A Busy Day

There is much to report today.  We will cover it as efficiently as possible.

TV talk show hosts and newscasters often appreciatively refer to their repeat guests as “friends of the show.” As it turns out Bayh-Dole has put on an impressive economic show over recent years. Now there are fresh numbers to prove it. I am sure readers would agree that the 36 yearlong B-D show’s indispensable and longest serving “friend of the show” is Joe Allen. In his IPWatchdog article today (see below), Joe lays out the recent new statistics you and your congressional delegation need to see. B-D was enacted with bi-partisan sponsorship and support. Because its public-private inventor/investor partnership commercialization dynamic is mainstream Republican in nature, its continued bi-partisan support is assured but only if R&D funding continues and otherwise uninvestable but needed basic research can be converted through private investment into jobs and economic development. His excellent article explains why congressional proposals to reduce R&D funding of basic research while weakening patent strength contradict common sense.

Three other notable links also are significant.

The excerpt below draws on a recent Techcrunch article confirming that China’s recent ascendency has made it a patent “powerhouse.”

“China is not only taking the spotlight in strong defense of global markets and free trade, filling a vacuum left by retreating Western capitalist democracies, China is quickly becoming a (if not the) global leader in intellectual property protection and enforcement. And there too, just as Western democracies (especially the United States) have grown increasingly skeptical of the value of intellectual property and have weakened protection and enforcement, China has been steadily advancing its own intellectual property system and the protected assets of its companies and citizens.”

The third significant piece is a recent Reuters article recounting the continuing conflict between SCOTUS and the CAFC which to no one’s surprise is adding increased uncertainty to patents’ predictable reliability. The fourth is another excellent IPWatchdog post that pointedly pins the efficient infringement tail driving all this court and congressional chaos on Apple’s donkey.

Continue reading A Busy Day

China’s Patent Ascendancy is Helped by House Judiciary.

Today the barons of big tech meet at the White House with President Trump whose understanding of their work and how that work bears on our present global economic leadership and security in this new digital information age is doubtful. But at least he appears to be uncontrollable. For more than a decade tech titans have been dominating our Congress, federal agencies and Supreme Court by spreading their poisonous anti-patent troll narrative among DC patent policy makers. We were reminded of this last week when the “patent troll narrative” (now lingua franca in all Capitol Hill patent discussions) surfaced in a House Judiciary Subcommittee meeting held to examine the impact of on the patent landscape of the Heartland venue decision. Rep. Issa oiled his way through various iterations of the stale troll narrative. He even sniffed about a recent patent suit against Apple. Pro-patent interests had one friendly witness in the person of Adam Mossoff, but the rest were members of the anti-patent chorus led by anti-patent apparatchik Colleen Chien.

Like certain Justices, House members Nadler, Goodlatte and Issa seem shamelessly transfixed by the troll narrative’s trope that our patent system is being destroyed from within by the abusive conduct of patent trolls, when in fact they are destroying it themselves. We hope the same narrative will not be replayed at the White House today. But it is very much alive in key congressional circles. It is equally clear from House Committee bloviating they want to keep it alive in case an opportunity arises enabling them to revive their tech-dictated Innovation Act. They are telling us that any bill that mentions patents will become a House vehicle for their Innovation Act “modular adjustments.” Big Tech’s congressional tub thumpers have waited for years to tack them on as amendments.

What is becoming scary, however, is that we are in the early stages of two tectonic world developments—the new Information Age and the rise of China as a superpower. Our patent system is being destroyed by the troll narrative and its impact on patent policy makers who are themselves destroying it. China is strengthening its patent system with the same dispatch deployed to stake its claim to the South China Sea and fill the Far East trade vacuum ceded by US PP abandonment. We are headed towards a dual superpower world in an evolving digital age. If our patent system cannot cope with the economic and defense demands needed to maintain leadership, China’s patent system will. If our Congress cannot understand what lies ahead, we have to hope our President does.

Continue reading China’s Patent Ascendancy is Helped by House Judiciary.

New PTO Director and Returning Patent Property Rights

As everyone not pinned under a rock or away on an exotic vacation knows by now, SCOTUS has agreed to decide whether PTAB has the constitutional authority to nullify patent rights in a mini-trial process (principally AIA’s IPR). The precise question before the Oil States Court is:

“Whether inter partes review – an adversarial process used by the Patent and Trademark Office (PTO) to analyze the validity of existing patents violates the Constitution by extinguishing private property rights through a non-Article III forum without a jury.”

Having rejected cert in earlier appeals raising the same issue (including MCM v HP ) experienced observers are speculating and theorizing about the SCOTUS reasons for agreeing over the objections of the Solicitor General to hear it. In a timely letter to Commerce Secretary Wilber Ross, the Licensing Executive Society ( LES) which is ably led by Brian P. O’ Shuaghnnesy advised the Secretary regarding its recommended qualifications appointment of a new PTO Director.The letter enumerated some of the many problems affecting our US patent system including a strong argument for patents as “property.” A few excerpts from the letter are below. We recommend reading it in its entirety.

LES Letter Excerpts:
“Above all, LES recommends appointing a Director dedicated to protecting intellectual property, generally, and patents in particular, as the private property right our nation’s founders envisioned.The founders saw great value in rewarding individuals who toil to bring forth from commonly accessible resources useful products and processes by granting to those individuals an enforceable property right. They recognized that such a property right would, in the fullness of time, work a substantial benefit to the public by encouraging innovation and disclosure.We must honor that philosophy.It contributed substantially to America’s rapid ascendancy from agrarian economy to industrial powerhouse and can be traced to America’s first patent act of 1792.In affording that private property right, we reward and empower the archetypal American innovator, the individual daring to risk all to bring forth the next big thing, and thereby challenge market incumbents who benefit from stasis and the status quo.”

“Commercial development of innovation, and new business formation, demands the prompt and predictable grant of durable property rights, and a reasonable expectation of the enjoyment of quiet title upon issuance. Financing of new enterprises, and the growth of existing ones demands intellectual assets that stand up to challenge, regardless how hose assets are derived or commercialized. American innovators deserve strong, predictable, enforceable intellectual property rights, and that starts at the USPTO. Regrettably, recent changes, both legislative and precedential, have chipped away at US patent rights. Meanwhile, patents issued by other countries are increasingly perceived to be more predictable and enforceable, and thus to have greater value. Investment, and ultimately innovation, will migrate to those environments.” Continue reading New PTO Director and Returning Patent Property Rights

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”

Cruel of Law

An important feature of the rule of law is the economic support imparted by its predictability, a growth-supporting quality enabling the economically necessary use of contracts, deeds, debt, trusts, currency and licensing. Without it, long range planning and investment are impossible, variously timed delivery differences would cancel trades, and mutually beneficial transactions would necessarily be crammed into the immediate present. The absence of a predictable rule of law thus severely hamstrings economic progress. Patent law depends heavily on its special rule of law. It is expressly created in our Constitution to authorize Congress to provide future investment reliability for a “limited times.” What does limited mean? It doesn’t say how much time but it certainly means some. But if AIA’s IPR can nullify a patent throughout its term all the way to expiry, metaphysically there is no “limited” time. If laws and court decisions continue to nullify effective patents retroactively, the express constitutional provision for prospectively “limited times” is distorted. If patent rights are property rights instead of public privileges, Article I agency-appointed PTAB tribunals cannot be constitutionally enabled to cancel them without reference to the protections in Article III and the Bill of Rights.

A wise man once warned me that standing by themselves, arrogance or ignorance was to be pitied, not condemned but combined in positions of power, they are extremely dangerous. So it is with patents. Our nation’s patent system finds itself caught between apathetic ignorance and under-informed assertiveness. On the one hand, there is the proud apathy of congressional ignorance that resulted in AIA’s PTAB. On the other, there is the under-informed assertiveness of SCOTUS that still uses the term “patent monopoly” in Impression Products v. Lexmark while erasing decades of established patent law by retroactively altering the impact of conditional sales that conformed to existing law when made. Such retroactive conduct scorns patents’ special “limited time” rule of law, by enacting retroactive nullifications unforeseeable during past compliance by legal practitioners as well as practitioners of grant patents. Retroactive patent nullification decisions have become commonplace in the courts and Congress. From AIA’s IPR to Lexmark’s recent nullifications of then complying conditional sales, such conduct not only cancels past established economic process, but it also deters future investment of innovative time and developmental financial support in our nation’s innovation ecosystem. It harms our economic future. The on-going self-inflicted collapse of the patents’ rule of law has become a counter-productive “cruel of law.” Worse, stopping this relentless DC march to economic madness may itself be madness. Can we halt them? Continue reading Cruel of Law

Turtle on a Fence Post

A  Saturday New York Times editorial called to our mind an old saying:  “If a turtle is perched on a fence post you know it didn’t get there by itself.”

With Congress now in recess and, when it returns, still entangled in health care, tax reform and Russia-gate, how is it that a high-priced, big tech PR firm would be trying to breathe life into patent litigation reform to justify its monthly retainer? No problem, just call in a favor and get a NYT editorial praising SCOTUS for its latest weakening of US patents. The editorial praised the recent SCOTUS decisions in TC Heartland v Kraft Foods and Impression Products v Lexmark under the headline, “Protecting Consumers in Patent Cases.” It was planted, we suspect, (like the turtle) on the Editorial Board’s patent troll narrative Kool-Aid cabinet shelf.

The Court in both decisions overturned years of patent law precedent on defendant venue in Heartland while in Lexmark it effectively held that any sale whatever or wherever of a patented product, including sales in other countries where our patent laws have no effect, cancels its US patent protection. One major problem is that when applied to existing arrangements such decisions have a retroactive impact. So if drug maker XYZ has made a discounted sale to the Gates Foundation of a patented anti-pandemic therapy for use in Africa, (even with a routine boilerplate restriction on further resales or other gray market activity) the US patent protecting the product is now automatically nullified. The Impression Products decision and the Court’s reasoning are explained in an IPWatchdog twin posts last week where experts comment on its “known unknowns.” As usual, however, the problem is the decision’s “unknown unknowns.” It appears to us that new uncertainties may further adversely affect investment in university life science research. It definitely will disrupt today’s biopharma innovation ecosystem.

Continue reading Turtle on a Fence Post

AAMC Acts Collectively to Rescue NIH’s Commercialization Mission

On the day the president’s budget was released this week 300+ medically engaged entities and associations nationwide, the backbone of our nation’s biomedical research ecosystem including many universities, disease advocacy groups, and medical centers, signed a full-page ad in the WSJ and POLITICO. Sponsored by “The Ad Hoc Group For Medical Research” and paid for by the Assoc. of American Medical Collages, its purpose was to thank Congress for its recent increased support for basic medical research. Ascribing US medical and economic strength to congressional bipartisan medical research, its content was straightforward and simple.

“When it comes to the Nation’s health
There’s One thing we can all agree on
Medical research Makes America Healthier and Stronger. ”
“LET’S KEEP THE PROGRESS GOING. INCREASE FUNDING FOR NIH BY 2 BILLION IN 2018.”

IP Strategic gratefully salutes this concerted effort to come to the rescue of NIH’s critical role in our life science innovation ecosystem.

Within our national health care ecosystem, NIH is the bridge between congressional R&D public investment in otherwise uninvestable life science and private sector development of its commercially promising results through Bayh-Dole directed commercialization. The ad’s focus is the NIH’s bridge’s on-ramp of congressional R&D funding. For the ecosystem to work the commercialization bridge’s off-ramp of private sector investment and development also must provide public benefit with its therapies, jobs and economic development. Off-ramp commercialization requires private sector investment which in turn requires reliable patent protection. Support and direction of commercialization bridge traffic flow is NIH’s mission. That bridging mission is undercut at its entry point by the Trump budget and effectively undermined at its exit point by patent uncertainties created by Congress, SCOTUS, and the USPTO. Here are just a few: Continue reading AAMC Acts Collectively to Rescue NIH’s Commercialization Mission

SCOTUS Issues Heartland Decision

The defense venue rule in patent cases had been that suits must be brought in the state where the defendant resides or where they have committed regular acts of infringement and have a regular and established place of business. In Heartland, the Court focused on the “resides” portion of this test. In 1990 the Federal Circuit ruled that patent actions also could be initiated in any venue where the defendant conducts its business. Patent suit venues were thus treated differently for more than 25 years. No more. SCOTUS has ruled by a vote of 8-0 that the special rule for patents should be narrowed holding that its “resides” prong means wherever the domestic corporation is incorporated. SCOTUS thus has overruled the Federal Circuit’s broader rule regarding venue. Henceforth plaintiffs relying on the reside prong of the test will have to bring their actions in the defendant’s state of incorporation (which often is Delaware). The regular acts of infringement or permanent place of business prong were not affected. Until now “doing business” especially in the digital age had meant they could be brought virtually anywhere and had led to forum shopping.

Justice Thomas writing for the Court said concerning venue based on party home location as distinguished from their infringement activity: “we, therefore, hold that a domestic corporation ‘resides’ only in its State of incorporation for purposes of the patent venue statute.”

We consider this decision to be another setback for patent holders. The infringer lobby has long complained that the Eastern District Court in Marshall Texas of being a haven for patent trolls. That particular venue was not at issue in this case, but most consider that the Texas court’s conduct was what this case was about. The Marshall court both moved too fast in the opinion of anti-patent infringers and ruled too often in favor of plaintiff patent holders. Anti-patent infringers will characterize it as a setback for patent trolls, but of course, it applies to all patent suits. Stanford professor Mark Lemley authored a brief for 61 economists emphasizing these issues, reiterating the troll narrative that dangerously seems to have become the prism through which SCOTUS now views all patent cases. It could be considered the final troll abuse to be addressed and end the patent troll narrative’s repeated harm to early stage innovation. But do not expect big tech to relent. Because efficient infringement tactics traditionally include the imposition of attrition through stalling and delay, the decision is another significant loss for all under-resourced patent holders, the usual victims of the anti-patent troll narrative. Big tech still values that capacity. This decision will more likely be seen by them as an invitation to seek more anti-patent costs sanctions in Congress.

So here we go again. Senator Hatch has indicated earlier that he wants to introduce venue legislation, however, Heartland was decided. To be sure Senate Judiciary is busy but there is always time it seems for Chair Grassley to respond to the wants of Silicon Valley. The decision is below. Any bill introduced in the House for any purpose or that passes the Senate will be before the House Judiciary Committee anxious to revive portions of the Innovation Act. Rep Goodlatte’s supportive Statement (below) suggests that the Innovation Act’s punitive sanctions are still alive.

Continue reading SCOTUS Issues Heartland Decision

Joe Allen’s Take on Price Controls

Whether the subject is Bayh-Dole price-based march-in or other government schemes to control the final pricing of privately developed products emergent from the commercially promising discoveries made possible by federally-funded life science research, Joe Allen knows what he is talking about. NIH’s mission is to see to the commercialization of such discoveries so they can become available to the public that invested in it through congressional R&D appropriations. Such curiosity-driven basic research is otherwise uninvestable. What cannot be commercialized cannot become available. This disconnect will lead to the further diminution of R&D funding for such research. However well-intended, governmentally imposed price controls deter private sector for-profit investment. This is not a theory. It is a historical fact confirmed by CRADA pricing experiment explained by Joe in his article below. Fast forward to the present. Joe’s conclusions are being confirmed now. The private sector investment withdrawals triggered by SCOTUS’ Mayo and Myriad decisions is happening now. These Sec 101 eligibility judicial missteps have created unacceptable uncertainty, not only in the life science areas treated in the actual decisions but regarding all life science “discoveries” the examiners and Courts are declaring unpatentable. Life science commercialization has never been more needed. It has never been more perilous.

As Joe Allen explains below there are better ways to skin drug pricing’s cat than crippling life science investment in applied development that is definitionally different than the hoped for curiosity-driven discoveries that made its profit-directed development possible.”Many in Congress want to impose price controls on medicines that result from

“Many in Congress want to impose price controls on medicines that result from federally funded research. We’ve tried this before, and it nearly brought medical research and development to a halt. Lawmakers aren’t wrong to want to lower drug prices, but they should find a strategy that isn’t a proven failure. These policies would have terrible ramifications for the future of National Institutes of Health-supported research and development while harming those suffering from the ravages of disease.Responding to congressional pressure in 1989, NIH officials incorporated a form of price controls known as a “reasonable pricing” clause in its licensing agreements. In short, they didn’t want to let private firms build upon publicly funded discoveries to commercialize resulting products unless the government had a say in pricing decisions. Their actions were well-intentioned. By placing conditions on medical patent licensing agreements, they hoped to decrease drug costs for consumers. But the results were disastrous.”

Here is Joe’s Fierce Healthcare article.

Restoring Sanity to the Patent Landscape

Summarizing IIPC’s recent Capitol Hill Conference IPWatchdog’s Steve Brachmann and Gene Quinn highlight a consensus assertion by its numerous panelist experts. In simple terms they repeatedly asserted that patents are property and were intended in our Constitution to be legally recognized as such. Patents are not privileges granted by sovereign whim as they were in England. That John Locke’s property ownership theory influenced the drafters of our Constitution is universally accepted by constitutional scholars and historians.The Patent Act reflected it. Yet this historic differential between patent property and privilege has been watered down by PTAB and the Federal Circuit (CAFC) in recent decisions holding that patents are simply “public rights”. As such patent holders are not entitled to the basic protections set forth in the Bill of Rights. SCOTUS has declined cert in earlier appeals from Federal Circuit public rights decisions. It is again considering a cert petition in a dispute involving the applicability of Art. III and Art. VII to PTAB’s proceedings.(Oil States Energy Services) Below are excerpts from a typically thorough Watchdog post highlighting the misleading big tech troll narrative’s pernicious influence on patent property rights.

“Although many of the industry insiders at the event held similar opinions on the current state of the U.S. patent system, bringing their message to a mainstream audience has been difficult. Much of this has to do with the “patent troll” narrative that has been forwarded by the efficient infringement lobby. As Sen. Dick Durbin (D-IL) pointed out at a recent Senate judiciary hearing on intellectual property as a driver of innovation, “whoever came up with that phrase [patent troll] should get a special bonus” because it has created a massive mischaracterization of patent owners asserting their rights.”

Continue reading Restoring Sanity to the Patent Landscape