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It's time to start eliminating regulations inhibiting patents - IPWatchdog.com | Patents & Patent Law

It’s time to start eliminating regulations inhibiting patents

By Gene Quinn
March 29, 2017

President Donald J. Trump, taken January 29. Official White House photo.

President Donald J. Trump, taken January 29. Official White House photo.

In an effort to reign in the American regulatory state, President Donald Trump issued an Executive Order dated February 24, 2017, which directed agencies to review all regulations looking for those that are outdated, unnecessary, or ineffective. The goal of these efforts is to streamline regulations by eliminating regulations that inhibit job creation, eliminate jobs, or that are inconsistent with government initiatives and policies.

Michelle Lee, Director of the United States Patent and Trademark Office (USPTO), recently formed the Regulatory Reform Task Force contemplated by the aforementioned Executive Order, although the Office has not released the names of those on the Task Force. Regardless of the anonymity of the USPTO Task Force, a progress report is due on or before May 25, 2017.

Frequently, the question gets asked whether patents are important for economic success and whether they are relevant to job creation or the existence of high paying jobs. The answer, of course, yes! That being the case, it would seem extraordinarily beneficial if the USPTO Regulatory Reform Task Force started their work with the common sense recommendation that regulations that inhibit the issuance and existence of patents should be repealed.

But allow me not to put the cart before the horse. Those who wish only the demise of the patent system will never believe that patents are responsible for economic advantage, job creation or lead to high paying jobs. So let’s start there first in an attempt to make it impossible for even those nay-sayers to honestly question the veracity of these claims. Obviously, what follows is not an exhaustive proof, but for fair minded and rational thinkers will provide support for what we in the industry know to be true.

2012 Report by the USPTO

A 2012 report by the USPTO titled Intellectual Property and the U.S. Economy concluded that patents are critical for job creation. The report Summary explained:

Innovation protected by IP rights is key to creating new jobs and growing exports. Innovation has a positive pervasive effect on the entire economy, and its benefits flow both upstream and downstream to every sector of the U.S. economy. Intellectual property is not just the final product of workers and companies—every job in some way, produces, supplies, consumes,

or relies on innovation, creativity, and commercial distinctiveness. Protecting our ideas and IP promotes innovative, open, and competitive markets, and helps ensure that the U.S. private sector remains America’s innovation engine.

That 2012 report also concluded that IP-intensive industries support a total of 40.0 million jobs, or 27.7 percent of all jobs in the economy, and contributed approximately $5 trillion, or 34.8 percent, to the U.S. gross domestic product (GDP) in 2010.

Focusing specifically on patents, according to the 2012 report patent-intensive industries specifically supported 3.9 million direct jobs and indirectly supported another 3.3 million workers in 2010. Patent-intensive industries also accounted for 5.3 percent of GDP, accounting for some $763 billion.

2016 Report by the USPTO

In 2016, the USPTO released Intellectual Property and the U.S. Economy 2016 Update, which updated the previously released 2012 report. This updated report begins by stating the obvious: “Innovation and creative endeavors are indispensable elements that drive economic growth and sustain the competitive edge of the U.S. economy.” The Executive Summary goes on to say: “IP-intensive industries continue to be an important and integral part of the U.S. economy and account for more jobs and a larger share of U.S. gross domestic product (GDP) in 2014 compared to what we observed for 2010.”

The 2016 report also concluded that IP-intensive industries support a total of 45.5 million jobs (up from 40 million in 2010), or about 30 percent of all jobs in the economy, and contributed approximately $6.6 trillion, or 38.2 percent, to U.S. GDP in 2014 — an astonishing increase of nearly $1.6 trillion from only four years earlier.

Focusing specifically on patents, according to the 2016 report patent-intensive industries specifically supported 3.9 million direct jobs and indirectly supported another 3.5 million workers in 2014. Patent-intensive industries also accounted for 5.1 percent of GDP, accounting for some $881 billion. It is perhaps interesting to note that although the percent of GDP decreased relative to patent-intensive industries, the raw dollar total increased by $118 billion as compared to four years earlier.

Furthermore, according to the 2016 report, workers in non-IP-intensive industries earned an average of $896 per week, but those in patent-intensive industries earned $1,560 per week on average.

Importance of VC Funding

Mario W. Cardullo is a distinguished engineer and someone who knows a thing or two about innovation, inventing and entrepreneurship.  Cardullo has been a founder or principal in various technology companies and is the inventor of one of the basic patents for the RFID-TAG devices (i.e., E-Zpass), for which he was nominated for the Lemelson-MIT Prize (2003) and the Presidential National Medal of Technology (2004). In an essay titled Intellectual Property – The Basis for Venture Capital Investments he wrote:

One of the major problems faced by new technology seed and start-up enterprises is access to the first round of funding, either through debt or venture capital investment.

Venture capitalists want to know where an invention or innovation fits in the marketplace with reference to existing and potential competitors. The potential investors also want to know if the invention or innovation offers a dramatic and sustained advantage, and whether there is compelling evidence to warrant building a business based on the invention or innovation. They seek to evaluate both the strength of an innovation and the ability of the entrepreneur to motivate commercialization…

One of the most important issues evaluated by venture capitalists is the security of intellectual property. Normally, a strong patent position is desired and the issues of ownership of intellectual property need to be well understood…

Obtaining funding from Venture Capitalists matters greatly. Roughly 600,000 new businesses launch in the United States each year, with about 1,000 new businesses receiving their first venture capital funding each year. See Connecting the Dots. What that means is that .167% of new business receive venture funding. So the deck is enormously stacked against you if you are planning on starting a business and raising venture capital. That being the case, you certainly don’t want to make it more difficult to acquire VC funding.

According to a Patent Survey conducted by the University of California Berkeley Law School, many investors place a premium on patents when making investment decisions. In fact, 67% of firms surveyed indicated that the existence of patents were an important factor in their investment decisions. Indeed, 73% of VCs indicated a premium on the existence of patents before investing in biotech companies, 85% for medical device companies. Even 60% of VCs indicated placing a premium on patents before investing in software companies. Therefore, it doesn’t matter what industry you are in, significant percentages of VCs place a premium on patents when making funding decisions. With it already being so unlikely that VC funding will be acquired, why would anyone want to make it any more difficult by ignoring patents?

Venture backed funding can be critically important for a company that wishes to go public. Indeed, VC backed companies have consistently made up a large percentage of those companies that go into an Initial Public Offering (IPO), with the percentage reaching a high of nearly 60% during the dot-com era. See How Much Does Venture Capital Help the U.S. Economy? Given the importance of venture capital, and the strong preference for patents VCs have, it starts to become clear how and why patents play such an enormous role in the U.S. economy. The importance is only further increased when you understand “92% of the job growth for young companies occurs after their initial public offerings.” See Venture Impact. So if we want large numbers of those high paying jobs in patent-intensive industries we need to get companies to IPO, which absolutely requires an attractive ecosystem for VCs to operate. This means we must have a strong, vibrant patent system that will attract investors to engage in the speculative investing necessary to fund those risky, exciting young companies.

Why would we want to have a system that makes it difficult to obtain and keep patents once they are issued knowing how critical they are to VC funding decisions?

Conclusion

If you are not blinded by an agenda you must recognize that patents are linked to economic success, job growth and high wage jobs. If President Trump is serious about making America Great Again and dismantling the regulatory bureaucracy that stands in the way of those individuals and companies that will lead America to the 4 percent growth he wants, he will demand the USPTO once again become a patent friendly agency. It is particularly time for the USPTO to lift the foot off the throat of certain sectors of the biotechnology community and pretty much the entirety of the software industry. It is well past time for the USPTO to stop acting as an arms dealer by selling patents (which takes many years to achieve) and selling patent challenges.

There are a great many regulations, as well as interpretations of cases from the Supreme Court and Federal Circuit, that directly and unambiguously inhibit the issuance of patents, or make them quite easy to challenge (or harass). The very existence of the Patent Trial and Appeal Board (PTAB) is for the express purpose of providing a forum to kill patents. Of course, the PTAB itself is a legislative creation, but the decidedly anti-patent manner in which the proceedings are conducted could be changed with Executive action. Furthermore, since the PTAB judges are not independent (i.e., they report to the Director of the USPTO) philosophical and ideological change could be made with relative ease if there is the political will to see it through.

Indeed, President Trump would do great good if he took a page from President Reagan’s book when he fired the air traffic controllers on strike. Why shouldn’t President Trump fire all those patent examiners who have for years not issued a patent? Perhaps they are not “technically” on strike, but they are obviously engaged in some kind of game playing or work slow down akin to a strike, and they continue to get paid, receive bonuses and benefits and they haven’t seen a patent application in years and years worth issuing? Not even in Art Units thoroughly and completely dominated by the likes of Google, Microsoft, Apple and other tech giants? Who is fooling who?

President Trump may very well be politically naive, but this can be done. But will this anonymous Regulatory Reform Task Force actually make suggestions calculated to lead to economic growth for the United States? Will the Patent Office have the political will to actually follow through with both the spirit and intent of the Executive Order? Time will tell.

COMING SOON… Identification of specific regulations the USPTO should eliminate. 

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

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 27 Comments comments.

  1. Scott McQuarrie March 29, 2017 1:08 pm

    Excellent article, Gene. Hopefully readers will forward it to the WH and their elected representatives. Don’t let up; keep ’em coming.

  2. Patent Investor March 29, 2017 2:00 pm

    Which leads into my first question, 1) without knowing the composition of the panel, how can we assert any influence/pressure to make our voices heard in this matter, and 2) With many properly issued and investable patents having already been put in the grave (beyond SCOTUS review time line), but others only awaiting the doctor (CAFC appeal pending), can the director (either by change of heart or change of marching orders), by executive action effect PTAB results already past PTB board decisions?

  3. Anon March 29, 2017 4:04 pm

    It is not the regulations (per se) that is the largest source of the problem.

    That largest source would be the Supreme Court.

    There is an answer to that…

  4. Curious March 29, 2017 5:03 pm

    That largest source would be the Supreme Court.
    Fixed it for you.

  5. Night Writer March 29, 2017 5:56 pm

    Or, Trump could do what all the other presidents have done since Bush and that is take the Google bucks and live the high life as Rome burns.

    Good article in Fortune about companies like Apple and Google wanting to set up a 1,000 year rein.

  6. Anon March 29, 2017 6:04 pm

    “Technically” on strike: FOAM with no cited prior art (and hence no art rejections) are emanating from the USPTO. “Examination” solely under 35 USC 101 is the new staple (esp. when count Monday is quickly approaching).

  7. Anon March 29, 2017 6:32 pm

    Brother Anon,

    You might want to try calling and reminding the examiner that a full examination on the merits is required (examiners do not have leave to not do “piecemeal” examination).

    Overcome the 101 and you should have an excellent shot at a second action nonfinal.

  8. Anon March 29, 2017 6:59 pm

    Oops – too many negatives there (hope you understood the message anyway)

  9. JPM March 30, 2017 5:43 am

    The America Invents Act is a overreaching regulation that should be dismantled/repealed.

  10. Benny March 30, 2017 5:59 am

    Law of unintended consequences – firing examiners who don’t issue patents will likely swing the pendulum the other way, and encourage examiners to issue patents that have not been thoroughly examined. The consequence of granting a patent claim which has been disclosed elsewhere previously and is essentially in the public domain is far more serious than paying an examiner an un-earned bonus.

  11. Anon March 30, 2017 7:41 am

    Benny,

    Once again, your pablum is unpalatable as you merely voice the false logic of a fallacious choice.

    The choice is NOT between “Accept Accept Accept” or “Reject Reject Reject” and no one is going to be “firing examiners who don’t issue patents,” as that was most definitely not the point of any statement regarding non-issuance.

    The point of the statement regarding non-issuance is that examiners are not issuing patents to those applications that meet the legal requirements for issuance.

    You have been around long enough to understand this, and your attempt her can at best be taken as purposeful obfuscation.

    Maybe you want to try to post without your anti-patent views getting in the way?

  12. Benny March 30, 2017 8:29 am

    Anon,
    quote from Gene’s article: “Indeed, President Trump would do great good if he took a page from President Reagan’s book when he fired the air traffic controllers on strike. Why shouldn’t President Trump fire all those patent examiners who have for years not issued a patent? …President Trump may very well be politically naive, but this can be done.”
    Gene’s words, not mine. Think government employees won’t panic when their jobs are on the line?
    On another note, you might consider having more respect for other people’s right to hold, and voice, an opinion contrary to yours. I’m not expecting you to agree with me, but I do expect you to take a more liberal stance than suggesting that I not post views which are not aligned with yours.

  13. Anon March 30, 2017 9:58 am

    Benny,

    You still ploy a false dichotomy. Review the series just a short time ago on the unexplainable disparity based only on particular assigned art units.

    This is just NOT a “fire those who don’t grant ALL patents – worthy or not” situation that your words invoke.

    This instead is aimed at firing those that are denying patents to those that rightfully meet the requirements under the law.

    The fact that most all of your posts sound in anti-patent (or anti-strong patent) rhetoric does not help you here, as you do not deserve any leeway (or benefit of the doubt) in your comments.

  14. Anon March 30, 2017 10:01 am

    Benny,

    You still ploy a false dichotomy. Review the series just a short time ago on the unexplainable disparity based only on particular assigned art units.

    This is just NOT a “fire those who don’t grant ALL patents – worthy or not” situation that your words invoke.

    This instead is aimed at firing those that are denying patents to those that rightfully meet the requirements under the law.

    The fact that most all of your posts sound in anti-patent (or anti-strong patent) rhetoric does not help you here, as you do not deserve any leeway (or benefit of the doubt) in your comments.

    As for voicing your opinion – you are free of course to do so, but if you insist on voicing an uninformed opinion after you have been informed, you should fully expect recriminations such as mine.

  15. Gene Quinn March 30, 2017 11:02 am

    Benny-

    The jobs of patent examiners SHOULD absolutely be on the line. There are MANY patent examiners who have not issued patents in YEARS. They are practically stealing from the public and from stakeholders. They ABSOLUTELY should be fired. They are NOT doing their job.

    This is not rocket science. Are you really this dense? Are you really that blinded by hatred for patents that you think that employees who don’t do their jobs should be given a 6 figure salary, a 5 figure bonus and the most generous benefits in the world?

    Your comments are becoming more and more bizarre and unjustifiable.

  16. Eric Berend March 30, 2017 1:47 pm

    I hadn’t realized ‘Benny’, here is so anti-patent; or, should perhaps I should write, anti *U.S.* patent?

    Heretofore, it had seemed his axe to grind, was the implied conceit of assumed superiority of American jurisprudence, being offensive to those who are more Euro-centric, in their worldview.

    Now, however; it is apparent that he is, in fact, quite antagonistic to patents; to the point of motivating his misrepresentations. Personally, I find it regrettable when that degree of intelligence is turned to such vituperative prevarication.

  17. Caesar Salazar March 30, 2017 4:08 pm

    To Benny’s point,

    I wonder if the sheer size of the public domain and new developments in every field, especially in the information age, is paralyzing patent examiners. Almost like they have to double and triple check to make sure they searched everything in the relevant field of art; perhaps even in tangentially related areas of art. If that’s the reason why many patent examiners haven’t issued a patent in years, then you can’t really blame them. If they are doing it for other reasons, then they aren’t doing their job.

  18. Anon March 30, 2017 5:20 pm

    Caesar,

    That is barking up the wrong tree – as evidenced by the string of articles Gene ran not so long ago.

    You are attempting to defend the indefensible (and not doing too well at that – as you are not even bringing anything interesting to the table in your attempted defense).

    Plainly put: the issue is that there are examiners not doing their job properly.

  19. Gene Quinn March 30, 2017 5:57 pm

    Caesar-

    Here are a couple of the articles Anon references and show the bogus rejections examiners make. I’d read them in order. It was a series in July 2017. The last several most directly deal with bogus rejections, but all of them deal with the problem and game playing. There is no way to understand what really goes on at the USPTO and conclude that those examiners who are refusing to issue patents are doing their jobs. They all need to be fired.

    http://www.ipwatchdog.com/2016/07/14/where-patent-applications-go-die/id=70913/

    http://www.ipwatchdog.com/2016/07/17/impotence-patent-trial-and-appeal-board/id=70952/

    http://www.ipwatchdog.com/2016/07/18/patent-examiners-frivolous-rejections/id=70999/

    http://www.ipwatchdog.com/2016/07/19/applicant-waiting-board-reverses-examiner/id=71017/

    http://www.ipwatchdog.com/2016/07/20/prosecution-reopened-examiners-stop-applicants-appealing/id=71087/

    http://www.ipwatchdog.com/2016/07/24/alice-experts-second-pair-of-eyes/id=71185/

    http://www.ipwatchdog.com/2016/07/25/anatomy-bogus-alice-rejection/id=71192/

  20. Caesar Salazar March 30, 2017 7:17 pm

    Anon,

    I’m not defending, I was just speculating as to what the examiners may have been doing. I’ll check out the articles.

  21. Caesar Salazar March 30, 2017 9:12 pm

    I wonder if an AI could be trained to do this kind of work in the future. What do you guys think?

  22. Benny March 31, 2017 12:18 pm

    Caesar,
    There is no way that an examiner can, in one day, do the work it would take you or me two weeks to complete. A thorough examination is a near impossible task, and the only peope doing it are the ones preparing IPRs and oppositions. It cuts both ways. Some examiners issue patents without finding anything near the prior art which is under our noses (I have examples — many examiners appear to be especially talented at ignoring prior art in Chinese patent applications)

  23. Gene Quinn March 31, 2017 12:46 pm

    Benny-

    You say that many examiners are very good at ignoring prior art in Chinese patent applications. The interesting thing though is that it is widely accepted in the industry as true that Chinese disclosures are by and large garbage. They do not describe much, if anything. Yes, the numbers of filings in China are impressive and China is laying the foundation for a society that understands the importance of patents and will file patent applications, but a very high percentage of Chinese patent applications are garbage in terms of disclosure. That, of course, means that they are of little or no use as prior art. Merely hinting at or suggesting an idea does not make something prior art. So nice try there, but as a general statement what you say is too easy to rebuff as nonsense.

    -Gene

  24. Gene Quinn March 31, 2017 12:47 pm

    Caesar @21-

    Not to be too cute, but those examiners who refuse to issue anything could absolutely be replaced without any change in quality or consequence. You could train a monkey to only reject applications and never allow anything. An AI could absolutely be programmed to do that job. My guess is the rejections would be better and more reasoned and less circular too.

  25. Patent Investor March 31, 2017 3:06 pm

    Gene,

    While this post has your attention, do you have any thoughts on my questions @2? Obviously, question one is more important to the larger scheme of things.

  26. Benny March 31, 2017 3:37 pm

    Gene at 23,
    My comment is not so easy to rebuff, it is based on an actual case, the Chinese disclosue include every element in the US patent, and furthermore it described an actual product available for sale on the US priority date. Apparently your “rebuffal” is easy to rebuff with facts.
    I have never seen a Chinese patent document cited as prior art in an office action. Have you?

  27. Gene Quinn April 3, 2017 10:31 am

    Patent Investor @2-

    I don’t see how the Director could through any executive action change prior PTAB rulings. Certainly those rulings as to the parties would be final once the appeals process plays out and the Director could not change the outcome. But could the Director change the precedent? The answer is yes, but I don’t see it through executive action. It would have to be through rulemaking to change the rules. (NOTE: I’m speaking of procedural rules, which really is where the PTAB has gone seriously off the rails anyway).