It is already too late, but we still have time

By Gene Quinn
April 10, 2018

“If you want to see the effects of not having clear title just go to Cuba, where you see there hasn’t been anything built in the private sector since 1959,” Lauder explained.

Judge Kathleen O'Malley (CAFC) and David Kappos, at the Newseum, April 10, 2018. Panel discussion "The Great Patent Debate Continues", with Chief Judge Paul Michel (ret.), Gary Lauder, Jamie Simpson.

Judge Kathleen O’Malley (CAFC) and David Kappos, at the Newseum, April 10, 2018. Panel discussion “The Great Patent Debate Continues”, with Chief Judge Paul Michel (ret.), Gary Lauder, Jamie Simpson.

Earlier this morning the annual LeadershIP symposium was held at the Newseum in Washington, DC. Moderating the first panel was Judge Kathleen O’Malley of the United States Court of Appeals for the Federal Circuit.

“It is surprising that we continue to make the same mistakes that we have made over the last several hundred years,” said Judge O’Malley as she opened the panel, which included Chief Judge Paul Michel (CAFC, ret.), David Kappos (former Director of the USPTO), venture capitalist Gary Lauder, Managing Director of Lauder Partners, and Jamie Simpson, USPTO Detailee to the Senate Judiciary Committee for Senate Christopher Coons.

Judge O’Malley would go on to explain that throughout history the swing of the pendulum that is the U.S. patent system has swung from over emphasis on patent quality, to then allowing too much to be patented, only to repeat all over again.

“The point of the patent system is to incentivize investors, as much as it is to incentivize inventors,” explained Judge Michel. “The tilt of the pendulum has shifted dramatically.” Explaining that investment capital is truly mobile and on a global level today, “if the incentives are better in China that is where the money will go.” Michel also explained the undeniable reality that those with money are also only interested in a return on investment, which means that if there are better options for return in movies or other investment vehicles that is where focus will shift.

He is right. It is hardly surprising that investors have shifted away from paradigm shifting innovations that required proprietary protections (i.e., patents).

“Every light on the panel is blinking red,” Michel explained, as he talked about the U.S. falling out of the top 10 patent jurisdictions in the world, and the double to triple invalidation rate at the Patent Trial and Appeal Board when compared with federal district court, which suggests the procedures and processes of the PTAB are flawed.

Michel also went on to discuss the “double whammy” of the “vague, inconsistent, irrational standards of the Alice/Mayo standard.” Michel pointed out that there are potentially many thousands of patents that exist “under a cloud” because of the Alice/Mayo standard, and that uncertainty is not helpful for business. Again, Michel is absolutely correct.

 

Gary Lauder (L) and Chief Judge Paul Michel (CAFC ret.)

Gary Lauder (L) and Chief Judge Paul Michel (CAFC ret.)

Michel went on to mention that he has reason to know that some attorneys are advising defendants who know they are infringing patents that the time to money for patent owners is now at least doubled from four years to about eight years, and defendants can string along patent owners. “Many in Congress continues to believe the problem in the industry is trolls, it is not.”

“The biggest problem is the patent that doesn’t get issued,” Kappos explained. “The patient that doesn’t get cured… The pendulum has definitely swung too far…. Quality just isn’t about not issuing patents that shouldn’t be issued, but quickly issuing patents that should be issued.”

Historically the philosophy discussed by Kappos was the rationale by leaders of the Patent Office. More damage is done by burying deserving innovations and denying patents than by making a mistake here and there and issuing a patent that shouldn’t be issued. That philosophy has not been in favor for much of the last 15+ years.

“The truth is most entrepreneurs to don’t realize how useless the patents they have are,” Lauder said. “My hope is we can fix things before they realize how hopeless things are.”

“Most of the technologies relating to human health sciences have been hit most hard,” Michel said. “And if you look at it from the size of companies the small companies have been hit unusually hard. And startups are the canary in the coal mine… In 2014, more startups died than were formed for the first time in American history.” Startups are more important than more established companies because they are responsible for job growth, the more likely to create disruptive innovation. According to Michel, a rationale policy would be to advantage startups and small companies, not to strangle them.

Judge O’Malley would go on to ask Lauder, the resident venture capitalist on the panel, “is there less funding for life sciences startups because of [patent eligibility concerns]?”

“Most definitely,” Lauder explained. “Medical diagnostic companies, as well as companies developing new drugs… I do investments in that field and it is a problem.”

“If companies were to lobby to allow for more polluting most people would think that is unethical,” Lauder explained. But there are people lobbying to make it more difficult for companies to come up with cures that allow for the creation of cures that save lives, which Lauder says he finds “equally unethical.” Lauder hopes that others start to look at the problem in the same way. That would indeed be a big step forward.

As the conversation moved toward discussing the PTAB and PTAB rules and procedures, O’Malley, explained that the statute and rules seem to be geared toward allowing for amendments to allow for the fixing of patents that shouldn’t have issued quite as broadly, and to getting rid of those patents that couldn’t be saved. “But the emphasis seems to be on getting rid of as many patents as possible,” O’Malley said.

“I thought I gave them a pretty good road map in Aqua Products, but that portion didn’t get a majority,” O’Malley said, to laughter in the audience.

As the discussion turned to Oil States, and property rights, Lauder talked about the importance of property rights for investors, and how a decision that says the wrong things or goes the wrong directions could go the wrong way could be “devastating.”

“If you want to see the effects of not having clear title just go to Cuba, where you see there hasn’t been anything built in the private sector since 1959,” Lauder explained.

To end the discussion, about what we do and when the industry must respond, Lauder gave one of his characteristically brilliant, pithy quotes: “It is already too late, but we still have time.” He explained that the best time to fix a problem is yesterday, but since we didn’t do that we need to do it immediately before any more damage is done.

From a venue in sight of the Capitol building one can only hope the message from the panel will reach those with decision making capacity. While those who are skeptical certainly have reason to be doubtful, there is an optimism behind the scenes and a hope that has not existed in recent years. Where that leads and how soon is anyone’s guess.

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 31 Comments comments.

  1. Night Writer April 10, 2018 11:03 am

    >>“I thought I gave them a pretty good road map in Aqua Products, but that portion didn’t get a majority,” O’Malley said, to laughter in the audience.

    O’Malley was the last judge to be appointed that wasn’t selected by Google.

    But still she is not a very good judge to have on the CAFC. She had no patent experience prior to he appointment and no science background. Frankly, I think she is intelligent, honest, and well-meaning, but she is not qualified and doesn’t understand at a meaningful level the issues.

    All the judges appointed after her are abysmal and were chosen to burn the system down. ( I think Chen was a surprise as he was very anti-patent before the appointment but flipped.)

  2. Anon April 10, 2018 12:13 pm

    Night Writer,

    Recently, I had the benefit of conversing in some detail with a Washington insider, an attorney with a long and detailed history of interacting with the United States Court of Appeals for the Federal Circuit.

    He had many interesting stories about several of the current Judges of the CAFC.

    Part of our discussion centered around a reflection that Judge O’Malley does appear to have an earnest wish to properly apply the law and to have the CAFC meet its original mandate of bringing stability to patent law at the appeals court level.

    However, what each of us surmised was that the body that which is the CAFC will not hew to such reason or efforts.

    That group is – and will remain for the foreseeable future – out of control.

    Try as may, the efforts of such as Judge O’Malley (and even more so, Judge Newman), will not suffice on their own due in no small part to the LACK of actual leadership from Judge Prost, and the egos of other judges, who refuse to adhere to anything but their own view of what patent law should be.

    This is why in no small part that when I discuss my idea that Congress should engage in its Constitutional power of jurisdiction stripping of the non-original jurisdiction of patent appeals from the Supreme Court (to take back its statutory power and prevent law writing from the Bench – and yet maintain the holding of Marbury – which is for Article III review, and NOT Supreme Court review); that a NEW Article III court be established.

    This existing one is tainted with the repeated Supreme Court beatdowns and just does not have the right constituents.

  3. Curious April 10, 2018 12:38 pm

    I don’t worry too much about the technical backgrounds of the CAFC. Certainly, it would be nice. However, I am far, far, more concerned about whether his/her guiding principle is “patents are the solution” versus “patents are the problem.”

    The CAFC is supposed to give deference to findings of fact, which is where most of the “technical” stuff lies. Personally, I would rather that they be solid on the law and not try to invent ways to get around the law so as to arrive at a conclusion (i.e., the patent is invalid) that they predetermined before even reading the briefs.

    The Alice/Mayo test is one big pile of poo. The tests are meaningless before just about any patent these days can pass either test (i.e., the test for patent eligible subject matter or patent ineligible subject matter). It now just comes down to who are the sitting on the panel in the Federal Circuit that determines whether your patent survives or not.

    We’ve gone from statutory law to judge-made law to judges are the law.

  4. angry dude April 10, 2018 1:31 pm

    The doc said ‘to the morgue’, to the morgue it is!

  5. Tesia Thomas April 10, 2018 1:33 pm

    “The truth is most entrepreneurs to don’t realize how useless the patents they have are.”

    Yes. And most people think everyone else’s patents are useless.

    So, it’s a weird thing where my patents are valuable and yours are useless by the same rules.

    PTAB doesn’t make weak patents weaker and strong patents stronger, it makes ALL patents WEAK. No one has strong IP.

  6. Night Writer April 10, 2018 1:36 pm

    @3 Curious: some good points, but I think the technical background does matter. I think that many of the non-technical judges just have no frame of reference by which to judge the facts or the invention. They are simply lost and the facts always come into play and are not simply given deference to the dist. ct.

    >>We’ve gone from statutory law to judge-made law to judges are the law.

    I think it went from judges (kings/queens) are the law, to judge-made law, to statutory law, to judge-made law, to judges are the law. Pretty darn sad.

  7. American Cowboy April 10, 2018 1:42 pm

    “More damage is done by burying deserving innovations and denying patents than by making a mistake here and there and issuing a patent that shouldn’t be issued.” Amen to that.

    Invalidating a patent by spending hundreds of thousands of dollars to find some obscure reference with a teaching that those of ordinary skill in the art were not aware of before the patent issued, or even after the patent issued, strikes me as an injustice. The reference was only found because some defendant obstinately preferred to spend the money searching and litigating rather than designing around or paying a royalty.

    Even if what the patentee has done amounts to “re-inventing” what was taught in the obscure reference, hasn’t she done a service to the public by publicizing what she invented?

    If we are not going to go that far, at least stop the vilifying of inventors and those associated with them.

  8. Night Writer April 10, 2018 1:43 pm

    I think there are a lot of patent attorneys who spent many years understanding science and technology and find it offensive that people like Obama will appoint people with no science background.

    Reality is that many cases depend on the underlying facts and need someone that can apply their science knowledge to understand what is going on. Plus, this is the one court in the country where a judge should have a science background.

    (Probably more offensive that Obama ceded his authority to pick the appointment to Google for selection of anti-patent judicial activists.)

  9. Night Writer April 10, 2018 1:48 pm

    I also think that people just don’t appreciate what a profound difference it makes to have people trained in science. The current 101 tests are just outrageous. They seem to hearken back to the medieval thinking of spirits where our thinking was not performed by our brains but by our spirit in the spirit world. Etc.

    The other thing is that those who know technology/science know that the steps of progress are often small. The ignorant think in terms of movies where a sole inventor makes an enormous leap by themselves. It goes on and on.

  10. Tesia Thomas April 10, 2018 1:56 pm

    @Night Writer, 9

    “The other thing is that those who know technology/science know that the steps of progress are often small. The ignorant think in terms of movies where a sole inventor makes an enormous leap by themselves.”

    It’s both but neither are less of innovations than the other. The patent system should encourage both.
    But, as in Josh Malone’s case, incumbents will PTAB and kill the patents of paradigm shifts.

  11. Ternary April 10, 2018 2:04 pm

    In one of my cases it was determined by a Primary Examiner, supervised by a panel of no less than two Supervisory Examiners, that a device with inputs to receive a signal and an output to provide a signal, is not a physical device. No arguments were provided why. All in support of a 101 rejection (without a 112, 102 or 103 rejection). The allegation was literally that “the claimed invention is not a physical device.” This is a situation wherein one would expect the SPE to ask the PE, “Are you sure about this argument? In my old textbooks, these were all very much physical devices. Perhaps you should rephrase.” It renders the PTO examination process and quality control an utter and complete farce. To have to rely on the PTAB or the Courts to correct it does not make an inventor feel any better about it. Frankly, I do not see Judge O’Malley correcting this.

    The process is shamelessly riddled with unsupported rejections, technical nonsense and ignored rebuttals, adding to an unaffordable bill for independent inventors and generating patents that are susceptible to post-issuance invalidation, making them basically worthless.

    I used to believe that the above occurrences were incidents. But I am starting to see this as a systematic flaw of the PTO and the system, induced by a bunker mindset/policy that no longer appears to know what its mission is, receiving incomplete and technically undefined guidance from the Courts and Congress and no longer embarrassed by producing technical nonsense. Having Judges and Justices (even well meaning ones) with no technical background does not help. They are just cementing in concrete a system that is hopelessly flawed. I am starting to believe that it is too late to salvage the system, at least too late for independent inventors.

  12. Josh Malone April 10, 2018 2:06 pm

    @American Cowboy – your spidey sense is correct, but I suggest phrasing it a little differently. We should all stand firmly for the provisions of §102 of the Patent Act, that only “new” inventions are patentable. Even if the reference is obscure and difficult to find, or even hidden – no one other than the original inventor is entitled to the exclusionary rights.

    The problem is when obscure and hidden references are used to determine an invention is “obvious” under §103. KSR, hypothetical POSITA, prima facie showings are all esoteric legal fictions that bring in prior art to prove obviousness. The concepts of new and non-obvious must be kept distinct. If POSITA is effectively an encyclopedia and a computer that can run billions of permutations of all of the prior art in the field and analogous fields, then everything is obvious. But that is not the law, that is the result of paying lawyers and experts millions of dollars to use these tricks to argue that what the inventor discovered “would have been obvious”.

  13. angry dude April 10, 2018 2:35 pm

    Josh Malone@12

    Correct,

    Obviousness MUST be determined by the PTO right at the get-go, without going back 10 years later to reassess it using all possible combinations of multiple “prior-art” references

    Everything is obvious to everybody in hindsight, especially 10-20 years after patent is published and granted

  14. PTO-Indentured April 10, 2018 3:05 pm

    RE “patents are the problem” or not… @3

    While philosophizing up to Q2 2018′–whether or not “patents are the problem”–since at least ‘AIA 2012’, the United States PTO eco-system of has figuratively been a ‘Rome burning’.

    One benchmark alone should have sufficed to put an end to such philosophizing, and to instead make immediate course corrections:

    The USPTO ranked #1 worldwide, pre-AIA,
    The USPTO ranked 12th worldwide by Q2 2018 (and probably still in a nosedive).

    This is NOT a matter of “Patents are the problem” rather, THOUSANDS of U.S. “Patents made defenseless/invalidated, therefore valueless/worthless–by
    AIA
    PTAB
    BRIs
    PGR
    CBM challenges
    serial IPRs
    DJs
    venues favorable / most proximate to defendants
    a near extinction of licensed exclusivity and injunction rights…

    Fanning to new heights, an efficient infringment addiction and epidemic.

    All exacerbated by an AIA implemented intentional double-standard, whereby: the PTO sells you a property issued and deemed valid according to a first standard, then allows such validity to be challenged (knowingly) under a significantly easier-to-invalidate second standard, shown since 2012, to always render more of THEIR ‘issued properties’ invalid, defenseless and worthless than not (i.e., always a majority of THEIR patents not able to stand up to THEIR own easier-to-defeat challenges).

    Seemingly then, for years (now), turning a blind eye, and rendering zero empathy not only to the demise of our/their own U.S. patent system, but also to the THOUSANDS of patentees who watched their properties get extinguished by the PTO always-lose-more-than-win system, and in a good deal of such cases additionally get hit with a requirement to pay all attorneys fees.

    Final note: Good laws, are just laws.

    No more philosophizing, ‘judge’ the AIA train wreck, and its injustice, for what it is, and let’s get back to the good laws ASAP that pre-AIA had ensured the #1 ranking of our U.S. patent sytem.

  15. Night Writer April 10, 2018 3:07 pm

    >Everything is obvious to everybody in hindsight, especially 10-20 years after patent is published and granted

    that is the other thing about having non-science and non-patent people appointed to the CAFC. They have spent zero time thinking about hindsight reasoning.

  16. Brian Pangrle April 10, 2018 4:23 pm

    Ternary@11

    I’ve seen it too. I venture to guess that the application is in AU 2800. AU 2800 has some examiners that are science deniers, much like another federal agency.

    I had a junior examiner ask me the other day, in a rather sarcastic tone: “Why do you keep saying ‘preponderance of the evidence'”? Standards for fact finding, I guess not too important anymore.

  17. Ternary April 10, 2018 6:07 pm

    Brian @16. It is just so exhausting and causes me “prosecution fatigue.” You get no reasonable response to any rebuttals, just the same standard crap lifted from a standard response.

    I wish it was limited to junior Examiners. It is not. It seems nobody cares. Go fight it out before the PTAB or the Courts, but leave me alone, they seem to think. Perhaps the Examiners are also suffering from prosecution fatigue. The fun has completely gone out of it.

  18. Brian Pangrle April 10, 2018 11:38 pm

    Ternary@17, I remember chatting with Mr. Stoll, saying 101 “policy” would burn decades of goodwill. Reminds me of a Schwarzenegger movie where Arnold emerges from the smoke while others are engulfed in chaos, shooting at each other, expending their resources. Arnold navigates flawlessly because he created the chaos. Those that created the 101 chaos are certainly pleased.

  19. Ternary April 11, 2018 9:47 am

    Basically, the plan was to make it harder for independent inventors and small entities to fundamentally threaten incumbent companies. One event that accelerated the unhappiness of established industries with the “power of patents” was the NTP v. RIM case. Thus AIA was easily achieved, despite well argued opposition. There was never a single convincing argument for the positive effects of AIA. Yes, international harmonization was an argument. Why the heck would we care about harmonization with other lower rated patent systems? Let them harmonize with us. Have we seen one single instance wherein our economy has benefited from this harmonization? Absolutely not. In fact, our patent system, once the golden standard, is now at its lowest rating. Harmonization indeed.

    I believe the ensuing chaos was unintended and was achieved by having KSR and Alice in the toxic mix of AIA. The intention was to “merely” create a costly patent system more like the European one, wherein the participants are limited to mainly large institutions and companies, shutting out the lifeblood of the US economy: small start-ups and independent inventors. That part of the Mission has been accomplished!

  20. Night Writer April 11, 2018 10:41 am

    One point made above bears repeating. Having judges or the PTO look at new obvious arguments 10-15 years after the invention is fraught with hindsight reasoning. (This is another problem of appointing judges with no experience with patents and science.)

    I’ve been around a long time. I’ve seen many things go from being incredibly difficult for people to understand to being put in the introductory course.

  21. Tiburon April 11, 2018 11:37 am

    It is ridiculous to suggest that the U.S. is #12 in innovation. If the stats you’re looking at say that then may I suggest you consider carefully what you’re looking at because the majority of innovative software and online services being created today still originate in the USA.

    Give your heads a shake, Rome is not burning, the U.S. software and hardware industry is thriving. Startups are being created more than ever and investment into those startups is correspondingly up.

  22. Ternary April 11, 2018 12:27 pm

    Tiburon @21:
    “We are at an inflection point with respect to the patent system itself. As a nation, we cannot continue down the same path if we want to maintain our global economic leadership. And we will not continue down the same path,” Iancu explained.

  23. Tiburon April 11, 2018 1:02 pm

    Ternary – the inflection point is behind us (2011, AIA, etc). It’s legacy shows us that while innovation incentives may have changed (less about patents, more about open collaboration and data), it has continued to thrive. U.S. is not #12 but rather remains #1, look around you.

  24. angry dude April 11, 2018 2:05 pm

    Tiburon @23

    Dude,

    In a capitalistic society incentive for “real innovation” (by “real” I mean R&D with the emphasis on R) is money and money only (used to be enabled by working patent system)

    You can call open source software “innovation” all you want but
    for the most part it’s just a replication of someone else’s original ideas and efforts
    or just plainly insignificant for progress – e.g. no one really cares how many open source media players are out there – what really matters is the math used for encoding/decoding audio and video files

  25. Anon April 11, 2018 2:36 pm

    Tiburon,

    Your comments do not accord with reality.

  26. Ternary April 11, 2018 5:08 pm

    Tiburon. An inflection point (if you remember from calculus) is a point on a curve where the first derivative is 0. You may not know if a curve just inflects and continues or if you have reached an extremum. AIA/KSR/Alice are all part of a patent deteriorating trend and it will be very difficult to turn that trend around.

    While I am all for collaboration and collaborative R&D, history shows that original ideas come from individuals and pretty much from obstinate/persistent/unconventional individuals. Groups accept new ideas mostly after substantial struggle. In fact, so-called collaborative groups are often organized to suppress unconventional ideas. Many of current “collaborative” research ideas are more of the same and are intended to not fall behind competitors, not to develop pioneering technology.

    I see very few incentives nowadays for independent inventors to develop their inventions. Proponents of institutional R&D have declared many times that the time of the individual inventor has passed and have been active in removing incentives to help realizing their prediction.

  27. Night Writer April 13, 2018 11:39 am

    @21 Tiburon Give your heads a shake, Rome is not burning, the U.S. software and hardware industry is thriving. Startups are being created more than ever and investment into those startups is correspondingly up.

    The problem is that we do need to quantify the health of innovation in the USA. Wild statements can be made with no evidence.

    One thing that is a good sign that the patent system is failing the innovation engine is that big corporations are hording money and not spending it on R&D. That indicates they aren’t afraid of competition and are instead setting up task forces to quickly take whatever innovation may be generated by start-ups.

  28. Night Writer April 13, 2018 11:41 am

    Another thing to think about is that not one country has built an innovation engine without patents.

    So maybe we can have a good innovation engine without patents, but it is a theoretical construct that has never been achieved.

  29. Tiburon April 16, 2018 7:35 pm

    Night Writer @ 27:

    My statements are not wild and unsubstantiated.

    Where are all the unemployed software and hardware engineers, programmers, and the like? Where are the recent grads in those programs not being snapped up?

    I’ll answer for you: there are none. The industry is thriving like never before – yet according to this site, patents have never been more dead and useless. So how do you explain the juxtaposition and contradiction?

  30. Tiburon April 16, 2018 7:37 pm

    Ternary @ 26:

    The origin of the incentives have changed but as evidenced by the industry thriving, the innovation continues.

  31. Tiburon April 16, 2018 7:42 pm

    angry dude @ 24:

    When all you have is a hammer then everything looks like a nail.

    Patents are hammers, but there are more tools in the shed.

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