Europe sees value in a strong patent system, patent owners ability to enforce patent rights

By Phil Hartstein
October 22, 2015

The London IP Summit is a unique event that brings together IP owners, experts, lawyers, and investors to address the key challenges and operational issues faced by companies and IP professionals today. I gave a keynote speech at the Summit offering his perspective as a public company CEO who faces the daily challenge of managing our IP assets. I used the opportunity to address patent reform from a historical perspective and to establish a key theme that patent assets are becoming more valuable in countries outside of the United States. The transcript of my speech is below. I welcome any comments, feedback, thoughts, or criticism you may have.

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european-union-flag-gavel-335“The patent system has lately been subject to investigation by committees of Congress and reforms have been proposed to meet some of the most serious criticisms.” Surprisingly this quote, which is very much synonymous with today’s patent debates, was published in The Journal of Economic History in May of 1950 – some 65 years ago. With a simple substitution of the word “industrialization” with “technology,” it reads like a modern document. More fascinating, its actually a survey from the preceding 100 years of established patent systems around the world and is aptly titled The Patent Controversy in the Nineteenth Century.

The modern notion of a patent system began in 1623 in England when the Statute of Monopolies was enacted under Elizabeth and James I. Although other countries like Italy claim patented behavior in the 15th Century when Brunelleschi patented his famous design for the dome on the Florence Cathedral. Interestingly enough, the first reform initiatives did not occur for nearly 200 years.

The center of these early reform initiatives was based in Europe with the most activity coming from England, France, and Germany. These early reform initiatives lasted for decades and reached a height between 1850 and 1875 with the settling factor becoming, very simply, the positive economic impacts to growth and development that societies realized from having a strong patent system.

Today we describe these cycles as “the pendulum swinging” in one direction – toward – or the other direction – away from – patent owner’s rights. Reform cycles, while they may seem endless, are condensed and the repeating cycles are accelerating at an alarming rate. In the history of the US patent system, there have been number of overhauls, most recently was the America Invents Act. Even as recent a shift as that represented, we immediately find ourselves in the midst of a continued reform debate.

In the Journal of Economic History article from 1950, one of the most striking observations was that, at the time, the subject wasn’t limited to “patent reform” but also included the extreme suggestion that patents provided no civil or economic value and went further to suggest that patent systems should be done away with, entirely. It’s always interesting to draw conclusions with the benefit of hindsight. It is common knowledge that history has a tendency to repeat itself. Some of these earliest criticisms of patents and limited monopolies were led by — then called – The London Economist.


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It is quite surprising to see that with all of the work being done to strengthen the patent systems across Europe with the creation of the Unified Patent Court, we see The Economist recently publishing a number of authorless articles calling for dramatic curtail of patent rights – on the edge of abolishment. Aside from the Economist, the underlying value of patents and their economic impacts, have been the subject of much debate. We have seen a number of scholarly articles and empirical studies either supporting or separating economic value derived from patents.

The United States has long been recognized for its patent system, as most know, it has pro-patent rights baked into its Constitution. Many of the earliest inventions protected by patent systems around the world were on necessities for survival, advances to accelerate crop production, and infrastructure technologies that led to better health. Today, while there are still some of these idealistic pursuits active in prosecution in patent offices around the world, what we are really talking about are the incremental technological advancements driven by increased consumer demand.

Turning to an example, we are barely a decade into smartphones and two-decades into the publicly accessible Internet. By contrast, the industrial revolution – counting the first and second waves – lasted between 60 and 90 years. In various ebbs and flows of industrialization and innovation ages there have been challenges to individual patent rights which required the Courts to engage in the active assertion of those rights. Leading into the twentieth century, the United States was recognized for its established remediation pathways for patent infringement through its District Courts. It is important to emphasize that you can not have a strong patent system without an established process for enforcing those rights.

In fact, in 1982 the United States established the Court of Appeals for the Federal Circuit to deal with patent specific issues. And, in recent years, the United States Supreme Court has weighed in on patent matters, although their interest appears to be receding of late with a fewer cases being heard at the high court. While the Supreme Court doesn’t appear to want to be involved in patent issues, in the past few years they have taken more patent cases than in the history of the Court. They appear willing to do so when there are narrow questions to be answered and if there is a perceived imbalance coming out of the Federal Circuit.

The right to enforce patent rights is fundamental to entire construct of a healthy patent system. The underlying proposition for any individual inventors or investors in new technologies, therapies, or industrial processes is that very promise of a limited monopoly to return value on the invested innovation. However, the uncertainty of outcome in the process has forced some patent owners to look elsewhere when securing enforceable rights. This is where the United Kingdom, England specifically is blazing new trails.

We are currently witnessing some patent owners enforcing their patent rights exclusively using the European courts, some of these are companies based in the United States. Now with the Unified Patent Court on the horizon, it is expected that we will see more enforcement actions in London, and Europe more broadly. This again is a clear sign that Europe sees value in a strong patent system and recognizes the importance of a patent owners ability to enforce those rights.

Reform is defined by a process for refining a system without challenging the very premise for which it was first implemented. I have described myself as an accidental tourist to the reform discussions. This came as a mandate from Finjan’s Board and is an example of just how important the issue had become for Finjan as a public company. Finjan’s message to congressional lawmakers has been one of “moderation.” The Company’s focus is on identifying and curtailing the bad behaviors while not advocating or supporting the notion that the patent system is fundamentally flawed. Patent reform has had and will continue to suffer from haphazard modifications and unintended consequences post implementation, of the America Invents Act.

The extenuating debate has provided enough time for companies and venture capitalists to realize the dramatic impact of changes being proposed by lawmakers.

One example is recent messaging that worked when meeting with legislators. Finjan decided to take the definition of a “patent” off a coffee mug purchased at the patent office. It was copied into a word document and with tracked changes turned on it was marked up to illustrate how transformative the proposed reforms would be to the definition.

Turning back to the 1950 paper which offered a survey of the prior 165 years to demonstrate the importance of a strong patent system. “the [patent] system… might still be the cheapest way and the most effective device to stimulate [technological] progress.”

Sir Henry Sumner Maine, a British journalist and historian who lived in the 1800’s, who conceded that the United States patent system was “one of the provisions of the Constitution that have most influenced the destinies of the American people.”

The Author

Phil Hartstein

Phil Hartstein is a California native, a Silicon Valley resident, and CEO of a NASDAQ listed company with patents at the very core of its business. There is no question that he views patents as the most important asset of Finjan and he notes they have been for almost twenty years.

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