On March 8, 2011, the United States Senate passed S. 23, the Senate version of patent reform, by an overwhelming vote of 95 to 5. Just about three weeks later the House Judiciary Committee unveiled the House version of patent reform. While the framework of the House bill is largely the same as the framework of the bill that achieved overwhelming bipartisan support in the Senate, there are some non-trivial deviations that place the likelihood of achieving patent reform squarely in doubt. The two big ticket items being kicked around as differences that threaten the entirety of patent reform are inter partes review and prior user rights. These two issues could cause a splintering of stakeholders and place us back in the limbo we have been in for the past 6 years, which would be tragic because Congress is finally poised to adequately fund the United States Patent and Trademark Office.
Earlier today President Barack Obama held a press conference where he addressed the nation on the rapid increase in gas prices caused most immediately by unrest in Northern Africa and more generally as a result of the world slowly emerging from the Great Recession. After detailing a number of efforts to boost domestic oil production, including encouraging companies to pursue leased lands that are idle and possible new development efforts onshore and off-shore in Alaska, the President explained, “All of these actions can increase domestic oil production in the short and medium term, but let’s be clear: it is not a long term solution. Even if we started drilling new wells tomorrow, that oil isn’t coming online over night. Even if we tap every single reserve available to us we can’t escape the fact that we only control 2% of the world’s oil, but we consume over a quarter of the world’s oil.” President Obama even quoted T. Boone Pickens,saying: “This is one emergency we can’t drill our way out of.”
President Obama delivers his weekly address on Feb. 5, 2011
In his February 5th radio address, President Obama noted that “If we make America the best place to do business, businesses should … set up shop here, and hire our workers, and pay decent wages, and invest in the future of this nation. That’s their obligation.”
I agree. But government has an obligation, too. Is it doing all it can to truly make America the best place to do business?
Consider Evergreen Solar, which until last month was one of America’s largest solar panel makers. On January 14th, it shut down its Massachusetts factory and sent 800 jobs to China. This leaves only Silicon Valley’s Solyndra making solar panels in the U.S., and it just shut down one of its two production facilities.
2010 was a terrible year to graduate from law school. The days when being sworn in as an attorney automatically yielded a dependable source of income are over. Many graduates are angry, and on some level, maybe they should be. Angry at the government for not making more progress on job creation, angry at their law schools for listing employment statistics seemingly unchanged by these economic times, and angry at themselves for taking on huge sums of non-dischargeable student loan debt in a vain quest for status.
First-year law students are told to study hard, earn that invitation onto law review, become involved in extracurricular activities, obtain real-world experience through legal externships and graduate at the top of their class. They are told that if they do these things, they will land that Associate Attorney position at a reputable law firm. I followed this advice. I earned those honors, and I am currently working, not as an attorney but in the retail industry for about minimum wage. Allow me to explain how I got here.
What appears below is the speech Henry Nothhaft (Tessera President & CEO) gave at the Innovation Alliance conference on January 21, 2010, which is published with his permission. Readers may also find interesting Nothhaft’s recent article Looking for Jobs in All the Wrong Places: Memo to the President, relating to President Obama’s State of the Union Address and published by Harvard Business Review.
Hank Nothhaft addresses the Innovation Alliance Conference, 1-21-2011.
All told, I’ve helped create more than 6000 jobs and return 8 billion dollars to investors. And this work experience has given me first hand insight into a subject that economists are only now beginning to study closely. Namely the surprisingly powerful role that start ups play in job creation and economic growth. Of course, economists have been studying the sources of economic growth for a long time. 50 years ago, Robert Solo discovered to every one’s great shock that virtually all economic growth, or at least 80% of it comes from technological innovation. Not capital inputs or productivity increases or anything else, just technological innovation, the kind of break-through innovation that crates whole new industries and millions of jobs. Like the development of semiconductors, personal computers, software, and the Internet.
Manus Cooney (American Continental Group) discusses job creation with the panel, Chief Judge Michel looks on.
On Friday, January 21, 2011, I was at the Newseum for the Innovation Alliance conference on patents, innovation and job creation. The turn out was spectacular. Of course there were the usual suspects, but also in attendance were a number of Congressional Staffers and a good contingent of reporters. No doubt the location, only blocks away from the Capitol, facilitated the attendance of many.
I had the privilege of moderating the first panel on how patented innovations create jobs and economic growth. On the panel were Lisa Kuuttilla, President & CEO of STC.UNM at the University of New Mexico, Harry Leonhardt, Vice President & Deputy General Counsel for Amylin Pharmaceuticals, Inc., and John Swart, President of Exemplar Genetics, a small Iowa-based biotechnology company. The panel discussion ran the spectrum from Kuuttilla, who is responsible for getting University based research licensed and into the hands of start-up companies, to Swart who’s company is only three years old, has raised $6 million from investors and licenses University technologies, to Leonhardt who described Amylin as being in virtually the same position as Exemplar Genetics 20+ years ago.
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.
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.
News of Nathan Myhrvold’s Intellectual Ventures bringing a series of lawsuits should have displaced the above the fold headlines regarding the vague financial turmoil currently afflicting the U.S. and World Economy. Whereas one will pass, like kidney stones, with much watery eyed pain and gnashing of teeth, the other is far more insidious and potentially fatal to our collective future as a leading economy. Here’s why:
Just like in the story-line of Independence Day, where the alien death ships slowly but surely positioned themselves over each major city, with the eventual outcome well understood, so too is Intellectual Ventures (I.V.) slowly positioning itself as the patent overlord over many major industry segments. Just like in the movie, the eventual outcome is well understood. To wit: Complete usurpation of the U.S. Patent system. The outcome is a, gigantic tax/toll collector controlling the pulse of innovation in the U.S. or, like the movie, extermination of innovation.