It's Hard Out Here for a Patentee

The Storm No One Forecast
When it comes to undermining innovation in the United States, it appears we are currently in the midst of the perfect storm. It all started in the late nineties and early naughts when patent trolls began to run rampant. Much to the chagrin of American innovators, the government overreacted, stifling innovation on nearly every front.

Winds of Change
The storm has been brewing since June 23, 1998, when the Court of Appeals for the Federal Circuit ruled in that you could patent a method of doing business. This ruling led to inventors falling all over themselves trying to file patents on "novel" online business methods.

A Storm a Brewin
The problem was that, prior to 1998, no business method patents had ever been allowed. Up until that time, checking patent applications against previously issued patents was the United States Patent and Trademark Office's (USPTO) principal way to determine if a particular invention was truly novel. When these new business method patent applications hit USPTO, the office had nothing against which to assess their novelty. Accordingly, the USPTO granted many patents on methods that had been in the public domain for years.

Windsheer
As you might expect, new business method patentees were using their ill-gotten patents to sue established business for patent infringement. Online businesses reacted immediately, petitioning the USPTO to stop allowing the monopolization of business methods that had been in in the public domain for years. The USPTO listened, completely reversing its trend of never meeting a business method patent application it did not like, and adopting strict new protocols to more thoroughly examine such applications. Not surprisingly, these new protocols take considerably more time. Business method applications that had taken just over a year to convert into a patent, now take four years or more. That is, assuming the application has what it takes to navigate the new gauntlet of protocols. Most business method applications do not.

A Gathering Storm
Not satisfied with merely killing the goose that laid the golden egg, opportunistic patent trolls immediately began buying up early business method patents. Now, with few, if any, new business method patents issuing the overly broad patents which had issued during the short "free-for-all" window were even more valuable. Despite the new "No Business Method" patent protocols at the USPTO, the influx of patent trolls into the courts actually began to increase.

Lightening Strikes, Again and Again
As most courts knew little about patents, and even less about business method patents, Patent Trolls created a cottage industry of leveraging the court system to hold software companies hostage. You either pay, or get an injunction from the courts and six years of a lawsuit. The bad news is that it will likely cost you $1.5 million in attorney fees IF YOU WIN. If you lose, it does not matter how much it will cost, as the cost will likely far exceed the value of your company.

The Perfect Storm
Rather than simply reexamine erroneously issued patents, and wait for the new USPTO protocols to take effect, the government lept into action on all fronts. The USPTO stopped issuing patents. According to USPTO Director Jon Dumas, the United States Patent and Trademark Office has recently started rejecting more patents than it allows. Matt Buchanan has a nice graph showing how the allowance rate has dropped from over 70% in 2000, to less than 55% in 2006. Today, the allowance rate stands at about 44%.

Courts have also taken their run at the patent system. On April 30, 2007, the United States Supreme Court gutted the United States' Patent System in a case called KSR Interneational Co. v. Teleflex Inc. et al. Basically, the KSR ruling not only makes it much more difficult to patent inventions, it makes it much easier to invalidate existing patents.

And do not leave the legislature out. For several years, lobbying giants like Microsoft, Google, Blackberry and Autodesk have been pooling millions toward convincing Congress to pass a comprehensive Patent "Reform" Act. While the proposed patent reform law admittedly stops short of authorizing the waterboarding of patentees, this seems either to be merely oversight on the part of the drafters, as it is a distinction of form, rather than substance. While the large software companies support this ban on innovation, smaller tech companies, labor unions, professional engineers, the Patent Office Professional Association and the Communications Workers of America all oppose the new law. According to a letter sent to Senators last Wednesday by the Computing Technology Industry Association (CompTIA) "Key parts of the proposed legislation may have the effect of increasing the likelihood of American inventions being stolen by our international competitors and, consequently, inhibiting sorely needed new investment in domestic manufacturing."

Digging Out
Little can be done to reverse the damage big business and the government has done to our patent system. It is not too late, however, to prevent the greatest damage from being done. Thankfully, patent attorneys are probably going to be all right regardless of whether the legislation passes or not. It is a poor attorney that cannot find work in times of legal uncertainty. Everyone else, however, stands to lose. Patent Reform means much less innovation, the most highly skilled jobs shipped overseas and the United States placed at the mercy of other countries' innovation. As goes innovation, so goes prosperity.

But you can do something to stop this hemorrhaging before it begins. Contact your Senator. Tell them not to support the new Patent Reform legislation. Tell them you want them to support inventors, support growth, support jobs and support the United States remaining a world leader in innovation. Tell them in no uncertain terms. Tell them before it is too late.

Brett Trout

Companies Waking Up to the Evils of Patent Reform

Before it's too late
Like Net Neutrality, Patent Reform is an issue flying under the radar screens of most companies. Unfortunately, as with Net Neutrality, by the time these companies realize there is a problem, it will likely be too late to take action.

What is patent reform?
Patent reform actually refers to a very specific type of reform. The type of patent reform currently under discussion involves federal legislation which undermines the ability of inventors to obtain and enforce patents. It seem strange that such legislation would find any support at all, especially when you consider patent protection was a Constitutional right long before the Constitution ever protected the freedom of speech, the right to bear arms or even the right to due process under the law. So who is behind undermining the innovation this country was built on and our forefathers sought to protect above so many other valuable rights?

Why is patent reform inherently evil?
The Patent Reform Act is designed strip away the protections and rewards patents afford smaller, more innovative companies, ensuring such innovations, and the benefits they provide consumers, never compete with much larger, less innovative behemoths. Keeping costs high and innovation low obviously favors the status quo. According to the largest professional society of electrical engineers in the country, theIEEE, patent reform is a "disincentive to inventiveness" and "stifles new businesses and job growth." Such reform, states the IEEE, creates an environment "harmful to individual inventors and small business."

Who is fighting the fight?
"Sure" you are saying to yourself "YOU think it is evil, but I know, deep down inside, the mega-corporations fighting for patent reform have my best interests at heart." Well, for starters, pundits from around the world laud the protections afforded by the United States Patent System and warn of the dire consequences in store if proposed reforms are eventually implemented.

Organizations like Innovation Alliance, while admittedly partisan in favor of their constituents, are working hard to inform the public about the dangers of patent reform. The organization has just posted several letters on its website which were sent to members of the U.S. Senate during the past week:

Letter to Senators Lamar Alexander and Bob Corker from 14 Tennessee manufacturers opposing patent reform

 

Letter to Senator John Cornyn from 54 Texas employers and patent holders opposing patent reform

 

Letter to Senators Arlen Specter and Robert P. Casey from 29 Pennsylvania manufacturers opposing patent reform

 

Letter to Senators Mitch McConnell and Jim Bunning from 51 Kentucky companies and universities opposing patent reform

 

Letter to Senators Harry Reid and John Ensign from 19 Nevada companies opposed to patent reform

 

Letter to Senator Kay Bailey Hutchison from 54 Texas employers and patent holders opposing patent reform

 

Letter to Senators John McCain and Jon Kyl from 28 Arizona employers opposing patent reform

Once Congress eviscerates such an ingrained Constitutional right, what will be next up on the chopping block?

Brett Trout

Patent Reform - Awaiting Atlas' Shrug

The United States House of Representatives has just passed the most sweeping patent reform legislation bill in a generation. Punishing innovation and rewarding free-loading technology thieves, the reforms passed by the House: making patents more difficult to get, insulating infringers from injunctions, decreasing damages associated with infringement and undermining protections afforded inventors by the founders of this country, all look like the first 800 pages of an Ayn Rand novel (or the first ninety minutes of the Angelina Jolie film). You can click here to see if your representative voted in favor of this dangerous legislation.

Patent protection is mandated in the United States Constitution. Our forefathers did not include Freedom of Speech, the Right to Bear Arms or the right to be free from cruel and unusual punishment in the Constitution; those rights all came later. The framers of the Constitution knew that the rights of inventors were so important to this nation that their rights had to be inviolate. Today our House of Representatives seems to have forgotten the tenets of those more considered minds.

If passed into law, the new patent reforms will give large companies license to steal the property of small inventors, creating a huge disincentive to innovate. You too will feel the brunt when Atlas shrugs. Instead of cheaper new, competing technology, you will pay higher prices to monopolistic companies selling older, less efficient, technology. By the time the effect is felt, the problem will be too far gone. The United States cannot help but suffer grave, irreparable consequences.

It is not an overstatement to say that the effects the proposed patent reforms will have on innovation will undermine the position the U.S. currently holds in world trade and world politics. These patent reforms will change us from leaders to followers. Let's hope the Senate has more than one John Galt in its midst.


Brett Trout

ayn rand john galt patent reform

Engineers Show Patent Reform Bill is Anti-Inventor

According to the New York Times, the IEEE, the largest professional society of electrical engineers, may have put the final nail in the coffin of the very anti-inventor Patent Reform Act of 2007.

In a letter to Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid, the IEEE points out that the Patent Reform Act is a "disincentive to inventiveness" and "stifles new businesses and job growth." The IEEE believes the Patent Reform Act creates an environment "harmful to individual inventors and small business."

By undermining the current protections afforded inventors under the current patent system, the Patent Reform Act would allow large companies to exploit inventions of smaller players, creating a huge disincentive to innovate. Consumers will not see any price breaks. Instead, if the Patent Reform Act were to pass, consumers would likely be paying higher prices to larger companies selling older, less efficient, technology. Under the current system, which fosters innovation, customers spend less money, with smaller companies, which have developed better, faster solutions.

The Patent Reform Act simply strips away the protections and rewards patents afford smaller, more innovative companies, ensuring such innovations, and the benefits they provide consumers, never see the light of day.

Brett Trout

Patent Reform Patent USPTO

Patent Reform Can Get You Killed

My guess is that over the course of your life something invented since 1900 has saved your life. Unfortunately, patent reform threatens to stifle these types of inventions at the start of this new century. Conventional wisdom notwithstanding, existing patent laws fit new technology. I mean that is what they were designed to do.

It is only well-monied interests that would have you believe new technology mandates new patent laws. Proposed patent legislation, such as the Patent Reform Act of 2007 will only make matters worse. Onerous limitations on patents pressure small inventors and competition out of the market, taking with them that next medical or safety breakthrough.

The problem arises when 800lb gorillas assert their will on courts and lawmakers. Every time I walk into court the judge explains to me how much more I, as the patent lawyer, know about patent law than he or she knows. While this may be flattering, I am more often than not immediately chafed when opposing counsel seizes the opportunity to weave the law of patents from whole cloth. Patent lawyers revel in the contrived complexities of the technology and law, fearing Occoam's razor spells the demise of their case. They argue knowing fair-minded application of existing patent laws is anathema to their clients' technology.

Working the other side of the fence, putting lag bolts to lawmakers, is big business. Corporate leviathans have been successful in moving the dreaded Patent Reform Act of 2007 ever closer to becoming the new sheriff in town. The Patent Reform Act of 2007, in its current form assures that even if a small inventor can get the money to go to court, he or she will never win enough money even to cover the costs of the case. If Congress passes the new Patent Reform Act, the best a small inventor can hope for (assuming they can even still get a patent), is a multi-year court battle where, from a financial perspective, even winning means losing.

Knowing the lose-lose proposition the Patent Reform Act poses to small inventors, Big Business will run rough-shod over inventors, wiping them from the landscape. With small inventors out of the picture, Big Business can dial back research and development dollars and just sell us the old technology for more money.

According to Mark Leahey, Executive Director of The Medical Devices Manufacturers Association, the proposed Patent Reform Act, in its current form "would severely undermine investment and innovation in every industry, including medical technology."

So far, this two-pronged attack has been successful in stifling the ability of small inventors to obtain a patent and allowing big businesses to steal patented technology from small inventors. Until small inventors find away to raise the $1.5M it takes to go to court on a patent case, they simply sit back and watch large companies get rich off of the inventors' patented technology. The only hope of reversing this trend is to turn the proposed Patent Reform Act from an anti-inventor law to a pro-inventor law.

Five years from now, when you, or a member of your family is in need of a life-saving medical procedure that is not there, do not say I did not warn you. Check here for more information on the proposed reform and here to see if your representatives in Congress are behind this potentially devastating law. Thank goodness Iowa's Senator Grassley is requesting vetting of the Act before it moves any further. For a link to the letter reflecting Senator Grassley's concerns, check out Peter Zura's 271 blog.

Brett Trout

Patent Reform Act