Patents as property rights: What will it take to restore sanity to the narrative surrounding US patents?

Charles Henry Giancarlo, former Cisco CTO, explained that the patent system specifically envisioned those who do not manufacture being able to license their patents.

On Monday, May 8th, the U.S. chapter of the International IP Commercialization Council (IIPCC) held an event entitled Promoting Innovation, Investment and Job Growth by Fixing America’s Patent System. The event, held in the basement of the U.S. Capitol, featured many speakers and panelists who discussed various issues with the current state of the U.S. patent system and how those issues were reducing the nation’s overall investment into research & development (R&D) and overall innovation.

Although many of the industry insiders at the event held similar opinions on the current state of the U.S. patent system, bringing their message to a mainstream audience has been difficult. Much of this has to do with the “patent troll” narrative that has been forwarded by the efficient infringement lobby. As Sen. Dick Durbin (D-IL) pointed out at a recent Senate judiciary hearing on intellectual property as a driver of innovation, “whoever came up with that phrase [patent troll] should get a special bonus” because it has created a massive mischaracterization of patent owners asserting their rights.

One reason why the “patent troll” narrative has been able to play to wide audiences is because most Americans don’t concern themselves with intellectual property on a daily basis. However, a great majority of Americans are very interested in property rights of other kinds. For example, a 2013 Gallup poll found that only 11 percent of Americans were non-homeowners who weren’t planning on buying a home within 10 years. The rest of the survey’s respondents were either homeowners, non-homeowners planning to buy a home within 10 years or others; another 3 percent were homeowners planning to sell and rent within 10 years. Still, that survey indicates that fully four-fifths of the country’s population is interested in owning real estate property.

If patents were thought of by the general public in the same way as real estate property it is hard to believe the patent troll narrative would be so widely, and blindly, accepted. But why aren’t patents considered to be property in the same way? The U.S. Supreme Court has for over 100 years recognized patents property rights as having an equivalency with real estate property rights. On at least several occasions during the nineteenth century the Supreme Court unambiguously said that a patent for either invention or land, once issued, is private property. See United States v. Am. Bell Tel. Co., 128 U.S. 315, 358-59 (1888); James v. Campbell, 104 U.S. 356, 358 (1882); McCormick Harvesting Mach. Co. v. Aultman-Miller Co.,169 U.S. 606 (1898). Indeed, the right to private property is something explicitly enshrined by the U.S. Constitution, a document not particularly known for its length or specificity.

So why aren’t patents considered property by critics of the patent system? Why are those who are seeking to exercise what are supposed to be property rights that are statutorily presumed valid considered villains instead of those who are trampling on those property rights?

The first panel of the day during the IIPCC event included Bob Pavey, partner emeritus at Morgenthaler Ventures and former chairman of the National Venture Capital Association (NVCA). In his opening remarks, Pavey offered an analogy for the current state of IP rights, which should register with any American who owns real estate or is contemplating the purchase of a home in the years to come. “If you sell a house to me, is there some reason that I can’t rent it out or generate profit from it? No,” Pavey said, noting that patents as a form of property right were very similar to property titles.

Indeed, it would seem pretty ridiculous to suggest that someone who owns a home, whether a house, condo or apartment couldn’t rent that property out to others. If such a rule were adopted it would fundamentally undermine the entirety of property law and through landlord/tenant relationships into complete and total disarray. That is exactly what has happened over the last decade due to the crusade against patent owners who have seen their property rights marginalized, if not completely taken away, and themselves personally vilified for having the audacity to seek ownership of patents and then exercise the rights appurtenant to that ownership.

Other panel members seconded this viewpoint. Marshall Phelps, former VP of IP for Microsoft and IBM and current vice chairman of the Center for IP Understanding (CIPU), noted that “when faced with that question, if you own a house, can anyone walk into that house? That’s another form of property right.” Laurie Self, VP and counsel for governmental affairs at Qualcomm, added that intellectual property was “intended by our founders to be treated in parity with real property.” She added that the idea that intellectual property was much different than other property rights is a foreign concept which has been injected into the current debate. “That’s not at all what was intended,” Self said.

Keynote presenter and former Cisco CTO, Charles Henry Giancarlo, explained that it was understood that individuals would not be able to manufacture and would need to license their rights to others. “It was specifically contemplated that this would engender a licensing industry with respect to patents.” Indeed, Phelps would later point out that 70% of early U.S. inventors did not even graduate high school. Thus, the founding fathers purposefully set up a system that had unique attributes: “it was cheap so everyone could use it,” Phelps explained. And the founding fathers also knew that the patent system they were creating would lead to individuals obtaining patents on their inventions and those individuals would not be able to manufacture, but would instead license those rights to others. But today “patents are suddenly pro-competitive only if you are a manufacturer,” Self explained.

This all shows just how far we have come from our patent roots and the very fabric of the U.S. patent system, which was set up to encourage licensing of rights by those who were not manufacturers. “Licensing was expected by the creators of the patent system,” Giancarlo explained. “It enabled inventors to focus on their core competency.”

Dean John Whealan

In a later panel, John Whealan, former deputy general counsel for IP law and USPTO solicitor and currently the associate dean for IP law at George Washington University, echoed this sentiment on the parallels between real estate property rights and intellectual property rights. Whealan noted that home ownership required title searches to prove that the property could be legally sold, somewhat similar to how patent applications require a prosecution period with an office examiner to make sure that the claims are patentable in the face of prior art. “What if I show up to your home and tell you, ‘I don’t think that you own this house’? If you pay the administrative costs but two-thirds of those titles are invalid, you won’t buy the house, you’ll rent,” Whealan said. That hypothetical two-thirds of titles which are invalid references the two-thirds of challenged patents found to be invalid, a statistic offered earlier in the day by Adam Mossoff, professor of law at George Mason University’s Antonin Scalia Law School.

If there are any trolls in the U.S. patent system, the IIPCC event made it clear that the true trolls are the giants taking concerted actions to weaken the U.S. patent system to the detriment of small inventors. If the American economy is to return to the innovation economy ,which has made this country great, control of the patent system needs to be wrested from the tech oligarchy and balance must be restored so that individual innovators and startups have a much greater chance to survive. Without the proper balance, American innovation will no longer come from a robust collection of property owners but, rather, a small group of sovereign tech monarchs who rule over a serfdom of companies who practice technology, but only with the express consent of the kings.