Creating an Ecosystem that Encourages Disruptive Innovation

By Gene Quinn
April 1, 2018

Creating an Ecosystem that Encourages Disruptive InnovationWithout strong patent rights the incentive for risk-taking entities and the investors who support them is simply not present. The risk-reward calculus tilts too far toward risk for investors when patent rights are weak, as they are now in America. This is one reason why today there is more funding in China for inventions related to artificial intelligence than in the United States.

A weak patent system that tilts toward risk and away from reward only works to starve those small, nimble actors most likely to achieve paradigm-shifting, disruptive innovation. Large entities full of mid-level managers and bureaucratic red tape have lost the ability to innovate. That is why giant tech companies like Google and Facebook either acquire smaller innovative companies or they simply copy smaller companies, as Facebook has rather notoriously explained is its policy and they have obviously done with respect to Snap.

When the risk-reward calculus tilts toward risk, particularly when it does so in such a dramatic fashion as it has over the last decade in America, those nimble, creative actors are starved of the capital they so desperately need. This is true because innovation doesn’t just happen, despite what so many of the tech elite want you to believe.

If by chance you believe innovation just happens, as if by magic, ask yourself why it is the Microsoft invests $11 billion annually into research and development? If innovation just happens why spend so much money to create something that will already come to fruition on its own? Saying, or believing silently, that innovation just happens and doesn’t require an ecosystem to support, encourage and nurture it is ludicrous. You might as well believe in leprechauns riding unicorns sliding down rainbows!

Taking risk is absolutely required in order to achieve innovation of a magnitude great enough to have any hope to compete with entrenched market players. This should hardly be surprising. By its very nature innovation is the act of introducing something new; something that has never existed before. Challenging what is established is never easy. The path of least resistance is simply to go along, not to disrupt.

Oddly, the merits of disruptive innovation are trumpeted in every corner of the business world and throughout Silicon Valley, but then policies are advocated that make such innovation all the more difficult to achieve. If we want disruptive innovation we need an ecosystem that supports, encourages and nurtures risk-taking.

If you want to ensure you have a bountiful harvest you don’t just plant a single tomato plant and hope for the best. You plant several, perhaps many, which maximizes your chances of getting the tomatoes you want and need. Innovation is no different. The more risk-taking that results the greater the likelihood that one or more of the resulting innovations will be disruptive.

Assuming America wants paradigm-shifting, truly disruptive innovation we need to recognize the need to incentivize the risk-takers and those that provide the capital to those risk-takers who dare to challenge the status quo. This means policies, laws and rules that foster innovative activities from smaller entities who are most likely to innovate.

With an eye toward policies, laws, rules and actions that would most benefit innovators, their endeavors more attractive to investors and more feasible to pursue, the U.S. should adopt policies, laws, rules and actions including:

  1. Treating patents as property, not a government franchise, not as a public right, but as a vested property that is presumed valid in all forums and treated as a real asset with a quieted title at some point.
  2. Declaring loud and clear that software, medical diagnostics, medical discoveries and biotech innovations are patent eligible.
  3. Recognize that a patent cannot be property without the right to exclude, and when a patent has been infringed and withstood all invalidity challenges the patent owner must presumptively be entitled to an injunction.
  4. Institute fewer post grant challenges because surely if the Office is correct about the 96+ percent quality output of examiners there cannot be as many mistakes made during prosecution as have been identified by the Patent Trial and Appeal Board (PTAB).
  5. Requiring the PTAB to issue final written decisions confirming the validity of patent claims challenged by not instituted, which would allow estoppel to attach to those claims the PTAB has necessarily determined to be not likely invalid.
  6. Introducing a new category of entity between micro-entity and small entity for companies with 50 or fewer employers, which would benefit small businesses and start-ups that actually innovate.
  7. Moving applications to the front of the line where the micro-entity or small business applicant has received angel, venture capital or crowd funding, which will advance technologies that have the greatest commercial potential.
  8. Reducing or eliminating all USPTO fees for micro-entities and the newly created small business category.
  9. Redefining micro-entities so that the number of patent applications filed no longer disqualifies applicants from micro-entity status, which unnecessarily disqualifies serial independent inventors.
  10. Instructing patent examiners to actually follow the law and presume the applicant is entitled to a patent unless a credible rejection can be made, and terminating or reassigning patent examiners who refuse to follow the law and instructions from senior Officials.
  11. Terminating, or reassigning, patent examiners who have not issued patents for years.
  12. Shift quality review of patent examiners away from primarily considering only patents granted to equally considering patent applications that are denied.

Turning the patent system around is possible, but bold action is required given the significant hole America has dug for itself, and given so many nations around the world understand that a strong patent system is the way to economic prosperity.

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 36 Comments comments. Join the discussion.

  1. Paul Morinville April 1, 2018 11:57 am

    Leprechauns do in fact exist. My Irish mother told me all about them and she can’t be wrong.

  2. Paul Morinville April 1, 2018 12:04 pm

    Universities are classified micro entities just like independent inventors with less than four patents. I have no objection to their treatment as micro entities, but there needs to be a distinction between universities and independent inventors. Because they are grouped together, it is not possible to know how many small inventors are taking advantage of Track 1 prosecution.

    I suspect the number is very small because of the cost.

  3. Ternary April 1, 2018 3:30 pm

    Re: Item 9 in Gene’s article: The current anti-patent movement has as one main target to diminish the value of patents created and owned by independent inventors (and NPEs), who are effectively being wiped away from their traditional position as risk taking innovators in the USA. Research funded by a company is entirely different from inventions done by an unfunded independent inventor.

    By their nature, independent inventors are generally fearless and often unrestricted by conventions and perhaps even unmanageable. Independent inventors are also often annoying and determined to push their ideas. That is exactly why independent inventors have played such an outsized role in American history. It is not that incumbent parties have not tried to suppress the patents of independent inventors. They have in the past, with varying levels of success. But never at the present level which appears to completely obliterate the importance of the independent inventor.

    I endorse Gene’s suggestions and particularly step 9 above to promote work by independent inventors: Declare all independent inventors (those not employed or contracted by a company or institution) as micro-entities before the USPTO with NO LIMITS on the number of application filings and issued patents.

  4. Benny April 2, 2018 5:31 am

    “Reducing or eliminating all USPTO fees for micro-entities ”
    No. Do that and you will be hit with a deluge of pro-se crackpot inventors with snake-oil inventions. The USPTO is stuffed up with them enough as it is.
    Prioritizing examination based on source of funding – smells like unfair discrimination.
    Adding yet another entity? The USPTO already has 2 more than any other patent system.
    Paul @1 – I know of many people (some of them senators, one even a presidential candidate) who believe, without evidence, in more ridiculous things than leprechauns – but this is no place for a theological discussion

  5. Greg Owoc April 2, 2018 5:40 am

    Gene, your skilled defense of the independent inventor and practical insights and arguments for a strong US Patent system is courageous and highly commendable. I encourage you and your other skilled colleagues to compile a succinct, but exhaustive treatise that summarizes your core, most cogent reasons, as many clearly enumerated in the above article. Present this, preferably with many like minded signatories, to key Senators who understand the gravity of these issues, it may advance the cause much further and faster than you might imagine.

  6. John Fetter April 2, 2018 6:24 am

    Gene, I refer to your points 10 and 11:

    10. Instructing patent examiners to actually follow the law and presume the applicant is entitled to a patent unless a credible rejection can be made, and terminating or reassigning patent examiners who refuse to follow the law and instructions from senior Officials.
    11. Terminating, or reassigning, patent examiners who have not issued patents for years.

    You appear to have worked out the situation back to front. All the signs are pointing to an examination system that is controlled from the top. Applications are purposely steered to examiners in accordance with a “suggested” prescribed degree of obstruction or facilitation. Examiners known for their obstinacy are in demand – and these examiners are obviously aware of it. Their superiors LOVE THEM. Private enterprise is in communication with the patent office. It does not take much imagination to figure out what they talk about. It does not take much imagination to figure out how applications are assigned to examiners. The rot is at the top.

  7. Anon April 2, 2018 7:24 am

    No. Do that and you will be hit with a deluge of pro-se crackpot inventors with snake-oil inventions. The USPTO is stuffed up with them enough as it is.

    The fallacy machine keeps cranking….

    The pro-se style of applications that you seem so worried about are some of the easiest applications to examine.

    The ones that are tough to examine are the good ones at the edges of patentability (and I specifically use “patentability” as distinguished from “patent eligibility”).

    All that you are doing here Benny is mouthing the parade of horrible s mantra of the Efficient Infringers position.

  8. Benny April 2, 2018 7:39 am

    Anon,
    I fail to see any connection between my comment and efficient infringing. There is no such thing as eliminating the USPTO fees – all you can do is have the large entities subsidize the micro entities – not in financial terms, but in human resources, increasing the backlog. “Easy” doesn’t mean an examiner doesn’t spend half a working say reading (at least some of) the application, writing a rejection, and fielding phone calls from the inventor. Maybe you should look at a few pro-se nutcase file wrappers. (some of them are pure comedy).

  9. Anon April 2, 2018 8:11 am

    Comedy has nothing to do with the point here – the point that you are generating a dustcloud that mirrors the rhetoric that the Efficient Infringers love to spread.

    That you “fail to see the connection” is a failure on your part.

    Nothing more.

  10. Benny April 2, 2018 8:29 am

    Anon,
    There is no connection to see. You have an annoying habit of calling everyone who disagrees with you “an efficient infringer lobbyist”. At least you don’t prefix this with a McCarthy style “card carrying” epithet.
    What I see is here is identifying a problem (apparent lack of innovation) and then laying the blame fully and squarely on the patent system. I call foul.
    In my experience, most young engineers (the innovators, remember? ) have a pretty sketchy picture of the patent system, and certainly don’t appreciate the nuances of different national patent systems and patent review procedures. If you want more innovation, you start at the source, not the end. Do you know what differentiates countries with a high per-capita level of innovation from the others ? Subsidized higher education. Start there.

  11. Kirk Hartung April 2, 2018 8:35 am

    Congress needs to act on these, since most will not likely arise via court decisions. A political party who seeks to create jobs and grow the economy would do well to support these proposals.

  12. Anon April 2, 2018 9:15 am

    8. “Reducing or eliminating all USPTO fees for micro-entities and the newly
    created small business category.”
    9. “Redefining micro-entities so that the number of patent applications filed no
    longer disqualifies applicants from micro-entity status, which unnecessarily
    disqualifies serial independent inventors.”
    Yes I agree with these but I would modify it to include Inventors who already have patents in their names but the corporations paid for & own the all rights to it, then that Inventor who still works on their own is still a micro entity. I qualify these statements from first hand experience, with patented work that will never have rights to. The patent office pigeon holed me as small entity not as a micro entity because of it.

  13. Anon April 2, 2018 10:15 am

    Your “calling foul” misses the mark in several ways.

    First, your views (to which I have commented upon) DO align with the Efficient Infringer mantra.

    We’ve had this discussion before and you yourself have admitted as much.

    Second, you now attempt to move the goalposts and want to insert a discussion about something to which I have not commented upon: increasing innovation potential through supplemented education. Not only is this a moving of goalposts, it is a topic to which I have not ever indicated that my position would be contrary to what you now offer. Your presentation here insinuates otherwise.

    If you want to return to the actual topic upon which we may have a disagreement then, you WILL see (if you bother to unclench your eyes) that – once again – your position DOES align with the Efficient Infringer Mantra. Any annoyance that you may feel with my correctly pointing this out is only a feeling that you have, and one that is unjustified for you to try to state the my observation is somehow “MaCarthy-lite.”

  14. Ternary April 2, 2018 1:41 pm

    Benny @4. But that is exactly the point of promoting independent inventors who work outside a bureaucracy that is specifically set up to align opinions and work. You would want independent inventors to develop and publish their unconventional ideas, even if some of them may be considered crackpottery.

    To equate independent inventors with crackpots is not correct. There is a very strong tendency in science and technology to adhere to conventional ideas and marketable inventions and to filter out unconventional ideas. History has shown that what is unconventional in the past may be genius in hindsight. See: Fourier, Heaviside, Einstein, Armstrong, Carlson, etc. In case of Heaviside it was the authority figure Preece (Sir William Henry Preece, no less), chief electrician of the British Post Office and his merry band of “practical men” who turned out to be the theoretical crackpots.

    A patent system is an expression of a nation’s industrial and economic policy. Letting independent inventors benefit from their inventions has served this nation very well. It is something that now appears to be more recognized and promoted by China. Other nations have elected to promote inventions and patents by offering tax breaks that mainly benefit companies. It demonstrates a, largely unwarranted,greater trust in innovative capabilities of companies rather than of individuals. Providing minimal support in filing fees to independent inventors who finance their own work seems like a very advantageous proposal.

    I would not worry too much about crackpot inventors. My concern would be more with crackpot managers, crackpot opinion makers and crackpot politicians.

  15. David Lewis April 2, 2018 2:20 pm

    Although, in general, I agree with the article, it is my understanding that the Chinese government funds at least some startups.

    The government is in a unique position to understand what is important to the economic and security interests of the country as a whole, in terms of guiding and encouraging innovation, because the government is not profit driven. Although there are many flaws (e.g., related to partisan politics and some times out right corruption, for example), with the way the government goes about choosing what to fund and what not to fund, having an entity that at least in theory should be acting in the best interest of the people funding and guiding at least some innovation (in addition to private investment banks) is probably a good thing.

    So, I would go one step further than what is outlined above in this article and also advocate more government funding for both basic research and development and for fledgling startups would also helps foster innovation.

  16. angry dude April 2, 2018 2:44 pm

    Benny @4

    Dude,

    This is one thing we can agree on..

    If someone is serious about pursuing his/her invention then this person should be able to obtain (or borrow) some money to pay for patent filing and prosecution
    … at least more than a dinner for two at outback restaurant
    I say make PTO filing and examination fees 10K but make sure each and every patent application receives proper examination (not hours but many days or weeks if necessary)

    People buy houses and new cars they don’t need on credit
    Might as well borrow money to file patents if they can’t afford out of pocket cash payment and patents are not bs and treated as property rights

    “Property rights” are the key words

  17. angry dude April 2, 2018 2:59 pm

    Back in early 2000’s I was talking to several patent prosecution contingency attorney ans agents
    Where are those now ???

    If patents are treated as property rights there must be plenty of those

  18. Gene Quinn April 2, 2018 3:38 pm

    angry dude-

    I know you think you know everything about everything, but you really don’t know anything. Do you actually read the articles or do you just race to comment?

    Please see: http://www.ipwatchdog.com/2017/07/08/why-patent-attorneys-dont-work-on-contingency-2/id=85514/

  19. Benny April 2, 2018 3:38 pm

    Angry and Ternary,
    the bar should be just high enough to keep out the nuts filing applications for teleportation and anti-gravity devices. Look up inventor John Quincy St. Clair to get a picture of the sort of thing you don’t want examiners to waste time on. I think micro entity fees are fair, and a downright bargain compared to getting a patent on the other side of the pond. The biggest costs are the attorney fees.

  20. Anon April 2, 2018 4:11 pm

    Benny,

    Your “concern” is a hyperbolic exaggeration.

    Nothing more.

  21. Roger Heath April 2, 2018 5:23 pm

    “the bar should be just high enough to keep out the nuts filing applications for teleportation and anti-gravity devices.”

    If they want to put their heads on the chopping block they have that right, nuts and all.

  22. Ternary April 2, 2018 5:45 pm

    Benny. I agree with Anon @19. All of John Quincy St. Clair’s patent applications were rejected in a first office action and were abandoned due to failure to respond to an Office Action. Nothing to get upset about. This is how the system is supposed to work and that part works. No clogging of the system. No long exchanges of amendments and/or complaints. This has little to do with the position of independent inventors.

    I am pleased that you agree that independent inventors should have micro-entity status. I wish the EPO would have a similar program. But independent inventors do not play any role of significance in Europe. A lesson that American interests have taken to heart lately.

  23. angry dude April 3, 2018 9:39 am

    Gene @17

    Back in early 2000’s I was planning to file patent applications and was talking to several patent agents willing to do the work for 1/3 of their actual billable time in exchange for partial ownership
    I ended up filing just one patent (a really long one – like 50 pages mostly written by myself) and paying 20K to a reputable patent attorney (a senior partner at a small patent prosecution firm)
    So contingency or partial contingency patent prosecution choices were there before Ebay
    It’s capitalism after all – all you had to do is convince patent attorney or agent to become your investor
    But it only works if patents are treated as real property rights

  24. Anon April 3, 2018 10:32 am

    angry dude,

    Smart patent attorneys and agents AVOID the arrangement that you advocate, as that is a sure-fire way to run the risk of ethical entanglement and conflict of interest.

  25. angry dude April 3, 2018 12:02 pm

    Anon @23

    Is this illegal ? No

    So it is a sure way for them to lose money in the current environment so they don’t do it anymore
    But back in early 2000’s quite a few of them did at least partial contingency representation
    – mostly agents, but I checked their work (issued patents) and they were quite proficient and no less smarter than you are…

  26. Anon April 3, 2018 12:41 pm

    angry dude,

    Engaging in practices known to be rife with ethical pitfalls is itself sufficient evidence to show your “as smart” comment to be simply incorrect.

    Just because such may be done does NOT indicate that it is smart to do so.

  27. Gene Quinn April 3, 2018 3:40 pm

    Angry dude-

    You say that quite a few patent agents represented inventors on a contingency basis in the early 2000s. That is simply false, period. Contingency representation has never been a big part of patent procurement. As I’ve explained in my article, which I’m sure you never read, you just can’t offer contingency representation to an inventor for a whole host of business reasons without ever even getting to the very real ethical issue Anon brings up.

  28. angry dude April 3, 2018 3:51 pm

    Gene @26

    I said partial contingency – meaning at least 50% discount in billable time for partial assignment of property rights.
    I talked to more than 2 such patent agents back in early 2000s, believe it or not
    Those were certainly not the mainstream established practices, but still they existed back in those days

    alas… no more

  29. Gene Quinn April 3, 2018 4:56 pm

    angry dude-

    Do you even read what you write? You previously said that there were “quite a few” patent agents that worked on contingency. Now you say you spoke to a grand total of 2 who you claim were willing to work on contingency. You go from “quite a few” to “certainly not the mainstream”. It is hard to keep up.

  30. angry dude April 3, 2018 11:15 pm

    Gene

    I suffices to state that back in 2001
    I was able to easily find couple of such guys
    Try to find them now
    The fact that you absolutely dont want to take any patent work on partial contingency basis just shows how much respect you guys have for your own work
    – none
    Sad

  31. Anon April 4, 2018 8:20 am

    angry dude,

    You are seriously confused about what we consider “the worth of our work.”

    Sad indeed – just not how you are feeling about this.

  32. Anon April 4, 2018 10:33 am

    To emphasize the point, angry dude, you want to place your feelings (again) over any type of reason; which is probably not a small reason why you are so angry.

    You want to make the “logical” jump from “I[t] suffices to state…” to your conclusion of insinuated denigration about what level of respect attorneys may have for their work product, while ignoring not only my attempts to educate you, but Gene’s attempts as well.

    That you happened to find (readily or otherwise) two people exhibiting an improvident judgement way back in 2001 simply has no bearing on the conclusion that you want to impose.

    It was a bad idea then (for reasons provided to you by both Gene and I), and it is a bad idea now.

    You have shown no nexus between the ability to make such a bad choice and ANY notion that such a choice exemplifies “respect for our own work.”

    In other words, your attempt at an insinuated putdown is baseless.

    Everyone is allowed to have their own opinion – even you. But when you want to proselytize here and project that opinion to be more than an opinion – and at the same time you willingly forsake efforts of others to turn your opinion into an informed opinion, you border on merely providing blight.

    Having a dialogue here does mean that you do not get to merely repeat yourself endlessly and in total disregard of counter points presented.

    Continue this at your own peril.

  33. angry dude April 4, 2018 2:12 pm

    Anon @31

    In other words, if some dude comes to you with some groundbreaking invention similar, for example, to transistor (for electronic hardware) or to public key cryptography (for software) you would tell him to write a check for your full retainer (what is this, 10K ?) before you do anything
    You won’t even try to work out some deal to have your own name attached to some groundbreaking patent with industry changing potential ?
    Sad…
    People in most creative professions do at least some of their work, perhaps the best of their work, for free, for self-fulfillment and self-respect, for future fame, for respect from others, for distant future profits if any, but not for measly retainer check before you even move your fingers

    And BTW the only reason I’m angry is that people like you – lawyers and politicians, change the rules of the game all the time

  34. Anon April 4, 2018 4:01 pm

    won’t even try to work out some deal to have your own name attached to some groundbreaking patent with industry changing potential ?

    Exactly.

    And no, that is not sad. What is sad is that you refuse to even bother consider the reasoning why such would be a problematic venture.

    the only reason I’m angry is that people like you – lawyers and politicians, change the rules of the game all the time

    People like me…? CLEARLY, you are clueless as to what “people like me” are all about.

    Take your blinders off. Get a hold of your own emotions and get yourself out of your own way.

  35. angry dude April 4, 2018 4:40 pm

    Anon @33

    Nothing personal, dude 🙂
    I have no idea who you are – you are “Anon” anyway

    But scotus and cafc and congress and pto are staffed with lawyers and politicians

    No ?

    P.S. No wonder that many great inventors like Chester Carlson were also patent attorneys themselves – just not to take bs from lawyers
    I was also considering becoming patent agent but after Ebay changed my mind

  36. Anon April 4, 2018 7:43 pm

    You paint a far too broad brush with your “the problem is attorneys” mantra.

    Nothing personal, right back at you.

    You are simply not correct with your attempted logic – very much like your attempt to equate what you “could do” with two people likely NOT very attuned to the actual pitfalls with somehow tying that notion that anyone NOT willing to engage in such questionable activity must somehow not be “respectful” of their own work.

    Your reasoning is at best absent. Compounding that is that you refuse to listen to others who offer you solid reasoning.

    As I pointed out, having an opinion is one thing. Having an informed opinion is infinitely better, Choosing to not have an informed opinion – and doing so based purely on emotion – is rather asinine (and will likely get you into trouble on this forum).

    The choice of becoming informed is yours.
    As always.

    Choose wisely.

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