Gary Shapiro takes self-righteous stand against patent trolls despite obvious bias in favor of infringers

By Steve Brachmann
August 30, 2017

“Bias” by Nick Youngson/nyphotographic.com. Licensed under CC BY-SA 3.0.

It is unfortunately very easy to come across offensive screed regarding the U.S. patent system which does far more to confuse the mainstream opinion of the nation’s current patent law environment than it does in actually informing readers about the real issues in play. Many seemingly venerable publications put their reputations on the line regularly all in service of advancing a narrative proving to be ever more damaging to the U.S. patent system day by day. As articles published by Barron’s, Forbes, Fortune and Science prove to any rational observer, there is very little that will stop the anti-patent crowd from pumping out poorly reasoned analysis in service to their own position. Nothing seems to sway them, not easily rebuttable statistics, inconsistencies in their own position on the subject or even hard research on the deleterious effects of recent patent law.

One of the most recent examples of a biased individual making an unprincipled attack on the U.S. patent system has been published by Above the Law, an online news site providing news, insights and commentary on the world of law. On Friday, August 25th, Above the Law published a piece written by Gary Shapiro, president and CEO of the Consumer Technology Association (CTA), entitled Supreme Court Has Another Chance To Help Take Down The Patent Trolls. The article is a reprint of an earlier post from TechDirt, an online tech legal news site which regularly decries “stupid” patents and hurls vitriol in the face of patent owners trying to assert a presumably legitimate property right.

In his article, Shapiro lauds the opportunity given to the U.S. Supreme Court in Oil States Energy Services LLC v. Greene’s Energy Group, LLC, a case which will ask SCOTUS to decide whether the patent validity trial activities conducted by the Patent Trial and Appeal Board (PTAB) operate in violation of the U.S. Constitution. Like many other media manipulators working to muddy the waters of the patent reform debate, Shapiro draws a direct link between so-called “non-practicing entities” (NPEs), firms which own patents but seek to license them instead of practice the technologies they cover, and “patent trolls,” a term which the Federal Trade Commission (FTC) has declared to be prejudicial and which at least one patent owner is seeking a court declaration on whether use of the term constitutes defamation. The use of the term “patent troll” in media coverage has been found to correlate with a high level of subjectivity in reporting, so Shapiro’s article already seems to employ questionable logic by the second paragraph.

“Patent trolls cost the U.S. economy $80 billion each year, or about $1.5 billion a week. The billions of dollars wasted in this way are funds that can’t be invested in research and development or in hiring the innovative talent needed to develop new products and grow the U.S. economy. In fact, a Harvard Business School study found that companies that settle with or lose to trolls lower the amount of money they invest in R&D by 25 percent on average.”

It must be very helpful to Mr. Shapiro’s position to be able to cite a figure published on CTA’s official website without having a further citation to provide the source of the information. Seemingly, the cost of patent litigation reaches $1.5 billion per week simply because the CTA says it does. Also, the decision to cite a figure reported in 2010 by the Cato Institute rings a little hollow when a study on the effects of NPEs on the patent system published in June 2012 not only puts the figure of annual costs much lower at $29 billion, that survey is one which has been identified as employing a deeply flawed methodology that conflates the basic economic terms “costs” and “transfers.” By doing so the $29 billion number has been shown to be over estimated by a factor of four, which obviously casts serious doubt on the $80 billion number that is nearly three times higher than the previously debunked over-estimate.

To further tie down his argument, Shapiro trots out some quotes from an former licensing executive from Intellectual Ventures, Ira Blumberg. Blumberg, who Shapiro calls “a former patent-troll lawyer,” has seemingly seen the error of his former ways by noting that the actions of patent trolls “can wreak havoc on tech companies of all sizes.” While Mr. Blumberg is as entitled to his opinions, presenting him as a former patent troll lawyer deserves some questioning as it appears that Blumberg never once represented Intellectual Ventures, or any other client, in the court in an IP case at the district court level. Counsel data compiled by Lex Machina shows no cases listing an Ira Blumberg as counsel going back to January 1st, 2000. Finding out that someone touted as a former lawyer to a patent troll has never actually represented any entity, troll or otherwise, in a patent case renders the statement given by that individual just a little hollow.

Shapiro continues on his defense of the PTAB by noting similarities between patent validity challenges and trials: “Lawyers make their case to the Patent Trials and Appeals Board (PTAB), and three highly qualified administrative patent judges hear their case and come to a decision.” Highly qualified or not, there is at least one administrative patent judge (APJ) who has sat on panels issuing final written decisions on trials petitioned by a former employer, a situation which would require a sua sponte recusal in district court to answer any concerns over potential conflicts of interests. Furthermore, the Patent Office has admitted to stacking PTAB panels so that cases are decided in the manner desired by the Director, which is as difficult to believe as it is stunning. Clearly, the PTAB is not an independent tribunal that exercises decisional independence. The PTAB has also removed pro-patent decisions from its database, refused to consider timely submitted evidence, fundamentally misappled the law of obviousness, determined that an MRI machine is an abstract idea, and blatantly ignoring the law with respect to CBM patents. Shapiro paints a picture of a PTAB that defies experience and simply is not realistic.

“This process is expensive, but it’s considerably less costly than going to court,” Shapiro writes. Who is the process less expensive for? Certainly not the patent owners attempting to assert their property rights. Take, for example, the story of Bunch O Balloons inventor Josh Malone who has spent $17 million thus far to protect his private property against a bevy of validity challenges. From the perspective of the patent owner, PTAB is not cost-effective, it is deleterious.

Finally, Shapiro’s status as an unbiased observer of the patent system is completely shattered when looking at the lobbying activities of the CTA, activities which are under Shapiro’s control. In 2016, the bill which the CTA lobbied for the most was H.R.9, the Innovation Act, a bill notable for containing multiple provisions making it more difficult for patent owners to assert their property rights, enabling efficient infringers. The CTA posted 10 lobbying reports on the Innovation Act and a few of these reports indicate that the CTA was focused on lobbying regarding patent litigation reform. CTA filed six lobbying reports on S.632, the STRONG Patents Act, legislation introduced by Senators Chris Coons (D-DE) and Tom Cotton (R-AR), which would have been more favorable to patent owners had it passed, but it’s obvious that CTA was more interested in the bill that favored infringing parties over patent owners.

The disingenuous discourse regarding the U.S. patent system permitted by publications purporting to offer well-reasoned analysis is truly discouraging. It is difficult to witness biased individuals and entities who stand to gain from weakened patent rights self-righteously railing against the system and further weaken our international standing regarding the strength of patent rights in our nation.

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.

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 15 Comments comments. Join the discussion.

  1. Robert August 30, 2017 8:38 am

    Thanks for this article, Steve. I read that piece and was disgusted with the blatant lies being told with every word. Also, Intellectual Ventures has investors such as Apple and Microsoft…do these so-called “practicing entities” then directly support “patent trolls” through their investments? It seems the “goodies” and the “baddies” are all conflated. So called patent trolls defend the rights of inventors who otherwise would have no recourse against the efficient infringers out there. In my opinion, such NPEs are the white knights of the patent system. Also, consider the litigation by “patent trolls” against entites such as Google karma for Google and the like not paying their taxes.

  2. Valuationguy August 30, 2017 9:19 am

    Most of the research I have been able to read estimates the actual direct cost of actual “patent trolls” lawsuits is more along the lines of $5B annually….which is a drop in the bucket of the $20T market for R&D and IP-related revenue. The $80B figure that these Boston Univ professors invent is from looking at the changes in STOCK MARKET VALUE (most derived from large (multi-billion market cap public companies) from before and SHORTLY after lawsuits are filed. It has ZERO probative value on the actual cost of these trolls….as changes in UNREALIZED market value isn’t ONLY due to the filed ‘troll’ lawsuits…despite the authors attempts to link the two statistically.

    Shapiro and Lemley are two peas in a pod…and they are definitely trying to pull all the string ahead of the Oil States case as they know it will set back alot of the effort they have put into “efficient infringement” and they (or their university department) historically get paid (directly or indirectly) for proselyting.

  3. Judge Rich's Ghost August 30, 2017 11:03 am

    Someone should write about the high rate of agreement in three-judge panels. I would venture to guess that the rate of agreement is well north of 90%. Some would argue that the high rate of agreement is a sign that the PTO is doing a good job. I disagree. It seems to be confirmation that one APJ is the primary judge doing the lion’s share of work and decision making and the other two APJs are simply along for the ride, rubber-stamping the opinion.

  4. Anon August 30, 2017 1:18 pm

    To venture beyond the scope of this article for a moment, I am left wondering just how much of the “mass consumption” news out there suffers from such serious lack veracity and care for objectivity, and just how much “spin” surfeits (and supplants actual news) what is being “fed” to the public.

    If, as here, those in the know KNOW how off the “mainstream” coverage it on this topic, what then of any topic?

  5. Gene Quinn August 30, 2017 1:40 pm

    Anon-

    I ask myself that question a lot any more. We know this space very well, and as it becomes increasingly mainstream to talk about patents, patent litigation, commercialization of innovation/technology, etc. we see just how awfully wrong the popular media gets things on a routine basis. In fact, it is practically newsworthy when they get something correct. Now I do know there are some in the mainstream media that try very hard to get their stories right, and I speak with them whenever they call, but they are too few in number it seems. And outlets allowing this sort of nonsense to be published without equal time given to the other side is difficult to understand, other than with (1) bias; or (2) complete ignorance.

  6. Brian August 30, 2017 2:27 pm

    Gene and Steve have you guys looked at this new revelation on what Google does when someone on the left tries to go against Google Gospel / Agenda.

    https://www.nytimes.com/2017/08/30/us/politics/eric-schmidt-google-new-america.html

    I truly believe Google is funding this PR machine against our Patent System and someone needs to expose this farce and deliberate attempt by Google.

    It is time for some investigative journalism and exposing Gary Shapiro & funding of Consumer Technology Association (CTA) by Google and the infringement lobby.

    What Google and its PR machine is doing to push its agenda and if someone goes against it what happens to them?

    You guys should write a piece exposing the tech cartel and its PR effort to destroy our Patent System.

  7. Gene Quinn August 30, 2017 3:35 pm

    Brian-

    I read that article in the NY Times this morning. It is very telling, and absolutely in keeping with what I’ve been hearing for some time. There is great fear in Silicon Valley. There are many innovators and start-up companies that do not want to follow the Google script when it comes to patents, but there is tremendous fear that if they do not they will be blackballed. This is just evidence that Google wields its power to curb criticism.

    There is no doubt that Google is the major player behind the anti-patent narrative. We’ve written about that over and over again. There really isn’t any secret about that. Google spends huge sums lobbying on tech, and patents specifically. The Google narrative is inescapable in Washington, DC. It is everywhere. They don’t try and hide it. They practically had a revolving door on the White House during the Obama Administration, and that was in addition to the dozens of Google executives who became high ranking government officials during the Obama Administration. Unfortunately, the Trump Administration has not changed its views. The Trump Administration is in perfect alignment so far with the Obama Administration on patents, both in budget statements and in Court filings. The remnants of Google’s influence continue as if unchanged and not affected by the new Administration.

    I’ll see if we can whip this into a post over the next week or so. It is increasingly being discussed in the Capitol area and noticed. The great hope that was President Trump is fading quickly. Nothing is changing it seems, and the government is arguing that patents are a public right, which means that there is no right to exclusivity and patents are not even a property right.

  8. Brian August 30, 2017 5:05 pm

    Gene I agree with what you are saying. The only thing I may have a different opinion is that it may not be Trump admin, but the holdovers from the last administration that is doing the Google bidding.

    Similar to the FBI holdovers in this news story.

    http://www.washingtonexaminer.com/fbi-refuses-to-release-hillary-clinton-files-says-lawyer-did-not-demonstrate-the-publics-interest-in-the-disclosure/article/2632905

  9. Valuationguy August 30, 2017 5:06 pm

    Gene,

    Not sure you allow links in comments but I posted below a 2-part article showing the vast network of contacts between Google, the CIA, NSA, and other Deep State bodies. While much of it reads as conspiratorial….the social and professional links themselves are of interest. (Obviously patent issues is not the primary concern of the author…but it shows the vast REACH of Google in gov’t, defense, intelligence, and lobbying circles….)

    https://medium.com/insurge-intelligence/how-the-cia-made-google-e836451a959e

    https://medium.com/insurge-intelligence/why-google-made-the-nsa-2a80584c9c1

  10. Gene Quinn August 30, 2017 5:45 pm

    Brian-

    It may be Obama holdovers, but it may also be Jared Kushner. Stay tuned!

    -Gene

  11. Name withheld to protect the innocent August 30, 2017 7:42 pm

    It seems to be confirmation that one APJ is the primary judge doing the lion’s share of work and decision making and the other two APJs are simply along for the ride, rubber-stamping the opinion.
    Bingo … we have a winner.

  12. Night Writer August 30, 2017 9:05 pm

    @11

    I think the patent judges get points just like examiners. I don’t think there is an advantage to writing a dissent. I think a lot of the work of the patent judges is governed by their point system just like with examiners.

    (I also heard may have heard in the wind that at times the CJ had to approve a dissent.)

  13. Curious August 31, 2017 8:42 am

    Another good opinion piece in the NY Times today about Google’s influence.

    https://www.nytimes.com/2017/08/30/opinion/google-influence-think-tanks.html?ref=opinion

    Some snippets:
    In his book “Zero to One,” the tech investor Peter Thiel writes that companies like Google lie to protect themselves. “They know that bragging about their great monopoly invites being audited, scrutinized and attacked. Since they very much want their profits to continue unmolested, they tend to do whatever they can to conceal their monopoly

    As well as:

    According to a 2017 Wall Street Journal investigative report, “Over the past decade, Google has helped finance hundreds of research papers to defend against regulatory challenges of its market dominance, paying $5,000 to $400,000 for the work.”

    This comes as no surprise:
    Occasionally this is revealed to the public, such as when the infamous Google Shill List came out during a lawsuit brought by Oracle. Google was forced to disclose that it provided major funding to important organizations like Public Knowledge, Electronic Frontier Foundation and the Computer and Communications Industry Association.
    Wasn’t our good friend, Matt Levy, the “former Patent Counsel at the Computer and Communications Industry Association (CCIA)”? We might just as well had someone from Google’s corporate office writing the opinion pieces that Matt Levy furnished. Come to think of it, I wouldn’t be surprised if they did.

  14. Curious August 31, 2017 8:49 am

    NW @12

    Gene wrote about this a long time ago:
    http://www.ipwatchdog.com/2009/05/21/patent-office-really-muzzling-dissent/id=3615/

    And referenced the following article:
    https://patentlyo.com/jobs/2009/05/bpai-shuts-down-dissent-in-favor-of-efficiency.html

    The long and the short of it is that (1) APJs do get productivity credit (i.e., comparable to the point system of the Examiners) and (2) dissents, concurrences, and remands are discouraged.

  15. Brian August 31, 2017 1:41 pm

    New Google’s slogan – Don’t be evil. That’s our job.!

    Google Lee : USPTO / PTAB : We are running a fraud : USPTO charges $5000 to an inventor and give him a patent after 5 years, then PTAB charges $25,000 to the infringer and take away that same patent in 18 months.

    Google blessed CAFC : We make sure inventor never wins and Google / infringement lobby is happy.

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