Posts in Interviews & Conversations

As patents become more essential to more businesses, investors are going to want to have more information about them. They’re going to want to have more visibility about the decisions being made around patents and so they’re going to need to know what’s going on in terms of deal making. They’re going to need to understand why deals are being done, how much they’re being done for and that kind of stuff. And another issue I think which is really important is what’s going on in the moment between the U.S. and China in terms of IP and the U.S. being very concerned about Chinese companies getting hold of U.S. technology. We all know for the last 10 years, Chinese companies have been buying shedloads of U.S. patents. But what more do we know than that?

“I can tell you that my work in China and Japan and Korea tells me that the companies there are quite delighted to pick up the slack where American companies don’t have quite the protections that they do under their law,” Judge Vader said.  These concerns about American companies not being able to compete with Asian companies echoed the message that Donald Trump frequently expressed during the presidential campaign. During the interview, Judge Rader also mentioned “a really excellent paper from a Hoover scholar and it said they had never found an instance of a strong, growing economy that didn’t correlate with a strong protective patent system.”

One of the great aspects of the Unitary Patent is that it follows the normal EPO procedure up to grant. And indeed, the search and the examination processes will be precisely the same as those you’ve been used to with the current EP and PCT procedures, and will be performed by the same examiners. One of the strengths of the EPO is that we allocate examiners to applications according to their technical expertise, regardless of the filing route through which applications arrive. It will only be at the end of the procedure, when the application proceeds to grant, that applicants will have to indicate if they want to have a single Unitary Patent instead of a bundle of patents for individual member states, as is the case for the European patent. So it’s extremely straightforward, cost effective, and much simpler to administer post grant than the current European patent. My impression is that many U.S. applicants already understand the logic and advantages of this very well, sometimes even a little better than European applicants, as the geographical size and the GDP of the market covered by the Unitary Patent is very similar to that of the U.S. patent.

“The key ingredient needed for the prisoner’s dilemma to work its destructive magic is a lack of transparency between the parties involved,” Siino writes. The article goes on to discuss how the lack of transparency in patent licensing transactions is disrupting the the patent marketplace, and threatens “to break licensing’s virtuous circle of innovation leading to commercialisation, which in turn funds more innovation.”

“I can tell you, every day Congress is in session there are lobbyists here trying to weaken the patent system,” Massie explained. In Massie’s words, those companies that come to Capitol Hill and lobby to weaken the patent system want to get into new fields, but the problem is they didn’t invent in those fields, so they face problems. Patent problems. A lot of those companies want to become automobile manufacturers, or cell phone manufacturers, or they want to write software for operating systems, but they didn’t invent in those areas and they don’t own the patents that have historically been the touchstone of innovation ownership. “They’d love to just come in and start playing in those fields and start using their size and scale as an advantage, and to them, patents look like a hindrance,” Massie explained. “They are here in Congress looking to weaken patents and they are not just interested in weakening patents issued in the future, they are looking to weaken all patents.”

We pick up our conversation with me suggesting that there is a problem with claims being found to be abstract when the decision maker has been able to do a complete 102 (novelty) and 103 (obviousness) analysis. We then move on to discuss the meaning of “innovation,” whether innovation leads to patents or patents lead to innovation, and briefly touch on a long-time disagreement about whether patents are property rights. … LEVY: “Uncertainty I agree makes businesses nervous. That’s obvious. But, and again, I’m speaking only for myself here, it seems to me that for many businesses there is a desire to have the benefits of taking the risk without the down side of taking the risk. And one of the downsides here is that the law can change. Patents are not — even if we didn’t change the law patents are no guarantee of anything. Once you get an issued patent that patent could be found invalid. It’s in the law that a patent can be challenged and that I can be found invalid. So no one should think that once I have this patent that’s it, it’s good for all time and I can take on all comers and they’re going to have to pay me regardless. I have heard too many time people thinking that this is some sort of guarantee and any sort of challenge is a violation of their Constitutional rights.”

It is probably fair to say that Matt Levy’s views are contrary to mine with respect to many patent related matters, but particularly so with respect to software patents… One of the things I have always liked about Levy is that while we do disagree about much, we do so in a way that is not disagreeable. I also greatly appreciate how he always tries to work with me to figure out at what point in our analysis we go separate ways, which leads to some very interesting and lively conversations (as you might imagine)… Recently we were swapping e-mails and something came up that I found particularly intriguing. I told him I thought we really need to take this on the record and he agreed. What follows is our conversation.

Russ Slifer: “And as you know by statute the Director is tasked with making the institution decision on an IPR but that’s been delegated to the PTAB for obvious logistical reasons. There’s no way that the front office could read through all petitions and make a decision itself so it had to be delegated to the Board. But sometimes there are cases that probably should be reconsidered on whether institutions should have be made – and maybe it’s because the art that is relied on is the same or substantially the same as what was in prosecution. Or maybe there is a financial hardship of the patent owner or the IPR will not resolve all of the outstanding validity issues that are pending in a district court. So there could be certain categories of reasons that you could basically an interlocutory appeal to the Director for reconsideration. I think that is one way to help address some of the potential abuses or hardships on the patent owner if there’s been several IPRs that have been instituted against a patent from different parties. Right now the system does not allow for reconsideration once a decision has been made. That’s just one example.”

As you will see from the transcript, nothing was out of bounds, although because of time we didn’t get into everything. Slifer did agree to come back for more in the coming months, specifically relating to a discussion about patent eligibility, and we will be following up on this specific ideas relating to inter partes review (which you will hear him mention in Part 1 of the interview and which we return to in Part 2). We did discuss the turmoil at the end of the Obama Administration and the fact that he did resign, as requested, effective January 20, 2017. We also discussed the mechanics of resignation, getting things done on a government timetable, how being Deputy Director was an extremely rewarding job, his view that a fee increase is absolutely essential and that Tony Scardino makes an excellent Acting Deputy Director. In the final segment, which will be part 3, we also spend some time getting to know Russ a little more, talking about movies, sports, music and more.

Ashley Keller: “However, when you do infringe a patent, even if it was efficient for you to do so, the upshot should be you have to pay. You have to pay a reasonable royalty associated with that infringement so that the innovator who came up with the innovation can also be compensated for the research and development that they did to generate that innovation in the first place. So efficient infringement existence, in and of itself, is not the concern for me. The concern is it is now legally possible, I think in many circumstances, for someone to not only be an efficient infringer but also to get away with infringing and never paying and that is problematic from a societal perspective because it will dramatically reduce the returns to R&D and society will lose out on the advancement of technology that R&D inevitably produces.”

Why should we care about getting more women inventing? What does it matter? You don’t find more innovation by looking in places where you’re not likely to discover it. You’ll find innovation by researching and developing and we have several untapped sources of potential. Up until now there has been little or no real significant output on an entrepreneurial innovative level for female inventors, as well as with minority inventors. So I’m very interested in the types of programs that are going on at Historically Black Colleges and Universities, and I’m very interested in the efforts to try and bring women into the entrepreneurial and innovative space because I think that’s where we can find creative, fresh ideas. So I think this is a very important initiative.

“[W]e are finding that when the schools that are starting to measure their invention disclosure and their patent filings, again with at least one woman represented, even when they control for the percentage of female faculty members within a given department, for instance, they’re still finding that yes, there are fewer women represented but those fewer women that are represented are not filing as many invention disclosures as their male counterparts. So while we do need to concentrate on changing the culture and on making sure that girls and women are encouraged within these fields, we also have to, I think, for the sake of our economy, concentrate on women who are in these fields and are working and make sure that they also know about the patent process and find that accessible to them.”

RUSS KRAJEC: Getting a patent is not the end goal. Using an issued patent is not the end goal. It’s the beginning for the startup. Think about how you are going to use this asset in your business, and then craft that asset to match that business goal. When you do that, you make much better use of your time and energy. So many people who are looking for a paper trophy or a plaque on the wall, and they don’t understand what they’re going do when this asset shows up, and if that’s the case, why bother doing it?

RUSS KRAJEC: The startup company has an exclusive license, so they have full control of the asset, and they have a buyout option that can be exercised at any time. And the buyout cost is reasonable, is predictable, and it’s known ahead of time. So from them, it is purely a matter of financing while the startup company has excruciatingly high cost of capital. Angel or venture money averages 30, 40, 50 percent per year. Our financing is much lower than that, it’s a better use of capital. If at some point in the future, the company may be able to get a bank loan where the cost of capital is much cheaper, and it makes sense to exercise the buyout option. The patent financing is purely an analysis of Net Present Value in these scenarios.

I think the long-term benefits to authors are greater than the downsides or the risks. But, like any time there’s a shakeup of an industry, there are short-term and long-term winners and losers. I’ll even use the term “digital disruption,” although it is way overused these days (and too often used as a poor excuse for infringing copyright). Digital technology is disrupting the industry as a whole. We had the same business models for the better part of at least a century, and while things are starting to change, we’re still largely operating as we did in the past, based on old business models with just a few tweaks. We haven’t fully evolved yet, and as a result we’re mostly seeing a little bit of the downside. Whenever there’s a disruption in business models, someone is negatively affected. Unfortunately, here it is the authors, and creators generally. And that’s because creators in these industries tend to have the least bargaining power and they tend to be a line item in a budget where there is some discretion.