the rest of the world. We are quite accustomed to it. I don’t think there is any way to predict whether the Trump presidency is going to be good, bad, or indifferent for Australia. What will be, will be.

    Back on-topic, I don’t wish to cause poor Bemused any further hurt by criticising the son as well as the father, but a little judicious Googling (e.g. ‘Trump MacroSolve deal’) might lead a cynical person to the conclusion that Donald Trump Jnr’s apparent concern about patent litigation abuse four years ago had more to do with short-term business interests than a nuanced long-term policy agenda.

    Doubtless I would be pinged again if I were to suggest that this seems to be a pretty common theme where the Trump family is concerned, so I won’t. But it does lead back to my original pertinent point, which is that I do not believe that conventional means of lobbying/influencing will be effective with Trump’s administration. The author’s objectives are laudable, but I question his apparent assumption that it will be ‘business as usual’ in Washington DC, such that reasoned policy arguments will be the way to win the day.

    I am not sure, however, why this observation should trouble Trump supporters. The impression I have is that this is exactly what many of them want from him: to shake things up and change the way things are done.

  21. Ron Hilton January 6, 2017 1:19 am

    But at least the Trumps with their extensive business experience have had the opportunity to learn some valuable real-world lessons, about patents and other issues as well.

  22. EG January 6, 2017 7:44 am

    Hey Ron,

    I agree that the Trumps collectively with their business experience could be beneficial to the cause of nurturing innovation, provided they avoid the pitfalls of a “big corporate” mentality.

  23. Night Writer January 6, 2017 9:27 am

    @19 Ron Hilton: There are lots of ways of improving search. I would go back to TSM. First, the EPO does a much better job. Second, the search could be outsourced and there could be some kind of feedback or reward for finding art directly on point that includes TSM for obviousness arguments. Put a structure in place for search that would encourage finding the art. Most attorneys are going to write claims that read over the prior art if they plan on litigating a patent.

    Doing that would vastly increase patent quality at a very modest increase in cost. Probably double the search cost.

    The fact is that it would just take a person with a business mind to devise a reward system for finding good art. But, central to this is that the PTO has to be the repository of what is known and not known (again the anti-patent judicial activists have tried very hard to shift the burden.)

  24. Night Writer January 6, 2017 9:28 am

    @20 Mark: All good points. Reasonable posts.

  25. Curious January 6, 2017 12:35 pm

    The PTAB is Congress’ love child, not the President’s.
    True that. I know it is “politically correct” to blame the current problems on the current administration in the hope that the new administration will smack down anything that can be associated with Obama. However, in doing so, we ignore that the AIA was passed by Republican majorities in the House and Senate.

    There are a good number of Republicans that are addicted to Tech money and are willing to take down the US economy to fatten up their reelection coffers.

    Barack Obama left the patent system in far worse shape than when he entered the presidency.
    Does anybody remember Jon Dudas? For all of Michelle Lee’s ties to Google, the Dudas-era was the WORST at the USPTO. Has everybody forgotten all the anti-patent applicant rule packages he attempted to promulgate? The second half of the Obama administration was considerably worse for the patent system than the first half, but to say that it is “far worse shape” than pre-Obama is a bunch of hyperbole.

    The US patent system has been under attack for a very LONG time — starting well before Obama. By placing all the blame on Obama, we lose focus on the real culprits — the high-tech industry (and their overnight billionaire leaders). Let’s not also lose sight that the country that makes all of the hardware for that high-tech industry is the country that has the most to gain from a weak US patent system — that country being China.

  26. step back January 6, 2017 2:33 pm

    Curious @25

    Excellent point.
    There probably are many more countries besides China that would like to see the USA go down in flames. Even our so called allies, who are competitors on the world trade front would like to see that happen.

    One way to achieve the goal is by taking down the American patent system, slice by slice if not all at once.

    Direct proof of foreign involvement will be hard to come by. But it should not surprise that the long war of attrition against the American inventor has foreign backing as well as domestic support.