EDITORIAL NOTE: What follows is a letter to Congress from Gary K. Michelson, MD, published here with permission.
President and inventor, Abraham Lincoln
As Abraham Lincoln said “The Patent system added the fuel of interest to the fire of genius”.
Many inventions allow a worker to be more productive. That is to provide more service or more product with no increase in the work performed. For example in the era of the building of the great canals in America steam shovels appeared such that one man and such a machine (an invention) could displace 100 men with shovels. Similarly a large room full of typists with typewriters were replaced by a single person with a word processor (an invention) who was then capable of turning out an unlimited supply of originals.
It is admittedly hard to get worked up about the prospects of patent reform given that over the last 5 to 6 years we have be variously told that it was only a matter of time, a done deal, imminent and/or guaranteed. Of course, patent reform hasn’t happened; legislative efforts have simply been unable to cross the finish line.
Notwithstanding, Congress is at it once again, with the Senate Judiciary Committee reporting out a bill last week that remarkably resembles the bill that has been unable to gain any traction in the Senate for the last several years. That would suggest that the same fate is in store for this legislation. Not so fast! I have a suspicion that this year things are different and that we really could be on the cusp of patent reform. Whether that is for better or for worse will largely be in the eye of the beholder, but what is emerging feels different and I think we are closer to change, and perhaps an end to fee diversion, than we have been at any point over the last 6 years.
Earlier today the current version of patent reform legislation in the United States Senate, S. 23 titled “Patent Reform Act of 2011,” was marked up in the Senate Judiciary Committee. The amendments offered by the Senators seemed relatively minor for the most part, with one notable exception. Senator Tom Coburn (R-OK) presented an amendment to the bill that would once and for all put an end to fee diversion and allow the United States Patent and Trademark Office to access its fees.
The Coburn Amendment would create a specialized fund within the Department of Treasury known as the “United States Patent and Trademark Office Public Enterprise Fund.” The PTO Director would have access to monies in the Fund for expenses ordinarily and reasonably necessary for running the Office. Perhaps most importantly, the Fund could grow so monies in the Fund could be accessed by the Director without fiscal year limitation. This could allow the Fund to grow in certain years to a critical mass that may be needed for capital expenditures. This is a brilliant idea and one that the industry needs to get behind wholeheartedly.
Earlier today the United States Patent and Trademark Office announced more details relating to the “Three-Track” program, which was first published for public comment in June 2010. See USPTO Announces New Examination Rules). The Three-Track initiative is designed to enable applicants to choose the speed with which their patent application is processed. On Friday, February 4, 2011, the USPTO will publish in the Federal Register a notice of proposed rulemaking on “Track One” of the program, which will give applicants the opportunity for prioritized examination of a patent within 12 months of its filing date for a proposed fee of $4,000.
Sadly, because the Patent Office does not have fee setting authority there will be no reduction in fees available to small entities who otherwise normally pay 50% of most Patent Office fees. Because the Congress controls which fees qualify for small entity preference everyone will need to pay $4,000 to accelerate under Track One. Perhaps this will get Congress to stand up and take notice of the patent system they have so long neglected. I can only imagine the outcry from independent inventors and the small business community. If you are offended by the high fee just be sure to direct your ire where it is deserved; namely in the direction of Congress.
Kappos at the Innovation Alliance conference, 1-21-2011.
Yesterday David Kappos, the Under Secretary of Commerce for Intellectual Property and the Director of the United States Patent and Trademark Office, went to Capitol Hill to testify before the House Subcommittee on Intellectual Property, Competition and the Internet, which is a part of the House of Representatives Committee on the Judiciary.
The title of Kappos’ prepared remarks was How an Improved U.S. Patent and Trademark Office Can Create Jobs. For those who are marinated in the goings on at the Patent Office a lot is review with a few tidbits of new information. Specifically, we learned that the USPTO projects an average first action pendency of 23 months by the end of fiscal 2011, that participating in the First Action Interview Pilot Program more than doubles the likelihood of getting a first action allowance, that Track 1 rules are imminent with rules for Tracks 2 and 3 to follow and during FY 2010 nearly 6,000 USPTO employees worked from home at least a portion of their work week. We also heard an ominous and declarative statement from Kappos, who told the House Subcommittee on Intellectual Property that the diversion of fees will cause the patent backlog to rise.
The Freshman Class of the 112th Congress in the U.S. House of Representatives
Yesterday was the day that we remember Martin Luther King, Jr., which unofficially seems to typically be the start of the new business year and marks the end of the celebratory hibernation that occurs in the United States from the end of December through about the middle of January. The College Bowl games are now over, the NFL playoffs are half-way over and the next federal holiday isn’t for five weeks, with the next such holiday after that Memorial Day at the end of May. Thus, we are about to embark the heavy lifting period for business in the U.S., which coincides with the cold dark days of winter.
As a nation we continue to suffer from a number of very serious issues. We have a new Congress with a large number of new faces. There are 94 new Members of the House of Representatives, with 85 being Republican and 9 being Democrat, and a total of 16 “new” U.S. Senators, with 13 being Republican and 3 being Democrat.‡ See Congress by the Numbers: The 112th’s New Composition. We can only hope that eventually our leaders will turn their attention to the most important issue of the day; namely our struggling economy and anemic job growth.
The 111th Congress once again left patent reform efforts on the table without any resolution or even a vote. That might be just as well given that in the minds of most the patent reform efforts were not truly “reform,” but rather were merely changes that would not have made for a stronger Patent Office or otherwise addressed some of the pressing issues that require Congressional attention.
At some point during 2011, however, I suspect that Congress will become engaged and interested as innovators find themselves on the short end of the Supreme Court sick in the Microsoft v. i4i case. We all know that the Supreme Court only takes patent cases to overrule or at least modify the law of the Federal Circuit. That only makes sense since there is but one Circuit responsible for patent law, thus no splits among the Circuits to resolve. So in taking the Microsoft-i4i case that asks whether there should be as broad a presumption of validity as required under the well-established law of the Federal Circuit, it doesn’t take a rocket scientist to figure out that the presumption of validity will be eroded by the Supreme Court, perhaps in this term. That being the case, it is at least plausible that Congress could be persuaded to become involved, perhaps even undertaking sensible reforms that protect innovators. Yes, I realize how naive that sounds, but please keep reading!
We have all made the arguments — the issuing of patents leads to job growth. The nay-sayers would have people believe, however, that the issuing of patents is a drag on the economy. The factual realities are stark and tell a clear and unmistakable tale: patents are good for the economy and promote job growth.
Those who are not fond of the patent system like to pretend that innovation is free and will happen despite funding. Purveyors of extremist anti-patent rhetoric even go to the extreme of saying that we can expect the same level of innovation as we enjoy now absent a patent system. There is always one who is a software programmer who says that he or she could just work non-stop for six months, suffer many sleepless nights and wind up with a killer application, program or service, all at no cost and despite any patent protection. Of course, this proves the point for those who believe in a patent system, which is clear to all rational thinkers. Nothing in life is free. Opportunity costs are costs, and exactly how do you plan on taking your application, software or service to market? At some point every business will need funding to grow, it is just that simple. Patents and the rights they provide are extremely attractive to investors, so attempting to grow a business without a strategic patent portfolio means you are building obstacles and hurdles to success rather than removing them.
I frequently ask myself why it is that patents continue to come under attack by those who want to pretend they are only a burden on society and provide no benefit. Believing patents provide no benefit to society demonstrates a failure to understand fundamental aspects of the patent system, disclosure and publication of applications, as well as the basic economic reality that to innovate requires funding. Innovation, particularly cutting edge innovation, requires quite a bit of funding, sometimes many millions or hundreds of millions of dollars of funding. Where will that money come if there is no reasonable expectation of recouping the investment? Free-riders are not innovators and policies that encourage free-riders at the expense of innovators are nonsensical.
What follows are the prepared remarks of Senator Birch Bayh, which were to be delivered on December 1, 2010, at the AUTM commemoration at the Washington Convention Center. Senator Bayh decided to go off script and spoke contemporaneously. His prepared remarks are published here with his permission. Any emphasis by way of bold or italics appeared in the original speech as written.
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I’m delighted to be here today to say “Happy Birthday” to the Bayh-Dole Act on its 30th anniversary. It’s great to look around the room and see so many friends who worked so hard to make this day possible along with those who appreciate what the law means to our country, and indeed, the world.
Bayh-Dole teaches several lessons worth recalling:
A handful of motivated citizens really can change the course of a nation;
An idea whose time has come can bridge the partisan divide; and
Each generation must cherish and protect the entrepreneurial spirit that built America for it is our greatest national asset, but can also be lost if neglected or discouraged.
Medal awarded to Warren M. Washington for development of global climate models.
During his prepared remarks on Wednesday evening at the ceremony to award the Medals of Science and Medals of Technology and Innovation, President Obama discussed the importance of a quality science and mathematics education, and the fact that recently the White House played host to winners of science fairs. He explained that the White House hosts championship sports teams, so why not host science fair champions as well. This is certainly a worthwhile endeavor, but where does this lead us? Yes, the President and those in Congress always say the right things regarding math, science, innovation and technology, but now it is time to build on the rhetoric with action.
On October 12, 2010, I had the honor of interviewing retired United States Senator Birch Bayh at his office at Venable LLP. Senator Bayh was the primary architect of the landmark Bayh-Dole Act, which gave Universities the ability to own the patent rights to the inventions made. The 30th Anniversary of passage in Congress is rapidly approaching, which provided the backdrop for our discussion.
Those familiar with Bayh-Dole and government funded research in generaly know that the United States has for years funded research at Universities. Prior to the enactment of Bayh-Dole, however, it was virtually impossible for private enterprises to license the rights to patents obtained through federally funded research. Thus, society was funding the research and the innovations were simply being withheld from the public due to the existence of too much red tape. Bayh-Dole changed everything, and has been described as the “the most inspired piece of legislation to be enacted in America” since the end of World War II.
In part 1 of the interview we discussed some of the accomplishments of Bayh-Dole and Senator Bayh told me the story of how Bayh-Dole came to be. But for another Senator lifting a hold with an hour left in the 1980 lame duck session there would never have been a Bayh-Dole Act. In this second and final installment of my interview with Senator Bayh we will discuss the aforementioned loft praise for Bayh-Dole, which came from The Economist. We will also discuss statements of Vice President Biden (when he was a United States Senator) regarding the tremendous success of Bayh-Dole, how the United States can stay on the cutting edge of technology, and how to successfully lobby for changes in the patent system.