Going Grassroots in 2011: Fighting the Assault on Patent Rights

I frequently ask myself why it is that patents continue to come under attack by those who want to pretend they are only a burden on society and provide no benefit.  Believing patents provide no benefit to society demonstrates a failure to understand fundamental aspects of the patent system, disclosure and publication of applications, as well as the basic economic reality that to innovate requires funding.  Innovation, particularly cutting edge innovation, requires quite a bit of funding, sometimes many millions or hundreds of millions of dollars of funding.  Where will that money come if there is no reasonable expectation of recouping the investment?  Free-riders are not innovators and policies that encourage free-riders at the expense of innovators are nonsensical.

Those that look at the patent system and see no benefit for society are either the most intellectually dishonest people you will ever meet, or they are taking a ridiculous and objectively incorrect position because of some agenda. There really is no other way to say it. Just look at the number of patent applications that have been filed since 1975 (see chart below). As patents became more valuable more applications were filed, but a fraction of those applications filed actually are patented, which means that society gets the benefit of the disclosures in those applications without having the burden of having to live with an issued patent. What a deal! Without a patent system that provides for acceptably strong patent rights many, if not most, of these innovations would either not exist or they would be held as trade secrets. A secret doesn’t benefit society, but disclosed patent applications and expired patents do.

If you look at the demand for utility patents dating back to 1975 (see chart below) you clearly can see that from 1982-1983 there has been an almost linear increase in the demand for utility patents, as demonstrated by the numbers of utility patent applications filed each year.

Clearly there is demand for utility patents, and that demand is only growing, which demonstrates that the innovation industry values patents.  They are, in fact, acting as if they are necessary.  After all, an entire collective of disparate interests, in different technology sectors, represented by different actors (i.e., individuals, universities, large corporations, etc.) wouldn’t pursue something that costs significant sums of money if there wasn’t a perceived value.  Of course, we know that in many industry patents are, in fact, necessary if you want to attract investors or if you want realistic hope to recover costs associated with the time, money and energy inputs that were necessary to create the underlying innovation.

Whether we like it or not, it has gotten increasingly difficult to obtain a patent over the years, or at least a patent that is economically viable. It isn’t impossible by any stretch of the imagination, but to pretend it is as easy as it once was would be to ignore reality. Patents are granted on new and non-obvious innovations, they are not handed out like candy or to everyone who applies. Patents are a reward for coming up with something new, non-obvious and useful, so spare me the garbage about how patents are issued on things that are old and known. The only people who can say that are those who are ignorant and don’t realize that it isn’t about whether the innovation was old and known when the patent issues, but rather whether it was old and known at the time of creation and/or the time the patent application was filed.

Most of the innovations we want most cost a lot of money to create. New pharmaceuticals and biotechnological advances are expensive, as are medical devices that offer life saving treatments. Similarly, creating vast new communications networks and Internet platforms are expensive as well. Virtually everything society would want most costs a lot of money to create and take to market. For crying out loud it can easily cost hundreds of thousands of dollars to invent and take a kitchen gadget to market. So who is fooling who? No one in their right mind spends that kind of money without an expectation that they can at least recoup that amount plus a reasonable profit. Of course, that doesn’t always happen, but do you go into an endeavor thinking you are likely to lose money? Are you going to go into an endeavor knowing that if it is successful some Mega-Corporation will just take it from you and cut you out? Are you willing to donate your R&D costs to society and then allow others who can make it and sell it for less to reap the rewards of your invention? If you are, you are in the substantial minority. And if you are in that minority there is nothing stopping you from not getting a patent and donating your time, money and energy to the betterment of society. You have that right now, so why don’t you go exercise it and leave the rest of us alone who know that a strong patent system, with strong patent rights, lead to a better economy where there is more innovations that truly benefit society.

Notwithstanding, there are those who constantly want to chip away at the rights granted to a patent owner pretend that there would be just as much innovation without patents as with patents, which is so naive it is almost difficult to believe anyone could hold that opinion honestly.  Those who choose to live in this mental Utopia simply disregard human nature and the natural condition, and project their own socialistic ideals as if they are the norm, which history clearly shows they are not.  People are greedy and socialist nations that treat everyone equally stomp out the greed characteristics of their people, which then necessarily impedes maximization of individual output.  Why would someone work extra hard if they are not going to benefit?

Certainly there are exceptions to the rule that people are motivated by what is in it for them, but this charity characteristic is not one to build a national innovation strategy upon.  Some will point to academics or others employed through grants to come up with inventions, but even those individuals are not truly benevolent and need the incentive of a pay check or funds to do their work. Even if we wanted to pursue that model now we have to recognize that it is impossible for governments around the world to spend any more money, they are all broke.

We know through controlled studies that when there is no incentive structure provided by the government there is little or no innovation. All you have to do is look at the third world countries and notice that they don’t recognize intellectual property rights, and many if not most don’t recognize any property rights; none that aren’t at the will and whim of a dictator.  In those countries that have adopted property rights, including intellectual property rights, there has been economic growth, foreign investment and a growing domestic economy. Government is the answer, it is the private sector and individual who has incentive to succeed that is the answer. Governments merely need to set fair rules, provide a mechanism to resolve disputes and then get out of the way.

We also have a controlled study in the United States relating to recognizing that strong patents rights spur economic growth and innovations that create new industries. When patent applications started to rise in a linear fashion in the U.S. coincides with the creation of the United States Court of Appeals for the Federal Circuit, which was formed for the express purpose of taking patent appeals out of the hands of the Regional Circuits because most of the Judges in the Regional Circuits had never seen a valid patent, or perhaps it is better to say that they had seen plenty of valid patents but never recognized one.  Thus, Congress knew it needed to do something to make a patent right valuable and desirable, so they created a separate Circuit Court of Appeals to hear all patent cases.  It was this, in my opinion, more than anything that caused patents to become valuable.  What good is it having a right that when litigated is guaranteed to be invalidated?  None.  So the Federal Circuit played a vital role in touching off tremendous economic growth.

Yet, there are forces out there, strange bedfellows indeed, that are working in various forums to chip away at the value of a patent by attaching the rights granted to the patent owner.  The patent is a right to exclude, so without the ability to exclude a patent is meaningless, yet the Supreme Court decided that a patent owner who prevails in a patent litigation is not as a matter of right entitled to a permanent injunction.  That is one of the most asinine rulings any Court has ever made, and shows just how little the Supreme Court understands about patents.  A permanent injunction should issue as a matter of right in every case where the patent owner prevails.  The permanent injunction wouldn’t do anything other than what the patent already grants, which is an order to not infringe.  The only difference is that with a permanent injunction you could go back to the district court for contempt proceedings if violated, at least presuming that the Federal Circuit gets the TiVo case correct, which is unfortunately a very large if.

The Supreme Court issuing a decision that permanent injunctions are not a matter of right shows they really don’t understand the nature of a patent, which is simply a right to exclude.  They have demonstrated their lack of understanding of patents many times before, at one point saying a process was hardly useful because it could only be used to power a computer, they have ruled that manganese is legally equivalent to magnesium, and they had said that in order to make a claim for infringement under the doctrine of equivalents you must prove that you were not entitled to the claim at the time you filed your application because the specification you filed would not support the claim you now seek as an equivalent. That which the Supreme Court doesn’t know about patents could fill volumes, but now they have decided to take a case that will in all likelihood lower the presumption of validity of a patent (Microsoft v. i4i). And a challenge to the constitutionality of gene patents is working its way to the Supreme Court because the ACLU thinks that isolated DNA occurs naturally, despite the fact that DNA is within a cell and a human created process is required to remove it from the cell and isolate it. The science doesn’t stop the ACLU from arguing to the public that the Patent Office is allowing the patenting of body parts, which is utterly ridiculous. The ACLU is wrong on the law and they are willfully, perhaps intentionally, wrong on the science to impose their agenda on society. But will the Supreme Court be able to understand this? They are the same Court that said manganese is equivalent to magnesium, so nothing is impossible when it comes to the Supreme Court. There is no mileage in underestimating the ignorance of the Supreme Court when it comes to patent and/or science matters.

The fight moving forward into 2011 and beyond will be more of what we have seen to date. The forces that would prefer to have a weaker patent right are those that are in the anti-patent community who want to do away with all patents, but they are also those who have built Mega-Corporations on patented innovations and now want to maintain that dominance by making it impossible for the next generation of small to mid-size company to seriously challenge them by building a foundation upon their own patented innovations. Strange bedfellows indeed.

Those who are anti-patent have been unable to achieve “patent reform” in Congress. In fact, it really isn’t “reform” it is just “patent change” and changes that reduce the value of a patent. Perhaps Congress understands, but more likely they are just unwilling to cast a vote that might upset campaign donors, who are on all sides of the “patent reform” efforts. Thus, both serious and pretend reform of the patent system in Congress stalls year after year after year. The anti-patent forces have taken to the Courts, where they are finding success at the Supreme Court, and sometimes even at the Federal Circuit, which ironically was formed with the express purpose of bringing uniformity to the patent laws and recognizing that not all patents are invalid.

It should come as no shock that government gets what government incentivizes. If we want innovation we have to incentivize innovation. Energetic people need to be able to provide for themselves and their families, and if there is no realistic way to innovate, protect and reap the rewards of the time, money and sweat invested there will be less time, money and sweat invested to innovate. We will then wind up with a patent system that exalts cheap, easy, incremental improvement rather than the paradigm shifting, industry creating innovations that we really want. It does no one any good to pretend that it doesn’t take money to innovate. It does. Without a reasonable expectation to recoup investment and make an appropriate profit then there will be fewer who invest and innovate. It is just that simple.

In 2011 expect Congress to take up patent reform again, expect it to go nowhere, and expect the anti-patent forces to continue to look to the Courts to do what they have been unable to achieve in Congress, which is the substantial weakening of patent rights.  Truth, science and economics are on the side of a strong patent system that rewards innovators.  Make it your New Years Resolution to talk to friends, family and business associated about the need for a better functioning Patent Office and meaningful patent rights that can support the creation of new companies and industries.  The more we talk about it the better.  We can’t call a press conference and get hundreds of media there like the ACLU can, so we need to excel at the ground game — a grassroots movement that isn’t afraid to say it like it is and point out the agenda of those who would prefer to harm innovation in America.