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US close to innovation heart attack, warns Priceline founder Jay Walker

quinn-walker-12-08-2015

Jay Walker (right) with Gene Quinn (left) before the IPO cocktail reception, December 8, 2015.

On Tuesday evening December 8, 2015, Jay Walker, a prolific patented inventor and billionaire businessman, was named National Inventor of the Year by the Intellectual Property Owners (IPO) Educational Foundation at their annual celebration in Washington, DC. Walker, the man behind Priceline.com, began his 12-minute speech by thanking the IPO for naming him Inventor of the Year “because until now my tombstone was going to say, The Man Who Hired William Shatner.” Laughter abounded through the Old Patent Office Building, the site for this great event, which is today host to the National Portrait Gallery and American Art Museum.

Over the past several years I’ve gotten to know Walker a bit. Always on display are a sharp wit and a self-deprecating sense of humor, witnessed by his explaining to the audience that he was not wearing a tux because although he may be a genius that side of him is not always evident. His tux remained safely packed in his travel bag next to the door at home in New York, which he somehow managed to leave en route to Washington, DC.

But don’t let the humor fool you. There is a very serious side to Walker.  As the 11th most patented living inventor in the world Walker has a mind that works in different ways from a technical point of view, but he is a tremendous communicator. Drawing the audience into his world, he does not mince words and there is no doubt where he stands on an issue when he has concluded.

“The public, the government and even much of the business community often hates or fears patents,” Walker told the industry audience. “The very word ‘patent’ makes them scared or angry or both. Public respect for intellectual property and the understanding of its constructive role in our economy is at an all-time low. How did we get here? To be a patented inventor used to be a great thing. You used to be like proud to have patents.”

Sadly, thanks to a public relations campaign that for far too long went unchallenged, in many corners it is viewed as a self evident truth that patents are evil and patent owners, including inventors, are nothing more than a bunch of greedy monopolists who run rough-shot over the public domain. We vilify rather than celebrate innovators who cure disease, feed the hungry, revitalize the environment, or just make life better, easier and cheaper for the masses.

“Patents started as a bargain between the inventor and society, a bargain that said if you’ll teach me your innovation so that anybody can make it I will grant you a period of limited exclusivity. It was a bargain with the public,” Walker explained. “You didn’t have to build a factory. You didn’t have to make the thing. You just had to figure it out.”

Here is where things have dramatically changed over the last decade in the United States. There are a handful of tech companies that would prefer the patent system not exist, or at the very least that a far less robust patent system exist. These companies have rightfully pointed to the handful bad actors that engage in patent litigation abuses and have demanded reform. Without missing a beat, however, they have then pivoted from these bad actors that are rightly characterized as patent trolls, to claim that the problem of abuse is with all so-called non-practicing entities, or NPEs. It has been a brilliant PR move.

When you control the linguistic high ground you control the debate. Convincing the press, the public, Congress and some Courts that patent litigation abusers, who often engage in what is properly characterized as extortion-like activity, are one and the same as NPEs was what the coup d’état. Of course, non-practicing entities include research and development companies, independent inventors, and universities. Thomas Edison would have been a patent troll if being an NPE makes you a patent troll, so too would the Wright Brothers. But then again so too would Apple, since Apple really doesn’t make anything either, choosing instead to ship manufacturing (and jobs) overseas so that workers in other parts of the world can make what they innovate.

As crazy as it sounds, U.S. patent law and policy has evolved over the last decade to a place where figuring out the innovation is not only something we don’t celebrate, but it is something that we openly vilify because you greedy innovator will simply stand in the way of some giant multinational corporation from copying what you figured out and want to get paid for your innovative contributions. How did we get here?

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What difference does it make? For the small, start-up technology company it makes a huge difference.

“You know, when I created Priceline.com I created a unique way of buying something, of naming your own price and not knowing what you were going to get precisely and I received a US patent,” Walker explained. “When a very large and very respected company, a giant corporation who I like a lot infringed and just took it and put it into their product, we said you can’t do that, we have a patent and they said, we’ll see you in court, we’re giant and you’re a startup. Well, they picked on the wrong guy at that time because I wasn’t such a small startup; I had a few dollars and we sued in court and they stopped… they were a Fortune 50 company. That’s the power of the system when you have the money, the expertise and the wherewithal to make it right.”

Walker was just getting warmed up, next targeting what he described as the “elephant in the room,” which is the reality that “not only is our patent system broken but the patent itself is totally broken.” In what can only be described as an eloquent and perfectly on point tirade, Walker continued:

Patents are impenetrably complex, they’re costly, they’re confusing and they are the opposite of certain, they are uncertain. There isn’t a CEO in America who can pick up a patent and tell you with certainty whether his product actually infringes on what that patent teaches and that is nuts. We have allowed the creation of an Alice in Wonderland of rules and procedures and technical details to overwhelm the beauty of the original conception of a teaching. This system has been spinning out of control slowly and gently for the past 100 years, each year getting three or four or five percent more complex like an arterial blockage getting narrower and narrower and narrower until one day bam, you have a heart attack. We are that close, ladies and gentlemen, to an innovation heart attack. Any marketplace that cannot make a deal without filing a lawsuit in federal court is in deep trouble and that is the state of my opinion today. The results of this mess are sad and unpredictable. There is less incentive to create long-term intellectual property. There is certainly more incentive to infringe if you can figure out what infringement is. There will be more secrecy and there will be less innovation or certainly a very different kind of innovation. Because when you talk about patents in Silicon Valley they laugh at you. Laugh. They say by the time these patents come out years from now they may or may not be any good. We’re gonna be big. We’re gonna be stealing the customers and then another five years in court, what a waste. They’re wrong. It’s not a waste but the way it’s operating today I understand why they feel that way.

My first inclination is to simply say AMEN! My second inclination is to marvel at how perfectly and simply Walker has explained exactly what ails the patent system. When he talks about incentive to infringe he is, of course, referring to the concept of efficient infringement. Efficient infringement is a business decision. Even if I’m infringing there will be a subset of patent owners that don’t sue. Out of the subset that sues there will be a smaller subset that prevails. Out of that smaller subset that prevails there will be a smaller subset yet that gets anything that would approximate reasonable compensation for the damage done when you factor into the question that the infringer did not enter into a negotiated license and instead chose to infringe. An even smaller subset still will actually collect anything thanks to the infringer favorable damages laws and litigation realities.

But even if you were not inclined to engage in efficient infringement, how could you figure out what infringement is? If you look at patents issues 100 years ago they were maybe 2 pages long. Patents issued 50 years ago were maybe 4 or 5 pages long. Patents issued today on even simple kitchen gadgets that you might see for sale on QVC could easily be 15 to 20 pages or more. For a software patent application filed today that patent application could easily be 100 to 150 pages, or more, for something that is quite simple. Patent law has increasingly gotten more complex like the tax code. With every new ruling or requirement more detail is required. But the way the law works is if you say X and not Y then you must not have meant Y. But I said X, so certainly that meant all varieties of X, right? Who knows is the technical legal answer, at least today. Yet somehow 100 years ago when patents were 2 pages long everyone knew what was invented, claimed and owned.

“A world without property rights, except for the big guys, is not a world that enlarges itself,” Walker said. If we do not make the patent clearer and easier to understand “we will handicap our economy. We will handicap our ability to compete against people who do not want intellectual property.”

Walker then did a mini-pivot to discuss something I’ve heard him talk about many times before. “It used to be that inventors used to read the patents,” Walker told the audience. “Scientific American started as an organization to publish synopsis of patents. Imagine publishing in the Wall Street Journal, Forbes and Fortune and nobody in the business community would read it for fear of infringing on any of the ideas in business magazines. That’s what we have. At every major corporation they’re often told do not read patents. You are not to look at patents. It’s a fire-able offense at many companies. This is a perversion of the system we inherited.”

Walker ended his speech with a call for a new market reality, one that realizes that a system that pushes disputes into litigation is a system that is broken and doesn’t work for anyone. “Instead of treating every infringement like a crime with a trial, which is expensive and creates friction, let’s figure out how to treat them as a rational predictable cost of doing business,” Walker explained. “We are a community that recognizes what is being lost for our country. We are the community that needs to come together to encourage 100 times more innovation, 100 times more property rights that work. Think like the music industry. A million pieces of music are better than 100,000 pieces of music.”

From his lips to Congress’ ears! I can only hope.

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Join the Discussion

24 comments so far.

  • [Avatar for step back]
    step back
    December 9, 2015 07:54 pm

    Speaking of linguistics Gene, your post title could benefit from a comma.

    Let’s eat Grandma.
    Let’s eat, Grandma.
    Two different meanings, one fatal as far as Grandma is concerned. 🙂

  • [Avatar for step back]
    step back
    December 9, 2015 08:03 pm

    Wow.
    Just in. A new all time low for Scalia J.
    Maybe he is channeling D. Trump?

    We’re not going to be getting black inventors from top tier schools according to Scalia because those are “too fast” for them.

    How did this country get to where it is today? Now we see.

    http://www.huffingtonpost.com/entry/antonin-scalia-black-students_5668804ae4b009377b236c70?tlat6gvi

  • [Avatar for angry dude]
    angry dude
    December 9, 2015 11:02 pm

    Where would Mr. Walker with his priceline.com patent be in today’s anti-patent climate ?

    Could be another Alice or worse – they would just laugh him out of courtroom (and impose sanctions too)

    Lucky guy

  • [Avatar for Benny]
    Benny
    December 10, 2015 05:24 am

    “There isn’t a CEO in America who can pick up a patent and tell you with certainty whether his product actually infringes on what that patent teaches and that is nuts”

    It is not only nuts. It is also 100% true, and holds true not just for the CEO but also for all the engineers in R&D.
    It must be added, though, that in the real world companies use patents not so much to protect innovation from which they intend to profit, but as trip-wires to block the competition.

  • [Avatar for EG]
    EG
    December 10, 2015 07:47 am

    SB,

    “Wow” is appropriate with respect to Justice Scalia supposedly said during oral argument in Fisher v. University of Texas. We don’t need that sort of uninformed and racist statement from anyone, much less a Justice of SCOTUS. But I would be careful as to whether the whole context of what Scalia said, as the Huffington Post is hardly a bastion of “fair and balanced.”

  • [Avatar for step back]
    step back
    December 10, 2015 09:34 am

    EG,

    Right you are.
    Now a days one doesn’t know whom to trust.

    I recall when the author of Future Shock (Alvin T__something?) said that in the future the technologies of deception would outpace the technologies of verification. I think we’re there now.

    With that said, Scalia’s reputation of “gobbledygook” and “jiggery-pokery” precede him. So I would not be surprised if he said what was reported.

  • [Avatar for step back]
    step back
    December 10, 2015 03:05 pm

    Gene,

    Yes, that’s where the comma belongs in the post title.
    Thanks –Grandma

  • [Avatar for A Rational Person]
    A Rational Person
    December 10, 2015 03:32 pm

    “Patent law has increasingly gotten more complex like the tax code. With every new ruling or requirement more detail is required.”

    Innography’s Webinar “Top 5 Techniques for Software Patent Applications Post-Alice” hosted by Gene today really illustrates this point. Because of the rulings in KSR, Alice, Mayo, as discussed in the webinar, which I highly recommend, one way to try to avoid 35 USC 101 and 35 USC 103 rejections is to make the description of the invention in an application sufficiently complicated that a judge or justice cannot understand the invention.

  • [Avatar for Night Writer]
    Night Writer
    December 10, 2015 03:34 pm

    I think step back Scalia’s nonsense is related to the patent nonsense. We have reached a point where reality is getting fuzzier and fuzzier. People bow to the powers. We really don’t have a public forum that holds people to some degree of ethics and intellectual honesty. Patents are just another victim of the K Street propaganda machine fueled by the international corporations.

    What I like most about the patents story: Obama saying it was one of the worst problems in the US vs. the OMB (perhaps the most respected government office in DC) saying there was no problem. And, what was so grand about this is no one felt any need to resolve the discrepancy.

  • [Avatar for Night Writer]
    Night Writer
    December 10, 2015 03:43 pm

    I think too that allowing paid bloggers to dominate a patent blog is not good. I think we should all demand that paid bloggers be identified.

  • [Avatar for step back]
    step back
    December 10, 2015 05:40 pm

    EG @5

    Transcript for SCOTUS Fisher v U Texas is out
    Here is a snippet (HuffPo was not pulling our legs)

    10 JUSTICE SCALIA: There are – there are
    11 those who contend that it does not benefit
    12 African-Americans to – to get them into the University
    13 of Texas where they do not do well, as oposed to having
    14 them go to a less-advanced school, a less – a
    15 slower-track schol where they do wel. One of – one
    16 of the briefs pointed out that – that most of the –
    17 most of the black scientists in this country don’t come
    18 from schols like the University of Texas.

    21 schools where they do not fel that they’re – that
    22 they’re being pushed ahead in – in classes that are
    23 too – too fast for them.

  • [Avatar for A Rational Person]
    A Rational Person
    December 10, 2015 05:55 pm

    From a satirical(?) post on the New Yorker’s website:

    “According to the study, Scalia’s struggles to perform his duties in a competent fashion stem from his being inappropriately placed on a court that is “too demanding” for a person of his limited abilities.

    Forcing Justice Scalia to weigh in on complex legal issues that he lacks the background or aptitude to comprehend is, at the end of the day, cruel,” the study said.”

    And to bring this back on topic:

    I don’t know why this study picked on Scalia. Based on their decisions with respect to patent law, all of the justices, as well as the country, would be better off if the Royal 9 were on a “less advanced court”.

    The mess those clowns have made of US patent law is just staggering.

  • [Avatar for step back]
    step back
    December 10, 2015 07:19 pm

    Rational Person @12

    the country, would be better off if the Royal 9 were on a “less advanced court”

    Unfortunately it’s in the US Constitution. Probably our Founding Fathers could not have foreseen that a US President would nominate and a Senate would confirm any candidates for Justice of less than impeccable credentials and capabilities.

  • [Avatar for A Rational Person]
    A Rational Person
    December 10, 2015 07:55 pm

    step back,

    What is depressing is that the current set of justices do not even have the credentials and capabilities of the average NFL referee. Seriously, the NFL referees are currently more concerned about following the rules as written, having objective standards and the consequences of their rulings than the Supreme Court justices.

    For example, take the NFL’s often criticized rule regarding catches in which the receiver falls down or is tackled during the catch. Basically (and I’m somewhat simplifying here for the sake of illustration), the objective rule is that at the end of such a catch, the receiver must be in a position that he could at least theoretically hand the ball to the referee, otherwise there is no catch.

    Occasionally, this has resulted in some strange situations where to fans, the receiver looks like he has made a catch but is ruled to not have made a catch based on this rule. Because of this, there has been pressure on the NFL to change the rule. But the referees have resisted changing the rule, because no one has been able to come up with an “objective rule” that is any better. Rightfully, the NFL and referees have tried to limit “judgment calls”, i.e., subjective rules as much as possible in order to ensure the appearance of fair play.

    The Supreme Court Justices could learn a lot from NFL referees.

  • [Avatar for step back]
    step back
    December 11, 2015 04:16 am

    Rational Person @14

    Supremes learn from the “friends” of the court (amici curie).
    But only from a select few “friends”.

    All that nonsense you read in the Alice, Mayo and Myriad cases originates form the amici briefs of the select few “friends”.

    http://www.msnbc.com/all/slap-the-wrist-clarence-thomas#48504

  • [Avatar for Night Writer]
    Night Writer
    December 11, 2015 06:12 am

    Rational Person @4: your example brings up the question, though. Do the justices care? Are they setting up overlords who you come before and they can do whatever they want to you or a system of laws? I think we are headed for the former.

  • [Avatar for Night Writer]
    Night Writer
    December 11, 2015 07:49 am

    OT, but, come on let’s go to Titan instead of Mars. It looks a lot more interesting.

    https://www.washingtonpost.com/news/speaking-of-science/wp/2015/12/10/why-does-saturns-moon-look-so-much-like-earth/

  • [Avatar for Anon]
    Anon
    December 11, 2015 08:49 am

    A Rational Person @ 14,

    Your view is sound if (and only if) the only concern was “getting it right” according to rules already established.

    Such is reflected in our non-NFL vernacular as “bright-line rules.” It should be clear to anyone with any sense of historical appreciation that setting those rules is a power that the Court just does not want to give up.

    The Court does not want bright-line rules.

    The Court wants to maintain its own imprimatur on patent law because it wants to inject policies that it, as a separate body, wants to inject. Perhaps the judicial branch thinks that the legislative branch is not concerned enough with those things that it as a judicial branch is concerned with. Perhaps the judicial branch thinks that the law as written by Congress makes it “too easy” to obtain a patent, or that the power of a patent is just “too much.”

    What the Court neglects to remember though, is that its own powers are designed to be limited.

    What the Court neglects to remember though, is that substantive patent law is neither common law nor constitutional law (this last bit reflects my rejoinders to Night Writer).

    Patent law – the substantive law from which the judicial branch is constrained to abide by – is statutory law.

    It is beyond clear that a judicial branch engaging in subjective, future “projecting of things that merely MAY,” void for vagueness, let’s keep the necessity of coming into court to find out non-bright-line law writing is engaged NOT in being a referee applying the rules, but is instead engaged in the version of law writing that is known as making common law.

    The only thing that will stop this is explicit jurisdiction stripping. Nothing else will work. Nothing else will stop the Court from once again engaging in the creep of encroaching on a power that it finds too subtly addictive.

    There is a reason why ALL three branches are subject to constitutional constraints. There is a reason why placing one of those branches ABOVE any sense of constitutional constraint (with the subtle reasoning that that branch determines what is or what is not a breach of the very constitutional precept that it itself is violating – will not (and cannot) work.

  • [Avatar for Anon]
    Anon
    December 11, 2015 09:00 am

    (hit enter too soon)…

    For that last paragraph, add the (subtle) notion that said determining is infallible, and that such “determination” is automatically” deemed to be in and of itself unquestionable as to its own passing of constitutional scrutiny.

    Unchecked, this type of “reasoning” leads to the Will Smith movie Enemy of the State and Carla Dean’s question of:

    Well, who’s gonna monitor the monitors of the monitors?

  • [Avatar for Anon]
    Anon
    December 11, 2015 09:07 am

    A quick clip for that Carla Dean point:
    https://www.youtube.com/watch?v=G6NW_6Bg4M8

    For checks and balances to work (and it must work), NO branch can be allowed to think and act like it is above the law.

  • [Avatar for Anon]
    Anon
    December 11, 2015 09:07 am

    A quick clip for that Carla Dean point:
    [clip omitted]

    For checks and balances to work (and it must work), NO branch can be allowed to think and act like it is above the law.

  • [Avatar for Anon]
    Anon
    December 11, 2015 09:08 am

    Gene,

    For some reason, the hyperlink to the clip itself is tripping the spam filter. I will post that link by itself in the next post.

  • [Avatar for A Rational Person]
    A Rational Person
    December 11, 2015 10:25 am

    Anon@18

    “What the Court neglects to remember though, is that substantive patent law is neither common law nor constitutional law (this last bit reflects my rejoinders to Night Writer).”

    Except, in some cases, such as the dissenting opinion in Kimble v. Marvel Entertainment, when at least some of the justices do. From Alito’s dissent in Kimble:

    “As an initial matter, we do not give super-duper protection to decisions that do not actually interpret a statute.”

    The three justices who wrote or signed off on the above language in the Kimble dissent totally ignored this concept in Myriad, Mayo and Alice.

    Also, on its face from a political standpoint, Kimble is fairly strange, because you have three of the Republican justices writing a dissenting opinion that would benefit the small guy in opposition to a multinational corporation and the the four liberal justices joining a majority opinion that supports the concept of a multinational corporation being able to trick a small guy out of what he is owed by including potentially purposely including improper terms in a royalty contract.

    Some things that appear to have caused the above situation to occur is: (1) Justice Kagan did not or did not want to understand the legal and economic principles of the case but did want to write an opinion to show that she was one of the “cool kids” who knew something about Spider-man and (2) this case did not involve complex technology or interpreting claims, so the three dissenting justices could treat this case as a “normal” non-patent contract and statutory interpretation case.

  • [Avatar for Anon]
    Anon
    December 11, 2015 12:12 pm

    Even though Kimble was less a patent case and more a contract case, the disdain for the rule of law in that Kimble (majority) decision (“well, we don’t want to change a law we know is bad, because, well, just because”) is only yet another reason to employ jurisdiction stripping and remove the Supreme Court from hearing patent cases.

    Can there by any doubt that the Court is playing with “policy?”