Posts Tagged: "patent system"

Every time a new patent reform bill moves forward in Congress, the courts create case law eliminating the need to pass the bill. They legislate from the bench to protect their turf. The infringer lobby took advantage of this dynamic and pushed bills that would stimulate response from the courts… I think we should employ this well proven method of changing law. I know this is not how our government is supposed to work, but let’s be pragmatic. We cannot force an unwilling government to follow its own constitutional processes. So, we need to work with what is available.

One of Twain’s more strongly held beliefs was that the people of the United States had a unique drive and propensity for innovation, which made this nation a special one… In addition to all the accolades that can be bestowed upon Mark Twain, he was also an inventor himself. As the U.S. Patent and Trademark Office itself has reported, Mark Twain’s real-life alias Samuel Clemens was named as an inventor on three U.S. patents granted to the author during the 19th century. This Monday, December 19th, marks the 145th anniversary of the issue of the first U.S. patent granted to Clemens. U.S. Patent No. 121992, titled Improvement in Adjustable and Detachable Straps for Garments, was issued in 1871 and protected an elastic strap for vests, pantaloons and other clothes.

It is almost impossible to believe this report is the work product of the Obama Administration. The section on patents, which begins on page 134, reads like a cross between a Monty Python skit and a Soviet era, propaganda laden news report. Perhaps the Obama Administration is trying to rewrite history and brainwash the entire industry into believing that President Obama has been a tremendous defender of the U.S. patent system. Simply stated, the Obama Administration can write all they want about the importance of the patent system and how patents are critically important for innovation, but the reality is that the future of American innovation has been forfeited (or at least heavily mortgaged) by a calculated, intentional, and willful dismantling of the U.S. patent system for the benefit a handful of politically well connected companies that helped President Obama get elected and then re-elected.

Barack Obama came to office with the suspicion that patents caused higher prices and created market inefficiencies. He set a mission to disassemble the patent system, which culminated in the America Invents Act… Obama supplied power to the market incumbents, thereby fortifying their monopoly power, while depriving market entrants of critical tools. By strengthening incumbents and their industrial oligopolies, he harmed competition from market entrants, policies that generated the slowest growth in history.

Several weeks ago Internet Association President Michael Beckerman sent a letter to President Elect Donald Trump and the Trump Transition Team. The Internet Association is made up of companies that are by and large openly hostile to the U.S. patent system and innovators. The letter touched upon issues ranging from copyright safe harbors under the Digital Millennium Copyright Act (DMCA) to recommended reforms to the Electronic Communications Privacy Act (ECPA) to open access to the Internet and, of course, patent reform. I will confine my comments (see below) to the Internet Association’s patent reform commentary… Not that it should come as any surprise to anyone who follows the patent reform debate, but what the Internet Association says here is a lie.

The PTO then drifted towards being a very user unfriendly operation that has become a center of suspicion and cynicism. I do not think Director Lee necessarily played a direct role in this, i.e., guided this trajectory with policy objectives, but rather was present when it occurred. I do think, however, that politics and branding may have played a role. Kappos had been perceived as too “pro patent”; after all, he hailed from the PTO’s largest customer, IBM. Then Lee became the “anti-patent antidote”; hailing from a patent system foe, Google.

The message is being received by patent owners around the world, including those with large U.S. patent portfolios, that China is a reasonable and fair place to resolve patent disputes… Aside from any anecdotal evidence and cultural bias theories, it is also hard to ignore the reality playing out inside the Chinese IP courts. Foreign patent holders have been having a great deal of luck in China’s IP courts, at least at the courthouse situated in Beijing… If these patent granting and litigation trends continue, we could be left with the rather mind-numbing conclusion that China, a country ruled by a communist government, has a more robust innovation protection regime than the United States, an ostensibly capitalist country that doesn’t seem to see the virtue in protecting the rights of innovators.

As more reports come out that patent filings for individuals and small businesses are down and a general recognition that real innovation does not come from large organizations, but rather small ones, it is becoming clearer that changes in our laws have decreased the previous standards that were in place to “promote the progress of science and useful arts.” As such, it seems to this author that our current patent laws are unconstitutional, or at the very least are thoroughly and completely frustrating the constitutional purpose for which they were created since our laws are promoting less and not “securing” our discoveries. We need to strengthen our patent laws to have a system that promotes the progress of science and useful arts by efficiently and affordably securing for inventors the exclusive rights to their discoveries and innovations.

Patent offices are failing to keep up with the growth of the innovation economy and the resulting increase in patent applications. Unfortunately, the problem could easily get worse in coming years. Many patent offices apparently have yet to process applications from recent years, when huge increases in applications have occurred. It’s a problem that threatens to undermine the global patent system, but what’s both encouraging and discouraging by turns is that it’s largely a basic problem of good governance. Many of the solutions to the problem are relatively straightforward. They require the application of sufficient resources and a willingness to hire an appropriate number of examiners and share work between patent offices. These solutions are a matter of political will and effective management, rather than complex policy. Some countries have shown the will to turn things around, and we hope others will follow.

The declines in productivity growth in recent years are undisputed. There is some controversy over the causes of these declines, particularly, the sources of the declines in technology investment. However, the arguments of the present article elucidating a decline in the patent system suggest a clear and potent explanation for the declines in technology investment and in productivity growth…. The tech cartel has been relentless in denying opportunities for patent holders to enforce patents. The three main ways for attacking patents include instituting IPRs in the PTO, constraining enforcement in federal court and limiting damages. Each of these must be retuned.

Technology transfer is blocked in a weak patent system since companies employ the “efficient infringement” model. In a weak patent system, enforcement is expensive and burdensome, supplying the infringer with incentives to infringe. Rather than voluntarily license technology, incumbents engage in reverse hold out in which they ignore patents and refuse to deal with patent holders. When an entire industry engages in reverse hold out, that is, collective refusal to deal, which is enabled by a weak patent system with high barriers to enforcement, they exhibit anti-competitive behaviors. In fact, enforcement in the courts, as expensive as it is, is generally caused by the belligerence and refusal to deal by technology incumbents which force matters to the courts. Particularly in the absence of an injunction as a remedy for the patent holder, the patent holder can no longer possibly be considered a hold out because their patents cannot enforce an exclusive property patent right. In the pervasive business and political environment that enables the collective refusal to deal with patent-holding market entrants, with high transaction costs to patent enforcement and with reduced compensation from enforcement because of a reduction in patent remedies, there is no incentive to invest in innovation.

Over the past 25 years, I have patented innovations relating to digital watermarking, content recognition, deep packet inspection, rights management, and related technologies. Today digital watermarking is found on billions of files moving around the Internet every day. This technology protects musicians, artists, writers, and developers from having their work illegally copied. How ironic it is that for the past decade, I have been forced to file many legal challenges to protect my own intellectual property. With the passage of the America Invents Act of 2011, Congress sharply tilted the playing field in favor of large corporations that decide to infringe patents owned by small businesses and inventors like me.

By providing a property right in exchange for the disclosure of a novel and useful invention, patent law supplied an incentive to perform risky and expensive scientific research. By embedding a property right in a patent, the market, not a biased government, could pick winners and determine value. A patent embeds a micro-economic property right in an invention from which market-based incentives are derived. From the property right, market competition is developed as multiple competing parties enjoy similar benefits of owning the fruits of discoveries in which they have vested financial interests. The patent system thus levels the playing field for different competitors as it encourages investment in scientific research. From the fair competition that arises in the system of patent rights that protects investment evolves economic and technological progress.

In the past decade, economic growth, wage growth, business investment and productivity growth have declined dramatically. Economists have discovered that productivity growth alone explains the dramatic development of industrial economies. Yet, the causes of productivity growth are unclear, with capital, labor and technological contributions. My central thesis is that productivity growth is strongly correlated with a strong patent system. Consequently, I will show that the attack on patent rights starting about 2005 is correlated to the decline of productivity growth. The patent system is designed to induce business investment in technology R&D. In effect, the macroeconomic analysis of productivity growth rests on microeconomic phenomena of decisions made by entrepreneurs to risk capital on technology projects in the expectation of a reward.

While all economic views of productivity growth may have a grain of truth, I argue that all of these theories of productivity growth are fundamentally wrong. The economic evidence shows clear relationships between the trend of decline in productivity growth and the trend in declines of the U.S. patent system. As the patent system has been weakened in the last decade, there is less investment by start-ups in technology R&D. At the same time, the technology industry has become highly concentrated, with big tech incumbents dominating their industries. The combination of increasingly concentrated competitive configurations in the technology industry with the reduction in key rights embedded in patents, has resulted in substantially reduced incentives to invest in R&D innovations.