The American patent system represents a delicate balance. On the one hand, the patent system provides an incentive to invest in risky technical problem solving by giving an inventor an “exclusive right” for a limited time. On the other hand, from the time of the first Patent Act in 1790, patent critics have argued that patents block competition with a temporary monopoly. This tension has, nevertheless, enabled the rise of the U.S. as a major industrial economy, particularly after the Civil War. Optimally, the patent system encourages inventors to take risks to invent and disclose new and useful things by investing in ex ante costs before a later payoff. After a limited time of exclusivity rights, a patented invention falls into the public sphere, thereby providing a public interest in the long run. Economic and technological progress proceeds by building on previous inventions. Until about 2006, the U.S. patent system worked well, as evident in the development of the largest and strongest economy in the world.
It is indisputable that the U.S. patent system has been substantially eroded since 2006. The delicate equilibrium that had been maintained for over two centuries has become destabilized. Making sweeping changes to the patent system, Congress was motivated to pass the America Invents Act (AIA), by calls from large technology companies that the patent system was unfair. In addition, an activist U.S. Supreme Court supplied a series of decisions from 2006 to 2016 that substantially eroded patent rights. The sources of criticism in the patent system were generated from the margins on both the far left and the far right. Critics of patents generally ignore the ex-ante costs and risks of invention and instead focus on the intensity of property rights with which the system was intentionally endowed. These policy changes have disintegrated patent rights from property rules to liability rules. The effects of these changes have raised transaction costs, increased inequality with higher burdens to market entrants, decreased investment in innovation and provided a key source of declines of productivity growth and aggregate economic growth.
In a sense, the U.S. patent system is the economy’s immune system; when it is weakened, opportunistic viruses invade the economy. The patent system is crucial mainly to small entities that require property rights in new inventions to enter markets and compete with larger rivals. Since incumbents have large market share, the only way to compete is to maintain strong rights for novel innovations. Without this critical mechanism of instilling property rights in a new invention, small technology companies have impossibly high barriers to entry in markets that are protected by incumbent advantages. Consequently, when the patent system is destabilized, market competition is affected, with inherent advantages moving away from market entrants and towards market incumbents.
In the present market, there is a de facto three-tier patent system. On the top tier are operating companies that compete and are able to protect their intellectual property rights with remedies that include injunctions and damages for lost profits. In the middle tier are original inventors, small companies and university researchers that may not receive an injunction but may receive a reasonable royalty. At the bottom tier are companies that acquire patents and receive limited remedies. Patent rights are now allocated based on the identity of the inventor, with increased legitimacy provided not to the original inventor but to a mythical manufacturing nexus.
Market incumbents, typically large technology multinational corporations, could not be happier with the disintegration of U.S. patent law in the last decade since it enables them to free ride and to preserve extraordinary monopoly profits of typically $10B to $40B a year.
The technology market incumbents have invested heavily in lobbying to constrain patent rights in recent years with sophomoric, unilateral and unreflective arguments. They have persuaded Congress to pass the AIA, a one-way redistribution of rights from small entities to large entities. In addition, they have persuaded the U.S. Supreme Court to interpret statutes involving patents that, collectively, supply a sea change in patent jurisprudence. An activist Roberts Court has sought to micromanage patent law to correspond to the technology incumbent narrative, often in contradistinction with the facts and in complete ignorance of the aggregate consequences of its decisions. In effect, the activist Supreme Court is enabling and emboldening extreme marginal critics of the patent system by rewriting patent law.
On the left side of the Court, justices are motivated by naïve arguments about non-practicing entities and patents blocking innovation. On the right side of the Court, justices are concerned about an abuse of enforcement transaction costs to force unfair settlements by “undeserving” patent holders. Both sides, however, are patsies to the large technology incumbents that preserve enormous market power and monopoly profits from a compromised patent system. To apply an analogy, the Supreme Court is recommending the killing of the dog to solve the problem of a few fleas.
This is in contrast with the long history of strong patent rights. Historically, Republicans ought to prefer responsible agency, efficient markets and law and order that are optimized with a strong patent system. Democrats should want to help entrepreneurs by supplying strong patent property rights that level the playing field, reward hard work and ingenuity and promote democratization of patent opportunities. In the last decade, however, both sides have drunk the Kool-Aid of the incumbent anti-patent sophistry, yet without adequate evidence, which exposes a narrow and self-interested agenda. Multinational corporations have an incentive to protect their monopoly profits by constraining competition, while the political left demands patents are supplied to the public for free since they presumably adversely increase costs in the short-run. Consequently, both sides are left with irreconcilable contradictions. Ultimately, the political center was sacrificed by narrow arguments on the margins.
Market incumbents paint themselves as victims when in fact they are exploiting the transformed patent system for competitive advantage. Their hidden agenda is to attack the patent system itself, not the marginal problem of frivolous litigation, with an aim to limit patent eligibility, increase patent validity tests, constrain patent enforcement access, weaken remedies and drive up costs beyond a reasonable level to constrain competition from all but the largest rivals. For example, by apply the manufacturing nexus to patent enforcement, inventors are attacked for not making things themselves, despite the fact that ninety percent of the economy is non-manufacturing, thereby driving higher capital barriers. Thus, tragically, Asian manufacturers are tremendously benefited at the expense of original American innovators.
The consequences of a diminished patent system from the disintegration of patent rights have been profound, with dramatically reduced investment in innovation, particularly by small entities, free riding by large companies with a reduced incentive to invest in innovation, preservation of incumbents’ historic monopoly profits, wage growth stagnation, productivity growth declines, asymmetric trade with more productive trading partners and reduced aggregate economic growth.
Death by a Thousand Cuts
While the Supreme Court has reviewed dozens of patent cases since its 2006 term, about 18 cases are prominent. In 15 of these cases, the Court narrowed patent rights. When taken alone, these cases severely cabin patent eligibility, enforcement, validity and remedies. However, when taken together, the sum of these decisions represent a sea change in patent law that dramatically transforms the patent system.
The general consensus is that eBay v MercExchange (2006) was the case that started the trend to reduced patent rights. The decision instituted a “four-factor test” for eligibility of an injunction (35 USC § 283) to protect the exclusive right in a patent, with an implied emphasis on practicing (i.e., manufacturing) the invention. After this landmark decision, a number of seminal decisions flowed from the Court in the last decade, deciding a broad range of issues ranging from patentability (35 USC § 101), obviousness (35 USC § 103), indefiniteness (35 USC § 112), induced infringement (35 USC § 271), presumption of validity (35 USC § 282), enhanced damages (35 USC § 284), attorney fee awards (35 USC § 285), right to challenge validity and patent exhaustion. Please refer to U.S. Supreme Court Patent Cases: 2006 to 2016, which contains a review of these cases.
There are a number of unexpected effects of the combination of these court decisions.
First, there is effectively now no voluntary licensing market after MedImmune and Cuozzo. If there is a high probability of an Inter Partes review (IPR) [or post-grant review (PGR) or covered business method (CBM) review] in the Patent Trial and Appeal Board (PTAB) at the PTO with a low bar for institution of a patent validity review, why send a letter to an alleged infringer to plan to discuss a license since the alleged infringer will simply seek declaratory relief or a patent review in the PTO? Patent reviews impose a one-way burden on patent holders that attack their property rights. Consequently, without a voluntary licensing market, more cases are driven to the courts for enforcement, which substantially increase costs for all parties.
The combination of Alice and Cuozzo enable large technology companies and small technology companies alike to attack software patents. In addition, medical diagnostics patents are difficult to support. These patents are now easily attacked in the courts (35 USC §101) and in the PTO (35 USC §103) in a second window of review.
Patents are now easier to attack in IPRs at the PTAB, since Alice (35 USC §101), Myriad (35 USC §101), KSR (35 USC §103) and Nautilus (35 USC §112) supply numerous tools for infringers. When combined with Cuozzo, there is a low bar to institute a patent review, with significant limits to due process.
Although TC Heartland is merely pending, it is clear from the trend that when combined with MedImmune, a defendant unilaterally controls a favorable court selection, with the power to initiate patent validity challenges at a time and place of their choosing, imposing a high burden on a patent holder.
The combination of Alice and Octane Fitness supplies primarily one-way fee shifting in cases, particularly involving software patents, when a patent is enforced, despite the presumption of validity in a patent. Since software represents a major category of the technology industry, this phenomenon of testing software patents and enabling asymmetric punishments for enforcement presents a troubling turn that suppresses innovation in a critical area.
When Quanta and Samsung are combined, it is clear that patent damages are highly restricted to both a small component that is negligible to enforce given high enforcement transaction costs and to downstream users in a complex supply chain. Representing short-term thinking, these cases ignore the entire market value rule to establish value based on the weight of a component in a larger product as well as the reality of downstream components in larger products in a global economy. Both cases enable a free ride by infringers to cabin patent rights and narrow the boundaries of infringement.
A number of these cases are apparently intended to be narrow. For instance, in the Roberts Court’s premier year, the unanimous eBay decision was not intended to represent a sea change. However, the Federal Circuit’s inflexible application of a high standard of “irreparable harm” has restricted injunctions to almost all parties with narrow exceptions. Since ninety percent of goods are manufactured out of the U.S., enforcement of patents has shifted to the ITC to enable an exclusion order for importation of infringing products into the U.S.
Similarly, in the unanimous Samsung decision, the court spends pages explaining the meaning of word “article” from the Civil War to the present to justify their conclusion of implementation of patent apportionment limiting damages. The effect of this is to destroy incentives for small improvement inventions and virtually eliminate enforcement of patents in which the reward may not justify high enforcement transaction costs.
In sum, when taken together, these Court decisions represent a clear narrowing of patent rights. While taken in isolation, one or two decisions may have limited effects. However, taken as a group, these decisions have had a profound adverse effect on the economy, by substantially eroding patent rights, dramatically increasing transaction costs for market entrants that need patent rights most, harming competition and efficient markets and promoting monopoly power by market incumbents.
CLICK HERE to CONTINUE READING… In Part II, I will describe the effects of Supreme Court decisions on patentability, patent validity reviews, patent remedies, compulsory licensing and the perpetuation of PAEs. These arguments show that the aggregate Supreme Court decisions have made the problems that they sought to solve much worse.
Join the Discussion
59 comments so far.
AnonFebruary 1, 2017 10:28 pm
Not only that, but “he” posted the exact same misrepresentation on multiple threads.
He has it close though – he just missed the fact that it was the entrenched interests that MADE the change that people are complaining about.
As I posted on the other thread, this is a small but very critical distinction, as this makes the exact opposite point that he wanted to make.
Gene QuinnFebruary 1, 2017 01:21 pm
Obviously you don’t know what you are talking about, which is why you need to use a fake name and fake e-mail address. So my thesis about you is you are a coward, a pretender, and almost certainly paid by the infringer lobby who steal from innovators in an elaborate scheme of efficient infringement.
Joe DohnFebruary 1, 2017 01:19 pm
So your thesis is: the patent system is a delicate balance. The balance existing before 2006 was a perfect god-given system that saw us through the late industrial age and therefore is perfectly tuned for the 21st century post-digital-revolution economy. The new balance is a cursed abomination that hurls patent owners naked into the street with weeping and gnashing of teeth.
Or, to put it more simply: entrenched interests hate change, complain about new system. Truly a groundbreaking revelation. Well done.
InventorJanuary 31, 2017 08:00 am
Night [email protected],
I agree. Chen stood tall in CAFC’s decision against Vringo for Google….while Mayer and Walach failed miserably. This was followed by no En Banc review by CAFC, and by SCOTUS ignoring the petition for writ of certiorari from Boies. That travesty of justice will not soon be forgotten.
Unfortunately due to Citizens United, the slimy trail left as the money flowed through the system has a greater chance of being legal.
Night WriterJanuary 31, 2017 07:14 am
I like the idea of follow the money. I can only imagine the many millions that are flowing into the pockets of people inside the beltway to get the directorship appointments and the Fed. Cir. appointments. I think it is very clear that Google selected the last 5 judges. We are very lucky that Chen is a man of integrity. They misjudged him.
Stephen CurryJanuary 30, 2017 11:54 am
By the way, michelle lee’s main outside patent prosecution counsel for Google is a contributor of articles for IPwatchdog. So he is reading everything here. I invite that patent attorney to confirm or deny here in the internet that Google fired michelle lee. let’s not hold secrets.
Stephen CurryJanuary 30, 2017 11:23 am
When the next person comes along wanting to do patent reform and wanting to be the next USPTO Director, Congress has to make sure that he or she is not presenting alternative facts and to make sure that his or her “mysterious” work history as an attorney is investigated just to make sure he or she is qualified to be USPTO Director. For Example, I looked up patents written by Russ Slifer and I am satisfied that Russ is a competent patent practitioner.
Up till now, the patents written by Michelle Lee remains a MYSTERY. Perhaps the Patent Bar should do some investigating.
These folks signed a letter.
Stephen CurryJanuary 30, 2017 11:05 am
No direct statement on the web.
I invite the FBI to look at this website and to contact me. This will be the biggest scandal in USPTO/Patent history.
Gene knows I am not joking.
InventorJanuary 30, 2017 10:57 am
Stephen [email protected],
Do you know of any evidence on the web that Google fired Lee in 2012?
Stephen CurryJanuary 29, 2017 10:19 pm
Maybe Erich Spangenberg regrets signing this letter
maybe we can encourage Erich Spangenberg to write a follow up article to this article. Maybe he could be encouraged to talk about some davids and roberts and erics and allens and darrells and baracks et al. and the angry looks that michelle obama directs to michelle lee and so forth.
Stephen CurryJanuary 29, 2017 10:06 pm
Sir, I did not sign the letter and Mallum Yen prepared it. My only conclusion is some folks did not anticipate the takedown of startups by the PTAB.
But I saw Michelle Lee’s revenge coming against the patent world when Michelle Lee and David Kappos gave talk at Stanford on 2005 of how they thought we need patent reform and that Lee felt the need for post-grant reviews by the USPTO (that should have been a clue to patent attorneys that she was going to take down the US patent system after Lee got fired by Google in January 2012).
angry dudeJanuary 29, 2017 09:58 pm
Stephen Curry @42
Something is seriously wrong with that list….
Erich Spangenberg of IP Nav ?
James E. Malackowski of Ocean Tomo ?
even Peter Detkin, for Chirst sake ???
What do they have in common with the likes of Mark Lemley, Pamela Samuelson and Mark Chandler ????
I’m so sick and tired of this bs called intellectual “property” laws in US
just find me another planet
DavidJanuary 29, 2017 03:58 pm
“Dude . . . if it walks like a duck, quacks like a duck, guess what . . . odds are it is a [kangaroo court]!”
InventorJanuary 29, 2017 02:39 pm
This list along with Schumer, Nadler, Issa, positioned at the bottom of the sea with appropriate weighting would be a Goodlatte start.
Stephen CurryJanuary 29, 2017 12:11 pm
Here’s Allen Lo saying michelle lee built a “skimpy patent portfolio”
why did all them patent lawyers and non-patent lawyers say that michelle kwok lee was qualified to be USPTO Director?
Stephen CurryJanuary 29, 2017 11:45 am
Did the FBI interview Allen Lo and David Drummond and Gordy Davidson when Obama nominated michelle kwok lee as Undersecretary of Commerce/PTO-Director ????
i like the $$$$ trail comment. great point
AnonJanuary 29, 2017 11:35 am
I think that more than “disqualification” may be in order.
It’s a good start to a “follow the money” trail.
Stephen CurryJanuary 29, 2017 09:11 am
One of my outside counsels informed me of this letter. This letter has been circulating the past few days in Sillycon Valley.
To rebuild the patent system, all signers of this letter are automatically disqualified as candidates for future USPTO Directors positions (USPTO Director, USPTO Deputy Director, USPTO Regional Directors, Commissioner of Patents, etc.). I also noticed that Allen Lo and David Drummond, and Google’s former main outside patent prosecution counsel (some dude in the downtown San Francisco City who led USPTO Director Emeritus michelle lee astray – we know who he is) did not sign this letter.
InventorJanuary 29, 2017 09:11 am
Chris Gallagher @40
I am not so sure “Near-future developments at USPTO and the courts” are needed to confirm the loss of integrity of our patent system. I think the evidence falls into several areas:
1) Statistics of increasing use of PTAB and the rate at which they are invalidating patents.
2) The unconstitutional nature of PTAB using broader category to interpret claims, such that it is easier to invalidate the clamins then when the Examiner allowed them.
3) The pushing of patent property rights over into the less protected area of being “public rights”.
4) The backing of politicians by big tech using Citizens United decision to legalize bribery. As yourself who does the PTAB help? What “innovation” (Orwellian) is being protected and what innovation (true) is being snuffed out?
5) Anecdotal evidence – see Paul Morinville’s recent article of the effect of AIA and the PTAB as constituted by Michelle Lee, here (short read, but illustrates the impact of AIA very well): http://ipwatchdog.com/2017/01/27/water-balloons-weapons-mass-destruction-ptab/id=77637/
“Water Balloons, Weapons of Mass Destruction and the PTAB”
Dude….if it walks like a duck, quacks like a duck, guess what….odds are it is a duck! Connect the dots….Personally I need not wait for future developments at USPTO and the courts to confirm or refute that which is a “no brainer.”
Chris GallagherJanuary 28, 2017 12:08 pm
Neal Solomon’s excellent posts have become catalysts for needed debate within our IP community. In this post Neal provides a thorough critique of our patent system’s continued mindless unravelling begun by SCOTUS with eBay. The post’s informed commentary agrees with Neal, adding disdain by many for the Federal Circuit. What is most disturbing however, is a recurring undercurrent among some commenters that our patent system may have lost its integrity. Near-future developments at USPTO and the courts can confirm or refute such concern. For the sake of patent reliability and our economy’s innovation engine, let’s hope it is not confirmed.
InventorJanuary 27, 2017 04:20 pm
Thanks for the perspective. Got it.
DavidJanuary 27, 2017 12:51 pm
Patents as public rights is an absurd holding, and has no (or even vaguely close) analogy in the public rights case law. It’s a true aberration in that area of the law, and a clear as day example of CAFC political judicial activism.
As Cooper and MCM both aptly pointed out, there are many SCOTUS cases in the land and IP contexts that held patents require Article III district court resolution. End of story.
Many observers, including myself, were dismayed by the denial of cert after the relists.
Stuff like this isn’t just a patent problem. It’s going on everywhere. Hence Brexit, Trump, and whatever it is that comes next (populist revolution?).
Night WriterJanuary 27, 2017 11:53 am
Also, I absolutely agree with the characterization that the different tiers of companies are treated differently at the Fed. Cir. I am sure that someone could write a paper illustrating this based on classifying the different patents in suit.
I read many cases where it is clearly a hatchet job and I always think, OK, a small company or PAE vs. a big international corporation. Odds of patent surviving–nearly zero.
Night WriterJanuary 27, 2017 11:45 am
@35: techrights people are very immature. I was a graduate student in computer science, a CTO of a start-up, a product manager for a large corporation, etc. So, I am old as dirt and done a lot of different things in my life.
What I have consistently found with people that do not respect patents is they don’t have any bearing of where the money comes from that supports their jobs or where the technology comes from that they are using. Microsoft, e.g., after deciding that patents were strategically necessary, hired 1,000’s of researchers to generate those patents and actually keep statistics about how many patents they wanted per researcher and per dollar spent. I talked to some of the hired researchers who thought patents were a scam and had nothing to do with the advancement of technology. That is just one example. I could give many, many more. (Like one engineer whose work I was directing as a product manager. I was writing the spec for his work and his team’s work. He had this neat new idea he came up with and was very proud of it and showed it at one of our meetings. I said, you realize that is exactly how Windows works, which you use everyday. He laughed and said, oh year.)
step backJanuary 27, 2017 10:40 am
Your above article is so spot on that it caused HWHAI (He Who Hates American Inventors) to spit up a hair ball and paste it on Gene’s photo
Keep that HWHAI coughing. Good job.
(Gee I wonder why that orange hair was down his throat to begin with in the first place?)
InventorJanuary 27, 2017 10:17 am
Night [email protected] – Agreed…raking in the doe from search, but little real innovation…mostly buying up other companies…like Microsoft….focus is on prolonging their business model.
Invention Rights @30
Appreciate the explanation. So that’s why CAFC began treating patent rights as public rights. Sort of like when SCOTUS decided (Citizens United) to treat corporations like people and money like speech. Got it. Definitely time to “Drain the Swamp!”
FRANK LUKASIKJanuary 27, 2017 09:30 am
Expiring Patents for non-payment of Maintenance Fees was the worst change. They stopped publishing expired Patents after I filed the Petition in the Supreme Court (Lucree v. US). First-To-File is the worst unconstitutional Act and it only helps corporations.
Night WriterJanuary 27, 2017 09:24 am
Also, you know, the problem too is that the CAFC judges are just terrible. There are many on the bench that have no regard for the rule of law. They will invalidate a patent they don’t like by generating the most heinous opinions imaginable.
We need to wipe it clean. I’d recommend legislation that disbands the Fed. Cir. (retire the criminal lot), and reforms it with new judges. These judges are no better than common criminals.
Night WriterJanuary 27, 2017 09:22 am
There is a very interesting article about Google in Fortune magazine. The summary is that Google has managed to innovate nothing after their search technology and that the search technology accounts for 90 percent of their revenue. No wonder they want to burn the patent system down. They need to make sure they can steal anything innovative that challenges their search technology.
Invention RightsJanuary 27, 2017 02:00 am
Public rights is just a label applied to any matter that is determined to be delegated to administrative courts. Usually this happens when new regulations (trade, tax, labor, environmental, etc.) are promulgated. If you get crossways your case goes before an administrative judge because it involves a “public right”.
The trick has been figuring out how to erase hundreds that established patents as a property right. The Federal Circuit has incrementally applied the label to patents, ignoring the incongruity.
“In contrast with the private rights at issue in Northern Pipeline, the grant of a valid patent is primarily a public concern.” (Patlex 1985)
“cases involving “public rights” may constitutionally be adjudicated by legislative courts and administrative agencies” (Joy Technologies 1992)
“the issue of validity of a patent involves public rights, not merely private rights.” (In re Lockwood 1995)
“Because patent rights are public rights” (MCM 2015)
See how they did that?
InventorJanuary 26, 2017 09:45 pm
Inventor Woes @28
ok. Thanks for trying to clarify. Sorry if I miss-quoted you. I tried reading about how patents became public rights and got lost in the legalese here:
Correct me if I am wrong, but it sounds like some CAFC judges began treating patents with the public rights exception, whether correct or not, they need to overrule themselves or be overruled by SCOTUS?
See [email protected]….and the Public Rights exception for patents allows Congress and PTAB to do whatever they want with patent rights without regard to what the constitution says about property rights and due process? Is that what is being implied?
Inventor WoesJanuary 26, 2017 08:50 pm
That’s not quite what I said. I said that some rights “existed” even before the formation of governments. That’s why they are “god-given” and “inalienable.” You would have them if you were the only person on earth. At least that’s the theory that the Founding Fathers subscribed to when they wrote the Constitution. Whereas things like patent rights aren’t god-given and you’re certainly not born with them. It’s not like freedom of movement, liberty of the body, etc.
InventorJanuary 26, 2017 06:09 pm
Glad you agree with Massoff.
All there is to say is that it is time to “Drain the swamp!”
The distinction between public rights escapes me.
Inventor [email protected] says it has to do with when governments were formed….by this definition all rights are public rights. The point is that the intention of our founding fathers was that patents were to be treated as property….as per Massoff
Of course Congress can change the constitution and thus can alter the bundle of rights associated with patents, but CAFC should not. Drain swamp!
Inventor WoesJanuary 26, 2017 05:14 pm
The case of universities has always perplexed me. Since they are purely research oriented, it’s not practical for them to try and “sell” things. However, what I’m really curious about is public universities or private universities that get government funding. If public funding was used and then an invention is developed, what right does the university have to the invention? Doesn’t it belong to the taxpayer?
Gene QuinnJanuary 26, 2017 04:55 pm
You say that watering down is bad for small entities with just one or a few patents. It is also very bad for large entities with one or a few relevant patents. The biotech and pharmaceutical industries have gone along to get along for far too long in my personal opinion. Like independent inventors, universities, R&D companies and manufacturing companies, bio/pharma companies have only a few patents that really matter. Why the industry that cares, which is MUCH larger than the industry that doesn’t care, hasn’t come together is a little bit of a mystery.
step backJanuary 26, 2017 04:45 pm
I mean angry @19
step backJanuary 26, 2017 04:44 pm
Perhaps IW is same as YKWIA @32 in this older set of comments:
similar MO’s (software is not real)
EGJanuary 26, 2017 04:37 pm
Once more, your article “hits it out of the park.” If only Congress and the courts would read it (sigh).
DavidJanuary 26, 2017 04:10 pm
Inventor @9 and @12: I am very familiar with the arguments, and Pr. Mossoff’s positions (and agree with them).
However, the CAFC has held that patents are public rights.
Until the CAFC either overturns this holding en banc of the SCOTUS weighs in, what else is there to say?
angry dudeJanuary 26, 2017 03:53 pm
Inventor Woes @18
I won’t give you any number (made some good friends in SV and elsewhere)
Suffice it to say that I solved some very old technical problem and published a paper and posted a working demo of my “patent pending” algorithm (with source) on my website … shortly before Ebay
The rest of the story you can guess yourself…
Had I kept it secret I would be able at the very least to sell some binary-compiled code before it got reverse-engineered – alas, too late for that
angry dudeJanuary 26, 2017 03:40 pm
Inventor Woes @16
“That only applies to the physical things…”
Software code is as physical as any other goodies: to create it you need at the very least to punch a lot of keys on your keyboard – very physical activity consuming energy
I am starting to think that you might be a troll 🙂 (MM in disguise ?)
Inventor WoesJanuary 26, 2017 03:36 pm
angry dude @17
You have stated in the past that you had a patent in 2006 and you weren’t able to license it or enforce it. What happened exactly? You don’t have to give me the patent number, but I’m genuinely curious as you seem to be very angry, hence the name. Did you try to produce your invention? Did you just try to license it? Were you a non-practicing entity? Was the invention not really an invention but still got through the PTO anyway? Just curious.
angry dudeJanuary 26, 2017 03:32 pm
Paul and Gene:
I don’t disagree with you, I just wanted to point out that “watering down” patent field by big tech corps was going on for many years with the clear purpose – to undermine the value of few really valid patents dissolved in a sea of “junk” patents
Mind you, “junk patent” does not mean “bad patent” at all:
“junk patent” – a harmless very narrow patent with narrow claims on some minor twist or improvement which is not critical to functionality – can be worked around easily
“bad patent” – a patent with broad conceptual claims on key functionality but lacking enabling specification (example – Mark Cuban owned patent on self-balancing something discussed on this blog a while ago)
“Watering down” patent system is real, folks, and it has some very bad consequences, especially for small entities with just one or few patents in some crowded technical field
Inventor WoesJanuary 26, 2017 03:24 pm
To further clarify on the Locke labor theory, you only owned property from that which you applied your labor. That only applies to the physical things you yourself (or through agents, corporations, etc.) created, not to your “ideas.” Thus even a libertarian view supports the notion that patents could be argued to be public rights.
Inventor WoesJanuary 26, 2017 03:20 pm
angry dude @4
What I mean is the distinction about where the rights come from. Property rights, like that of my house, “exist” (whether or not they can be effectively protected) in our constitutional system as rights prior to the formation of government. This is why deeds from Britain were held with the same force once the United States was formed. However, patent rights were “created” when America was born as a nation. Thus they can be regarded as public rights. It’s not about whether they mean anything without government to protect them, but whether they “existed” before governments formed. It’s the classical view of John Locke, which is what the constitution was based on.
InventorJanuary 26, 2017 02:42 pm
re: bad patents.
Well said. Big tech is not afraid of bad patents….they never disrupted big tech. Big tech was afraid of good patents that they had no defense against in court. Last thing they want if for their business model to be disrupted or to have to share with some start-up.
Gene QuinnJanuary 26, 2017 02:40 pm
To pick up on Paul’s comments…
Let’s remember, that historically somewhere between 2% to 10% of patents are viewed as being valuable. Prior to the modern licensing era where patents have been licensed in large portfolios for a variety of reasons we would always give 2% as the estimate of valuable patents. The rest just never materialized for one reason or another. In the modern licensing era where there was safety in numbers and quantity mattered more than quality, that ballooned the total of “valuable” patents to about 10%, but did anything really change? No, you just couldn’t really license the valuable patents on their own without taking a license to a portfolio that also included many patents that you really didn’t need or want. So when one says that 90% or even 98% of patents are junk that should hardly be surprising to anyone.
Of course, what does it mean to be a junk patent, or a bad patent? These terms really have no accepted definition. Thus, they get used in a variety of contexts by different people to mean different things. Just like most in the anti-patent community use the term “abstract” quite differently from its dictionary definition, without an accepted meaning these terms are subjective. It is time we demand definitions.
Abstract means it does not exist and is not real, that is what the dictionary says and the courts refuse to define the term so we have to look to the dictionary. If “bad patents” mean patents that should have never issued then the number of “bad patents” is dramatically lower than any public estimates. The law says if the patent examiner cannot find a reason to reject within the limited time they are given they must issue. So when examiners follow the law the bias should be on issuing patents, and to say those patents should have never issued is not actually accurate even if much later after the fact prior art can be found.
InventorJanuary 26, 2017 02:37 pm
Here is another good read that contradicts your point above:
Supreme Court Recognizes that Patents are Property
June 22, 2015
History of Intellectual Property, Innovation, Intellectual Property Theory, Inventors, Patent Law, Patent Theory, Supreme Court, Uncategorized
intellectual property, James v. Campbell, just compensation, patent, personal property, Takings Clause
By Adam Mossoff
InventorJanuary 26, 2017 02:31 pm
Patent Owner Counsel,
re: “I would argue that the original cause lies with a decline in patent examination quality at the USPTO…”
I disagree. I suspect you are anti-software patent, true?
I would argue that first came there has been an ongoing battle between the status quo and the little guys who are trying to disrupt and get a piece of the pie. Large corporations had a lock on patents for a long time through the use of patent agreements signed by fresh outs (of school) in return for employment. The patent agreements were over-the-top in terms of what they claimed for the company….so the young engineers were convinced that they could not do a patent unless it was through their company and that they had no IP ownership due to their employment. Then, for example, in the defense industry there was a great scandal about companies charging against cost plus contracts while working fixed-price contracts. This resulted in the use of time cards which are filled out daily by engineers and signed weekly by their supervisors. This created a clear record of what an engineer had worked on over the years. Thus they could separate their thoughts (IP) from company IP. Thus they began to file for their own patents and not company patents. This coincided with the advent of the Patent Troll. They grew as an industry due to the lop sided battle to inforce patents against huge deep pocketed corporations. Inventors had no way to spend through the barriers to entry and start a business when large corporations could eat their lunch. Patent Assertion Entities allowed for some portion of the value added by Inventors to flow back to the Inventor. This in turn leveled the playing field for the Inventor somewhat. Big tech couldn’t stand the proposition of some upstart disrupting their apple cart and making off with a portion of the apples. So…along comes Citizens United decision and corporation spending became speech and they talked to politicians a lot. Legalized bribery. The likes of Goodlatte, Issa, Schumer, lined their pockets and produced law to weaken patents. Currently with the Anti-Innovation Act (AIA) we have the patent killing fields over at PTAB….where the same prior art a patent was prosecuted against is now used in the broadest possible way to invalidate the same patent Examiners allowed. Can you say double jeopardy, lack of due process, theft of personal property? I knew you could. Here’s where your story starts….you would say those patents should never have been allowed. I would say Examiners did their job and followed the rules. Don’t blame the examiners because patent trolls have deep enough pockets to stand up to big tech in court. Big tech does not innovate they do the opposite, they try to maintain their business model at all costs. They innovate in ways to line the pockets of politicians.
Paul MorinvilleJanuary 26, 2017 02:15 pm
Patent Owner Counsel @3 and Angry Dude at 6.
The term bad patents is a false flag akin to other disparaging terms like patent troll, submarine patents, etc. It is not true, not defined and pejorative.
The idea that 90%-95% of tech patents are junk is probably true. Most patents are junk. They will never be commercialized or if they are their commercial value does not justify litigation or licensing. They have junk value and therefore are junk patents.
This brings me back to bad patents. Assuming that bad patents means the patent probably should not have been issued. The vast majority of bad patents are never asserted because they are too easily invalidated in court. The very small set of examples used to create the myth that millions of bad patents were floating around was the complete set of those asserted patents.
Using the term bad patents is perpetuating the misleading information that got us here in the first place.
InventorJanuary 26, 2017 02:13 pm
re: patents as property rights
See a great read here:
PATENTS AS CONSTITUTIONAL PRIVATE PROPERTY: THE HISTORICAL PROTECTION OF PATENTS UNDER THE TAKINGS CLAUSE
Invention RightsJanuary 26, 2017 12:38 pm
Neil you are spot on. I hope inventors are getting the message that a U.S. Patent is useless. We must figure out new ways to protect our inventions or else redirect our creative energies.
step backJanuary 26, 2017 12:36 pm
As always, a detailed fact-filled piece that strikes right into the heart of the dragon.
angry dudeJanuary 26, 2017 12:17 pm
Patent Owner Counsel @3
“…the value and usefulness of “good” patents to deserving inventors will continue to be watered down”
This is correct and, in fact, this has always been a part of the original plan by big tech: to water down patent system so that a few deserving patents are lost in a sea of junk patents and are treated the same way..
Years ago, before Ebay, I attended some IEEE conferences and had a chance to speak with some corporate R&D dudes – from MS, IBM, Lucent, etc etc the ones watering down patent system the most at the time (that was even before Google’s rise to power)
We actually agreed on at least couple things (in private conversations):
1. Most tech patents are junk (like 90-95% – very conservatively)
2. Watering down patent system is the purpose of big tech monopolies
DavidJanuary 26, 2017 12:12 pm
@Inventory Woes – the CAFC has repeatedly held that patents are public rights.
This distinction lies in contradiction with a number of 19th century SCOTUS cases holding that patents are property rights – hence the Cooper and MCM challenges.
Nonetheless, the SCOTUS denied cert in both, and it appears that the CAFC’s reclassification as a “public right” carries the day.
angry dudeJanuary 26, 2017 12:01 pm
Inventor Woes @2
Dude, your right to own your house (which you don’t have) and your car means nothing without government to protect that right
otherwise I can come tomorrow to live in your house and drive your car
Patent Owner CounselJanuary 26, 2017 11:37 am
Very, very nice article. I think you have aptly summarized the current state of patent law in the US. I look forward to Part II.
I completely agree that eBay v. mercExhange was a turning point in 2006, and marks the beginning of a downward spiral for US patents and the patent system.
But this begs the question – were eBay and the ensuing anti-patent case decisions and anti-patent legislative reforms the sole cause of the disintegration of the US patent system?
I would argue that the original cause lies with a decline in patent examination quality at the USPTO, beginning decades ago, and that resulted in the issuance of tens or hundreds of thousands of bad patents that should never have issued. The anti-patent legal decisions and statutory reforms can reasonably be viewed as attempts to counter the very real crisis in patent quality. I would agree that the reform attempts have been haphazard, misguided and ineffective. And I agree with your assessment that they have left the patent system in a state of disintegration. But one should not overlook the important role that poor patent examination played as an original cause of this patent crisis, leading judges and policymakers to overreact with misguided reforms.
The US patent system will never recover until the USPTO figures out how to examine patents efficiently (so that patents issue quickly enough to be useful in commerce – not just years later in litigation) and effectively (with high quality examination to minimize the issuance of “bad” patents). If the USPTO continues issue legions of bad patents as it has in years past, the value and usefulness of “good” patents to deserving inventors will continue to be watered down.
Inventor WoesJanuary 26, 2017 11:33 am
I thought a patent was the right to exclude, not intrinsic property rights like owning a house or a car. Wouldn’t that mean that in our constitutional system in the US a patent is a public right, insofar as it means nothing without the government?
InventorJanuary 26, 2017 08:59 am
Thanks for the great article. Well done, said!
In particular, I liked the following excerpted nuggets:
Critics of patents generally ignore the ex-ante costs and risks of invention and instead focus on the intensity of property rights with which the system was intentionally endowed. These policy changes have disintegrated patent rights from property rules to liability rules.
Congress was motivated to pass the America Invents Act (AIA), by calls from large technology companies that the patent system was unfair. In addition, an activist U.S. Supreme Court supplied a series of decisions from 2006 to 2016 that substantially eroded patent rights.
Since incumbents have large market share, the only way to compete is to maintain strong rights for novel innovations.
Do you think the Citizens United Decision is to blame for some of our politicians (Obama, Issa, Goodlatte, Schumer, to name a few) turning on the small inventor in favor of the well moneyed large tech companies?
Do you think that Obama, Michelle Lee, Issa, Nadler, and Schumer at the bottom of the sea would be a Goodlatte start? j/k lol