Bittersweet Milestone: Ten Million Patents Issued in the US, but What Are They Worth?

By Alex Poltorak
July 12, 2018

Illustration depicting a sign with a milestone concept.Last month, the U.S. Patent Office issued patent number 10,000,000. This historic occasion calls for rethinking our patent system and the future of American innovation.

In the past, such an event would have been a cause for celebration, a testimony to our ingenuity. Back then, patents were valuable assets, protecting and incentivizing innovation. A valid patent gave its owner the right to stop infringers in their tracks.  Unfortunately, that is no longer the case.

The ill-conceived patent reform legislation of 2011—the so-called America Invents Act (AIA)—was followed by a series of judicial decisions that devalued patents and made them increasingly difficult to enforce. With the patent system in disarray, inventors may be better off simply keeping their inventions under wraps, rather than seeking patent protection.

Why do we even need patents? Inventors are not obligated to disclose their ideas; they can keep their inventions secret and rely on the protection of the trade secret laws. Trade secrets have one great advantage over patents: so long as they remain secret, they never expire. Had the creator of Coca-Cola patented his formula, the patent would have expired over a century ago. Instead, he chose to keep it secret, and as a result, it is among the most valuable intellectual property assets in the world.

However, such secrecy is generally bad for society. The disclosure of inventions allows innovators to build on each other’s advances, accelerating the progress of science and technology. Therefore, the framers of the U.S. Constitution enshrined the patent clause in Article I Section 8, empowering Congress: “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

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The framers understood that “the progress of science and useful arts” depends on the sharing of novel ideas. A patent is a bargain between an inventor and society, wherein the inventor discloses his or her invention to the public in exchange for a limited monopoly. The very word “patent” comes from the Latin “patere”—to lay open or disclose.  Thus, a patent is the quid-pro-quo for an invention’s disclosure.

Title 35 of U.S. Code defines a patent as the right to exclude others from making, selling, importing, or using a patented invention. The right to exclude others—i.e., to stop others from infringing the patent—can only be enforced by obtaining a court-ordered injunction.

However, in 2006, the Supreme Court, in eBay v. MercExchange, took away the right of a patent owner to obtain an injunction against infringement, unless the patent owner practices the invention itself. Thus, inventors and nonpracticing entities lost the exclusive right to their respective … discoveries” that is the very essence of the patent protection guaranteed them by the Constitution.

It is nothing short of misleading the public by telling inventors that in exchange for their invention disclosure they will receive a limited monopoly, a patent. Most of the time inventors get no monopoly rights whatsoever. At best, after years of litigation, millions of dollars in attorney fees and multiple challenges to their patent validity at the Patent Office, they may get some monetary compensation. But is it worth the hassle?

Other Supreme Court decisions followed the eBay decision, each making our patents weaker, less valuable and more difficult to enforce, putting the patent system in a tailspin. The Octane Fitness decision essentially upended the centuries-old American judicial tradition that each party pays its own legal fees making it easy for judges to make the losing party pay the winning party’s attorney fees. Some judges, such as, for example, in the Southern District of New York, now frivolously apply section 288 of the Patent Code to slap plaintiffs with Octane sanctions. Today, a patent owner who dares to assert his or her patent in court is facing a real possibility of financial ruin from having to pay millions of dollars in Octane sanctions.

The SCOTUS decisions in Alice and Prometheus muddied the waters of patentability making unclear what inventions are even eligible for patent protection. Today, almost every patent, particularly a software patent, is open to an Alice challenge on patentability grounds.

To restore the bargain between society and innovators and incentivize the disclosure of inventions, Congress must immediately pass legislation restoring all patent owners’ right to exclude others, by requiring courts to issue an injunction upon a finding of infringement. Congress must also clarify what subject matter is eligible for patent protection.

The American patent system, which used to be the strongest in the world, has been further weakened by the American Invents Act that deformed the system more than it reformed it. Perhaps, the most egregious provision of the AIA is the introduction of inter partes review (IPR) and other forms of post-grant review, which allow defendants to challenge the validity of the issued patent before the panel of administrative law judges at the Patent Trial and Appeal Board at the USPTO. Drafted and pushed through Congress by special interests, AIA gave infringers a free-get-out-of-jail-card. After having spent tens of thousands of dollars prosecuting the patent at the USPTO, the patent owner is now forced to defend its validity again at the tune of several hundred thousand dollars. With an attrition rate of over 75%, the PTAB was dubbed the “firing squad” by the former Chief Justice of the Court of Appeals for the Federal Circuit. The erosion of patent protection removed the incentive to innovate and the incentive to invest in innovation, thereby threatening the future of American innovation.

To be sure, we need to curb frivolous patent litigation that games and abuses the system. Destroying our patent system to achieve that, is akin to throwing the baby out with the bathwater.

The United States is the most innovative and entrepreneurial country in the world. Abraham Lincoln said that the patent system “added the fuel of interest to the fire of genius.” By watering down that fuel, the Supreme Court and Congress have endangered the future of scientific and technological innovation.  It is now up to Congress to rekindle the flame of innovation by fulfilling its constitutional duty “to promote the progress of science …, by securing for limited times to … inventors the exclusive right to their respective … discoveries.”

 

Image Source: Deposit Photos.

The Author

Alex Poltorak

Alex Poltorak is the founder and CEO of General Patent Corporation, with over 27 years of experience in patent licensing and enforcement, IP strategy and valuation. Alex is a Certified Licensing Professional (CLP), co-author of two books and numerous articles on IP in general and patents in particular and has been named by IAM magazine among Word’s leading IP strategists every year since 2010. His focus on intellectual property licensing, IP strategy and valuation.

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 9 Comments comments.

  1. angry dude July 13, 2018 9:42 am

    Alex,

    Let’s not be naive here

    At this (very late in the game) point restoring injunctions like pre-Ebay is not gonna happen

    Big SV tech corps have being stealing fundamental technological inventions from small entities for over 12 years now without even thinking about patent rights
    if injunctions are restored a bunch of dudes like myself with very valid and very willfully infringed patents will come out of woods with legitimate claims “to exclude others”

    Those “others” are Apple, Amazon, Google etc etc and the products to be excluded are essential household products like your smart phone or tablet or TV etc etc

    You do realize what restoring pre-Ebay injunctions will do to those products and those corporate stocks ?

    The stock market will be devastated overnight
    it’s simply not gonna happen at this point

    Trump may personally hate that amazon freak bezos and google punks and the rest of those sv lgbts with their forced diversity bs and age discrimination hiring practices, but he will never ever do any damage to those precious stock values
    ( he probably owns some… congress and scotus critters certainly do)
    Its all about money today, unfortunately, and not about principles

    And those in power will always chose to destroy American inventors/small companies over causing even a minor decline in those mega stock values (and forget about US constitution – who cares at this point)

    Amen

    The doc said “to the morgue” – to the morgue it is!

  2. Eric Berend July 13, 2018 6:38 pm

    “Move Fast and Break Things!!”
    — SiliCON Valley and Technoristocrat ‘mantra’

    “The engineers are no longer driving this bus.”
    — Eric Berend, Inventor and Technologist

    And, if the people and private interests whose ox is gored happen to be the historically classical future technology, industry and wealth creators of America, that’s easy to address: besmirch them in advance with wholesale character assassination as a myth in the eyes of the general public and the readily duped (e.g., “patent troll”).

    All, while doling out a slice of the ill-gotten gains to corrupt politicians through ‘K Street’, to corrupt professors through captive interest academic grant making programs, and to sham front ‘industrial associations’ purportedly representing so-called “small business” interests before Committees of the U.S. Congress.

    Call it a giant criminal conspiracy?

    Well, what’s a few ‘broken eggs’, when you’re out making your own special “superior” omelet?
    ‘Who cares’ about those who become, in fact, illicitly stampeded?

    Technoristocratic megalomania and condescension towards anyone who does not comply with their “superior” vision of all of our futures, is boundless; a psychology akin to that of a coddled four-year-old brat.

    This can only end badly.

    The rest of us in American society today, certainly do not deserve to be dragged down into the vortex of consequences of their Capt. Ahab-like obsession with owning the future.

  3. Benny July 15, 2018 1:54 am

    ” Inventors are not obligated to disclose their ideas; they can keep their inventions secret and rely on the protection of the trade secret laws”

    That holds true for about 1% of patent applications. The rest could be reverse-engineered by any competent engineer in the field of expertise before lunch.

  4. angry dude July 15, 2018 8:12 am

    Benny @3

    Dude,

    You are full of sh1t as usual

    Just like that scotus senile retard Kennedy with his stupid remarks about some nerds in SV coffee shop being capable of writing code for any computer-implemented invention over a weekend… stupid as it is

    Dude,

    I challenge you to decompile and reverse-engineer to bits and pieces (e.g. flowcharts and actual math operations so it can be re-written in clean room without violating copyright) my DSP code and not even a lot of of it, just a few hundred lines of terse C code compiled into binary

    “Before lunch” won’t do it

    Neither before Christmas … not unless you spend at least half a mill on mental labor of a few very talented individuals capable and willing to do this for you

    Better buy it, dude – cheaper and you can be proud of yourself by paying inventor his dues

  5. Bill Clemmons July 19, 2018 10:40 am

    While you quoted Article 1, section 8, you seem to overlook the significance of “To promote the progress of science and useful arts.” Who has contributed more to the progress of science, Apple, Google, other evil “Big SV tech corps,” or NPEs?

  6. Jianqing Wu July 19, 2018 1:34 pm

    Benny@3

    You stated: “That holds true for about 1% of patent applications. The rest could be reverse-engineered by any competent engineer in the field of expertise before lunch.”

    I see two flaws in this statement: 1% v. 99% cannot be compared (see my example below), and second, the original article made an assumption that every invention was made for products. The article did not assume that many inventions are made as attempts to claim patent rewards. Some inventors have no motivation to make products and do business. The U.S. patent system has changed from one where most housewives would try to invent to one exceptionally few people would bother.

    Here is my example. In the Second World War, Japan had made war preparation for more then 50 years (perhaps nearly one hundred years). If you count numbers for bullets, guns, heads, ships, spies etc., used in war, its numbers were not bad. However, two atomic bombs ended the war immediately. If the war were not ended, the third bomb would have hit Japanese military headquarter. Patent numbers and invention numbers cannot be compared in assessing their impacts.

    When 300 millions people were put out of inventing business by so call (End) American Invents Act, disruptive inventions will not happen in the U.S. How did the U.S. get most of the military technologies? You can see from some published appeal cases (on secrecy order disputes) who were the most probable inventors. Corporate employees? I will laugh!

    Winning future wars would depend upon communication (including the ability to crack encrypted messages). Nearly all U.S.-originated inventions were revolved around commercial settings for making money. When few people work on out-of-box solutions, we may see the worst situation (anyone can imagine). It is entirely possible that one invention (which could be made by a housewife in any Block) may wipe out thousands of encryption inventions by corporate employees. This is something I have seen in real world. This is like litigation, where one smoking gun document is more important than tens of thousands of other documents.

    Every nation has similar law to keep disruptive military technologies from being disclosed. Thus all such technologies will not seen in the U.S.

    Under such a patent system, future military disruptive technologies will be developed mainly in other countries but the U.S. The reason is that all housewives are out of invention business.

    Denny grossly exaggerated the easiness in reversing engineering. For 99.99% of herbal formulations, an accurate determination of all compounds are impossible. Most production processes cannot be figured out by reverse engineered.

    Benny can keep counting and comparing abstract numbers, but the numbers do not support his arguments.

  7. paul l parshall July 19, 2018 3:03 pm

    how can i sell my ip?

  8. William F. Britt,Jr. July 19, 2018 3:24 pm

    Great article. This needs to be sent to President Trump. The USPTO fees for upkeep of patents is also a burden on the small inventor. The legal fees and patent filing costs are out of step with inflation. The system need reform with the little guy in mind..not the corporations.

  9. Jianqing Wu July 23, 2018 2:48 pm

    To all anti-patent people: before you do more to ruin the patent system, you should do more thinking. What you can do is not anyone in any competing nations would do. One thing is the massive number of U.S. patents have been granted due to restrictions and office prolific rejections. Even if you count patent number, you cannot take its figure. The massive number of expired patents is another problem: non-corporate inventors will try once in their life time. If you, everyone surround you, and everyone else think inventing and patenting is a bad venture, everyone else think exactly same. What will the end result? What will happen? No argument is necessary!

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