The path to prosperity requires sound patent policy, not more patent reform

Iowa State Senator Jeff Danielson (D).,

Iowa State Senator Jeff Danielson (D).

Innovation is the lifeblood of a prosperous economy. Iowa’s recent economic performance, where improvements in agriculture and manufacturing have allowed us to weather the storm of a national recession and keep our overall unemployment rate below the national average, are the result of a culture of productivity and improvement fueled by innovation often protected by patents. Let’s continue this path to prosperity by rejecting H.R. 9, the Innovation Act, and S.1137, the PATENT Act.

Sound patent policy, which encourages the nexus between risk and ideas (especially for small entrepreneurs), makes invention profitable. In Iowa, many of our best ideas begin small and grow allowing us the opportunity to dream and then make those dreams a reality. The U.S. patent system enables that dream by protecting the market an invention creates long enough for the inventor to gain a toehold against competition, and by creating a property right capable of attracting critical investment to bring the invention to market and grow the business.

Many of the provisions in H.R. 9 and S.1137 skew the patent system towards big business, which will harm the ability of small entrepreneurs to take an idea and make it a reality, and importantly we all will miss the opportunity of creating new jobs. Think of all the successful businesses that have benefited Iowa, many started on a farm, in a garage or small shop with nothing but an idea combined with sweat and determination. Don’t let H.R. 9 or S.1137 kill this can do American spirit of innovation.

If enacted, H.R. 9 and S.1137 will harm small Iowa innovation companies and inventors. Loser-pay increases costs and risks disproportionately against small companies to the benefit of large multinational corporations. Joining the personal assets of investors to loser-pay and forcing bonding just to open the courthouse doors will mean that most small Iowa companies may never be able to access a court if a big company steals the invention. Heightened pleadings brings excessive and burdensome red tape that will significantly increase the cost and complexity of defending patent rights while creating opportunities for infringers to game the system. Customer stay will stop a patent defense suit against an infringer and push the case to the manufacturer, even if the infringer is a large, sophisticated retailer or device maker that earns the most profits from the invention. Unfortunately, many manufacturers are overseas in countries like China, so customer stay will greatly increase litigation costs, complexity and risks for small Iowa companies and inventors, which could potentially prevent defense of patent rights. Inter Partes Review (IPR) is a procedure created by the America Invents Act of 2011 (only a few short years ago) to challenge the validity of a patent before the USPTO. Patents are property rights but IPR’s extinguish those property rights via administrative procedures with an exceptionally low bar – as opposed to judicial procedures used by the courts to uphold other property rights. Thus, IPR’s are being abused by nefarious players and the next generation of life saving medications and other technologies have been put at risk. No provision in either H.R.9 or S.1137 goes far enough to curb this abuse and profiteering.

Patent rights are exceptionally weak due to the effects of the America Invents Act and several court decisions in recent years, perhaps the weakest in the 225 years of our patent system. Not surprisingly, we have more companies going out of business than we have starting up for the first time in our history. Now is not the time to degrade patent rights even further for the benefit of a few large multinationals and Chinese corporations. We should instead take a measured and targeted approach to frivolous litigation as the STRONG Patent Act (S.632) does, while strengthening patent rights to increase capital flow into small innovative companies that bring new ideas to market creating our next generation of industries, medicines and technologies.

It is for these reasons, among others, I urge Congress to consider not only Iowa’s future prosperity, but America’s future as well, and keep small entrepreneurs in mind before supporting the Innovation Act (H.R. 9) or the PATENT Act (S.1137) in its present form.

The Author

Senator Jeff Danielson

Senator Jeff Danielson serves in the Iowa State Senate, currently in his third term. The district Senator Danielson represents includes Hudson, Cedar Falls and Waterloo in Black Hawk County, Iowa where he also continues his career as a professional firefighter with the City of Cedar Falls and an adjunct professor of public policy at the University of Northern Iowa. Senator Danielson chairs the Iowa Senate State Government committee (elections, campaign finance, pensions, professional licensing, open records/open meetings law, alcohol & gaming, constitutional amendments, state government administration/operations). He is Vice-Chair of Appropriations & Administration/Regulation budget committees. He is also a member of Veterans Affairs, Transportation & Economic Growth committees.

Danielson earned a degree in Public Administration (summa cum laude) from the University of Northern Iowa (UNI) and a Master’s of Public Policy from UNI as well. He is a Navy veteran and makes his home in Waterloo, Iowa with his wife Kim and two children, Brendan and Erin.

For more information visit JeffDanielson.org.

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Discuss this

There are currently 11 Comments comments.

  1. Anon2 August 10, 2015 9:49 am

    This is very sound and the sentiments are valid.

    I cannot criticize this particular piece but only make a general observation when considering the defenders of the patent system and the supporters of the correct position on the issue.

    There was a time when an individual’s existence and well being was justified on the notion of service to the king and the rightness of each taking up his place in the ordained hierarchy of rule. There was another time, a great time, when thinkers turned this upon its head, understanding that man’s rights, each individual person’s rights, and the service thereto are the only validation of any government, any system (and arguably any economic system/machination). This was a moral victory and the birth of freedom. Man has rights not the honor of servility to some collective amorphousity.

    To see so many defenders of the patent system is heartening. To see so much of their arguments based on a purported result, whether it is the economy of institutions, communities, states or the country is disheartening as it is a fundamental inversion of what America was and could be. Innovators, small businesses, inventors are not “good” FOR anything, the people and their rights are not a means to any collective end. The ends of a just and free society IS the protection of the rights of the individual, and in this case, patent rights.

    Protection of patent rights are not the means to a greater good their protection is an example of the good, good government, good policy, a just society.

    What is more important that that?

  2. Anon August 10, 2015 10:28 am

    Anon2,

    Your thoughts echo in what the Quid Pro Quo is, and is meant to be:
    an exchange between equals.

    Far too often, those “wanting more” presume without any thought at all that such wanting – since it is claimed to be “good” for the “commons” – must necessarily, and without question or further thought, be right and proper.

    This is evident in a variety of manners, from economists and unstated assumptions to what I will generously call the kool-aid swigging lemmings who mouth mantra with little to no care of understanding the law and the history of law (and the history of innovation) that attaches.

    Sound-byte warfare is all the rage. Thinking and its cousin, Understanding, are deliberately not invited to the party.

  3. Paul Morinville August 10, 2015 5:04 pm

    Anon/Anon2, I recall (possibly incorrectly) that it was argued that we needed the 5th amendment because the crown would torture to get an answer or a confession. People found that to be unreasonable because people have the right to think thoughts and those thoughts are theirs alone. Forcing the extraction of thoughts breached a natural right.

    If it is the case that thoughts are natural rights, and that patentable ideas are thoughts, then it would follow that patentable ideas are natural rights.

    I’d love to hear what you think.

  4. Joachim Martillo August 11, 2015 8:57 am

    Some reforms are needed, but they are not legal.

    First, all examiners that neither fully comprehend ordinary English nor write comprehensible English must be discharged — no ifs, ans, or buts.

    Second, programs like SAWS whether official or unofficial must be stamped out. Madison defined the guiding principle of the PTO in Federalist No. 43 when he campaigned for ratification of the Constitution.

    THE FOURTH class comprises the following miscellaneous powers:1. A power “to promote the progress of science and useful arts, by securing, for a limited time, to authors and inventors, the exclusive right to their respective writings and discoveries. “The utility of this power will scarcely be questioned. The copyright of authors has been solemnly adjudged, in Great Britain, to be a right of common law. The right to useful inventions seems with equal reason to belong to the inventors.

    PTO officials and examiners are mandated neither to pick winners in the markets nor to make economic judgments.

    (i) To prevent improper coordination between examiners and PTAB judges as well as outcome-driven judgments (a violation of due process), the PTAB must be removed from the PTO.

    (ii) One separate board of judges outside of the PTO (under the DOJ?) should judge 101 and 112 issues, which are for the most part epistemological and philological while another board (under the OST?) should judge 102 and 103 issues. Except in the context of a hearing, judges must not communicate with examiners.

    (iii) If a QAS or any other PTO official becomes involved in an examination, he must provide a written justification for his involvement as well as a statement of concerns. Both documents should become part of the permanent record in the image file wrapper. Applicants should be able to schedule interviews with intervening officials to overcome objections. OPLA already behaves in this way, and the Administrative Procedure Act seems to require such behavior throughout the PTO.

    (iv) Documents must never vanish from the image file wrapper.

    These changes would immensely improve examination as well as quality of patents issued and would help the PTO focus on its mandate.

  5. Anon2 August 11, 2015 10:58 am

    Paul Morinville said:

    “Anon/Anon2, I recall (possibly incorrectly) that it was argued that we needed the 5th amendment because the crown would torture to get an answer or a confession. People found that to be unreasonable because people have the right to think thoughts and those thoughts are theirs alone. Forcing the extraction of thoughts breached a natural right.”

    Torture, is a concept which we distinguish from justice. Particularly because when it is used it is used against the innocent, i.e. those which have not been proven guilty. Such action against an individual’s will, prior to it being shown that the person is guilty or that the punishment is just constitutes the initiation of force against an innocent, and is morally wrong. It is violation of many of the individual person’s rights. If a guilty person is being tortured then the justness of torture itself in view of the crime is the issue as to whether the rights of the guilty are being violated.

    As for a thought, it is mental content. Such a thing cannot be literally extracted, taken away, or transferred. A person can choose to communicate, to express in some form to another, what the person thinks so as to enable another to understand what he thinks but heretofore it is impossible (barring invocation of some science fiction) to deny, separate, or alienate a man from his thoughts, directly. Initiation of force or fraud can interfere with a man’s ability to think, but insofar as nothing can directly affect his thoughts, and only violation of his other rights can interfere with his thoughts,he does not need a separate right to his thoughts, as such. Give a man his moral right to be free from the initiation of force or fraud and he will be free to think.

    As for natural rights, this concept implies something intrinsic or mystical, that rights “come” from another dimension. Rights are not something that come from anywhere, they are inherent in the identity of man, i.e. what man is, the nature of morality and what is required to allow man to live according to his morally within a society. The concept “natural” right also implies there are other kinds of rights, perhaps unnatural, or man-made or some-such. There are no such things. There are only rights, the rights of man.

    “If it is the case that thoughts are natural rights, and that patentable ideas are thoughts, then it would follow that patentable ideas are natural rights.”

    An idea is mental content. Taken alone such a thing does not give rise to a right. Such would be, by analogy, like looking over a uninhabited valley and perceiving that it is there, and possibly thinking that it could be exploited and turned into a value. Although there is germ of value, the valley is still untamed, it is useless, the man has not created value from the potential, it lies still awaiting effort, no value and no parallel right arises by a man looking at the untamed valley. So too a man who has a thought that some result, which result would require a new means which escapes his ability to imagine: the manner and means of the obtainment of the result remains elusive, tangled, like an untamed wilderness, precisely because the how or what has not been discovered/invented.

    For the man to gain a right to the fruits of his own labor, i.e. the value he has created, he must first create the value. Thus the man who goes out into the uninhabited (unowned) valley, and fences off areas, clears fields, builds a house, builds a water wheel, he has created value which are his by right.

    A man or woman who, although in the beginning has only the germ of an idea, decides then to set off into the wilderness of thought and unexplored forms and combinations of reality, the tangles, the valueless mass of confusion of the unknown, and recognizing specific combinations of reality through a process of methodological mental labor, comes back with a valuable solution… he or she has created value though his or her own labor and that value becomes his or hers by right. If it is useful, new, and unobvious etc. we identify it as an invention and the right we identify as a patent right.

    “I’d love to hear what you think.”

    Hope the sentiment has endured the hearing.

  6. Robert Grantham August 12, 2015 3:11 pm

    I have only one short comment to make.

    There are a great many people complaining about IPR’s. It is true that there is a lower standard to overturn a patent at the Board than there is in court. It also true there is lower standard still in obtaining the the patent. Let’s remember why the IPR process was introduced. Too many patents issue today because of low quality prior art. The fact that so many patents are being overturned based on prior art should be an indicator that the prior art process needs to be reformed. Had the same prior art that is applied to overturn been identified before the patent issued the patent would not have issued.

    It is a burden on society to enforce patents that we subsequently learn would not have issued. It is no longer reasonable to leave the search process to the examiner. If corporate America or small inventors want strong patents then they have to take some responsibility for ascertaining the strength of their application before they file.

  7. Paul Morinville August 13, 2015 12:53 am

    Anon2, Thanks, That’s more than I expected.

  8. Paul Morinville August 13, 2015 1:15 am

    Robert, Most inventors do not have assets to leverage to attract capital to build a company. Patents create an asset that can attract capital. In order for a patent to attract capital, it must be durable, which is why it is presumed valid in black letter law.

    IPRs create a system where patents are presumed invalid. To make matters worse, if a patent becomes subject to an IPR, most of the hundreds of thousands of dollars of cost is disproportionately laid on the inventor, who generally is the least able to pay it. Still worse, an IPR will burn 3 years of the patent’s life – even in the best circumstances it burns ~18% of the patent’s life. Then the risk remains that someone else will file another one.

    This all means that IPRs make a patent a non-investable asset… therefore worthless to an inventor. I would suspect this is one of the reasons we now have more companies going out of business than starting up for the first time in American history.

    IPR’s are a really bad idea.

  9. Anon August 13, 2015 7:27 am

    Robert @ 6,

    One of your premises was soundly defeated in the Tafas case. What you claim as “no longer reasonable” is the very thing that MUST be made reasonable – it is the very reason why there exists a multi-BILLION “tax” on applicants in the first place.

    You seek to excuse the processing and lay total blame on the input. This is just a retread of an old fallacy. Do poor applications get through? No doubt. But poor applications are the ones most easily (and rightfully) rejected. The bottom line here is NOT that it is too easy to file – it is that examination is not being done properly. Examination is not proper under either a “reject everything” or a “accept anything” mindset. But that does not mean that you blame the applicants and call it a day.

  10. Robert Grantham August 13, 2015 7:20 pm

    I appreciate the comments.

    First in replying to Paul, prior art searching is not that expensive, depending on the technology $750 to $2000. Considering what is at stake, this is not a big expenditure, it is basically due diligence. For a variety of reasons the PTO has lost its ability to do dependable proficient searching consistently. That genie is not going back into the bottle.

    Replying to Anon 9, I am not excusing the process only recognizing how the system has evolved. My assumption regarding all of this is that the patents (or claims actually) being overturned are being overturned based on easily findable prior art.

    I have only read the first IPR case (IPR2012-00001) which involved Garmin International (the petitioner) and Cuozzo Speed Technologies (the patent holder). The patent 6778074 is directed to a speedometer, in combination with a GPS system that links to a speed limit database. The arrangement will automatically alert the driver that he or she is speeding. The IPR file suggests that the applicant’s representative did some kind of search but it unknown as to what. The examiner’s search, available in PAIR, was a brief three query exercise resulting in a very low number of hits. Garmin submitted six references to support of the petition, three of which were used to overcome one independent claim and it’s depending claims. The references found by Garmin contain the words “GPS” and “speed” in either the title alone or in title and abstract. These references were easily found low hanging fruit. Indeed, a reference with GPS and speedometer on the front page of the document is not low hanging it is fruit laying on the ground. Patent ‘074 issued essentially without a serous search being conducted.

    As I commented above, I suspect that the patents and claims being overturned will upon inspection show the same – lack of searching – dynamic. Low quality patents are issuing because of deficient searching. Many some argue it is the PTO’s responsibility solely to improve its ability to find prior art. I’m not blaming the applicant however everyone certainly recognizes that prior art is critical and expecting the examiner with lots or responsibilities and limited time to find the critical art is misguided. Don’t get me wrong, some examiners are very knowledgeable about the prior art however it is a skill that only develops over time. Under the PTO’s Patent Quality Initiative, an automated pre-examination search and crowd sourcing are the proposals the PTO has made to enhance their search effort. Notice that the proposals advocate less searching, e.g. less human input, not more. The IPR process is demonstrating that more searching, and by that I mean human input, is required. I don’t think the PTO will acknowledge that a quality search may take ten hours. Because they won’t make that acknowledgement, they won’t improve their overall search competence.

    Finding prior art is very much a human centered and time consuming activity. I think a system of incentives and disincentives to encourage applicant searching is a plausible reform that should be explored. This would retain the applicant’s discretion as to whether or not to provide a search before filing. The IPR is exposing a problem which is affecting the presumption of validity. Fixing the real problem of getting germane prior art into the application file on a consistent basis will go a long ways, over the long haul, in strengthening the patent system.

  11. Anon August 13, 2015 8:07 pm

    Robert,

    So you are going to ignore the Tafas case completely and still push the thing that you somehow find “undoable” by the Office unto the inventors…

    With all due respect, you have this assbackwards.