America Needs Startup Experience in the USPTO Director

By Paul Morinville
January 18, 2017

Congressman Thomas Massie (R-KY)

Congressman Thomas Massie (R-KY) is an inventor, has built a company based on his patents, and is a strong advocate for startups.

This week Congressman Issa advocated retaining Michelle Lee as the USPTO Director.  I suppose there are about 30 multinational consumer Internet companies like Google that would all agree.  After all, her leadership at the USPTO has thrown the patent system into chaos and that benefits consumer internet companies.  However, the remainder of US companies would probably disagree.  Without question virtually all inventors and startups disagree.

The power of USPTO Director cannot be understated.  The USPTO Director is responsible for the creation of one of the most important property rights in America, patents.  Patents are used by inventors and startups to attract investment at the earliest stages of innovation, and that capitalization effect creates most of our new jobs.  However, the America Invents Act (AIA) errantly granted the power to extinguish those same patent rights to the USPTO Director.  That power to both grant and take away a property right is akin to the dictatorial powers of a third world tyrant and is completely contradictory to our American property right system.  But it is what it is, so selecting the next USPTO Director is a more important decision than it has ever been before.

In the past, USPTO Directors have been recruited from large multinational corporations, big law firms, political careers and lobbying organizations.  Michelle Lee ran Google’s patent strategy.  David Kappos ran IBM’s intellectual property.  Jon Dudas was a lawyer, staffer and lobbyist.  James E. Rogan was a lawyer, politician and a judge.   Todd Dickinson was an in-house patent lawyer at large corporations and a lawyer in a patent law firm.  And Bruce Lehman had a political career as a lawyer working in Congress.

None of these folks were unqualified for the job.  They all knew the technicalities of patent law.  They were well intentioned, professional and had more than adequate intellectual horsepower.  But they all lacked the most important qualification for the job.  None had ever invented something, patented it, and using that patent, funded a company to commercialize the invention.  This is the whole point of the patent system and it is amazing to me that this experience has not been on the resume of even one USPTO Director in more than a generation.

Those who start new companies put it all to risk betting that the government will back up the patent right.  Their investors make the same bet.  These people intimately understand how capital is driven to startup companies and how patents play in that capitalization effect.

The USPTO Director creates policies that directly affect the duration and cost of examination, both critically important elements to startups.  Today examination in the USPTO can last a dozen years or more.  A patent is not an investible asset until it is issued and the claims are known.  So this unacceptable delay alone is killing startups.   Since the AIA, the USPTO Director also has the authority to invalidate the same patents issued by the USPTO.  Patent Trial and Appeal Board (PTAB) procedures today have created titanic uncertainty by radically increasing the risk of invalidation.  An unstable patent right cannot attract capital.

The USPTO Director’s experience becomes their perspective and the foundation of USPTO policy and recommendations to Congress.  I believe that blind spot of understanding the reality of how things work at the grassroots of innovation has led us to where we are with more companies going out of business than starting up for the first time in generations.

USPTO directors are a respected source of knowledge that lawmakers place significant weight on when considering legislation.  Unfortunately, the USPTO Directors who testified in the run up to the AIA could not predict the damage to startups because they did not understand how the AIA’s changes would work at the grassroots level.  As a result, the AIA changed the US patent system to a “first to file” system, which discourages small entities from starting up companies.  The AIA also created the dictatorial powers of the PTAB.  The AIA added both risk and cost to both ends.  It forced inventors to spend thousands of dollars filing for patent protection as the first step in the process of invention, thereby discouraging the creation of new startups.  And at the other end, a patent is now primarily litigated in the PTAB with a very high likelihood it will be invalidated, thus obliterating a patent’s value for investment purposes.

For large corporations, neither first to file nor PTAB procedures are fatal.  Large corporations often have thousands of patents mostly used for marketing purposes, competitor harassment, and defense against patent infringement suits.  They do not capitalize their companies based on their patents.  If patent rights are weakened, there is often no real effect on their operations and very well may help by enabling them to efficiently infringe on the patents of startups.  The patents they invent themselves are not even valued on their books, which means if patent values crash they do not need to be written down. A Director that would bring these views to the Patent Office would be out of touch with the most innovative elements of the American economy, for who PTAB procedures are fatal, harassment is very real, and devaluation of rights is crippling.

The USPTO Director still needs an understanding of law, technology, politics and many other things, as our former USPTO Directors have.  We just don’t need another lawyer or lobbyist to run the USPTO.  We need more this time.  We need someone from the grassroots who understands the very real hurdles facing America’s most innovative segment.

Congressman Thomas Massie (R-KY) comes to mind.  He has built a company based on his patents and is a strong advocate for strong patents for startups.  Hans Høeg, Congressman Massie’s Chief of Staff, also comes to mind.  He is an inventor with a couple dozen patents and a startup built on patents.  He also has four years navigating Congress and the government in his role working for Massie.  He understands how patents work at the grassroots level, he understands the processes of the USPTO, he is experienced in patent law and licensing, and he understands how to navigate politically.

The blind spot of how startups generate investment is a problem of much greater magnitude than just killing off a few startups.  The vast majority of jobs are created by inventors and startups, so America itself needs a USPTO Director with direct experience starting up a company based on a patent.

The Author

Paul Morinville

Paul Morinville is the Founder and former President of U.S. Inventor, Inc., which is an inventor organization in Washington D.C. that advocates strong patent protection for inventors and startups. Paul has been as executive at multiple technology startups including computer hardware, enterprise middleware and video compression software in the U.S. and China, and now medical devices.

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 9 Comments comments.

  1. Night Writer January 18, 2017 12:06 pm

    Strongly agree. You know, Lee, has been up to some nasty little things. I wish I had the time to document them. Maybe someone does. But, some of the rules she is proposing don’t seem that great to me. Also, let’s all remember that Lee with one word could change the policy on amending claims for IPRs.

  2. EG January 18, 2017 12:24 pm

    “None of these folks were unqualified for the job.”

    Hey Paul,

    I disagree, certainly when it comes to the current USPTO Director (Lee). A terrible choice relative to her predecessor (Kappos). I’m not saying Rogan or especially Dudas weren’t bad, but we definitely need someone other than a Google “clone.”

    Congressman Massie has the right attitude for Director, but I’m concerned whether he’s got the requisite administrative experience for that position. Also, we need Massie in Congress to fend of Issa. (I’m also a cynical registered Republic and I dislike Issa intensely).

  3. Paul Morinville January 18, 2017 12:46 pm

    EG, Lee was considered qualified. She knows patent law. She ran a department for a large company. That was proven out by the Senate vote supporting her.

    She lacked startup experience, but unfortunately that has never been a qualification. Her problem is that her experience is all big consumer internet companies and nothing more. She makes decisions based on this perspective.

    I think that in her heart she views herself as doing the right thing and I suspect that the damage to startups and inventors is surprising to her. She has never started up a company. She is not an inventor. She has always defended infringement suits. Her perspective is what is wrong.

    There are so many lawyers and administrators in the PTO that administrative or legal experience should not be a prequalification. A good Director will set the tone and those under the Director will execute it. We need a leader and someone who can sort through the BS. Someone who is not afraid to raise a little hell. Someone who knows how patents drive capital to startups, which is the whole reason for the patent system to begin with.

    I doubt that Massie would take the job. His Chief of Staff might and he has the right experience. He should be considered for the position. At minimum, this would set the stage for evaluation thus sending a message to other candidates that we have seriously screwed up our job creation engine and are giving it away to China.

  4. A Rational Person January 18, 2017 12:59 pm

    Strongly disagree that Dudas or Rogan were qualified for the job of USPTO Director.

    Kappos and Dickinson were qualified and were great USPTO Directors.

    Lehman was qualified to run the Copyright Office, not the USPTO.

  5. Kevin Rieffel January 18, 2017 2:32 pm

    I respectfully disagree. Appointing a Director because of his/her “startup experience” is like hiring a little league coach as GM of the Yankees.

    Respectfully, the Director needs to be a legal nerd and know IP law inside and out. Being pro-patent necessitates being someone who is consistent in his/her reading of the statutes and case law, not merely supporting patent owners in order to maintain valuation figures.

    First and foremost, we need someone who understands what a prima facie rejection actually entails and holds each examiner/PTAB judge to that standard. The Director should be able to pick up any patent application file history, IPR docket, or appeal brief and have an understanding after a brief review. Unfortunately, being an engineer or inventor is not sufficient training for that.

    That said, there is a “job creator” argument as the buzzword “startup” is overused to cover everything from a garage t-shirt designers to an anticipated Snapchat IPO. An appreciation of the economics behind patents as attractive value (or loan collateral) for small and medium tech businesses is vital for the new Director. However, there is no quick fix here for “startups”–we can’t apply a relaxed standard for “first time buyers.” Consistent interpretation of legal principles must be the foundation or ownership rights will always be in flux.

  6. Curious January 18, 2017 3:39 pm

    The USPTO Director, IMHO, needs:
    1) A good working knowledge of patent law;
    2) The experience to administer a large agency; and
    3) The mindset that patents are good for economic development of the United States.

    Our current Director’s shortcomings was considerable in 2) but egregious in 3).

    Nowadays, sophisticated inventors don’t believe patents will protect their inventions. This is a serious problem. Inventors don’t want to develop or share their ideas if they think those ideas will be stolen. A mindset like this can only end badly for the United States.

  7. Paul Morinville January 18, 2017 4:23 pm

    Kevin @ 5. “Consistent interpretation of legal principles must be the foundation or ownership rights will always be in flux.”

    Aren’t we at the point now where there is no “Consistent interpretation of legal principles”? That is the problem with taking big corporate lawyers making them PTO Director.

    There will never be a perfect person to run the PTO. But what we have been selecting has not worked for anyone except large multinational corporations. With more than half of all patent filings in China and a huge chunk of VC money flowing there as a result, the error must be on the side of small inventors and startups. I know you dispute that term, but it is what it is. Startups that create most new jobs do it with a patent. T-shirt makers may create a few jobs, but nothing like companies who started up based on a patented invention. Look at the most anti-patent multinational corporation out there, Google, who was funded based on a patented search algorithm. This putrid company now wishes to pull up the ladder despite the edge their patent gave them as a “startup”.

    You could look at a few others – Westinghouse, GE, ATT, CA, IBM, and many now multinationals that were once startups that funded their earliest stages based on a patent. These were the job creators when they were first started up.

  8. Night Writer January 19, 2017 8:13 am

    @@ Lee was not qualified for the job. The reason is that she had never done prosecution the job of 90 percent of the people at the PTO.

  9. Richard Baker January 21, 2017 9:22 am

    Paul, I think you are on the right track by suggesting a USPTO Director who has patents and experience in small companies. However, the Director also needs to understand US Patent Law and patent prosecution procedures. Experience in large companies and in patent litigation add to the mix. What we need for a USPTO Director is a well rounded patent practitioner. The shortcomings of the past USPTO Directors is that they were well respected specialists that understood part of the economic dynamics of patents without understanding the impact of patents on other stakeholders.