Has the Patent System failed US tech companies?

Businessman driftingOn account of Gene being temporarily out-of-action due to back surgery, he tossed me some assignments in the “Press” arena. He asked if I would cover and report on the recent IAM Conference (11/14/27) in D.C. I previously summarized the Keynote. This article summarizes the Panel presentations.

The first (morning) panel was directed to Patent Litigation. The first topic was: Venue since Heartland. It was an interesting take. The Eastern District Texas cases have now been split up: some to Northern California, many to Delaware; some to Illinois and Central California; and some remain. Interesting because there seemed to be a feeling that the Eastern District, albeit, on its own, had developed a system for processing these cases, and that expertise, even if off base, has now been lost to Districts and Courts that have no particular interest in, or extra capacity for, patent cases. For the most part, we all know, Federal Judges do not count as a positive the day they are assigned a patent case. In contrast, the Eastern District of Texas seemed to thrive in it, obviously.

Next up was the interplay of Courts with PTO proceedings. The PTO has dominated, with the Courts doing clean up with Rule 12 motions: both being affirmed by the CAFC. Safe to say, the efforts and constant focus to address “troll” litigation have swept everyone overboard. The future of innovation has been lost by virtue of our focus on past issues. The comment was made that the patent system is presently re-arranging deck chairs on the Titanic, post Iceberg contact. Not funny. It was also noted that none of the seminal patents upon which entire US industries have been founded, i.e., light bulbs, Morse, Wright Bros., the very first patent on soap making, etc. would survive review in the present system.

The first afternoon panel was supposed to be directed to patent policy in Trump’s Washington. But, inasmuch as there isn’t one, not yet anyway, the discussion moved onto an assessment of the patent system at this moment in time and what, perhaps, policy might be developed in light of this circumstance. Paul Morinville was plain spoken in his view of what needed to be done with the PTAB. It should be terminated, as soon as possible. No rule re-write, no running adjustments, termination is the only cure. In addition, statutory adjustments need to be made to address Supreme Court mistakes. The reasons are straight forward: a patent is the only insurance an investor has of worth in a small company. It allows for security and exclusivity and may be the only asset left if things go awry. But, with the PTAB invalidation rate, and no injunctive relief, a patent is essentially worthless as security or insurance. Hence, no reason to invest. Henry Hadad spoke to the vital need for strong and predictable outcomes in the patent world inasmuch as Bio is the most R&D intensive industry extant. It takes decades to obtain results, patents are the only way to support that investment. Period. No reliable patent protection; no Bio industry in US.

Laurie Self, whom I have heard present in the past, needs to replicate herself in Washington! She is presently at Qualcomm, and tries to influence decision makers as to Patent Policy in D.C. But, in Tech, she may be one of the few who actually believes patents are a force for good. Again, it is straightforward, and Qualcomm is a good example. When a company emerges from basic research and experimental origins, patents are the only mechanism with which to attract investment to reach the next phase of existence. Without a predictable reliable patent system, these companies simply do not have the ability or opportunity to emerge. The US was the “gold standard” for patent systems only a decade past; it has now been ranked 10th in the world. The reasons: PTAB and 35 USC 101 jurisprudence.

The fix: overturn eBay; fix 101; and, reign in or eliminate the PTAB. In the “reign in” list: rid the system of “experts” and raise the threshold of proof to “clear and convincing”.

The next panel was directed to the PTAB, and included amongst its members the current Deputy Chief Judge of the PTAB. This was an interesting set-up. Nothing but sunshine as far as can be seen here, bye-golly! Some panel quotes: “kudos to the PTO”, “no unfairness (at PTAB) at all”, “Board does a great job of handling experts”. Well, what did we expect? Something like: Judge, you and you fellow Judges are doing an awful job, and it seems politically motivated. Ah, doubtful.

But, we at least lifted the veil on what some influencers in D.C. patent policy circles think about the patent system before and after the AIA. Pre-AIA, Suzanne Michel, from Google, indicated stacks of cheap fast patents were issued by unqualified examiners. Garage in – garbage out. The PTAB is necessary as a check on invalid and non-viable patents. It is a very effective tool to control system. All true – I suppose – unless that tool has been trained on your patents or your industry. She also went on to characterize the PTAB as being made up of “long trained and skilled decision makers” as opposed to, for example, 12 random people on a jury. Wow! Really? But, no surprise.

Kind of felt sorry for David Korn, Pharma, on this panel. He was the lone voice of reason, and in favor of a viable patent system. How’d he get up there?

At least the PTAB Judge was honest in the approach the PTAB tries to take. They decide one case at a time on the basis of what is presented. If the case is badly prepared or poorly made, they cannot make up for that in their decisions. True, but they could certainly adjust their rules to allow for more due process. The feeling I had listening to this panel was one where “Twilight Zone” is playing, and you can’t quite wrap your head around it.

The last panel: Patent Monetization, was a wake. Some quotes: “Patent System has failed US tech companies”. “Licensing is dead.” “Patent system is over.” “Patent values are zero – perhaps even negative.”. “Good faith negotiations do not exist.” The only good thing after this panel was there was an open bar! Seriously, anti-trust seems to be the only plausible mechanism to challenge the present tech structure. The Silicon Valley elites have patent strangled start-ups and hire away their talent. No respect for patents at all. Zero. Nada. Ironic in view of the past creation of Silicon Valley where patents were, once upon a time, the driver of value accretion. Not anymore. Data is the new “oil” in them thar hills. If you have and can secure and sell data, you’ve got it made. Gee, sure hope you do not rely on patents to protect any of what you do to collect, secure and sell that data!


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13 comments so far.

  • [Avatar for angry dude]
    angry dude
    December 5, 2017 09:29 am

    Joachim Martillo@12

    wishful thinking, dude
    its all about money in today’s America
    no principles, no laws as written, just cash

  • [Avatar for Joachim Martillo]
    Joachim Martillo
    December 5, 2017 08:12 am

    I may not be as up on the cases as John White is, but I detect some pushback against the anti-patent mob since since the beginning of September.

    Reaching the End – Destroy or Preserve US Patent System?

  • [Avatar for Edward Heller]
    Edward Heller
    December 4, 2017 02:33 pm

    Ron, since almost all reexaminations were ordered, they became a form of harassment of patent owners.

    It was alleged and hoped that IPR would create a significant barrier to approval at the front end. But that was the hope. The reality was that the PTAB rigged the system by allowing the petition to include expert witness testimony that was not subject to cross-examination, and refused to allow patent owners to reply with counter expert testimony.

    But the unfairness of the IPR provides no justification to assume that reexaminations are fair even if they are conducted with fairness by the PTO. The problem is there is no barrier to repeated filings by anonymous parties and harassment normally takes place. The harassment is entirely effective because the entire time the patent is under reexamination, it is effectively unenforceable. Thus the reexamination itself takes patent term away from the patent owner. In the serial nature of the reexaminations is multiplies the expense for the patent owner such that only the relatively well-healed can afford to system.

  • [Avatar for The Time Is Now To Act]
    The Time Is Now To Act
    December 4, 2017 01:47 pm

    Ron- well said.re PART.

  • [Avatar for Ron Hilton]
    Ron Hilton
    December 4, 2017 12:24 pm

    At best the PTAB has merely added one more expensive layer to the whole patent litigation process. In my opinion, inter partes belong in the courts, ex partes in the (re)examination process. There is a place for both, but as soon as you bring PARTes into it, you get all the downsides that start with PART-, as in PARTisanship and PARTiality. There are also potential upsides when multiple parties are involved, such as PARTicipation and PARTnering, but these work best when all sides are coming from a position of strength.

  • [Avatar for Benny]
    December 4, 2017 09:32 am

    Angry dude,
    Sadly, what you say is true, and it is a source of frustration to me. Everyone in our field is filing patents of dubious value and really little innovation, partly to obtain a “patent count” to impress shareholders and partly to create a minefield for the competition. In the end it’s just business, rarely does one of these patents represent genius or genuine improvement to the product. Some of us see it as alternative advertising. You got a better idea? I’m all ears.

  • [Avatar for angry dude]
    angry dude
    December 4, 2017 09:17 am

    Yeah, screw Morse

    But Benny’s engineers regularly file dozens of US patents as a matter of doing normal business (and further watering down US patent system)

    screw inventors and flash of genius

    business, just business, according to Benny

  • [Avatar for Benny]
    December 4, 2017 09:06 am

    According to wikipedia (O’Reilly v. Morse) even Morse got caught up in abstract idea eligibility issues.

  • [Avatar for Edward Heller]
    Edward Heller
    December 4, 2017 08:19 am

    Benny, the only thing Morse really invented was the repeater. But that made the whole thing work.

  • [Avatar for Benny]
    December 4, 2017 05:49 am

    “none of the seminal patents upon which entire US industries have been founded, i.e., light bulbs, Morse, Wright Bros., the very first patent on soap making, etc. would survive review in the present system”

    I love nitpicking.
    The light bulb was invented in Britain by Joseph Swann. Powered flight was not invented by the Wright Brothers – they provided the first practical application of powered flight, and patented a method of lateral control which was obsolete within 10 years. There is a dispute as to whether Morse did indeed invent the telegraphic code, or “borrowed” the idea from Harrison Dyar.
    There may be good reason that these examples would run afoul of patent review.

  • [Avatar for Anon]
    December 3, 2017 08:36 pm

    I am not sure that “Has” is the best way to phrase the question. But any sense of reason, the answer to that question is “Yes.”

    Perhaps a more pertinent question might be: “How badly does the failure of the US patent system bode for promotion of innovation in the United States?”

  • [Avatar for Bemused]
    December 3, 2017 08:14 pm

    John, thank you for filling in while Gene is out of commission and for the summary of the panel events at the IAM Conference. I have to confess that I enjoyed your commentary as much (if not more) than the actual reporting on the panels. 🙂

  • [Avatar for angry dude]
    angry dude
    December 3, 2017 06:06 pm

    it sure failed tech sector big time, outside of spoiled, corrupt and unjustly overcompensated oligopoly of SV

    any new complex hi-tech product involves many advances, some are more fundamental, some are less..
    But failure to license out patents on fundamental tech inventions removes any incentive to do deep fundamental R&D in the first place
    To hell with such patent system