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.

The Author

Steve Brachmann

Steve Brachmann is a writer located in Buffalo, New York. He has worked professionally as a freelancer for more than a decade. He has become a regular contributor to IPWatchdog.com, writing about technology, innovation and is the primary author of the Companies We Follow series. His work has been published by The Buffalo News, The Hamburg Sun, USAToday.com, Chron.com, Motley Fool and OpenLettersMonthly.com. Steve also provides website copy and documents for various business clients.

Steve Brachmann

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 25 Comments comments.

  1. IPdude May 10, 2017 10:12 am

    The problem is further exacerbated by the current administration’s (Lee and acting solicitor general?) response to SCOTUS regarding Oil States cert request. They were pretty adamant that patents are a public right, not private.

  2. angry dude May 10, 2017 10:25 am

    But, according to some commentators here, we have a robust patent market in the US :):):):):)

  3. Anon May 10, 2017 10:32 am

    IPDude,

    There is an ongoing dialogue, albeit disjointed and fragmented due mainly to the artificial editorial controls, over at “the other blog” concerning the (necessary) differences of something considered to be private property and something considered to be a public right.

    The main antagonism to your view is that patents are a special kind of personal property and that they (somehow and unexplained) are not just private property, and enjoy (again somehow and unexplained) less than all the normal attributes of being private property because they are ALSO public rights.

    I think that there is some rather heavy confusion between something “affecting the public interest” and something being within the legal term of “public rights,” but that is merely my own viewpoint.

    After all, even real property (real estate) has long been known to affect public interest and have given rise to a whole slew of property law dealing with nuisance and zoning (including attributes of government taking in the form of eminent domain and the like).

  4. SMK May 10, 2017 4:35 pm

    Great points, but I would also add it is not just SCOTUS and the efficient infringement wing of corporate America undermining the system. Some Fed Circuit judges are also “anti-property” when it comes to patent rights. I wrote an article a few years back about a case (3M Innovative Properties Co. v. Tredegar Corp.) where Plager argued in a concurrence that contract rules should apply in litigation. By the time of litigation, the “deed” of the property has been determined, so why should contract rules apply? The answer is they shouldn’t, unless you want to render that “deed” malleable.

  5. Anon May 10, 2017 6:39 pm

    SMK,

    Truly, attacks on the patent system come from more than one ideological and socio-political direction.

    Indeed, it appears to be a common point of misinformation (and propaganda) to pretend that such multiple attacks do not – or cannot – exist. Leftists will often pretend that those on the far Right are examples of “patents are e v i l” or pretend that large established companies (typically thought of as “Right”) could not possibly want patent policies that would diminish patents.

    As has been discussed time and again, this type of obfuscation just does not accord with reality.

  6. Peter Brady May 10, 2017 8:48 pm

    Steve and Gene nicely done and clear discussion of patent as property rights for more than 100 years. But you neglected to discuss that in 1989, the Granfinanciera S.A. V. Norberg, Justice Brennan carved out an exception to the private rights exception. He included many restrictions and caveats to using the public rights exception and emphasized that Congress was not authorized to create a public rights exception in something that has been historically a private right. Some 20 years later Justice O’Connor solidified the use of the public rights exception- but did not warrant caveats in its use. Unless and until these SCOTUS cases are reversed, the efficient infringers will continue to make use of the public rights exception to there benefit ant the CAFC will continue to play along.

  7. Peter Brady May 10, 2017 9:58 pm

    The O’Connor case is Thomas v. Union Carbide

  8. IPdude May 10, 2017 11:14 pm

    Anon @3 – the true measure of whether a patent is private or not is based on it vesting at some point. Given there is no limit to the number of IPRs an infringer may bring, patents, at this point, are public. We need to repeal the AIA, or at least limit IPRs so that patents may vest at some point.

  9. Benny May 11, 2017 5:44 am

    Nitpicking as usual, but given the limited term of patents, and the expiry of such rights upon non payment of maintenance, wouldn’t a lease on property be a more apt analogy rather than outright ownership?

  10. Paul Morinville May 11, 2017 7:08 am

    Benny, Do you pay property tax on your house?

  11. Benny May 11, 2017 7:25 am

    Paul,
    I paid a one-time property tax on my house when I purchased it. The title deed to my house is not limited to 17 years nor any other period. The title to my house cannot be revoked if I fail to pay council rates. I can (and do) rent my property for financial gain, but the dwellers cannot claim that they need not pay rent if the flat is more than 17 years old.
    Any other questions regarding my house, I’ll be more than glad to answer.

  12. Anon May 11, 2017 9:02 am

    Lease is not apt if only but got to whom the property underlying a lease belongs to.

    Without the inventor, there would be no property to begin with (origins do matter with your attempted analogy)

    The lifespan is simply a difference in the attributes of the property, and not a driver as to the item being property or not.

    Similar with vesting. While IPDude’s comment merits interest, that interest is less in the property/public right discussion and more in the fact that a lack of real vesting plays more into the failure of the AIA to meet the Constitutional mores of “securing.” If in fact that at the point of grant – the traditional demarcation of a property right secured, Comgress has attempted to change property (while not directly changing property – which was not on the table with the AIA), we have a situation wherein other Constitutional protections of a property have swept in and even Congress, the correct branch of the government to write patent law, is constrained as to the laws that it may write.

  13. Anon May 11, 2017 9:05 am

    “If only but got” => “if only but for”

    (Correcting the auto correct)

  14. Paul Morinville May 11, 2017 10:17 am

    Benny, Not sure where you live, but I’ve owned my house in four states. In each state there are annual property taxes due. If I do not pay them, the house will be taken by the county and I will be evicted. How is that different than maintenance fees on patents?

    The term has nothing to do with whether or not something is a property right. It is merely an attribute of a specific type of property. One is restricted to time and the other is not. But that changes nothing about the nature of the property right.

    The nature of a property right is changed (at least in the US) when it can be challenged and invalidated by an administrative tribunal rather than a Article III court. Due process and a jury are required of property rights and not of public rights.

    If your argument is that a patent is really a public right (a lease from the government), you have a heavy burden overcoming the Constitution’s construction of a patent as an “exclusive Right”, black letter law defining a patent as a property right and 200 years of Supreme Court precedent.

    Please prove your case as to why all of this is wrong and you are right.

  15. Benny May 11, 2017 11:08 am

    Paul,
    Whoa, an annual tax on ownership of property is out of line with the democratic norms in my country (Road tax for vehicles is a tax on use, not ownership).
    ‘Nuff of that. My point is, property title to real estate, vehicles, etc is not constrained by time. Property rights to patents are, so the comparison between patents and houses breaks down somewhere down the road.
    But I have no gripe against patents granted after due and diligent process. The discussion here is about what should be done about patents which were granted despite not being patent eligible? (example of actual case – patent granted in US, same inventor’s identical patent application published in China 3 years prior to US filing). Some here take the view that the government cannot be an Indian giver. My own, personal, and obviously minority view, is that if the government hands you something you don’t deserve, the government can take it back. In the EU, that job goes to the same office which granted the rights in the first place. I’ve heard it told on these pages that the USPTO is the best patent agency yet, casting a shadow over the EPO. I’m not so sure.

  16. Paul Morinville May 11, 2017 11:24 am

    Benny, “My own, personal, and obviously minority view, is that if the government hands you something you don’t deserve, the government can take it back.”

    I agree that a patent issued that should not have been issued should be taken back by the government and there has always been a way to do that in Article III courts.

    But the same agency that grants apatent cannot be the one to take it back. It creates dictatorial power in one person, the PTO Director, which at minimum causes the strength of a patent to oscillate as new PTO directors come and go. In the worst case, it opens the door to corruption by consolidating enormous power in the hands of one person.

    Also, if a patent is treated like public right where an administrative tribunal can invalidate a patent without the protections guaranteed in an Article III court, a patent’s enforceability is not known at an early stage. If it is not known it is uncertain, and nobody invests in new technologies that are heavily reliant on patent protection if that protection is uncertain. Unfortunately, these are the technologies that historically have created most of our new industries and new jobs. The evidence of the crash of American innovation due to the PTAB and Alice is becoming very clear as venture capital flees to China taking with it startups.

    Is a patent a property right? Well, if it is not we don’t fund startups. That question must be answered. Oil States v. Green Energy is the perfect vehicle to answer it.

  17. Anon May 11, 2017 12:29 pm

    Benny to echo Paul, you step into the abyss by stating “My own, personal, and obviously minority view, is that if the government hands you something you don’t deserve, the government can take it back.

    The problem with your statement is not that such reflects your feelings and opinions.

    Everyone has those and has a right to those.

    The problem is that such are uniformed when the topic is centered on the law and how the law affects the topic to which you have feelings and opinions.

    Putting blinders on, sticking your fingers into your ears and chanting while others are trying to inform you as to why your feelings and opinions come up short is the epitome of what does not pass for an inte11ectually honest dialogue.

    You really should take to heed the attempts to inform you so that your feelings and opinions are informed feelings and opinions.

    This concept is not new, and, sadly, we have had this conversation before.

  18. Frank Lukasik May 12, 2017 9:00 am

    Doesn’t anyone else care that Patents are “Property” which is taken away after 4, 8 or12 years for non-payment of Maintenance Fees?

  19. angry dude May 12, 2017 9:09 am

    Frank Lukasik @18

    Yes, I do care

    Third maintenance fee is due later this year and I’m not gonna pay it. Why ?
    Because I don’t have any property in the first place – just a sh1tty piece of paper with signature of some dude named dudas…
    It’s throwing good money after bad – might as well flush it down the toilet
    How things have changed since 2002 when I filed my patent application…

  20. Peter Brady May 12, 2017 10:21 am

    Still you all are looking in the wrong direction regarding the property rights/public rights issue.
    The article waxes nostalgic – but it’s not the reality. SCOTUS has carved out exceptions and the CAFC has used these exceptions to rule that patent rights are not property rights.
    The SCOTUS cases (Thomas and Granfinanciera) need re- examination re: patents. Until then or until they can be distinguished regarding patent law there will be no changes. The CAFC has ruled in MCM patents are not property. SCOTUS needs to set the errant CAFC on the right path.

  21. Jeff Hunt May 12, 2017 10:28 am

    The big picture, perhaps is that innovators have been victimized by the dark industry of U.S. lobbying, which has commoditzed individual rights and sells them to the highest bidders. I can’t characterize it as generally immoral, really it just seems like very predictable U.S. politics in the era when about 500 elected representatives hold immense power over 350,000,000 citizens. This gross accumulation of power in elected seats must be monetized or it will be forfeited by loss of the elected seat to one willing to better manage monetization of the accumulated power represented by each seat. This, I believe, is the source of the problem. Face it – the marketplace for rent seeking by enacting changes to law and the processes of government, is robust particularly where spectacular wealth transfers can be realized by lobbying and governing. The compliant judiciary that might protect patent owners, but always finds reason not to protect the individual or tiny company, is just a symptom – all are astute political appointees. Patent owners like all other individuals, face a ridiculous mountain of artificial obstacles to commonsense enforcement of their rights. I think it is unwise to expect real improvement in the honoring and enforcement of individual rights, and this includes patent rights, where government is asked to provide the enforcement mechanisms, except where those individual rights happen to coincide with rights of corporations. The copyright system is such an example. Patent rights are not.

  22. Anon May 12, 2017 10:56 am

    SCOTUS has carved out exceptions and the CAFC has used these exceptions to rule that patent rights are not property rights.

    Both of which are ultra vires in direct contradiction to patent law as set by the only branch provided authority under the Constitution to do so.

    This is a court-made problem.

  23. Anon May 12, 2017 11:24 am

    Jeff,

    Citizen’s United would be a good place to start taking things back.

  24. Chris Gallagher May 12, 2017 1:37 pm

    Benny
    You come home from work and find a strange family living in your dining room. Instead of calling the police to remove them you must spend millions in court proving that your own the room where they are squatting. You prove your case but instead of ordering their eviction the court orders them to pay you rent at an amount hypothetically determined by calculating what you and the squatters would have agreed to before they moved in, even though you are not in the dining room rental business. Does this involuntary rent remedy sound like the post eBay compulsory licensing remedy for non-practicing patent holders?

  25. Darrell Metcalf May 13, 2017 1:39 pm

    We’ll Need to Take the Patent = Property Analogy a Step Further

    Steve and Gene, thank you both for keeping a steady focus on Patents = Property (‘P=P’) as a poignant analogy. Adding to the intensity of that magnifying glass focused-light, I’d like to make the case that we need to take the analogy a step further, to have any hope in re-framing the patent troll narrative and its considerable (intented) momentum.

    Two things working against P = P in a public perception of patents is ‘complexity’ and ‘fear’. The former garners clout via ‘a greater the complexity of a system, the easier it is to corrupt it’ equation. Meaning, the patent system, in the mind of the public, is just complex enough that many cannot get their minds around it–allowing a succinct ‘troll’ analogy (known from its outset to have been false) to ‘win’ attention, and thereby a de facto ‘understanding’. ‘Fear’ accomplishes at a visceral level what analogy cannot. But people have not been led to fear a ‘patent troll’ per se, deeper, they have been led to fear a troll poised (allegedly/ironically) to arbitrarily seize property. What an injustice! Thus, complexity-plus-fear has conjured a perfect (succinct) cocktail, easily consumed and literally intoxicating. The patent troll anology remains powerful–‘top of mind’ as marketers would say. A suitably stronger counter-analogy is what is now needed, one that can be readily brought to mind and held there with sufficient traction.

    I think we could advance the Property anology a step further (memorably) by framing what has been created and perpetuated at the PTO (even if unwittingly in certain respects) as a Caste System for Property Barons Granted Firing-Squad Like Powers Over Patents of ‘Small Property’ Owners.

    The ‘firing-squad’ being the host of post-grant attacks, used daily, systematically, by ‘big owners’ to seize ‘small owner’ property rights, yielding the likes of ‘efficient infringement’, bearing a dreadful BRI ‘different-standard’ death toll rate, PGR rifles, CBM hand-guns, IPRs even ‘machine-gun’ like serial IPRs, etc. All yielding a devaluing U.S. patents, rendering many patents defenseless, sending the U.S. Patent System into a downward-only trajectory now tenth-ranked in the world (not fixed thereat), ‘outsourcing’ patent investment to those countries who DO defend their patents, and so on.

    People need to get a sense of the proportionality of how much ‘big owner’ Baron-like powers are regularly trampling, invalidating property rights of ‘small owners’, not the converse.

    A simple graph would helpful as well (worth a 1000 words): show the downward trajectories of successfully defended patents, PTAB patent death tolls, reduced startup investment (U.S.), related employment losses, U.S. patent system ranking since AIA (or last decade) to date.

    Whatever the analogy is, it has to be succinct, powerfully memorable and it has to have ‘legs’ sufficient to offset a dauntingly concise two-word ‘Patent Troll’ moniker. While the P=P is and should be a dominant operating ‘principle’, as the operative analogy alone it will not suffice, because it is too much a tip-of-the-iceberg initial explanation (complex) rather than a quickly-shared, memorable telling of an ongoing injustice (worthy of actual fear, versus a Big-Tech intended campaign of ‘perceived’ fear unsupportable by fact).

    I would happy to assist in any way possible to help get us to a succinct counter-analogy, understandable in seconds (Matchbook cover / Elevator pitch sized).

    In the meantime, I hope the above helps to further such discussion.

    Sincerely, Darrell