With a Supreme Court hostile to inventors, venture capital and many startups moving to China

By Paul Morinville
June 1, 2017

The patent troll is dead. It died a simple death, a sudden death, and a death by truth. Today the majority of members in the House and in the Senate know that patent trolls were nothing but a multi-million dollar disinformation smokescreen paid for by the largest multinational companies on the planet. But lies can only survive behind a smokescreen, so once the fake numbers and other phony reports generated by the many academics with an agenda were exposed, the patent troll myth fizzled and melted away just like the Wicked Witch when Dorothy threw a little water on her.

Patent trolls were never a real problem, which is why those crying the loudest opposed the TROL Act aimed specifically at the few bad actors they held up as boogey men. Patent trolls were never a real problem, which is why even the Obama Administration’s Federal Trade Commission opined in October 2016 that the use of the term is unhelpful and misleading.

The only folks still using the fake numbers, the phony reports, and scare tactics are efficient infringers digging their fingernails in for one last swipe at legalizing their theft of other people’s property. The most recent swipe was venue reform masked by a similar disinformation smokescreen, this time about the Eastern District of Texas. In the end, the infringer lobby got what they wanted, but not through Congress. Once again the Supreme Court stepped up to the plate to deliver what those seeking to legalize the theft of patent rights couldn’t even obtain from Congress.

Due to the death of the patent troll narrative, venue reform would never have made it through Congress, but the infringer lobby doesn’t need Congress when they have a Supreme Court. They just need to make it sound like Congress may pass it and the Supreme Court will just do it for them, as if the Court can’t help themselves but to meddle in patent politics as they continue to disrupt generations of well settled patent law with practically every decision. However, this mode of lawmaking comes with very serious consequences. A group of nine liberal art majors who have never started up a company with the sole asset of a patent need a lot of information in order to understand the effects of their decisions. It is clearly evident from eBay, Alice and virtually all of the Supreme Court’s major patent decisions in the last decade that they do not understand the consequences of their decisions.

That is why Congress is supposed to write our laws. Anyone can just walk into Congress and explain the effect of proposed legislation. After four years walking the halls of Congress, I know there are good lawmakers and there are bad lawmakers, but the good ones outnumber the bad. If you just walk in and make a clear easy to understand case, collectively they will listen and bad law will be averted. Lawmakers have to pay attention because if they don’t, they will be ousted in the next election. It’s personal for lawmakers.

But that is not how the courts work. Only the parties in a case are allowed to explain the consequences. You can’t just walk into the Supreme Court to explain what will happen if they make a bad decision. Sure you can file an amicus brief explaining it, but that costs tens of thousands of dollars and the Court does not have to read it. But they get to change law in whatever way they see fit even without understanding the effects of their decision. There is just no fear of making a bad decision. They are lifetime appointed so they can’t lose their next election since there will never be one.

So what are the consequences to venue reform as pitched in Congress and now made law by the Supreme Court in TC Heartland? Well, it is probably not terrible if you only have one infringer. If the infringer is your next-door neighbor, probably nothing changes. But if the infringer is not your next door neighbor, you will have to file the suit wherever they are incorporated. That will drive your costs up because you will have to hire local counsel, and pay to get your attorneys, expert witnesses and yourself to the courthouse probably many times. But the cost increase may not be fatal depending on your circumstances and depending on the value of your case.

But for those inventions that change the world, the ones we as a nation want to encourage, TC Heartland is a disaster and far too often will be fatal. In many high value inventions, there are hundreds of infringers. The America Invents Act (AIA) makes you file each case individually, so you cannot file similarly situated cases as a single case like you could before the AIA. And there is no law that allows you to file suit where you reside, so now you have to file each case independently where the infringer resides. This means that you will could very well end up with hundreds of cases filed in dozens of different courthouses scattered around the country.

Of course, there is the serious issue of radically increasing your costs. You will have to hire local counsel for each courthouse. You will also have to transport your technical experts, lawyers and you to multiple locations for multiple hearings, depositions and other court procedures. Depending on how many different courts you are engaged with, this will likely cause scheduling problems that will probably significantly delay many of your cases.

And why does it make sense to require the property owner to go to the home turf of the wrongdoer to seek a remedy for their wrongdoing?

But there are even worse problems than just cost and delay. Each court will make independent decisions on claim construction, validity and many other issues. Since the Supreme Court has eliminated the longstanding decision frameworks of almost every element of patent law, instead demanding a case-by-case approach to everything without any bright lines, the likelihood that multiple courts will come to different decisions on the same question is extremely high. And when they do come to conflicting decisions, your cases will be thrown into chaos as multiple infringers argue in multiple courts that all of the courts adopt the most damaging decision against your patent. This alone could kill all of your cases just because of the incredible cost of cross litigating all decisions after any one court makes a decision.

None of that really matters anyway unless you happen to have a few million dollars that you are willing to lose. But if you are like most of us and you don’t have that kind of spare change laying around, there are no longer any contingent fee attorneys or investors still in the patent business anyway. This is because of the law created by the Supreme Court and Congress. eBay made it impossibly difficult to get injunctive relief, Alice is invalidating around 64% of challenged patents, and the PTAB invalidates or neuters over 95% of the patents it reviews. So the damage of TC Heartland is really just mute. It’s a big nothing in the larger scheme of patent law created by the Supreme Court and Congress that is thoroughly hostile to inventors and startups. But eventually there will come a final straw.

Is it really any wonder so much venture capital and so many startups are moving to China?

 

The Author

Paul Morinville

Paul Morinville is Founder and former President of US Inventor, Inc., which is an inventor organization working in Washington DC and around the US to advocate for strong patent protection for inventors and startups. US Inventor has been walking the halls of Congress knocking on doors and sitting down with hundreds of offices to explain the damage suffered by inventors due to patent reforms. Paul is President of SemiComm HK, a Hong Kong company licensing patents in China, and an independent inventor with dozens of U.S. patents and pending patents in enterprise middleware.

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 21 Comments comments.

  1. EG June 1, 2017 6:31 am

    ” A group of nine liberal art majors who have never started up a company with the sole asset of a patent need a lot of information in order to understand the effects of their decisions. It is clearly evident from eBay, Alice and virtually all of the Supreme Court’s major patent decisions in the last decade that they do not understand the consequences of their decisions.”

    Hey Paul,

    Very accurate and sobering characterization of the lack of basic education in and understanding of the start up world of Our Judicial Mount Olympus. (And I take no offense at you charactering them as liberal arts majors even though my degree is a B.A., not a B.S. but it is nonetheless in chemistry.” You might also add that far too many of the current IP law professors have no degree in science or engineering who are educating (or more accurately miseducating) current law students on patent law with attitudes as anti-patent as the Royal Nine-in other words, the blind leading the blind.

  2. Anon June 1, 2017 7:50 am

    EG,

    To mirror a different (albeit ongoing) concern vis a vis ethics, it is not only that the blind are leading the blind, there is an abundantly apparent lack of ethics in how that leading is taking place.

    Attorneys swear to and live by a code of ethics.
    Perhaps that code is not perfect, and certainly, there are bad apples.

    But when you look at academia, and especially the anti-patent factions of that generalized group (as with any group, exceptions may be found), what you see is an abundant lack of ethics in the manner of advocating changes to the law (notably the duty of candor that attorneys must abide by in relation to recognizing controlling law not in accord with a position being advanced).

    As the duty of ethics is imposed in part because of the attorney’s proximity to the legal process and changes to law that thus may flow from an attorney’s actions, how is there not an even higher ethical bar for IP law professors who are not only active in trying to shape law directly (through “friends” writing to the Court), but also through the actions of shaping the minds of each new generation of attorney?

    I recently apologized to a writer here for our class of attorneys because that writer had the unfortunate experience of dealing with a patent attorney who was denigrating the reward system for innovators.

    That such a person (the patent attorney denigrating the system to reward innovation) should be taken to task seems a no-brainer. How much more though should those who have instilled in this person the mantra of anti-patent be held accountable?

    I also find it interesting as I think back to my own personal experience in studying patent law in law school. I too had such a professor who lacked a technical background or experience with start-ups and who possessed a socialist mindset that property was bad and that personal property as a reward for innovation was also bad.

    I was no lemming though, and treated the professor’s open contempt as a challenge. Each class, I would be prepared to ask questions that revealed that we have reward systems for innovation because having such systems is a benefit to society. I took great joy in hearing the professor admit to the points that my questions presented. Alas, I had the benefit of approaching law after having careers in engineering and management, and I knew the questions to ask and the points to make.

    But how many classes go on without such a counter force present? How many attorneys “learn” a mindset that is a slow poison to the system for rewarding innovation, and how may attorneys turn to careers in the judiciary with that academic mindset and training?

    Not just blind leading the blind.

    Not to get caught up too much in the biblical, but since ethics is nominally taught in the Bible, and the aphorism of blind leading the blind is found there, I would add Matthew 18:6 or Mark 9:42.

  3. angry dude June 1, 2017 10:27 am

    An independent American inventor or small US company MUST be able to sue in their home state (if infringing products or services are sold there). Period.

    Having to go to infringer’s home state or state of incorporation is a disaster for small players – completely impossible

    If those scotus critters don’t understand the very simple and immediate consequences of their decision then this country is doomed.

    To the morgue…

  4. Curious June 1, 2017 10:28 am

    This means that you will could very well end up with hundreds of cases filed in dozens of different courthouses scattered around the country.
    Efficient infringement just got more efficient.

    Honestly, if I was inside counsel these days, I would tell anybody knocking on my door asking my company to take a license on a patent (even one that I believe my company is knowingly infringing) to go take a hike. Between the exorbitant cost of filing a patent lawsuit against multiple parties and multiple jurisdictions and the AIA patent death squads at the beck and call of infringers, most patent owners just cannot afford to enforce their patents. If they cannot afford to enforce their patents, there is no reason why my company should take a license.

    While anti-intuitive, it has been the anti-patent fervor of the Courts (combined with the AIA) that has given rise to patent trolls. Inventors, by and large, are far more interested in inventing (and getting recognized for their inventions) than they are in extracting every last penny from a potential licensee. Many inventors (particularly those that don’t have the financial backing to create a business based upon their invention) want to collaboratively work with potential licensees. It is in the mutual interest of both parties that the licensee does well. In this instance, the inventor gets (financially) rewarded for their inventions and licensees get the benefit of the invention.

    The problem that exists today and at least since 2006 with the Supreme Court’s decision of eBay v. MercExchange, is that licensees (i.e., actual or potential infringers) have less and less of an incentive to take a license as it becomes harder and harder to enforce a patent. Also, with the decisions of KSR, Nautilus, Bilski, Mayo, and Alice, the Supreme Court has given courts much greater leeway in invalidating patents. While issued patents have a presumption of validity, anybody practicing in this area knows this is a farce and potential licensees know that as well. Hence, the rise of efficient infringement in which companies knowingly infringe patents because it is cheaper to infringe than it is to pay a license.

    “Trolls” got their foothold when individual inventors could no longer effectively license their patents. When anybody who holds property (no matter what kind) cannot make money off of that property, they will typically sell it to somebody who can — in this instance, patent holding companies whose sole purpose is to maximize the monetary value of the patents. In stark contrast to inventors, Trolls have no interest in working with companies to develop/nurture the technology. Trolls also have no interest in having a working relationship with the companies that take a license. Instead, Trolls simply look as the patents as an asset to be monetized to its fullest.

    The Troll problem arose because the Courts and the AIA have tilted the patent system from being favored towards inventors to the patent system being favored towards infringers. With inventors having little power to license their patents, they have sold their rights to professional patent assertion entities (i.e., the “Trolls”) whose sole purpose is to monetize the patents — not develop the technology. Moreover, these Trolls acquire these patents for pennies on the dollar because the inventors have no other recourse.

    In the end, the Courts’ anti-patent fervor have made it much easier for patent infringers to do so. To the extent that there is money generated by the technology, much of it flows to professional patent assertion entities. All his leads to inventors getting a pittance for their inventions. Like any rational actor, once an inventor realizes that inventing cannot pay the bills, they’ll find something else to do that will.

    I know of many inventors (who still have great ideas) that have basically given up on inventing because the patent system has failed them. Instead of the patent system providing them with the funds to continue to invent with bigger and better ideas, they have looked elsewhere.

    What I find laughable is that because of the Court’s ignorance of the long-term consequences of their rulings, every decision that they issue that supposedly hurts Patent Trolls only makes it easier for Patent Trolls to obtain patents and harder for inventors to make a living off of patents.

  5. Joe June 1, 2017 2:39 pm

    @Curious – Great points, I really appreciated your write up.

    To what extent do you think willfulness doctrine could be used to help minimize the appeal to large companies to avoid a license? It seems to me like this could be a good method to tip the scales back in the other direction. What other major changes do you think could help bring back balance?

  6. Tesia Thomas June 1, 2017 3:45 pm

    Well once independent inventors stop inventing, there will be less demand for patent attorneys and hopefully those law professors will be unemployed too.

    ‘Biting the hands that feed them’

  7. Tesia Thomas June 1, 2017 4:04 pm

    And I was even thinking about applying to write an article on this blog and that’s because most people are missing the largest player in all of this.

    Companies lobby. Sure.
    But you know who’s really behind this?
    The military!! DoD and many other government agencies.

    The military has been stealing from independent inventors since the MIC was instituted.

    It’s self- preservation of government researchers to steal from the private sector, from me a simple 22 year old inventor to the huge machine that is Boeing. All of us have faced the wrath of government/public sector competition and IP infringement.

    Any dollar they give to the private sector is a dollar that they don’t have. SBIR and other federal research sources are there to take ideas. Note how one can only submit ideas for Phase I grants.
    Ideas can’t be patented.

    The AIA laws make sure the first to invent doesn’t matter because inventors were proving they invented first and then applied for SBIR.
    The AIA laws also make sure that tech with other uses besides military uses can’t make money for the inventor.

    It makes procurememt much simpler when you can assure that there’s less pressure to make sole source contractors…because what’s proprietary is weakly held.

    Please read this article:
    http://pressreleaserocket.net/u-s-government-competition-is-not-an-isolated-problem-the-time-for-action-has-come/

    It’s really the government against its citizen inventors.
    It wouldn’t budge for private companies if there weren’t internal reasons.

  8. Tesia Thomas June 1, 2017 4:14 pm

    “The AIA laws also make sure that tech with other uses besides military uses can’t make money for the inventor.”

    To clarify, it used to be that if the military took inventor IP for itself, the inventor could still make sales in the private sector selling to consumers.

    Now, What they can’t steal or ITAR/EAR restrict, they make sure the inventor can’t rely on commercializing anywhere.

    They’ve cut off dual use tech.

    No revenue anywhere means the government gets free research/tech for low to no cost.

    These researchers didn’t fund my sbir and are waiting out my company even though they asked me for the tech.

    Why would you wait when soldiers lives are at stake?

  9. Independent Inventor June 1, 2017 11:23 pm

    Thank you Paul and your team; for all you have done, and will continue to do, on the behalf of all of us independent inventors … and indeed on behalf of all of America.

    You are a bright beacon of truth cutting through the darkness and shadows of those companies stealing the innovations of others for themselves.

  10. EG June 2, 2017 7:12 am

    “To mirror a different (albeit ongoing) concern vis a vis ethics, it is not only that the blind are leading the blind, there is an abundantly apparent lack of ethics in how that leading is taking place.”

    Hey Anon,

    Couldn’t agree more. For some IP law professors, the agenda, not the facts, drives their narrative. That’s not a good example to inoculate law students with, some of whom will carry that trait into clerkship’s with judges/justices (cringe).

  11. Anon June 2, 2017 9:32 am

    EG,

    I will go one step further and state that “agenda driving” is an academic wide problem (and not just in IP law).

    Academics has lost sight of what they are supposed to be teaching (critical thinking) and have become a bastion of group think and “how well can you gurge back the desired philosophy.”

    The lack of true meritocracy in academia sadly is not new, nor do I see any current of correction.

  12. angry dude June 2, 2017 9:43 am

    @Tesia Thomas

    It’s actually not the government per se vs independent inventors/small entities.

    Government does not make or sell anything.

    It’s the largest sole-source contractors (huge corporations like Raytheon or Harris) stealing ideas and tech from small entities with the full help from US government officials and then selling same tech back to the federal government at hugely inflated prices pocketing USA taxpayer’s money.
    Welcome to USA

  13. Tesia Thomas June 2, 2017 10:01 am

    @angry dude

    Everyone explains this to me. I know.
    I understand that the government doesn’t make anything but it’s also the government lobbying itself.

    When has Congress ever agreed on any *radical* piece of legislation as quickly as AIA?
    Wasn’t it introduced in the beginning of the year and signed by former Pres. Obama well before the end of the year??

    Not sure exactly of dates but I looked it up before and it was something like 9 months to get through the whole government.

    Yes, Northrup Grumman, Boeing, etc are lobbying and against inventors. But the government and especially the military is lobbying too.

    Public sector researchers don’t like working with independent inventors. They only work with the big contractors because they can’t make anything otherwise.
    There’s also the revolving door. I know for a fact that most military officers go to work for these defense companies. By getting them contracts now in their public sector jobs, they secure private sector jobs in the future.

    Someone currently researching for the military is hoping to get out and the way to do it is to make money for their future employer.

    If a small business outdoes that future employer then the public researcher has no future secure job.

    I’m saying that private AND PUBLIC are lobbying and colluding against we small companies.

    The reason so many inventors’ tech is being given to defense contractors is to secure future jobs. When your future boss is threatened by a competitor, you’re going to fight with him because if he goes down you’re unemployed.

    So many of we inventors would have displaced huge contractors if we were made to be sole source contracts.

    My startup can displace Ideal Fastener Corp. – the company that provides zippers for the military. They’re also a family owned American company. That’s why the VP of Ideal contacted me.

    Someone on the research team in Natick is hoping to work at Ideal or Under Armour one day.

  14. Tesia Thomas June 2, 2017 10:20 am

    So…

    Maybe, when we speak about AIA we must realize that Google, Boeing, and whoever [insert private company] has government contracts that are lucrative.

    And when you complain about, say, Michelle Lee having conflicts of interest from moving from a private role to a public role then you have to consider those moving from public roles to private roles.

    For every Michelle Lee or PTAB attorney that uses a current public position for private gain…
    There’s a private employee who used to be a public employee.

    People join the military because they’re poor and want to feel challenged or build ‘character’ or whatever.

    Joining the military is often a means to a better end.
    Dwell on that.

    (Not a lot of people join the military to stay in the military. It’s just opportunity.)

  15. Tesia Thomas June 2, 2017 10:43 am

    The best way to secure a job these days is to turn tricks, tit for tat.

    IP watchdog you’ve only been focused on half the problem.

    Yes, we can thank the academic businesses which have been unchecked for decades. PhDs and other well-educated people are fighting for their lives.
    Most psychopaths are really intelligent right?

    Well with the pressure cooker of rising through academia, these researchers are taught to manipulate and steal. Hence, growing academic fraud and government corruption.

    And it sucks even more when the people inventing your groundbreaking tech are actually people with hardly any degrees/credentials and who are independent.

    Just my hypothesis.



    But if ISIS ever uses chemical weapons on our troops and it gets through their current 200 year old zipper and kills them then please call Natick and ask them why the heck they’re willing to sacrifice the lives of troops all for not using my technology… that they asked for.

    Yes…psychopaths.

    Note:
    I’m using myself as an example not promoting my business.
    I find it hard to grapple with the facts of my situation.

    And I’m speaking out for my “I told you so…” at the end of the day.

    It’s the best I’ll get once someone infringes my IP under this patent system.

    🙂

  16. angry dude June 2, 2017 11:23 am

    @Tesia Thomas

    There is nothing special about the military – exact same thing happens in all departments, not just DOD
    Take your pick – NASA, DOT, FAA etc etc etc
    Huge sole-source over-inflated contracts, set-aside contracts – anything but a fair market for government procurement
    This is the way our government functions… or rather malfunctions
    welcome to USA again

  17. Shawn Ambwani June 5, 2017 1:35 am

    Hey Paul. You didn’t answer me on the LinkedIn thread again. https://www.linkedin.com/hp/update/6276070921803485184

    I’m sad and forlorn. You started with a fake stat of 95% and then mentioned (a more fake) 97% in your reply. If you are just making it up, why not make it 100% invalidation rate for full effect? Again no sources and the PTO have never said anything close to this. Is this how you help inventors? Making stuff up?

    Feel free to provide a real source other than your mind.
    If you want to look at the real stats you can check our all the PTAB numbers and results at our https://portal.unifiedpatents.com

    Unfortunately, the real data doesn’t fit your narrative. If guess fact checking isn’t something IPWatchdog does.

  18. Gene Quinn June 5, 2017 12:06 pm

    Shawn-

    It is hilarious to see you complain of fake statistics and someone else making things up. I still laugh about conversation several years ago when I pointed out that merely counting the number of lawsuits was horribly misleading given the AIA mandated the filing of more lawsuits, and the response I received was it would be too difficult to count the number of defendants so you only count the number of lawsuits. I was flabbergasted that you were more interested in providing easy to access information rather than accurate information, so excuse me for laughing here at your complaints.

    As far as you saying the PTO has never reported anything close, you are correct. But it is also correct to observe as I and many others have that the PTO statistics are practically fraudulent. See:

    http://www.ipwatchdog.com/2017/04/05/ipr-gang-tackling-distorts-ptab-statistics/id=81816/

    http://www.ipwatchdog.com/2016/09/06/pto-statistics-hide-broken-ptab/id=72513/

    Unfortunately, the data does fit the narrative. The fact that you choose to ignore the truth and twist the numbers is your problem, not a problem with the data. But hey, for someone who admitted that you only want to count what is easy rather that what is really happening I guess it makes sense.

    -Gene

  19. Shawn Ambwani June 5, 2017 2:14 pm

    Gene, so just so I understand your argument. You are saying that because we don’t show data the way you would like (which I actually didn’t) you don’t need to show any which are accurate. An important caveat to this was we actually do show how we get the data and present it correctly. I can even share with you the source if you wanted. Unfortunately, I am afraid to say this article bases its conclusions on no actual data. The stats are fake and a lie. There is no backup for them and you knowingly publish it anyways. No source and the source he mentions as the basis you said distorts and misrepresents. If he really has done this analysis he would have the data to show… doesn’t. If he had a source, he could provide it, doesn’t. Sad really.

    Simple question. Do you believe that 95% (or 97% since he changed his mind) according to Paul of all patents reviewed at the PTAB have a least 1 claim invalidated?

    Happy to show you ours at our https://portal.unifiedpatents.com. It is all there for anyone to see. Numbers don’t work out the way you want. Show your work…

  20. Can Akal June 7, 2017 4:23 am

    I think what you guys must fix before the patent system is, the justice system; it is way too expensive for iys purpose.. But looking at the greed and stupidity of human kind, it can be fixed by the year, mmmm… No, I say the NEXT Big Bang…

  21. falsalem June 25, 2017 7:45 am

    Question: Suppose a university owns a patent that provides the BEST solution to a long standing problem (with a definitive proof that no better solution can ever be created for said problem), would a (big) company X be interested in buying that patent from the university, despite efficient infringement?

    In other words, even though company X could try efficient infringement, wouldn’t it stand to benefit better if it could get exclusive rights to the patent (e.g. by buying it), at least to deprive other companies the chance of competition (in developing said patent into a product?)