WIPO Report Validates Fears About U.S. Patent Decline

“These patent filing statistics seem to confirm what those in the monetization, patent litigation and venture capital business have been reporting for several years—innovators and innovation funding are shifting away from the United States.”

Each year the World Intellectual Property Organization releases a report titled World Intellectual Property Indicators. The latest edition of the report, the 2019 version, is a look back on the filing statistics for 2018. The report is eye-opening and should be mandatory reading for policy makers and legislators in the United States. For the first time since 2009, the United States saw a decline in the number of patent applications filed. This remarkable statistic comes at a time when patent applications are growing in number across the rest of the world. And let’s not forget that 2009 was a time of particular economic crisis both in the United States and around the world due to the global financial crisis and Wall Street meltdown brought on by the housing market collapse.

Numbers Don’t Lie

As for the specifics, in 2018, the United States saw a 1.6% decline in the number of patent applications filed, which is the first decline since 2009. Meanwhile, patent filings grew by more than 5% worldwide. Patent filings grew by double digits in China (11.6%), India (7.5%), Korea (2.5%), Singapore and the European Patent Office (4.7%) all also saw increases in the number of patent applications filed. Even low-and middle-income countries are seeing substantial increases in patent filings: Pakistan (+27.8%), Philippines (+26.7%), Uzbekistan (+17.5%), Morocco (+14.1%) and Vietnam (+12.8%) recorded particularly rapid growth in 2018. Even the African Intellectual Property Organization (OAPI), the African Regional Intellectual Property Organization (ARIPO) and the Eurasian Patent Organization (EAPO) all similarly reported strong growth in applications in 2018, 6.2%, 11.2% and 5.6% respectively.

Amidst this decline in the number of U.S. patent applications filed in 2018, the WIPO report continues to show that U.S. applicants are among the hungriest for patents in the world, although their desire for U.S. patents is declining for the first time in a decade. Indeed, in 2018, U.S. applicants filed the largest number of applications abroad (230,085) in 2018, which is more than double third-place Germany (106,753) and more than triple fourth place Korea (69,459).

A Decade of Decline

These patent filing statistics seem to confirm what those in the monetization, patent litigation and venture capital business have been reporting for several years—innovators and innovation funding are shifting away from the United States.

Anyone who has been paying attention to the decline of the U.S. patent system, well chronicled on the pages of IPWatchdog.com over the last decade, will hardly find it shocking that patent applications are increasing across the rest of the world while they are in decline in the United States. Each new day it seems there are only further reasons to deter U.S. inventors to file patent applications.

In 2012, in Mayo Collaborative Services v. Prometheus, the Supreme Court was faced with patent claims that no one in the patent community thought were novel or nonobvious. Yet, the Supreme Court took the opportunity to invalidate the claims as being patent ineligible because the claims at issue added so little beyond observing the natural law that the defined claim couldn’t possibly be worthy of a patent.

In 2014, in Alice Corp. v. CLS Bank, the Supreme Court was faced with patent claims that related to computerizing the function of what was essentially, in the view of the Supreme Court, a checkbook register. The Supreme Court during oral argument was even told—not once, but twice—that the invention could have been coded by a second-year engineering student over a weekend. How trivial must the code be for that to be correct?

Where We Have Arrived

Rather than recognize the facts of Mayo were peculiar and represent the most trivial of situations, the Federal Circuit has used Mayo to destroy medical diagnostics and reiterate again and again a conclusion that is contrary to the text of the statute and Constitution—that discoveries are not patent eligible. We are now at a point where a method for manufacturing a shaft assembly of a driveline system is considered to be patent ineligible as being a natural law. See American Axle & Manufacturing, Inc. v. Neapco Holding LLC (Federal Circuit, October 3, 2019).

Judge Kimberly Moore in dissent referred to the majority ruling in American Axle as “validity goulash”, which is being rather polite. It is utterly asinine for a method of manufacturing a drive shaft to be patent ineligible as being a natural law. This ruling means all methods of manufacturing, and quite possibly all methods and even all patent claims, are patent ineligible because on some level everything is based upon a law of nature. The fact that you are not floating out of your desk chair as you are reading this right now relies on a law of nature for crying out loud! Does that mean sitting down is a law of nature? It just might, in the view of certain Federal Circuit judges.

Rather than recognize the peculiarly simple, even trivial code that was admitted by the patent owner to have been written over a weekend by a second year engineering student, the Federal Circuit has so expanded the Supreme Court’s ruling in Alice that we are now at a point where a wireless controller system for a garage door is abstract, as if it doesn’t exist in any concrete or tangible form. See The Chamberlain Group, Inc. v. Techtronic Industries Co. (Federal Circuit, August 21, 2019). Obviously, a wireless garage door control system is not abstract and does exist, as do the hundreds of thousands of other wirelessly controlled innovations that have been patented all the way back to the original discovery of wireless control by none other than Nikola Tesla.

Swallowed

Obviously, the Federal Circuit has jumped the shark. And the Court is also ignoring the Supreme Court’s direction. The Supreme Court specifically told the Federal Circuit—and all other courts and tribunals—that too strict an application of patent eligibility as a gatekeeper would swallow all of patent law, and cautioned decision makers not to allow patent law to become so swallowed.

With the law having evolved to the point where no medical diagnostics are patent eligible, a wireless controller system for a garage door is considered abstract, and a method of manufacturing a drive shaft is a natural law, well, patent law has become swallowed by extreme overreach by an activist Court that is driving innovation funding overseas, and is now driving patenting activities overseas as well.

If this WIPO report is not the cry for help that Congress or the Supreme Court will hear, where will the industry be in 2020? Where will the industry be in 2025? The future does not look bright without intervention by those at the top who have authority to fix the mistakes they have made and a willingness to put the Federal Circuit Genie back into its bottle.

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Copyright: JrCasas

Gene Quinn Gene Quinn is a patent attorney and a leading commentator on patent law and innovation policy. Mr. Quinn has twice been named one of the top 50 most influential people [...see more]

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com.

Join the Discussion

31 comments so far.

B
October 30, 2019 03:12 pm
@ ghostndragon

The Alice Corp. decision is actually quite narrow. Wrong, but narrow. It took the CAFC to turn bad into sewage and, despite the whining, the CAFC doesn’t follow Alice.
ghostndragon
October 30, 2019 03:00 pm
@18 Benny – Excellent question. I know of a large IP boutique who took a case with their client all the way to the SC and won. In the process, they pretty much invalidated 90% of the rest of that client’s patents and pretty much screwed biotech up for the foreseeable future. I touched the case and when I gave them the answer they didn’t want, they ignored it. In any case, I find it amusing that everyone here (especially Gene) want to blame the Fed. Cir. and not SCOTUS. There’s a power struggle here, and no matter what the Fed. Cir. does, they will always lose bc they’re not SCOTUS. SCOTUS is the final say, and if they avoid taking up the Fed. Cir.’s protest decisions, it’s on SCOTUS.
BP
October 25, 2019 01:50 pm
@22 BP, its helpful to use a name that is different from a name already being used in the thread (e.g., BP2). Or, use a general name “anon” or “anonymous”.

As to American Axle, listen to the Federal Circuit hearing, you will be amazed at how Dyk bluntly says that certain broad types of claims run afoul of 35 USC 101 – without ever mentioning preemption. Rather, he resorts to “natural law”.

He also makes a faulty comparison to “noise cancelling headphones”. He sure didn’t hear J. Moore when she referred to 102, 103 and 112! Maybe he’s wearing J. Moore voice canceling headphones!
angry dude
October 24, 2019 12:55 pm
Concerned @27

There won’t be any meltdown – rather it’s a (very) slow death by thousand cuts

If both individuals/small companies and large corporate (as Paul the PE @12 described) inventors give up on inventing and patenting for lack of incentives, this country will become a third-world economy, with nukes and military, but with impoverished people (much like Russia)

Takes time… but it’s happening already – tariffs imposed on Chinese imports are not gonna help, they’ll just make things more expensive to buy in US for most people
Concerned
October 24, 2019 08:27 am
Night Writer:

To your point about the hope that patents will pick up again. I feel the patents will make a comeback, it is the only logic outcome. When and how fast:? Not fast enough.

The title of my article is “Can I hold on longer enough until the madness stops?” That still remains a good personal question.

The subprime mortgage scam had plenty of Professor Lemley types running around stating lending money to people without financial means is an acceptable risk. It did not take a professor to realize the preceding was “code” to underwrite nonperforming loans and perpetuate fraud in the secondary markets.

Perhaps patents will not have the tipping point climax that the subprime mortgage crisis had of complete financial collapse, unless the Morinville possibility plays out: The Chinese hijacks our aircraft carrier and beaches it. I’m sure Professor Lemley would have a ready explanation for the Morinville possibility if such occurs.
Concerned
October 24, 2019 07:58 am
Angry Dude:

My wife cannot get past the observation that the USPTO (and courts) care more about HOW the problem was solved than the fact the problem WAS solved.

My response to her is that the founding fathers also cared more about solving the problem and spurring innovation. That the illogical situation she observes today is the byproduct of a hidden agenda.

Her reply: Whatever!
Night Writer
October 24, 2019 06:22 am
The reality is that the value of patents has dropped 80% or more as measured by the actual purchases of patents. (Note that people like Lemley are trying to argue that it doesn’t matter whether or not patents cannot be enforced that people will continue to file them.)

What I see is this is a slow learning curve. There have been so many ebbs in patent law that the corporations are still filing patents in case they pick up, but that is starting to change. The in-house counsel are starting to act more and more like patents are junk paper. The budgets are dropping. The VPs are starting to think that maybe filing about 50% or less of what they did before would be prudent. It will keep dropping.

The whole system is dying. It is just taking a long time.
angry dude
October 24, 2019 03:14 am
Concerned @22

My wife asked me almost 20 years ago which industry was going to pay me for my invention..

After hearing “Apple and others” (that was before IPhone) she just pointed her finger at her forehead and twisted it..

20 years later, after wasting all the efforts and time and tens of thousands of dollars on a useless US patent I finally realized that she was absolutely right

Moral: women are much more practical than men
Concerned
October 23, 2019 11:25 pm
Jack @20:

My wife was at a community event about a month ago. Out of the blue, a commoner tells her that patents are worthless.

He did not know my status as an inventor.
BP
October 23, 2019 10:42 pm
For the fear of stealing my idea, I didn’t file patent at all. The internet is very open, especially for Govt. So, filing patent, before it reaches to patent office, it goes to someone else who milk money fom our idea. Also, we can’t store ideas in cloud platforms too, it goes fast to others, before even filing patent, some one already come up with product.
Anon
October 23, 2019 07:28 pm
Benny,

No – your “referring to attorneys just like yourself but servants of a different master ?” is not accurate.

While many things are done at a client’s discretion, choosing to subvert the law is NOT something that an attorney may pass off as “that’s what the client wants.”

There ARE attorneys filing items under the IPR regime that are NOT subverting the law – they are not to whom I direct my disdain.

Rather, it is those attorneys who advocate for a variety of reasons that are NOT in accord with the law as written by Congress, that actively perpetuate the wrongs that the Supreme Court have done, and who do NOT abide by their state oaths to hold ALL branches of the government beneath the Constitution.

To answer your question then, I would bring the best arguments that I have — in accord with the law and NOT in perversion of that law.

This has nothing whatsoever to do with California.

Angry Dude,

Yet again – there is a difference between anger, realizing the actuality of that emotion and then playing the pawn of the Efficient Infringer by advocating “just quit” — which is exactly what they want you to do.
jack
October 23, 2019 06:11 pm
it is only question of time when current Sorry state of affairs in US is going be common knowledge among inhabitants of this country. Not only inventors. Good luck than to find a sucker willing spend money on worthless US patent. Such common knowledge comes to reality in unpredictable surges similar to start of sudden migration from Syria to EU. Did you ever wonder what happened to this people suddenly looking for life in EU? Knowledge is dangerous thing. This situation is more serious than we think – signs of American domination era coming to the end. ( accelerated by the Stable Genius)
I myself going to submit US patent next month only because I live here in hope that things will change but my FOCUS, main pursuit is abroad. Only logical approach.
BP
October 23, 2019 06:07 pm
@18 Benny, You are correct to place some blame on attorneys that perform such services for the monopolies – if we had a level playing field, their positions/arguments would have been shut down (sanctions?). Unfortunately, the monopolies/politicians have arbitraged/distorted the playing field. One or two bad decisions can be explained away as anomalies, but the string of illogical, unscientific, anti-patent, anti-jury, anti-anti-trust decisions coming from various district courts and the Fed Cir, only one explanation for that, corruption. Too many here have seen multi-million dollar deals and jury decisions go down the drain due to the handiwork of the Fed Cir. And the winners? The usual suspects.
Benny
October 23, 2019 02:48 pm
Anon, am I to understand that when you speak of silicon valley you are referring to attorneys just like yourself but servants of a different master ? If one of the SV bigwigs desired your service, how would you respond ? Would you not do your level best to serve your client’s interests, raising 101, 102,103 and 112 arguments in an IPR?
Our company has initiated 3 IPRs in the last 10 years, and that is what our well paid attorneys did. And we aren’t based in California..
angry dude
October 23, 2019 02:39 pm
Anon @14

Dude,

It’s all crystal clear to me

The mess was conceived and financed and carefully engineered by billionaire SV tech “elites” to get rid of little pesky inventors like me and small R&D ventures with “computer implemented” inventions threatening their tech monopolies and it was subsequently put into everyday practice by corrupt DC critters

The folks who exploited this mess are a larger group including infringers of Bunch-of- Balloons patents or Tesia’s mechanical zipper patents – Josh and Tesia were just a collateral damage (Josh got extremely lucky with his timing btw – if he attempted to enforce his patents today we would have another broke and very angry dude here)

The mess then spread over to cover “everything under the Sun made by men” including wireless garage door openers and mechanical drive shafts…
Good job !
Now what ? To the morgue ?
Jam
October 23, 2019 12:58 pm
It may be argued that the Federal Circuit is perfectly following the roadmap laid out in Alice: give the false pretense that the court is “worried” about the effects of its opinion, kill the patent, then fabricate a tortuous reason to justify. Alice: doing this could swallow all of patent law … and we’re doing it anyway! (because … 103 reasons). Federal Circuit: we don’t want to kill valid patents … but we’re doing it anyway! (because … SCOTUS, 112 reasons, 103 reasons, take your pick).
BP
October 23, 2019 12:13 pm
Finally, I understand Dyk and Taranto, they live in the abstract universe where there is no friction, no plastic deformation and no possible means for failure of a driveline system shaft assembly – ergo – there is no real need for tuning of the shaft assembly. Let it vibrate according to Hooke’s law, according to Dyk and Taranto, it will never fail.

Brilliant, simply brilliant, Dyk and Taranto deserve the Nobel Prize, not in Physics, but in Literature for their fiction.
Anon
October 23, 2019 12:11 pm
Benny @9,

I would not go as far as your comment goes.

The difference that you see may merely be the difference in “blame” from those that have created the mess from those that exploit the mess.

In the larger picture, the exploiters certainly do not “escape” blame — as easily witnessed by comments identifying the concept of Efficient Infringement.

Quite in fact, Night Writer quite often puts the blame on SV Efficient Infringers for having a hand in the political machinations of the courts, and would be directly counter to your attempted point here.
angry dude
October 23, 2019 09:37 am
The doc said “to the morgue” – to the morgue it is !

I told y’all years ago…
Paul the PE
October 23, 2019 09:31 am
Hello Gene. As an American innovator, working in corporate happy land, I have given up on the patent process, and let me tell you why. First, the company has a big giant computer that tracks big giant data, candidates, all knowledge, all times. And for all of this, the IP tool takes my invention, my spec, my claims, my drawing and hosts them on a “secure” server, which I’ve come to believe is a thumb drive under a big orange painted rock that reads “company secrets under here”. The database is raided, pilfered…both internally and externally. Next comes the peer review, after allowing the data a good long time to soak in thievery. The experts consist of a cadre of folks that can’t won’t and don’t do anything as a matter of policy. the same policy that allows aircraft manufacturers to do things to passengers in the name of profits that would have us carpet bombing a sovereign that attempted anything along those lines. policy and profit over all no? At the peer review, the bumping morons that can’t won’t and don’t can barely find the title block on my work. interpreting the utility, the business case, the prior art (all of which I have provided in endless detail) is beyond their “comfort zone”. Usually this means that the decision of the “gifted” is to make my innovation a trade secret, let it die on the big fat server, and then sometime later prosecute it after their buddies actually read and copy my work, change the name to theirs and offer no improvement at all. yes, there’s laws on that….but what of law? policy governs all. Now, if by chance, I get “the nod” from the gifted fools, I get to sit with outside counsel that was hired based purely on price not skill. then I get to write my own spec, claims and drawing, of course in the format and dogma that they like, and then they begin prosecution into an art unit with an FOA of “go away, we are busy” followed by years of nonsense. If in fact the patent issues, I get about $50 as an “award”, again, per “policy” after spending thousands of hours working on the matter while the droolcup wearing “counsel” that did nothing more than file what I gave them makes off with a few hundred K. you may tell me that I’m defective, etc. that’s fine. but if I run a risk/benefit analysis on this very process on my big corporate data server, the results are “run like hell….there’s no benefit here” on most any metric I can gauge. The folks that read this seem very bright. Gene, I’ve sat in front of you and John several times. Let me ask you: if it’s policy over law, how do we fix this? I’ve taken to simply sitting on ideas, going back to the Cicero notions that I grew up with. “if you do sump’n and you don’t want nobody to know, don’t tell nobody!”. I regularly advise friends to patent through Belgium and avoid the art unit lags in the US. it costs more but you don’t waste the 3 to 5 years waiting for and FOA of “no, ,go away”. Holla back, shed some light, enlighten me, show me the way baby!
BP
October 23, 2019 09:06 am
J. Moore: “Section 101 simply should not be this sweeping and this manipulatable. It should not be used to invalidate claims under standards identical to those clearly articulated in other statutory sections, but not argued by the parties. It should not subsume § 112. It should not convert traditional questions of fact (like undue experimentation) into legal ones. The majority’s validity goulash is troubling and inconsistent with the patent statute and precedent. The majority worries about result-oriented claiming; I am worried about result-oriented judicial action. I dissent.”

Rule of law: “the principle whereby [a] all members of a society (including those in government) are considered equally subject to [b] publicly disclosed legal codes and [c] processes”.

In American Axle, Dyk and Taranto flout the “rule of law” by [a] not treating all members of society equally, [b] severely distorting laws (101 and 112) and incorrectly citing precedent (Flook), and [c] making a mockery of legal proceedings before the US Court of Appeals for the Federal Circuit (narrowing issues to their liking to achieve their intended result).

As Moore stated, this is results-oriented judicial action.

Dyk and Taranto have adopted the anti-patent, pro-illegal monopoly anti-anti-trust stance of their handlers. Or, they have simply delegated opinion writing to clerks seeking favor of the same.

Technically speaking, Dyk and Taranto expose themselves as ignorants. Their writing demonstrates that they have no understanding of real-world mechanics, vibration, resonance, etc. They purport to rely on the evidence/testimony of “some” paid expert(s) in total disregard of reality. In reality (which Dyk and Taranto ignore), Hooke’s law is an extremely constrained approximation of real-world behavior. Any first year university physics student or mechanic knows that fact. Even a two year old child that has over extended her SLINKY toy knows that fact.

Time for some on the Fed Cir to retire. We don’t need their bought-out, biased, ignorant, detrimental-to-society, results-oriented judicial activism.
Night Writer
October 23, 2019 06:14 am
@7 B

You really have to get your head around the fact that judges like Hughes, Taranto, Stoll, Reyna, Chen, (I am missing one or two) were appointed by Obama but selected by SV.

Chen was virulently against information processing patents at the USPTO.
Taranto was virulently against patents at the DOJ.

The judges were selected based on being virulently against patents (or a willingness to get patents under control) and a willingness to not apply the law but be judicial activists.

That is why the CAFC is the way it is. The people selected were not the type of people that should be judges.

And many of my comments are based on first hand experience with these people before they were judges. I think the DC community knew that SV was stacking the CAFC as it happened. Each new appointment of Obama’s was a grave disappointment to the patent community inside the beltway. Not one of Obama’s appointments was considered by the patent community to be a qualified person that would attempt to apply the laws.
Benny
October 23, 2019 04:21 am
From the aggregate pf comments and articles on this subject, one could be led to believe that attorneys who prepare and file IPRs are not complicit in any of the mess – blame is laid squarely on the courts. Maybe ’tis so. Maybe not.
B
October 22, 2019 11:16 pm
@ Gene “Obviously, the Federal Circuit has jumped the shark.”

Fonzy jumped the shark in season 5 of Happy Days, which signaled a decline in the writing. The Federal Circuit’s Alice/Mayo doctrine started miserably bad, but I must admit the Alice/Mayo doctrine has indeed declined. I didn’t think it possible.

“And the Court is also ignoring the Supreme Court’s direction.”

Few among the CAFC have read the Alice and Mayo decisions. At least nothing beyond the Cliff Notes.
B
October 22, 2019 11:04 pm
@ Gene “Judge Kimberly Moore in dissent referred to the majority ruling in American Axle as ‘validity goulash’, which is being rather polite.”

Every time I read an Alice/Mayo decision I feel like Jocobim Mugatu and want to scream “The courts have only one look for Christ’s sake! American Axle? Blue Steel? Chamberlain? Ferrari? Investpic? Le Tigre? They’re all the same search for an inventive concept nonsense? Doesn’t anybody at the Federal Circuit read case law for Christ sake?

Not one of these knuckleheads in black robes knows what an inventive concept is. Taranto wouldn’t know an inventive concept if one bit him on the rear end during oral hearing. They’re all playing this idiotic Emperor’s New Clothes snake oil, and too dishonest to admit it.

As I count through the technical errors in American Axle the eye-roll strain is tremendous. Flook didn’t involve a “natural law concept,” and Diehr overruled Flook. Also see p. 19 of the slip opinion — the “token post solution activity” in Diehr? Opening a freaking mold? how more conventional post solution can it possibly get in the rubber curing business than opening a mold?

Think about this: Taranto killed Investpic by this retarded nonsense theory that the advantage in the claims is part of the abstract and therefor the claims are still abstract. What differs in Diehr, where the calculation process is part of the abstract?
Ternary
October 22, 2019 10:53 pm
“To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”

I am a great believer in causality (no complex quantum mechanics about guessing the state of affairs required). When a patent does no longer protect an invention, an incentive to invent has diminished, and fewer patent applications will be filed. See article.

Most of the authors and commenters (like myself) on IPWatchDog have been involved in patents/inventions for a while. I am probably not the only one who notices that very few newbie inventors write on this site and if they do it is with great disappointment about obtaining a patent. Very few authors and commenters on this site and on the “other site” are enthusiastic and excited about our patent system. No one is telling the world that they are incentivized to invent by the patent system. And that correctly reflects the current state of patents.
TESIA THOMAS
October 22, 2019 10:12 pm
@Night Writer

I concur. I think people only use US as ISA because it’s cheap and US attorneys are used to it.
Even if we’re not the gold standard system anymore that we once were, old habits die hard.
Pro Say
October 22, 2019 09:05 pm
The moon is barren of life.

Abstractland is barren of American innovation.

Congress: It’s almost Halloween.

Is the trick going to be on Our Country?

Or are you going to provide the treat our nation desperately needs by restoring our patent system . . . by restoring American innovation?

What are you waiting for?

What?
Night Writer
October 22, 2019 08:56 pm
What I see are a lot of applications that are first filings but were not made in the USA. I suspect without all these types of applications that the real decline is much more.
Anon
October 22, 2019 07:01 pm
Sorry, but I only see “crocodile tears” with the part of the write-up here of:

“The Supreme Court specifically told the Federal Circuit—and all other courts and tribunals—that too strict an application of patent eligibility as a gatekeeper would swallow all of patent law, and cautioned decision makers not to allow patent law to become so swallowed.”

The “don’t do as we do” just does not cut it when that same Supreme Court is fire-hose training all of the Simians in the cage of the CAFC.
Concerned
October 22, 2019 05:53 pm
Not only is everything allegedly abstract, every process is routine, well understood and conventional even if you may have to go to Mars to find such a process.

Earth calling Blue Origin and Bezos, come in please. We are trying to find a process in the universe that tracks parents of adults to solve long standing and financially harmful problems. Do you copy?