Constantly changing patent laws are taking a toll on American innovation

crisis-ahead-stormOur patent system is a public resource. Over two hundred years ago, America crafted a bargain offering inventors a limited exclusive right in exchange for disclosure of a meritorious invention. The objective was, and is today, to simultaneously encourage innovation and increase the public store of knowledge. Both public and private interest is served by robust reliance on that system. Thus, we must carefully restrict ourselves to changes to that system that are consistent with that bargain, and that encourage inventors to take advantage of its benefits.

Inventors and investors demand a system that affords predictable and durable intellectual property rights in a timely manner. If the system that we implement for granting patent rights does not meet those criteria, inventors will not make use of the system, the public store of knowledge will suffer, and investment in innovative and entrepreneurial domestic enterprises will diminish. Perhaps more importantly, if those rights are not found here, the procurement of intellectual property rights and associated investment and commercialization will move to foreign lands. The result will be lower domestic economic output, fewer jobs, and a decline in American innovation.

We are already seeing this unfold. In 2015, the European Patent Office (EPO) saw an increase in patent filings of 4.8 percent overall, and of 16.4 percent in applications from US companies.[1] The EPO acknowledged that “the strong growth in [EPO patent] applications from the United States is also due to the effects of a change in US patent law.”[2] In contrast, over the same period, the USPTO saw a decline in patent filings.[3]

There can be no doubt that the increase in EPO filings, and the simultaneous decrease in USPTO filings, is due to the referenced implementation of the AIA, and a corresponding erosion in trust in the U.S. patent system. It is also due to concerns arising out of institutional challenges (e.g., USPTO resources and funding), as well as uncertainty in light of judicial changes to our patent law. Specific concerns relate to the durability of a granted US patent (e.g., susceptibility to post-grant attack); the shrinking, and uncertain, scope of patent eligible subject matter; uncertainty as to exclusivity (injunctive relief[4]); and the market value of the property right in view of legislative efforts to restrict enforcement options.

These data, and at least one independent survey[5], show that innovators and IP experts alike believe that European patents are obtained more rapidly and reliably, and receive higher quality examination. Europe is also becoming a more appealing venue for patent enforcement, a trend that will gain momentum with the impending establishment of the European Unified Patent Court. If Europe is becoming a more appealing venue for patent protection, then we must conclude that European patents are perceived as more reliable and enforceable, and thus, having greater market value.

Collectively, these changes are taking a toll on American innovation. They are diminishing investment in, and thus the viability of, business formation in America. This will work to the profound detriment of the U.S. economy, and it puts at risk our traditional role as the most innovative people on the planet. We must be diligent and dedicated in our efforts to reverse this trend.

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[1] European Patent Office, Annual Report 2015 (https://www.epo.org/about-us/annual-reports-statistics/annual-report/2015.html)

[2] European Patent Office, “Demand for European patents continues to grow”, March 3, 2016 (http://www.epo.org/news-issues/news/2016/20160303.html)

[3] US Patent and Trademark Office, Performance and Accountability Report 2015, p. 184 (showing a decline in utility patent application filings from 579,873 in FY2014 to 578,321 in FY 2015; as well as in US patents issued, from 329,612 in FY2014 to 322,448 in FY2015).

[4] eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006).

[5] In a 2015 survey of patent professionals by Intellectual Asset Management (IAM) magazine, the EPO ranked first for patent quality among the world’s largest patent offices, followed by the Japan Patent Office, and then the USPTO in third place (http://documents.epo.org/projects/babylon/eponet.nsf/0/4783c6465d9a2b5fc1257e5900242b3f/$FILE/IAM72_benchmarking_q_p_en.pdf).

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The Author

Brian O’Shaughnessy

Brian O’Shaughnessy is a Partner in the Washington, D.C. office of Dinsmore & Shohl LLP, where he focuses his practice on counseling clients in strategies to protect and respect intellectual property particularly in the areas of organic chemistry, pharmaceuticals and biotechnology. Mr. O'Shaughnessy represents clients in contested matters before the federal courts of the United States, and in administrative proceedings before the U.S. Patent and Trademark Office including patent procurement, post-issuance proceedings, and interferences. He is also President and Chair of the Licensing Executives Society (USA and Canada), Inc. (LES), which is a non-profit, non-partisan professional society devoted to bringing the fruits of innovation rapidly to market for the benefit of the global community. For more information or to contact Mr. Mr. O'Shaughnessy please visit his firm profile page.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 17 Comments comments.

  1. angry dude May 16, 2016 6:06 am

    Yeah, right, no kidding

  2. Curious May 16, 2016 8:16 am

    The EPO acknowledged that “the strong growth in [EPO patent] applications from the United States is also due to the effects of a change in US patent law.”[2] In contrast, over the same period, the USPTO saw a decline in patent filings.[3]
    An intended result of the AIA (i.e., America [Infringes] Act). The serial infringers in the US, who drove the AIA, see every patent ever granted as being improperly granted, overly broad, ambiguous, and wielded by trolls. As such, anything that can reduce patent filings in the US is a good thing. “Efficient infringement” is much easier to practice when there are less patents to infringe.

  3. Edward Heller May 16, 2016 12:31 pm

    “The serial infringers in the US, who drove the AIA….”

    Unfortunately for all of us, they also controlled (at least circa 2011) the AIPLA that was one of the leaders advocating for the AIA.

    For 200 years, patent legislation was intended primarily to implement Supreme Court decisions. The Patent Act of 1836 brought us examination and ended scire facias actions by which anyone could challenge the validity of a patent. But nothing before the AIA did anything radical. The AIA was radical from top to bottom.

    Trust us they said. No more say we.

  4. Anon May 16, 2016 4:37 pm

    Mr. Heller,

    I have to laugh at your “vigilance,” given how much you tend to misconstrue the Act of 1952 which was motivated as a reaction by Congress against a Supreme Court that had swung so far to one side of the pendulum that their own members coined the phrase: “The only valid patent is one that has not yet appeared before us.”

    Shall I also remind you that the leeway provided by an earlier Congress to the judicial branch to set the meaning of “invention” through common law evolution was revoked by Congress with the Act of 1952?

    The level of “genuflection” that you exhibit for the Supreme Court prevents you from having pretty much any credibility on matters that the Court itself have seriously messed up with their intrusion into statutory patent law.

  5. Night Writer May 16, 2016 5:01 pm

    Yeah, Anon, with friends like Ned who needs enemies.

  6. Curious May 16, 2016 6:55 pm

    The level of “genuflection” that you exhibit for the Supreme Court prevents you from having pretty much any credibility on matters that the Court itself have seriously messed up with their intrusion into statutory patent law.
    E.g., Ned’s consistent portrayal of Benson v. Gottschalk as a judicial masterpiece doesn’t do a lot for his credibility. In Benson, the Supreme Court thumbed its nose at Congress and pretty much said (via its institution of “exceptions” to statutory subject matter) that it (i.e., the Court) gets to say what is patentable — not Congress. The so-called “patent clause” of the U.S. Constitution is found in Article I, Section 8, which is a list of power given to Congress. Had the “patent clause” been found in Article III (which mostly governs the judiciary), then the Supreme Court could have rightly thumbed its nose at Congress.

  7. Edward Heller May 16, 2016 7:11 pm

    Curious, Ned’s consistent portrayal of Benson v. Gottschalk as a judicial masterpiece doesn’t do a lot for his credibility.

    Curious, you cannot get away with this. I have time and again said that Benson was unclear as all get out. All it really stood for is that math is nonstatutory and that simply adding pen or paper, or a generic computer is not enough. There is a lot of Dicta in Benson which confuses. I do not call that case a judicial masterpiece. Not at all.

    But, might I add here, that this kind of lies is typical of people who argue for business method patents. They engage in the big smear.

  8. Edward Heller May 16, 2016 7:26 pm

    Curious, about your attack on the Supreme Court, there is little doubt that their jurisprudence in the area of 101 Funk Bros. has been abysmal, not because they got the result wrong in any particular case, but because their explanations of their holdings has been atrocious.

    Regarding the Patents Clause, Congress has the power to secure to inventors exclusive rights in their Discoveries. (Patents are not public rights any more than inventions are invented by Congress. And to H with the AIPLA for supporting the idea that patents are public rights.) But the Supreme Court has the exclusive power to interpret the statutes once passed.

    Now, since we are interpreting a statute (101) first passed in its present form in 1793, I presume the Supreme Court decisions since should have bearing? These decisions include Le Roy v. Tatham and O’Reilly v. Morse. Tatham created the limitation that “principles in the abstract” cannot be patented. Benson and the following cases only “applied” the holding of those cases.

    But that where the modern cases went astray. The problems with claiming math, business methods and the like do not involve claiming “principles in the abstract” so much as the do as to claiming non statutory subject matter. Math, business methods, and the like are not manufactures. But manufactures (including Art, machines and compositions) are the subject matter protected under our statutes just as they were in England under the Statute of Monopolies.

    I think a large part of the problem with recent Supreme Court cases is that the authors of briefs are not well educated in patent law. Professors might be, but some do not get it even though they might know patent law fairly well. As I have said before, every patent attorney should read Curtis. That is a good starting point.

  9. Anon May 16, 2016 7:31 pm

    Mr. Heller,

    Curtis is NOT a good starting point because it simply does not pertain to the Act of 1952.

    You continue to act as if that Act did not happen and that nothing at all had changed.

    You continue to be wrong about that and continue to lack credibility exactly because you refuse to recognize what happened with that Act.

  10. Jeff Lindsay May 17, 2016 12:17 am

    The rise in patents being filed in Europe is small compared to the volcanic eruption of IP in China, including massive increases in Western and domestic cases. The young Chinese system still has many problems, especially patent quality, but in China the trend is strongly toward strengthened IP courts, strengthened enforcement, and strengthened IP rights, and it’s part of a serious renewal in innovation that is positioning China for a great future, while the US declines in IP, innovation, and economic power. So sad to watch the US decline in this area. Keep your eyes on China.

  11. Curious May 17, 2016 12:55 am

    But, might I add here, that this kind of lies is typical of people who argue for business method patents.
    I’ve been reading your stuff for years and years and years … both on this site and the other (uncivilized) site … You LOOOOVE Benson and Douglas.

    Google (for being a terrible company patent-wise) does provide fun tools:
    Ned Heller wrote on April 5, 2014 at 3:21 pm:
    To the extent that I perceive the patent bar is a problem or that I perceive Judge Rich as a problem it is because I believe the Supreme Court is and has always been right on patent law.

    Here is another Ned Heller gem from June 6, 2012 at 6:28 pm:
    Douglas was, simply, brilliant; and right on so many, many issues. We owe a lot of what we are today to that one man

    From June 6, 2012 at 3:17 pm:
    Douglas was a friend to the patent system because he was an enemy to monopoly and to patent misuse.

    BTW — from perusing your past posts on Benson and Douglas, I had no idea you thought “[t]here is a lot of Dicta in Benson which confuses.” While we are on the topic, care to share what dicta you think is confusing?

    Math, business methods, and the like are not manufactures.
    Always seem to forget that processes are a separate class of patentable subject matter? Finding better ways to process information is the hottest technology of today, the past 30 years, and the foreseeable future. However, patent law is being hamstrung from protecting that technology by a decision laid down almost 45 years ago by justices that had, at best, woefully incomplete knowledge about the technology and its potential uses.

  12. Benny May 17, 2016 6:01 am

    Why should European patents be perceived as moe reliable? The process for revoking an EPO patent is faster, cheaper, and more professional than in the US. I have not seen evidence that European examiners are any more thorough than their peers across the pond. However, the EU practice of collecting maintenance fees before examination and grant discourages frivolous applications.

  13. Edward Heller May 17, 2016 8:12 am

    Curious, being right does not mean being clear. The problem with the Supreme Court decisions on 101 is that they are not clear.

    Benson held that one could not allow a claim to math using a computer because it would effectively patent an idea and, because the computer was the only practical use, the claim would wholly preempt the algorithm. That confused and still confuses. Flook simply said that math was nonstatutory, then held that one had to have a practical application, which was not present in that case. Flook has become the law — as Alice tracks its holding quite well.

    On reflection, I think the reason that math is non statutory is that it is not within the four classes. Once one understands this, everything else in 101 jurisprudence becomes simple and predictable.

    As to Douglas, his decision in Benson was correct, just as his decisions in other patents cases. But the language he used at times was imprecise and confusing. Benson was a good example.

    Regarding “monopoly,” the patent bar was abusing the patent system back in the day by tying the sale of unpatented items with a patent license. If you will note, it is doing that today as well and the Federal Circuit is letting them get away with it. I bet that the Supreme Court will unanimously reject the Federal Circuit’s holding in Lexmark.

    There is little doubt in my mind that the Douglas was viewed with alarm by most Republicans and by most patent attorneys. This colored the ’52 Act, and the jurisprudence of Judge Rich. There was a virtual war between Rich and the Supreme Court over 101. Rich ultimately prevailed at the Federal Circuit with State Street Bank. His crowning legacy was ultimately rejected by a majority of the Federal Circuit and by a unanimous Supreme Court.

    In contrast, Douglas’s legacy has stood the test of time.

  14. Ternary May 17, 2016 11:44 am

    The Shannon/Nyquist sampling theorem has made computers signal processing machines as widely applied in ….. about everything. The underlying technology of digital signal processing (DSP) is the execution of mathematical expressions by processors.

    While steam-age rules treat execution of mathematical expressions as a human activity reflecting an abstract idea, such a limited idea about the role of mathematics has been outdated for over 40 years now. Virtually all modern process control systems, radars, filters, modulators, coders, cipher machines, image processors, MRI machines, cameras, TV sets, smart phones, media players, thermostats, etc, etc, are digital computers that execute mathematical expressions.

    Many real-life problems (including machine learning) are optimization problems. One trick is to create a mathematical parameter based model of the problem and determine an optimized set of parameters based on signals provided by the real world. And even if one doesn’t like it, many business method inventions relate to process optimization.

    The use of (discrete) math in devices is so pervasive that discussing the statutory validity of math in patent claims sounds like a discussion if we should move from horse drawn carriages to these new-fangled contraptions called automobiles. Math in computers as non-statutory subject matter is outdated and completely ignores well established science. (Well, perhaps we have DSP-deniers, who knows in this atmosphere). The courts don’t get it, so Congress should act.

  15. Benny May 17, 2016 11:58 am

    Ternary,
    I seem to detect an inconsistency in your post. Math equations are non-statutory, even if performed by a computer, But that is not all that computers do. A computer also performs logical operations and in consequence decision making processes, which is a different matter entirely. For example, calculating a square root with a computer should not be patentable. Turning on the light when the result of the calculation is an integer should be a patentable machine.

  16. Ternary May 17, 2016 12:27 pm

    I agree with much in the article. However, I do not fully agree with “Perhaps more importantly, if those rights are not found here, the procurement of intellectual property rights and associated investment and commercialization will move to foreign lands.”

    Patent rights are bound to a legislative region. I do not see in many cases how an independent US inventor or any inventor would go through the EPO to get a US patent. Besides being unaffordable to an independent inventor to pursue a patent in Europe (the EPO does not even pretend to support independent inventors), one cannot assert an EPO patent in the US. Taking the EPO route to the US via PCT is costly and basically unnecessary if one drafts an application in the USPTO at the engineering level that the EPO requires. Seeing from reference [5] in the article that 50% of the patent drafters do not intend to take measures to improve the quality of their drafts we will probably have to muddle on.

    It would be interesting to analyze if US companies are moving towards a PCT via EPO approach to obtain a US patent. (I assume that this is what was intended with the “moving” statement) .That would be a damning trend.

  17. Ternary May 17, 2016 12:44 pm

    Benny @15.
    You are correct. The role of math in computers is much wider. The actual design of “logic” circuitry can be described by for instance truth tables which are mathematical expressions in a somewhat unusual form. The calculation of a mathematical expression can be broken down into a series of logical (usually binary) operations which are performed by physical switches. Computers are fundamentally huge (in capacity) physical switching machines. No more, but certainly not less. And your example is to-the-point and correct.

    I am not trying to argue that math in a patent claim is currently not non-statutory. I am making the point that it should be statutory, based on scientific and technological reality.