The Patent War Persists

“BROOKINGS Event, Dec 13, 2017”

“The recent slowdown in productivity growth has led to a renewed focus on policies that can support or interfere with Technological progress and innovation. Researchers who study the rules governing intellectual property have become concerned that the current system functions poorly, often impeding innovation rather than promoting it. At the same time, inefficiencies in the research and development pipeline have unnecessarily limited innovation.”

Patent Coalition Call (Every Week)

An all-star roster of patent advocates sharing different backgrounds and congressional aims participate in a pro-patent conference call every week. During this week’s call, the widely circulated Brookings Institution event invitation excerpted above was discussed at length. The event marks the official release of a Brookings Institute Report suggesting dangerous operational revisions at the PTO. The invitation began with the paragraph excerpted above.

As call participants discussed the event, it turns out some had participated in discussions of the Report’s early drafts long before its release and publication on Wednesday of this week. They were consulted but outnumbered. Their advice regarding the Report was ignored. Erstwhile patent advocate Ron Katznelson was consulted. After the call, he circulated a letter debunking the Report and explaining precisely why it was both misguided and harmful for early stage patent dependent entities. Here is how Ron’s letter opened. “This report is not only a one-sided proposal – it is a pernicious blueprint for killing the patent system using stale counterfactual rationales that have long been debunked.”

He closed his blast email by urging the group to attend the event so that its presentation would not be so one-sided. The event will be attended by the press.

Ron’s letter drew a confirming response from Brian O’Shaughnessy Esq., the Licensing Executives Society’s Immediate Past President. Brian was one of the DC patent and PTO experts asked to review an early draft of the Report. He shared Ron’s disappointment with the Report. Explaining what happened at the advance review session, he described how he had offered sound dissenting views that apparently fell on deaf ears.  Here is how Brian’s detailed letter summarizing the advance meeting began:

“I was invited to attend a special roundtable session of the Hamilton Project at Brookings a few months ago wherein Frakes & Wasserman presented an early draft of this proposal for modifying the patent system to minimize issuance of invalid patents.  The purpose was to get the comment from various experts in the community.  Regrettably, however, the invited review panel was notable for the absence of IP owners outside the efficient-infringer community (no life sciences representation at all); and there were very few unaligned IP practitioners having substantial real-world experience.” Continue reading The Patent War Persists

Patent Reform Survivors Counter-Attack

Paul Morinville is what happens when the politically dominant mega-tech platforms fail to complete their quest to cripple US early-stage innovation. The universities are fighting back. The Stronger Patent Act is launched. And now the independent US inventors have joined the pro-patent counter-attack with a new bill entitled “The US Inventor Act” dropped in the House. Paul’s independent inventors have felt the consequences of big tech’s dominant manipulation of Congress, the Courts and PTAB. They understand why big tech’s undermining of our innovation ecosystem is a threat not just to US global economic leadership but also to US military superiority. Sure, patent policy is complex. New digital technology and life science developments can be baffling. But led by Paul Morinville inventors have climbed Capitol Hill and have personally delivered common sense explanations that the entire Congress comprehends. They put it simply.  If inventors cannot afford the cost of wobbly patent reliability and investors cannot afford its uncertain risk, US early-stage innovation infrastructure will break down. As Paul explains in his IPWatchdog post linked below, our ecosystem’s inventors, researchers and investors are migrating elsewhere. Increasingly that “elsewhere” is China.

Virtually everyone in Congress is aware of China’s world-dominance economic and hostile military aims. Congress understands why it should not be contributing to China’s global hegemonic objectives by crippling our innovation ecosystem at the behest of big tech and promoting tales of patent trolls. Congressional staff must no longer rely on Representative Darrell Issa to comprehend why China’s government-backed commitment to AI dominance is a more critical concern than kowtowing to the faux worries of US mega-tech digital behemoths. However, Oil States turns out, having been awarded millions in willful damages Josh Malone’s “Bunch O’ Balloons” has, at last, prevailed over Telebrands, its serially infringing tormentor.

Paul describes the proposal in his IPWatchdog post linked below. In it, he first outlines the Act then refers his readers to suggestions and explanations that they can use to explain why its provisions are so vital.

To refer to one example, AI is the Information Age’s hottest new technology. Its mastery is crucial to world military and economic leadership. China’s AI infrastructure is now in place. Its patent enforcement system is credibly established. China’s vast amounts of data and cutting-edge technology are ready to propel it to global AI dominance. All it now needs is to attract the talent and capital to assume and hold the AI lead. Time is running out.  Congress, the Courts and USPTO are driving talent and venture capital to China.

Why should Congress help China take the lead by further crippling US innovation’s wobbly infrastructure at the behest of dominant big tech? Why not give our home team a boost? The dangerous military consequences of past congressional apathy to patents are becoming apparent to all congressional staff and Members, not just big tech’s puppets parked in House Judiciary?  These are not merely patent policy issues. They are in the news every day. Paul’s plain-spoken street leveled approach will add needed impetus to the pro-patent cause. All they need to do is read the papers. If he did not exist, the inventors would have to invent him. But he does exist. To big tech chagrin. Continue reading Patent Reform Survivors Counter-Attack

Qualcomm vs. Apple (and Broadcom)?

DC pro-patent advocates sometimes misperceive big tech’s primary mission which is expanding profits, not degrading patents. Congressional Patent reform may have temporarily gone underground, but big tech’s global commercial cage fight for market dominance will never let up. To understand what’s going on and where patent reform fits in, follow the money.

Apple retails electronic hardware in a commoditized cut-throat world market. Its business is expensive “prestige” retailing. Its profit margins depend upon jointly keeping down the cost of its parts while elevating its assembled products’ pricing. Apple is less concerned about being “first to market” than it is by being perceived as “best in market.” As NYU Sterne Profesor Scott Galloway describes it, Apple successfully assembles “Toyota” parts and sells the assembled products as “Porsches.” Its significant cost/price margin differential is maintained by marketing their products’ glamour and closed product ecosystem. Its assembly costs are suppressed by skillful utilization of its global supply chain of parts and labor. Apple bargains hard. Suppliers intimidation is routine. Component suppliers are also held in check by Apple’s tactical deployment of efficient infringement and bolstered by its reputation as PTAB’s most frequent filer of petitions for patent nullification. After quadrupling its lobbyist representation over the past decade, Apple’s profit margins have been boosted by its weaponization of Congress, the USPTO and Courts and government agencies here and abroad.

Despite these successes, Apple has been unable to cram down the costs of its Qualcomm chip components. So it launched a worldwide attack on the legalities of Qualcomm’s entire licensing system while simultaneously withholding royalties contractually owed to the San Diego chip producer. This has provoked an expensive war between them driving down Qualcomm’s stock price and disrupting its planned acquisition of next-generation chipmaker NXP. Qualcomm is still standing. Enter Broadcom…. waving an unsolicited offer to acquire Qualcomm. Some are wondering whether Broadcom is coordinating with Apple or is merely taking advantage of Qualcomm’s more recent wounds inflicted during Apple’s long anti-Qualcomm component cost suppression crusade. Continue reading Qualcomm vs. Apple (and Broadcom)?

Public Outreach by Research University Patent Attorneys

Below is an excerpt from an excellent linked op-ed appearing in Oklahoma City’s Journal Record. We need more of these. Like input from home state universities, it will attract the Oklahoma congressional delegation’s attention. Authored by Sabrina Stubblefield, a patent attorney for OU, it lauds the public benefit of the University’s research tech transfer programs at a time when the societal and student benefits from university attendance are increasingly questioned. Tax legislation reflecting such concerns is about to become law. Ms. Stubblefield references a UCO conference panel addressing the benefits of university research and passage of the STRONGER Patents Act. On any conceivable cost/benefit basis, similar centralized and localized support for research universities has become critical. Her op-ed which is linked below includes the following excerpt:

“Researchers every day are working to advance the healthcare landscape, which in turn improves and saves the lives of not only Oklahomans, but people across the globe. Patents are a critical component of the healthcare industry, and the Stronger Patents Act of 2017 would help protect the intellectual property that is produced in our state’s university system, which is where many of these innovations are born. There was a recent panel discussion at the University of Central Oklahoma on this very topic. Representatives from the largest research-oriented universities in the state spoke about their investment in intellectual property and the benefits of a strong patent system. A strong patent system helps universities in moving research out into industry. There would not be much incentive for industry to work with a university to help further a technology without strong patent protection.”

It has always been assumed that university education prepared graduates for productive, gainful employment. But the economic restructuring taking place in the information economy has imposed new pressures on our research universities to justify their societal value proposition and to reign in tuition. In his periodic commentaries regarding the waning strength of our innovation ecosystem, prominent DC patent attorney Robert Sterne of Sterne & Kessler noted the student cost aspect of the broader university cost-benefit issue.

Read on for an excerpt from his most recent offering.

“Tuition is growing at a much faster pace than inflation in the U.S. according to this article by CNN Money, which features data from the College Board. According to this report, tuition and fees for a public 4-year college averaged $2,966 in 1996-1997. Fast forward 20 years, where tuition and fees now average $9,650 in the 2016-2017 school year.  That is like 225% increase, or 6.1% average annual gain in tuition and fees. For 4-year private colleges, there was a 4.9% average annual increase in cost.  Over this same period (1996-2017), the US saw inflation average 2.1% annually.”

It is a very short walk from the anti-university deficit hawk provisions of the new tax bill to congressional reductions in R&D funding. Research universities can no longer assume that nationally-based programs like AUTM’s excellent efforts to promote a positive public image for university research will prevent similar concerns from reappearing elsewhere, including in annual appropriations for federally funded basic research R&D. University research patent attorneys should be tasked with writing similar op-eds.

Stubblefield Op-Ed Follows

Stubblefield- Federal bill on patent reform would streamline innovation for universities – The Journal Record

Right Numbers Wrong Conclusion

The Information Technology & Innovation Foundation (ITIF), a prominent DC think tank accepts industry contributions, but it is well-respected. That said, we believe a recent report on startups misrepresents (whether or not intentionally) the present state of the US innovation economy by reaching too far into the past to support its statistically based conclusions regarding today’s health of US tech startups.  (read the full report below)

The report suggests that although lawmakers recognize the well-documented predominance of net new jobs created by startups they fail to distinguish between mom and pop-type startups whose limited job and wage production is not comparable to tech startups’ employment and wage growth. They, therefore, should not be lumped into the same category. Citing the proposed tax legislation pass-through provisions as an example of economically misplaced bunching, the report suggests that Congress differentiate its economic encouragement between tech and non-tech startups. So far so good. But the report also appears to refute a “common narrative” regarding declined new business formation as a causative factor in overall US economic decline. The excerpt from its summary below raised our suspicions:

“Over the last few years, a common narrative has emerged that new business formation is down and that this has been a significant contributing factor to the recent underperformance of the U.S. economy. There is a parallel narrative which holds that large technology firms are crushing technology-based start-ups, using their power to enter markets that start-ups otherwise would occupy. Therefore, a critical question for the future of the U.S. economy is the current state of technology-based start-ups. ITIF attempted to answer this question by examining data on more than 5 million firms in 10 technology-based industries from 2007 to 2016. As it turns out, neither claim is true. While it is true that fewer “mom and pop” start-ups are forming—a trend policymakers should be mostly indifferent to—technology-based start-ups have increased. But politicians should not accept the recent increases in technology-based start-up activity as justification for inaction. Instead, they should promote policies that will help current and future technology-based start-ups emerge and scale into larger firms that will generate long-lasting, high-paying jobs, increase innovation and productivity, and improve the global competitiveness of the U.S. economy.”

We disagree. Continue reading Right Numbers Wrong Conclusion

Why Winning Oil States Is Not Enough

Oil States’ outcome matters. If the anti-patent crowd has its way with SCOTUS, with Congress essentially stalled there is very little time remaining to save US innovation’s exclusivity from its exclusive availability to well-resourced incumbents.  Even if PTAB were to be eliminated by a holding that its creation or procedure is unconstitutional, it is doubtful that PTAB’s incapacitation would be enough to eliminate AIA in its entirety. In fact, Oil States’ outcome is uncertain. Any decision will likely be either narrow or split.

For purposes of analysis, however, let’s assume PTAB is obliterated. Does that mean our US innovation ecosystem is saved?

Here are five reasons why the answer is NO. Patent uncertainty would still hobble investment.

  1. eBay is still the law.
  2. Most patent applications are published 18 months after their submittal.
  3. Alice, Mayo and other Sec 101 eligibility judicial uncertainties still hover.
  4. Efficient infringement preceded PTAB and will continue to be economically compelling.
  5. Elimination of PTO fee diversion becomes less likely as the deficit grows.

These concerns and others will prolong US investment uncertainty in patent-dependent innovation. Continue reading Why Winning Oil States Is Not Enough

Good News – Iancu Hearing and Former Senator Jon Kyl’s Call for Strengthening Patents

On Nov. 29, PTO Director nominee Andrei Iancu appeared before Senate Judiciary as his confirmation hearing. He is qualified and experienced which means that he understands what all unbiased observers know: that the downtrodden US patent system has nowhere to go but up.

Importantly, he connected invention and investment underlining the importance of investor confidence in patented property and a need for stability in the system – particularly concerning PTAB. Questioned by pro-patent Sen. Coons, he admitted that although critics of the system were strident, their concerns were valid and that more balance was needed. Any rebalancing whatsoever will reflect movement in a pro-patent direction.

Oil States case has triggered much commentary. A Hill newspaper op-ed by former Republican Senator Jon Kyl is significant. He was an active supporter of AIA. His Judiciary staffer was Joe Matal, AIA’s author who now captains AIA’s PTO Praetorian guard. Significantly Kyl recants his former support in saying that AIA has contributed to US patent system’s decline and a decline in patent dependent new business. He notes that PTAB is harming economic growth and that eBay is harming the system by curtailing injunctive relief. He strongly supports the STRONGER Patents Act. With co-sponsor Sen.Tom Cotton’s transfer to CIA Director a high probability, Kyl’s fresh look at AIA’s unintended consequences and the system’s decline will be circulated widely on the Hill. Continue reading Good News – Iancu Hearing and Former Senator Jon Kyl’s Call for Strengthening Patents

ICYMI – Joe Allen and Sen Cotton

  1. A widely rumored Trump plan to replace Sec of State Tillerson threatens to shift Sen. Tom Cotton, the Republican co-sponsor of the STRONGER Patents Act, to lead the CIA whose present Director Mike Pompeo would become Tillerson’s replacement. (See article here) Losing Sen. Cotton’s co-sponsorship and his presence on Senate Judiciary is a blow to pro-patent advocacy in the Senate and on Capitol Hill. It also appears that Rep Conyers former Ranking Member of House Judiciary and a critical pro-patent House ally will soon retire as well.
  2. In an IPWatchdog post today, Joe Allen unmasks sloppy advocacy journalism by Arte Rai, a Duke University anti-patent IP professor whose academic credentials enabled President Obama to politically cover his misplaced enthrallment with Google’s Eric Schmidt and Silicon Valley during the years leading to AIA. Rai is joined in this article by professor Robert Cook-Deegan. Like economist Joe Stiglitz and KEI’s Jamie Love who have actively promoted the installation of price-based Bayh-Dole march-in, Rai has long disparaged B-D based commercialization.

The Rai Cook-Deegan article Joe discusses misrepresents both the actual status of the parties and NIH’s position regarding the ongoing CRISPR patent dispute between the east and west coast universities. Her article is another manifestation of the continuing long-range legal lobbying deployed so effectively by Mark Lemley, his academic apparatchiks and Rai herself. They write highly speculative law review articles that lurk in academic and judicial libraries for later reference by legislators, law clerks and judges. Until pro-patent academic economists like Adam Mossoff arrived on the patent reform scene, dreck like this Rai article was mostly unanswered in legal and economic academia. This left B-D’s survival in the good hands of Joe Allen whose thorough, consistent analysis has efficiently responded to such lobbying efforts with his knowledge and experience. Here is an excerpt from Joe’s post:

“The allegation of a CRISPR crisis is part of the overall attack on the patent system claiming that it stifles science and that exclusive licensing threatens the public interest. The Bayh-Dole Act is a target because it encourages patenting and decentralized the management of federally funded discoveries from Washington to inventing organizations. The subsequent explosion in public/private sector partnerships helped reestablish the US as the undisputed leader in science and innovation.  But that’s lost on the critics.”

Oil States Oral Hearing Keeps Observers Guessing

We refrained from immediate comment on the oral arguments in Oil States. Its tapestry deserved a little distance from all but SCOTUS experts. The issues bubbling from beneath the questions were complicated.  Having read the excellent pro-patent Amici briefs and after ruminating on the questions asked from the bench, we think the briefs will be determinative. That said the final outcome is unclear. It may just be too hard for pro-patent property conservatives to untangle the conflicting congressional issues without legislating from the bench.

One thing is clear. “there’s a new Sheriff in town.” AIA’s author and PTO high priest Joe Matal’s prediction of a 9-0 decision upholding PTAB is highly unlikely. Justice Gorsuch and likely Chief Justice Roberts will see to that. But patents’ reliability remains uncertain. Undaunted by PTAB costs and risk, well-resourced big tech incumbents who finance their inventions will continue exploiting patent uncertainty. Until the Court or Congress otherwise decide, efficient infringement backed by PTAB access will continue to work. Meanwhile, sovereign immunity-based PTAB bypass will continue attracting creative lawyers like Michael Shore (who represented UFL and crafted the Allergan-Mohawk arrangement).

SCOTUS questioning revealed the divided focus on administrative and patent law. Justices either probed the adjudicative limits of administrative law tribunals and their capacity to correct past mistakes or the protective purposes of the Constitution’s IP clause providing patent exclusivity rights for limited time.The former group included Justices who tend to favor government’s “commanding heights.” Questions by Justices Ginsberg, Kagan and Sotomayor’s implied that long-established ( 40 years )PTO reconsideration procedures to correct past mistakes proved that PTAB’s more elaborate adversarial IPR proceedings provided a similar (if not better) opportunity to correct them.They searched for a constitutionally-triggered turning point in the examining process. But none emerged, forcing them to focus on due process review availability by Circuit Courts. Patent focused Justices led by Justice Gorsuch were more attuned to innovation markets. Their questions suggested that more settled exclusivity was required to incentivize investment reliance on patented technology. Mindful of Art.I Sec. 8 they may have concluded that the Constitution’s express reference to securing patents for “limited times” must mean securing them from subsequent PTO cancellation for at least some period of time within a granted patent’s term. This recurring alternating emphasis suggests that compromise is possible, but may result in shoving full resolution back to Congress. Continue reading Oil States Oral Hearing Keeps Observers Guessing

If SCOTUS Fails To Make The Right Decision

Here is Gene Quinn’s take on the Oil States Hearing.

Supreme Court seems split on Oil States constitutionality challenge to IPR proceedings by Gene Quinn.

Justice Gorsuch seems the most likely, based on his questions, to support the petitioner’s position that there is a constitutional infirmity surrounding IPR proceedings. Chief Justice Roberts also seemed to have substantial concerns with respect to IPR proceedings. Perhaps somewhat predictably, Justice Breyer and to a lesser extent Justices Sotomayor and Kagan, seemed through their questions to view IPR proceedings as just another opportunity for the Patent Office to make sure the correct determination has been reached at the time the patent was granted by the Patent Office. Justice Kennedy overall seemed more in line with the thinking of the liberals on the Court, Justice Ginsberg asked difficult questions and seemed difficult to predict how she might rule. Justice Thomas characteristically remained silent, although his judicial philosophy would be typically in line with Justice Gorsuch. Justice Alito asked only a few questions of the petitioner’s counsel, Allyson Ho, which focused on whether the Constitution requires a Patent Act and whether Congress could put limitations on the grant of “these monopolies.”

If SCOTUS makes the right decision, we can stop worrying about PTAB and focus on passing the rest of the STRONGER Patents Act. But if SCOTUS allows PTAB to survive in its present form, pro-patent advocates must quickly persuade Congress to pass the STRONGER Act. Failure to convince them will further unleash efficient infringement backed by PTAB and the end of our innovation ecosystem except, of course, for well-resourced big tech incumbents. Time will thus be of the essence.

A letter released today by numerous conservative groups (see full PDF below) contains an excerpt providing a pro-patent script for explaining why the STRONGER Act’s PTAB section should pass.

“While perhaps a worthy goal, the PTAB has become a regulatory agency run amok. The former head of the Federal Circuit even labeled it a “patent death squad.” And the data support this label. The PTAB’s patent invalidation rate ranges from 62% to 92%. In some high- tech sectors, well over 90% of patents are invalidated. This is partly because the U.S. Patent and Trademark Office (PTO) frequently uses the PTAB to carry out its agenda. For instance, during the Obama administration, the director of the PTO often stacked the deck by convening multiple panels of PTAB judges until a panel would achieve her desired result and invalidate a patent that she believed was not valid.

Although the PTAB was intended to be a “fast track” for patent challenges that saved time and reduced the costs associated with courtroom litigation, challenges often occur before the PTAB and in federal court at the same time. Patent holders who have spent years and a great deal of money obtaining a patent now must defend their patent rights on multiple fronts. Moreover, PTAB challenges can be brought by anyone, even if the party has no direct interest in the patent. With such a low barrier to filing, numerous entities can use the PTAB to harass patent owners, challenge their inventions, and hamstring their businesses.”

We hope we never need it but after an adverse Oil States decision, this concise statement is an excellent place to begin talking with your home state delegations. Continue reading If SCOTUS Fails To Make The Right Decision