STRONGER Patents Act – a Masterpiece

The opening lines of the press release announcing the introduction of the Senators Coons’ and Cotton’s STRONGER Patents Act (SPA) emphasize the bill’s important economic impact. They understate the bill’s breathtaking legal impact which is set forth in two other summary documents linked in the release; a “one pager” and a “two-pager.” Both are concise and must read. They reveal a masterpiece of common sense content designed to restore our once gold standard patent landscape to its former greatness. All three important documents are linked below. Here is a preview:

Among other things, SPA’s enactment would end PTAB’s reign of terror over lesser-resourced inventors and disruptive technology by harmonizing its burden of proof and claims construction standards with those of the district courts restoring patents’ presumption of validity while confirming patents’ property rights. Its put-up-or-shut-up one-time PTAB claims nullification process, its standing requirements and its meaningful estoppel provisions will help curb routine and abusive misuse by efficient infringer defendants against under-resourced early stage innovation. There are more equally important provisions.

Continue reading STRONGER Patents Act – a Masterpiece

“Secure for Limited Times” Can Not Mean No Security Ever

Before the long weekend ahead we want to call your attention to two hurdles ahead as Congress considers the Coons-Cotton STRONGER Patents Act and SCOTUS considers PTAB’s constitutionality in Oil States.

 SCOTUS

When our Founders expressly established patent rights in the Constitution they underlined the document’s unique establishment of a new and different sovereignty for the US. It was to be vested by the people in a Constitution not by a deity in a king. Patent property rights were expressly defined and vested in the inventor whose labor produced it and were no longer subject to a royal grant or withdrawal pursuant to the king’s sovereign whim. Like the Constitution itself, patent property rights were based upon the property theories of John Locke. Congress was given the power to codify them but Congress could not completely cancel, replace, or repeal them by completely denying their exclusivity. In short Congress could set a time limit but could not do so in a way that allowed for no time at all to securely exercise the rights conferred.

By characterizing these constitutionally-established rights as “public rights” for their entire term anti patent advocates aver that Congress can amend their term. But even if that was the Founders’ intent because of the words “secure …for a limited time” Congress cannot eliminate them entirely. Nor can Congress create an administrative agency like PTAB by which PTO’s administrative examination powers enables PTAB to nullify those rights all the way to and through the end of a patent’s term. PTAB’s nullification powers up to and through the final nanosecond of a patent’s entire term is contrary to the express words of the Constitution.” Secure for Limited Times” cannot mean for no time at all. This matters because unless parent rights are property rights in which ownership can become settled for a limited time such patents cannot support investment in commercialization. Gene Quinn provides further chapter and verse in a link below.

Congress

In another recent IPW post pro-patent all-star Paul Morinville, describes Google-bro Issa’s recent smarmy dismissal of Professor Adam Mossoff’s property rights testimony and explanation of what is now referred to as the China syndrome as the Asian powerhouse strengthens its patent system while weaken ours. Apparently preferring re-election support from Google and friends, Issa (who just won a close election in a recount) stands firmly on both sides of the property issue. In Paul’s description of a recent hearing, Issa first champions patent property rights but later mocks Professor Mossoff’s refutations of proponents’ support of patents as public rights. As Judiciary Chairman Goodlatte’s anti-patent poodle, Issa can be expected to block (or even adversely amend) much-needed pro-patent progress in the House during this unusual session. If Senator Coons’ STRONGER Patents Act clears the Senate, Issa will do what its takes to sabotage its passage in the House.

Both obstacles are not insurmountable but they are formidable. Please take a moment to read Gene Quinn’s take on choosing a “patent as property” PTO Director and Paul’s post describing Google tub-thumper Issa’s oily duplicity on the issue and the China Syndrome. They both are linked below.  Continue reading “Secure for Limited Times” Can Not Mean No Security Ever

Patent Troll Narrative proven to be “Fake Views”

Patent Reform was intended to be in full effect before anyone noticed that like AIA it was based on false assertions by anti-patent academics including: a non-existent litigation crisis; a tax on innovation; alleged patent holder valuation inflation; alleged patent holder valuation inflation and; the so-called, diversionary, “patent troll narrative” which, for a while, completely captured congressional attention but now shares the top-of-mind limelight with “efficient infringement.

Unfortunately, this story’s destructive thrall appears still to have captivated SCOTUS and captured PTO. Congressional delay, however, gave us room to convince enough members that at least there were two sides to the story. That same delay has now given responsible parties in academia time to respond to the barrage of faux studies demonstrating a “need” to address waning (and otherwise explicitly addressable) troll abuses with the comprehensive litigation reform the efficient infringer lobby sought. Each of their promulgated academic “fake views” has now been refuted.

Actual and readily available facts debunk the so-called “volume crisis” in patent litigation. The “tax on innovation” most prominently promulgated was a thoroughly discredited “study” authored by Bessen and Meurer. (It is also attacked in this article but still quoted by duped anti-patent apparatchiks who have not yet realized how foolishly gullible they sound.) This past year USC economist Jonathan Barnett has been circulating a draft law review article before its final publication in the Berkeley Law Journal scheduled later this year and entitled “Has the Academy Led Patent Law Astray.” Barnett’s thoughtful analysis will be released this Fall in final form. In it, he conclusively demonstrates that previous patent reformer academic assertions about “royalty-stacking,” “patent hold-ups” and “patent thickets” were entirely speculative when released and since have been proven by empirical data to be completely false. Nevertheless, they still are contributing to the “depropertization” of patents. Here is an advance citation to what can only be referred to as “must reading”

Now we have a new and definitive debunking of the misleading “patent troll” narrative entitled, “Patents at Issue: The Data Behind The Patent Troll Debate” by Ashtor, Mazzeo and Zyontz. Like the detailed Barnett article, it is a “must read” for pro-patent advocates. It also discusses the counterproductive remedial implications of applying “liability theory” instead of “property theory” to patent ownership. Liability theory maneuvering led to the notorious Justice Kennedy anti-injunction concurrence in eBay.

Here is a quotation from the article’s “Background” explanation:

“The core questions in the “patent troll” debate include issues of whether and to what extent patent assertion practices take a toll on innovation, whether PAEs are asserting low-quality patents and seeking quick settlement payoffs, whether startups suffer more harm through patent assertions than the benefits they gain from patent market liquidity, and whether high litigation costs are shifting the economics of patent assertion to favor PAEs. These questions implicate the underlying tension between “patent monetization” and “patent assertion.” Which types of patent monetization practices are legitimate, and which types exceed the intended scope of the patent grant? Does “after-market” patent value extracted by PAEs deserve the same status as the patent value derived by practicing entities? More generally, should PAEs be entitled to property rule protection for their patent rights – should they have the right to exclude infringers – or should liability rules apply? In this paper, we seek to inform the policy debate about “patent trolls” and modern patent assertion practices by studying some of the key questions concretely, through empirical analysis of patent infringement award data.”

“Our findings reveal a number of important facts about PAEs and their patent assertion practices, some of which are directly contrary to popular positions in the “patent troll” debate. Rather, in some respects this data paints a very different picture of PAEs, showing them in some cases to assert patents and conduct litigation in ways that are highly similar to other patent– holders enforcing their rights. From the perspective of decided cases, it is very difficult to distinguish the “trolls” from any other patent plaintiff……

“On the whole, our findings suggest that the realities of PAE assertion practices are complex, and it is difficult to identify clear signs of abuse or misuse of their patents relative to other plaintiffs. Rather, the similarities we observe between PAEs and practicing entities highlight the risk that attempts to limit PAE’s enforcement rights or restrict the remedies available to them could inadvertently impact all patent-holders and cause adverse effects on the ability of practicing entities to enforce and otherwise monetize their patents. These results counsel caution in designing policies aimed at PAEs and patent assertion practices.

“Moreover, these results further indicate that modern patent assertion practices may yield unique efficiencies and benefits relative to traditional enforcement actions by practicing firms. We need to understand the relationship between modern patent assertion, patent monetization and patent value in its variety of forms before we can identify which practices “promote progress” and which prevent it. True “patent trolls” are difficult to find, and all patent rights are at issue in the hunt to apprehend them.”

Continue reading Patent Troll Narrative proven to be “Fake Views”

Catching Flies with Honey

Actions that are publicly appealing in the short term can have undesirable long-term consequences when they secure privileged access to those elected to oversee their conduct. Economists call such influential access, “regulatory capture.” Elected officials often try to block it by post-election directives, but skilled special interests know how to bypass such barriers. Because Citizens United has commoditized financial campaign support, regulatory capture now must be more nuanced to be effective. When a regulators’ front door is locked rear door access can be gained by voluntarily performing “good deeds” that favor their regulators. Our efficient infringer opposition’s ubiquitous incumbencies depend on continued congressional and White House tolerance of their digital dominance. They are skilled at regulatory capture. One means is to voluntarily deploy their vast resources by making “Godfather-like” offerings “that” cannot be refused.” There is nothing unlawful about such conduct. And as the old bromide says, “you can catch more flies with honey.” But because regulatory capture is ultimately corrosive to our rule of law, it’s inevitable capture must be carefully watched.

Readers will recall how Google rescued President Obama after ACA’s initial rollout was technically botched. Google “volunteers” quickly got ACA up-and-running. Readers also may remember that to ward off regulatory capture President Obama barred all lobbyists from joining his administration. So while anti-patent academics streamed in its front door, Google slipped in the back. That Google’s anti-patent bent fit snugly with their academic patent bashing theories was then evidenced by the president’s infamous Rose Garden press conference warning America about patent trolls. Once established, Google’s many lobbyists’ White House visits and administration Google appointments (including our present PTO Director) confirmed the government’s regulatory capture.

Efficient infringement is only one of the many informational efficiencies sought by our five largest corporations. (Apple, Alphabet (Google) Amazon, Facebook, and Microsoft). Patents are a form of commercially useful data. They want all original data. Apple and Microsoft use it to sweep users into proprietary ecosystems. Facebook and Google use it to sell advertising. Amazon uses to sell, well, everything else. None of this is unlawful. Indeed, we cannot do without much of what they do. But incumbencies maintained by data mastery of digital markets call for close congressional and administration watchfulness if only because of their overwhelming size and scalability. The purpose of patent reform is to disrupt disruptive innovation and such regulatory oversight. Patent reform’s success thus far reflects the regulatory capture of much of Congress and the White House. Now we have a new president and Congress. Big tech has no plans to release its captives. Watch for new good deeds aimed this time at President Trump and Leader McConnell.

Google’s Erik Schmidt bet on the wrong presidential horse. Facebook’s Thiel is well placed with Trump but is unpredictable. At present President Trump’s strongest poll support is the public’s perception that he is saving US jobs. Jobs are scarce in McConnell’s home state of Kentucky. US jobs have thus become a priority for both men. Trump’s principal concern at present is “this Russia thing.” Whether or not it deserves it’s coverage, at the very least it pulls focus from the Trump labor initiatives including job creation. In addition to being the spouse of Labor Secretary Chow Senator Mitch McConnell is also the gatekeeper to the Senate floor where votes on tax reform and healthcare (and indeed all else from post offices to impeachment). He will determine Trump’s success or failure. He is Trump’s most prominent DC ally. With Google on the outs, it is Apple’s turn to capture the regulators. Apple’s good deed is a “twofer” because it hits on both of big tech’s congressional and administrative sweet spots.

Continue reading Catching Flies with Honey

Patent Decline’s Top Causes and US Chamber’s Plea for Increasing its Strength

In his World Property Day post, IPWatchdog’s Gene Quinn predicts continued but not permanent decline for US patents after naming its three top contributors. His typically insightful prose pulls no punches and IMHO correctly identifies the decline’s legal culprits and their consequences. But in IMHO he fails to give due credit is to the influence of the ubiquitous Patent Troll narrative created first at Intel then brilliantly injected into the minds of congressional, SCOTUS and PTO lawmakers. Propagated by unsubstantiated law journalists’ speculations, bogus economist projections, misleading falsities to a lazy, uninformed press, occasional anecdotes and the over-anxious suspension of disbelief accorded to the Silicon Valley vanguard of the Information Age, its self-serving shiny object distraction penetrated DC policy top of mind. Its “litigation crisis” theme delivered it to sympathetic Judiciary Committee salons, an under-informed Supreme Court and a politically pliable PTO. Fueled by Amici blather Justice Kennedy’s injection of trolls into eBay blessed it. PTAB was presumably established to curb trolls. Mayo’s expedient nullifications based on expanded eligibility grounds reflect the story’s so-called “bad patents” allegedly wielded by patent trolls. The patent troll narrative was conjured to protect the efficient infringement that compelled the cut-throat competitive smartphone markets. Indeed, efficient infringement inevitably helped create them. The troll story masked efficient infringement and perpetuated because it has worked so well and will be needed still. Mega-tech wars among big tech peers may someday shift to cars and IoT. But big tech’s need to push down patented component costs and infringe their patents will remain. The troll narrative was an early avatar of alternative facts and fake news. It will be hard to extinguish. But until the troll story is snuffed out by targeted legislation and thoroughly debunked by public disbelief, today’s decline in patents will continue. Yesterday offering “the other half of the story” the US Chamber of Commerce issued a statement strongly supporting our economic need for strong patents saying:

“Over the past decade, a growing number of academic and industry researchers have been exploring the relationship between patent protections and innovations, particularly as it relates to technology startups. What they continue to find is that patents and other intellectual property protections are absolutely vital to supporting innovation; in fact, many of the technologies and innovations we take for granted today would never have come to bear without patents.”

Amazon’s Groceries, Mega-Cap Convergence and IPR

C’mon man! Amazon has metastasized into groceries! Here’s what’s happening: the Mega-caps are converging.

Your Google IoT control device realizes you have just closed Windows on your Mac. After checking with your fridge, she tells your Apple watch to order-out a home-delivered meal for a pre-planned dinner with a Facebook friend you mutually calendared in Microsoft’s cloud to coincide with his visit to your area. Ranked lists of meals you each have “liked” on Facebook are separately crossed-checked in Microsoft’s cloud are sent to each other’s devices. When the excellent match is found, it orders both your meals from Amazon, prepays with Apple Pay, and schedules delivery to your door by a drone one hour after your friend arrives in his self-driving Google car. During dinner, your IoT devices are busy receiving Amazon and Apple offers for discounts on a movie to be aired during the next 5 hours. Meanwhile, Google offers your friend a self-driving automobile pick-up ten minutes after dessert. You get the idea. You can sense the future of our world is just over the horizon. The mega-caps will one day control the entire consumer landscape. Their anti-patent onslaught is a symptom.

Alphabet, Amazon, Apple, Facebook and Microsoft are now America’s five largest firms by market cap. Their market power is already overpowering. Their incumbency is threatened only by each other. Their combined profit last year was $93 bn. While they were controlling Congress during the last decade, they swallowed whole 519 smaller firms. They undoubtedly smothered countless others by efficiently infringing their patented IP or by attrition if any dared to sue. Working with SCOTUS and Congress as allies they are preserving market monopsony by crushing or absorbing disruptive technology and pushing patent reform to beef up profits by beating down product component costs. But their DC alliance is uneasy. They are swirling into the converging vortex of multiple diverse product control within the marketplace. When they meet, some cannot survive. Thus, each must soon decide when and how to kill or capture the others while today’s business-friendly administration is in power.

Meanwhile as reported in today’s WSJ “Once-Flush Startups Struggle to Stay Alive.” Venture capital for US startups has declined by 30 % in 2016. In the two preceding years, 5000 U S tech startup firms raised about $75 bn., with 294 of them obtaining at least $50 mil. But since three-fourths of those have neither been acquired nor raised and capital.

These investment facts that matter. They tell us IPR is harming early stage investment. They are neither “patent/troll” narratives conjured to stampede an under-informed Congress nor are they AMICI blather intended to mislead SCOTUS into worrying about patent trolls instead of their political and market power. What matters is the growing scarcity if capital for disruptive early stage innovation for those who need it most. Only so-called “unicorns ” can afford to risk a fight with the reigning five. Time is running out. Director Lee’s recently announced review of IPR “records” and PTO’s dialogue with IPR “users” in her misdirected search for IPR “fairness etc.” will not reveal this reality. Investment trends are real, and they are relevant to patent policy. PTAB’s contribution to our economy is not worth its cost. Congress should declare IPR’s victory over “bad patents” and repeal it.

Our Patent System Needs More Than An IPR Fix

Under Secretary of Commerce, Michelle Lee has begun an initiative to further shape and improve PTAB  Her Senior Advisor at the PTO will be “coordinating this effort.  Because her tenure is ending soon her post grant “effort’s” timing has caused some to wonder whether she plans to fix AIA’s second windows or to preserve them. Whatever her unspoken motives, if any, an official in-depth review of PTAB’s past performance is warranted. But is the PTO looking in the right places?

Continue reading Our Patent System Needs More Than An IPR Fix

New Directions for USPTO?

USPTO’s history is aptly described in John White’s excellent IPWatchdog post below. The agency’s recent capture by politics compels its future direction. Pervasive political influence inevitably reflects the IP objectives of better-resourced incumbents, whose use for patents may simply be overstaying their incumbency. Our patent system should encourage dynamic progress, forcing incumbents to be inventive while opening markets to new players. This requires a perceived commitment to a balanced competence that promotes patent reliability not investment-deterring uncertainty.  John White’s post thoughtfully discusses the see-saw environment in which TTO’s implementing Bayh-Dole commercialization has been conducted during the past decade. His recommendations to reestablish the USPTO’s functional proficiency are sound. Continue reading New Directions for USPTO?