Saving US Basic Research

“For decades, America lost factories and jobs to China but retained a coveted title: the world’s leader in inventing and commercializing new products.  Now, even that status has been eroded, and it’s hurting the economy. While the United States is still at the top in total investment in research and development – spending $500 billion in 2015 – a new Boston Consulting Group (BCG) study released Monday has made a startling finding: A couple of years ago, China quietly surpassed the U.S. in spending on the later stage of R&D that turns discoveries into commercial products. And at its current rate of spending, China will invest up to twice as much as the U.S., or $658 billion, by 2018 on this critical late-stage research. In other words, the U.S. Is doing the hard work of inventing new technologies, and China, among other countries, is reaping the benefits by taking those ideas and turning them into commercial products, the report says.” The quote above opens a recent article in USA Today. It refers readers to a Boston Consulting Group Study confirming China’s global leadership in later stage scientific research, our country’s penultimate scientific redoubt before surrendering our early stage research to China and with it, our remaining global economic leadership. Research university administrators sadly note that talented international students and faculty are no longer as attracted to US educational institutions as they once were. They are headed for China where government R&D support is accelerating while ours declines. Venture Capital development support is following them. Administration antipathy to foreign immigration and dwindling R&D expenditures share top billing among the reasons for this dangerous development. A similar lengthy Washington Post piece quotes a Facebook entry by Rep Mike Mulvaney in which he said about a bill dealing with Zika ” No one has written to me yet, to ask what might be the best question: do we need government-funded research at all?” Mulvaney now directs the Office of Management and Budget. R&D funding is dropping here while China’s is increasing.

In China “America First” translates into “China First.” How long will it take for our research universities to mobilize an effective response? The Study is informative. Its description of “friction” hampering tech transfer is worth mentioning. But the study fails to adequately emphasize the harm to our innovation ecosystem imposed by an under-informed SCOTUS and Congress. This is a problem research universities can solve. They must smooth their TT “friction,” and they must create budgetary conflict for the Trumps cuts to R&D. MIT’s President Reif is fighting back. Continue reading Saving US Basic Research

Researcher Patent Assignments Redux?

TTO directors remember their sickening feeling when the Stanford vs. Roche sent them scrambling for legal advice about university researched invention ownership and assignment. SCOTUS held that an earlier researcher promise to assign IP to their universities was trumped by an actual assignment made later. The case stirred debate about choice of law conflicts between state contracts law and federal patents. More important it raised the question of how to reliably verbalize future pre-invention assignments. Was an assignment valid if executed pre-invention?  Were assignments necessary every time an invention or discovery occurred?  Some universities have focused on acknowledging a PI’s on-going responsibility to report to university TTO’s any investigative undertaking that could possibly be patentable. One of the issues now raised by the Alice/Mayo eligibility line of cases may be the narrowing meaning of “potentially patentable” in the UCSC case described below where the university focused more on the researcher’s acknowledging a dual obligation to assign and disclose patentable inventions. The relevant UCSC operable language appears to have been:

“I acknowledge my obligation to assign inventions and patents that I conceive or develop while employed by University or during the course of my utilization of any University research facilities or any connection with my use of gift, grant, or contract research funds received through the University. I further acknowledge my obligation to promptly report and fully disclose the conception and/or reduction to practice of potentially patentable inventions to the Office of Technology Transfer or authorized Licensing office.”
Continue reading Researcher Patent Assignments Redux?

Death by a Single Cut

Yesterday at the USPTO I had the privilege of serving on the opening panel of the 12th Annual Advanced Patent Law Institute sponsored by The Texas University School of Law, Antonin Scalia Law School at George Mason University and the USPTO itself. The panel was organized and moderated by Rob Sterne and former CAFC CJ Paul Michel. It included Damon Matteo, Paul Stone, Peter Detkin and Paul Evans, all of whom are prominent, accomplished investors in innovation. Our audience of more than 200 advanced practitioners, judges, and USPTO personnel, included USPTO Director Michelle Lee. For the remainder of the two-day conference, its emphasis would be to sharpen its attendees’ legal skills. But for its first 75 minutes, patent non-investability was the panel’s sobering focus. Continue reading Death by a Single Cut

Patent Eligibility and the 115th Congress

House Judiciary Chairman Goodlatte has invited the press to an announcement today of his committee’s agenda for the 115th Congress. As always we anxiously await hearing his priorities regarding this year’s version of his HR 9, Sec 101 patent eligibility clarification, and other issues of importance to the survival of research university commercialization. Gene discussed the SCOTUS spawned Alice-Mayo eligibility doctrine yesterday in a post regarding IPO’s endorsement last weekend of legislation to clarify the doctrine. Continue reading Patent Eligibility and the 115th Congress

PTAB Elevates State University Research Values

“A very important decision has just been issued by PTAB impairing the capacity of private parties to challenge the validity of patents owned by state research universities and their TTO affiliates.”

In Covidian LLP v University of Florida Research Foundation Inc. http://www.reexamlink.com/wp-content/uploads/2017/01/Board-Dismisses-IPRs-on-Sovereign-Immunity.pdf, PTAB thoroughly examined the applicability of the Eleventh Amendment’s state sovereign immunity doctrine to IPR patent challenge proceedings. PTAB concluded that as an “arm” of the state, UF’s TTO affiliate was immune to IPR challenge absent Florida’s consent by waiver of its sovereign immunity. The decision has been appealed to the Federal Circuit but for now it clearly enhances TTO patent licensing values. Continue reading PTAB Elevates State University Research Values

Does Apple’s Suit Against Qualcomm Signal the End of Congressional Patent Reform?

Worldwide skirmishing between Apple and Qualcomm has now erupted into a US legal battle. Apple has launched a billion dollar U.S. suit attacking Qualcomm’s licensing model. The suit’s specifics are thoroughly explained by Steve Brachman in an IPWatchdog post. Research university TTO’s generally pay little attention to such big tech combat but this suit is worth watching because Apple now seeks relief from the marketplace bargaining envisioned by our patent system through more narrowly focused judicial pricing. In an earnings conference call earlier this week, Qualcomm’s CEO put it bluntly. “Apple’s complaint contains a lot of assertions, but in the end this is a commercial dispute over the price of intellectual property,” CEO Steve Mollenkopf said. “They want to pay less than the fair value that Qualcomm has established in the marketplace for our technology even though Apple has generated billions in profits from using that technology.” See Forbes article here. Mollenkopf’s blunt assessment summarizes what the last ten years of congressional patent reform have been all about lowering the supplier cost of patented components to ICT assemblers who distribute finished products to the public in a very competitive global market governed by the exponentially accelerating pace of Moore’s Law. After fighting with each other over product market share, big ICT tech patent reformers are gladly holding Apple’s coat as it tries to suppress Qualcomm’s share of its product’s sales price by judicially attacking its licensing model.

Big tech intermediaries who market their ICT products (like smart phones) to consumers gained overwhelming bargaining leverage over their suppliers when the eBay decision effectively denied non-practicing patent holders the protection of permanent injunctive relief. Having judicially secured that bargaining edge, price negotiations with lesser-resourced component suppliers reverted to under-payment or simple avoidance. Efficient infringement had become irresistible but led to the creation of secondary market specialists who were branded ” patent trolls “by efficient infringers. For big ICT tech, which already had weaponized patents to fight for market share with big tech adversaries eBay set the stage for big tech to open up a second front they called patent reform. This new war would be waged on Capitol Hill against the patent trolls but in fact it was brought by big tech aggregators against their supply chain component originators in order to gain a greater share of final product price. In this battle the warring ICT intermediaries were allies. For lesser-resourced component suppliers’ efficient infringement and AIA eroded patent values. But well-resourced suppliers able to afford post AIA enforcement suits were impervious to efficient infringement and could manage the punitive costs of AIA. Qualcomm is such a supplier. Its size and must-use technology supplier enabled pricing that had to be attacked in court.

At congressional patent reform’s outset, efficient infringers had little to lose. If eventually they were found guilty, unauthorized use of the patented infringed technology would be “judicially priced” in the form of damages hypothetically calculated under Georgia Pacific’s royalty requirements. Royalty damages would be hypothetically calculated as if their use had been mutually agreed to in timely pre-infringement negotiations. This is retroactive compulsory licensing in effect without further imposition of other contractual limitations on the “compulsory licensee’s” conduct and use of the patented technology. “Infringe now and price later” may have been economically advisable in ICT markets propelled by Moore’s Law, but is unlawful under US patent law. Moreover, this widespread business model has clogged courts and has encouraged genuinely abusive and predatory trolling conduct. But well-resourced suppliers are not intimidated in the new post AIA environment. They must be bargained with on even terms. The courts have now been drawn into a battle to unbalance those terms. In order reduce Qualcomm’s licensing powers Big ICT tech wants to undermine Qualcomm’s licensing strength, hoping that judicially-imposed licensing restraints will lower supplier costs giving Apple a larger share of their product’s sales price.

 

 

 

 

Prolonged, Pervasive, Uncertainty Lowers Commercialization Values

Recent prioritization of high-profile administration and congressional activity may postpone pending patent reform. It will not end it.  Postponement itself prolongs uncertainty’s harm to research university and other early stage commercialization by extending its deterrence of private sector investment. Because R&D originators are prime patent holders, patent valuations affect the product supply chain componential shares of ultimate product pricing, especially by its intermediary developers. Wars over product pricing are therefor always underway in three interrelated arenas; the market, the Congress and the courts. Research universities have been losers in each of these arenas because as originators of patented technology, their earliest stage commercialization efforts are most affected by these internecine struggles. They thus must watch all three areas closely because they stand to suffer more collateral damage to their TTO commercialization model when the congressional battles resume. Whatever weakens the value of promising research weakens commercialization. Continue reading Prolonged, Pervasive, Uncertainty Lowers Commercialization Values

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?