People With Silly Patents Would Really Like It If It Was Harder To Cancel Them

from the embarrassment-of-embarrassing-patents dept

A large group of patent holders sent a letter to Congress expressing concern that, since the US Patent and Trademark Office (USPTO) Director Iancu might soon be leaving, recent policies making it harder to challenge bad patents might be reversed. The letter concerns a process created somewhat recently, called inter partes review (IPR), that allows the USPTO to take a second look at the patents they issue based on a public request.

This is important because 43% of all issued patents challenged in court are ultimately found to be invalid, albeit at great expense due to the high costs of patent litigation. An IPR, by contrast, offers a far faster and less expensive way to challenge patents than using the courts, with the average IPR costing around $350,000 compared to litigation costs just shy of $1 million when defending against infringement claims brought by an NPE. It is no surprise that many who profit off patents do not like a process that makes it easier to find out if those patents are valid.

The letter states that “Director Iancu has clearly changed the dialogue surrounding patents, defined the patent system by the brilliance of inventors, the excitement of invention, and the incredible benefits they bring to our economy and society as a whole.” While a lot of this is true, celebrating the brilliance of inventors and the benefits of patents ignores the very real direct and indirect costs of the current patent system. Patents can issue for inventions that don’t actually work or exist. This was true of Theranos, a company built around patents with technology that didn’t work or exist. Patents can also be used to try to win big paydays on seemingly unrelated products. This happened again with Theranos, whose patents were bought and used against a company making covid-19 tests.

Then there are also many, many, silly patents that get issued that usually don’t matter because very few people want the thing the patent describes. It would be weird if these inventors got to dictate patent policy. But here we are, as a large number of the inventors signed to this letter have very silly patents (feel free to find your own favorites):

• US 7,814,680 - Overshoe Unit For Indoor Use (it’s a shoe that you put on your shoe)

• US 5,178,576 - Apparatus And Method For Manipulating A Spring Toy (expired due to non-payment of maintenance fee)

• US 9,009,870 - Garment Pocket For Rapid Extraction And Deployment Of A Concealed Weapon (does what it says it does)

• APP 16/199,080 - Peeball (“a potty-training slide apparatus for boys that temporarily clips onto the toilet seat and provides an ornamental target (target has a hole through it) that boys aim and pee through and on the back side of the target is a permanently affixed ornamental slide that the urine travels down and into the toilet water.”)

• US 9,278,737 - Remote Control Fishing Robot (when you just don’t feel like fishing yourself)

• US 6,923,299 - Wallet For Retaining a Plurality of Credit Cards (for holding all the credit cards you used to pay for the other weird stuff on this list)

To quote Thomas Jefferson, “these monopolies produce more embarrasment than advantage to society.”

While those with silly patents have a low chance doing any harm, even if their patent were invalid, the changes the inventors advocate for can be life or death for others. These patent policies would make it harder to challenge weak drug patents that could be holding up generic competition. Cancelling drug patents and enabling competition can save patients 79%, on average, for small molecule drugs. While biosimilar competition is nascent it is projected to save patients 15%-45% or more over the next five years, possibly more. For some, this is the difference between being able to afford a treatment and not being able to afford a treatment.

It would be a travesty if those that filed these silly patents swayed policymakers to make it harder to cancel all bad patents. Many of the inventors on this letter haven’t even had their listed patents challenged in an IPR--of the 240 listed, only 18 have had any IPRs instituted--making their perspective even less relevant. This makes sense, as many of these patents describe products that are probably not economically viable due to low demand. Indeed, our casual search found several that were allowed to lapse without paying maintenance fees, a sure sign that the inventions did not produce value.

The policies being championed by the letter are already having a large effect. Procedural denials, meaning denials based on something other than the actual merits of the petition, are spiraling upward. The inventor letter makes it seem that these denials are good because they happen when a court challenge of a patent is moving faster than the IPR challenge. The letter claims that since IPR was intended to be an alternative, not an addition, it makes sense to do away with these cases. But in practice these procedural denials are being applied nonsensically and for many other reasons.

For example, sometimes drug patent challenges are so complicated that petitioners have to file multiple petitions at the same time just to get around word counts. The USPTO’s Trial Practice Guide Update says this can be fine “when the patent owner has asserted a large number of claims in litigation.” However, the USPTO is using the “in litigation” language as an excuse to deny all but one of the petitions when there isn’t parallel litigation. So much for IPR being an alternative! These denials happened to challenges to patents on the important diabetes medication Lantus, which costs $357, and a Narcan injector that can save the lives of those overdosing on opioids, costing $126 for two doses. Narcan is only expensive because of the injector patent, the active ingredient - Naloxone - is available as a low cost generic.

The USPTO has also gotten rid of a petition because of the trial date of a completely different company. This concerned a drug used to treat schizophrenia , Invega Sustenna, that costs patients $1,853.

Another denial, concerning vaccine patents, was because the USPTO refused to allow a petitioner to step into the shoes of another company that settled. This was even though the petitioner could have not known that the other company would settle and withdraw their challenge.

Patents are legal instruments with real consequences. When patents represent true innovation, those consequences are usually positive. Patents often incentivize innovation, especially when inventions are difficult to discover but easy to copy. When patents do not represent true innovation, when they should never have been granted, they can be a drag. They can be used to hold up competition or harass other innovators. Common sense dictates there should be a quick and inexpensive system for sorting out bad patents from those that are good. However, any such system is a threat to those that make money off patents that could be cancelled. These voices should be taken with the huge grain of salt they deserve.

Filed Under: bad patents, congress, invalid patents, ipr, patents, uspto

Supreme Court Says Of Course The Patent Office Can Admit It Made A Mistake And Dump Bad Patents

from the phew dept

For the second time in two years, the Supreme Court has needed to weigh in and note that, of course, the US Patent Office can take another look at the crappy patents it already granted, recognize its mistake, and void the patents. A little less than two years ago, it looked at what standards could be used by the Patent Trial and Appeal Board (PTAB) using the Inter Partes Review (IPR) system created by the America Invents Act of 2010. The latest case was much more broad: challenging whether the IPR/PTAB process itself was Constitutional.

The basic idea behind the IPR process was an admission that the USPTO is historically bad at properly reviewing patents before granting them. It grants a lot of bad patents. The IPR process allows anyone to present evidence to the PTO that it made a mistake and granted a patent that should never have been granted. If the PTAB is convinced, it can invalidate the patent. Seems pretty straightforward. Except that the usual patent lovers (mainly patent trolls and big pharma) insisted that this was some sort of unconstitutional taking of property, without the review of a court. This is wrong for a whole bunch of reasons -- starting with the incorrect view of patents as traditional "property."

The Supreme Court ruled on the issue, in a case called Oil States Energy Services v. Greene's Energy Group, and basically said that of course the PTAB can invalidate patents this way. Justice Thomas wrote the majority opinion with a 7 - 2 split (Gorsuch and Roberts dissented). The key issue was whether or not invalidating patents is reserved only for the courts, and most of the Justices don't see any support for that. In short, the majority opinion says what the Patent Office gives, the Patent Office can take away...

This Court has recognized, and the parties do not dispute, that the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise. Inter partes review is simply a reconsideration of that grant, and Congress has permissibly reserved the PTO’s authority to conduct that reconsideration. Thus, the PTO can do so without violating Article III.

The majority opinion points out that the Constitution doesn't require the Judicial branch to weigh in on the granting of patents, and thus it need not weigh in on the invalidating of those patents either.

Inter partes review is “a second look at an earlier administrative grant of a patent.” ... The Board considers the same statutory requirements that the PTO considered when granting the patent.... Those statutory requirements prevent the “issuance of patents whose effects are to remove existent knowledge from the public domain.” ... So, like the PTO’s initial review, the Board’s inter partes review protects “the public’s paramount interest in seeing that patent monopolies are kept within their legitimate scope,”... Thus, inter partes review involves the same interests as the determination to grant a patent in the first instance.

The court reasonably compares it to other administrative processes where the government can grant things, such as franchises, and later revoke or amend those franchises.

An important part of the ruling is that patents are not property in the traditional sense, and this isn't case of removing someone's property without the Judicial Branch. Specifically, the court says that patents are really more similar to a franchise right, than a traditional property right:

Patents convey only a specific form of property right—a public franchise.... And patents are “entitled to protection as any other property, consisting of a franchise.” Seymour, 11 Wall. at 533 (emphasis added). As a public franchise, a patent can confer only the rights that “the statute prescribes.” Gayler, supra, at 494; Wheaton v. Peters, 8 Pet. 591, 663–664 (1834) (noting that Congress has “the power to prescribe the conditions on which such right shall be enjoyed”). It is noteworthy that one of the precedents cited by Oil States acknowledges that the patentee’s rights are “derived altogether” from statutes, “are to be regulated and measured by these laws, and cannot go beyond them.”

And while Oil States points to some earlier rulings saying that only the courts can invalidate a patent, the Supreme Court correctly notes that the cases it points to were decided under the Patent Act of 1870 -- and under that Act, courts were necessary. But there is no Constitutional prohibition on Congress setting up different rules for the patent system, and since 2010 with the America Invents Act, Congress decided to allow for this administrative review.

Amusingly, the court also takes Oil States to school for a history lesson. The company had argued that historical principles have established that only a court could invalidate a patent, and points to cases decided in 18th century England. But, the Supreme Court, citing Mark Lemley, points out that Oil States not only gets its history wrong, but that the actual history shows that England had something quite similar to an Inter Partes Review process:

But this history does not establish that patent validity is a matter that, “from its nature,” must be decided by a court.... The aforementioned proceedings were between private parties. But there was another means of canceling a patent in 18th-century England, which more closely resembles inter partes review: a petition to the Privy Council to vacate a patent. See Lemley, supra, at 1681–1682; Hulme, Privy Council Law and Practice of Letters Patent for Invention From the Restoration to 1794, 33 L. Q. Rev. 63 (1917). The Privy Council was composed of the Crown’s advisers.... From the 17th through the 20th centuries, English patents had a standard revocation clause that permitted six or more Privy Counsellors to declare a patent void if they determined the invention was contrary to law, “prejudicial” or “inconvenient,” not new, or not invented by the patent owner. ... Individuals could petition the Council to revoke a patent, and the petition was referred to the Attorney General. The Attorney General examined the petition, considered affidavits from the petitioner and patent owner, and heard from counsel.... Depending on the Attorney General’s conclusion, the Council would either void the patent or dismiss the petition....

The Privy Council was a prominent feature of the English system. It had exclusive authority to revoke patents until 1753, and after that, it had concurrent jurisdiction with the courts.... The Privy Council continued to consider revocation claims and to revoke patents throughout the 18th century.

Just a note: if you're going to cite English legal history at the US Supreme Court to try to establish some sort of general and accepted rule, it's best if you don't skip out on the fact that the actual history supports the other side. Just saying.

The final argument from Oil States that the court rejects, is that the PTAB is a violation because it looks too much like an Article III court, without being an actual court. But the majority opinion basically says "so what?"

But this Court has never adopted a “looks like” test to determine if an adjudication has improperly occurred outside of an Article III court. The fact that an agency uses court-like procedures does not necessarily mean it is exercising the judicial power. See Freytag, 501 U. S., at 910 (opinion of Scalia, J.). This Court has rejected the notion that a tribunal exercises Article III judicial power simply because it is “called a court and its decisions called judgments.”

The dissent from Gorsuch (with Roberts signing on) is all over the place. They seem taken in by the myth of patent greatness, kicking off the dissent with the following:

After much hard work and no little investment you devise something you think truly novel. Then you endure the further cost and effort of applying for a patent, devoting maybe $30,000 and two years to that process alone. At the end of it all, the Patent Office agrees your invention is novel and issues a patent. The patent affords you exclusive rights to the fruits of your labor for two decades. But what happens if someone later emerges from the woodwork, arguing that it was all a mistake and your patent should be canceled? Can a political appointee and his administrative agents, instead of an independent judge, resolve the dispute? The Court says yes. Respectfully, I disagree.

But... that makes no sense. Congress, which has the power to set up the patent system to "promote the progress of the useful arts" has determined (reasonably) that since the Patent Office grants lots of bad patents, it can also review and invalidate its mistakes. That's not a "dispute that needs to be resolved." It's an administrative function that doesn't end once the patent is granted.

Gorsuch seems to think people will read the narrow ruling of the majority to more or less decimate the courts and move lots of disputes into administrative processes. That's silly. The majority opinion is quite clear that it is narrowly focused on the issue before it concerning Congress's authority to enable the Patent Office to invalidate patents. As for the history lesson mentioned above, Gorsuch claims it no longer applies because the English Privy Council stopped invalidating patents in the 18th Century. That's true, but meaningless. The whole reason English patent history is brought up in the first place was because Oil States tried to argue that it was the natural order of patents that only courts could remove them. What they really meant is that it was the natural order starting in the late 18th century... which is a lot less convincing if you're trying to argue a form of "we've always done it this way." The point is... we haven't.

This is a big and important win, protecting everyone from bad patents. The IPR process has been shown to be a tool that is at least somewhat effective in dumping bad patents. We should all strive for a situation in which the PTO doesn't grant bad patents in the first place, but given that it does, it should be able to acknowledge its mistakes and correct them.

Of course, that won't stop patent trolls and big pharma from flipping out. Even the site FiercePharma seems to be completely off its rocker in calling this ruling a "blow for pharma" and describing the IPR process as "hated." Except that's silly. IPR is only hated by those with junk patents. If pharma hates it, it's because they know their patents are junk.

As that article makes clear, though, the powerful Pharma lobby intends to pressure Congress to still kill the IPR process as quickly as possible:

In a statement, PhRMA spokesperson Nicole Longo said the "narrowly tailored decision" found only that IPRs are constitutional, not "efficient or fair." The arguments and a Tuesday ruling in another case—SAS Institute v. Iancu—mean it's "clear there are problems with the IPR process that need to be addressed," she added.

Amusingly, the article also notes that most of the big pharma companies have used the IPR process themselves to invalidate the patents of others, suggesting that maybe they don't actually "hate" it that much after all...

Filed Under: america invents act, bad patents, franchises, inter partes review, ipr, patent reform, patent trolls, property rights, supreme court, uspto
Companies: oil states

Shocked, Shocked To Learn The Patent Office Is Structurally Designed To Approve Shit Patents

from the and-to-create-problems-for-innovators dept

The book Innovation and Its Discontents, by Adam Jaffe and Josh Lerner, was first published in 2004. We've cited the book frequently around here, as it did a bang up job describing structural problems with our patent system (and the judicial review of patents). There were a few big points that it made about why our patent system was so fucked up, and a big one was the incentive structure that heavily incentivized approving patents rather than rejecting them.

Specifically, there were two big ideas mentioned in the book about the US Patent & Trademark Office: (1) that because Congress forced the USPTO to fund itself from fees, it had the direct financial incentive to encourage more patent applications, and a good way to do that is to approve a lot more patents and (2) individual examiners were rated and reviewed based on productivity scores on how many patent applications they completed -- and it is much faster and less time consuming to approve a patent, rather than reject one. That's because once you approve a patent it's completed and gone from your desk (and into the productivity metrics as "completed"). But, if you "reject" a patent, it's not done. Even though the USPTO issues what it calls "Final Rejections" there's nothing final about it. The patent applicant can keep going back to the well over and over again, making minor tweaks on the application, requiring the examiner to go through it again. And each time they do, that hurts their productivity ratings. As an additional "bonus" -- the USPTO actually makes significantly more money when it grants a patent, because in addition to application fees, there are also issuance fees and renewal fees.

In the years after that book came out, the USPTO actually seemed to pay attention. It changed how it measured examiners' work and, magically, fewer patents were approved. For a bit. When President Obama appointed David Kappos to head the Patent Office, he decided that the number one problem that the Patent Office had was its huge backlog of patent applications. And, there's no denying that was a problem -- but it was a problem the USPTO created itself by spending the previous dozen years or so agreeing to issue patents on all sorts of crazy things, leading to more applications and more filers hoping to get their own golden patent trolling lottery ticket. So, it was little surprise when soon after Kappos took over, the USPTO started approving patents much more quickly, and a study from 2013 found that (surprise, surprise) it did so by drastically lowering the standards for approving patents.

Now there's a new study with even more empirical evidence showing how the Patent Office's entire structure is designed to incentivize the approval of crap patents (first highlighted by Tim Lee over at Ars Technica). The paper is by professors Michael Frakes and Melissa Wasserman, and they used FOIA (yay!) to get data on millions of patent applications between 1983 and 2010. The key point with that date range is that Congress only switch the USPTO over to funding itself off of fees in 1991 -- so the researchers could look at before and after data. It also allowed them to look at different cross sections within the data.

So, for example, the researchers looked at whether or not there was evidence that the USPTO approved more patent applications when there was a big backlog. The answer: hell yes!

Specifically, we compared the Agency’s patent grant rate across different groups of applicants based on the tendency of their associated technologies to file repeat applications; importantly, we performed this across technology comparison for two groups—defined by their average tendency to file repeat applications—before and after periods of budgetary shortfall and increases in application backlog. Our findings suggested that when the Patent Office begins to face mounting backlogs, it appears to act on its incentive to grant patents at higher rates for technologies that are associated with higher rates of repeat application.11 In figure 1, we replicate a figure from Frakes and Wasserman (2015), demonstrating that the Patent Office indeed began to grant at differentially higher rates for high repeat-filing technologies during the mid-1990s, a moment in time when the Patent Office’s application backlog began to increase considerably year-by-year. Again, this analysis is alarming because it suggests that factors other than the underlying quality of applications are affecting the Patent Office’s decision to allow patents.

Then there's a separate question of whether or not the USPTO has a higher approval rate for "profit-maximizing" patents. That is: not all patent fees are the same. Smaller entities get to pay reduced fees. Big companies pay full freight. If the USPTO is being incentivized by fees... then it's likely to approve big company patents faster. And... that's what happened. The study also looked at whether or not the USPTO more readily approved patents in categories where there were higher renewal rates -- meaning a much higher likelihood of generating future fees from renewals. Take a wild guess what they found in both of those studies?

As theory predicts, the Patent Office does indeed grant patents at notably higher rates to large entities and applicants from high renewal rate technologies when it finds itself in a position of insufficient fee revenue.9 More broadly, the parameters of its fee schedule appear to affect the way in which the Patent Office applies the legal patentability requirements. This is concerning, given that the granting decision should be based solely on whether the application meets the legal patentability standards. If the fee structure were to encourage more patent grants overall (or more grants during times of budgetary shortfalls), the result could be the issuance of patents lacking legal validity, potentially leading to substantial social harms.

Of course, patent system (and patent troll) supporters will cry foul at this for all the usual reasons -- insisting that this is all a conspiracy to take away their patents. But that's ridiculous. Everyone should agree that we're all better off if the Patent Office is not approving low quality patents. I guess everyone... except those with low quality patents. Basically if people are complaining about the results of this study, there's a half decent chance that it's because they hold crap patents.

The report suggests some ways to try to fix these incentives -- or at least to minimize the social cost of them. One is to stop making the PTO so reliant on fees. You can understand why it was appealing for Congress to make the PTO funded by fees in the first place: not having to allocate taxpayer money to an agency seems like a good thing. But it's important to pay attention to what kinds of incentives that can create -- and how it could create serious problems, as it has here. The report suggests raising patent filing fees -- such that they cover the costs of the actual examination, thus making it less likely for there to be budgetary shortfalls that create these warped incentives.

Because the actual fees paid to the Patent Office for the examination of a patent application are a fraction of the overall cost of securing a patent (which includes attorney fees), there is reason to believe that even a two-fold or three-fold increase in examination fees will not substantially impede access to the U.S. patent system. As a bonus, increasing examination fees will likely also result in raising the quality of patent applications filed with the Patent Office, as applicants become more judicious in selecting those inventions for which they choose to pursue patent rights.

While that increase in filing fee may feel unfair to some, they also propose doing away with the issuance fee -- so there won't be additional expense for actually getting the patent upfront (there are still renewal fees, but that's much further down the road). As for renewal fees:

Instead of eliminating renewal fees, we recommend that Congress decouple the renewal fee income from the revenue stream that the Patent Office can immediately access for funding. While this decoupling goal could be achieved in various ways, we propose the most straightforward approach: Congress would abolish the requirement that the Agency’s aggregate fee income not exceed its operational costs. Renewal fees would then be allocated to a separate fund, similar to the Patent and Trademark Fee Reserve Fund, and earmarked for Patent Office use only. This fund would then be used to provide rebates to small and micro-entities. As a replacement for the guaranteed fee discount for any given small- or micro-entity application, the Agency’s excess renewal fee income would be used to subsidize the small- and micro-entity examination fee.

Perhaps an even more important modification -- and one that's been obvious for many, many years -- is to actually have final rejections of bad patent applications, so people and companies can't just keep refiling over and over again without end. As the paper notes, it's not at all clear what societal benefits allowing repeat filings creates. It overburdens the system, creates incentives for bad patents to get approved, and provides no benefit to anyone other than the entity applying for bad patents. The specific proposal in the paper is that filers can get just one chance to refile the application.

It's good to see more research being done on all of this -- and to see more empirical evidence. What's troubling is that almost all of this was clearly shown more than a dozen years ago, and Congress still hasn't done a damn thing to fix any of it.

Filed Under: bad patents, incentives, patents, uspto

Microsoft And IBM: If Patent Office Can Do A Quick Review Of Our Crappy Patents, You'll All Die In A Car Crash

from the scared-of-something? dept

Last fall, we wrote about how the BSA, the Business Software Alliance, famous for being basically a Microsoft-front organization whose main job is to publish absolutely, hilariously misleading "piracy" numbers each year, had been taking on the issue of the so called "covered business method (CBM) patent" program that was being pushed in patent reform. The covered business method patent program is pretty straightforward. It allows certain types of patents -- currently financial patents -- to undergo a faster review, allowing the USPTO to dump bad patents faster. Senator Chuck Schumer, who had put the original CBM tool into the last round of patent reform, is now championing expanding it to cover software patents as well. While very heavy lobbying from Microsoft (and some from IBM) convinced the House to drop the plan from its patent reform bill, there's still a battle in the Senate, and Schumer doesn't show any interest in giving it up.

And there's no reason for him to do so. As he's noted, the use of the CBM program has already shown that this works. It has helped dump some bad patents and hasn't created any massive damaging consequences anywhere else. But you wouldn't know that to read the latest laughable BSA letter on this program, as they kick off their attempt to get the Senate to drop the CBM program as well. According to the BSA, since the original CBM program was just a test, it must always remain that way:

During Congressional consideration of the AIA, proponents of Section 18 argued that it was a necessary and temporary measure to review a very narrow class of financial-services-related patents. However, recently-introduced legislation proposes to make the transitional proceedings of Section 18 permanent and expand the definition of “covered business method patent” to include data processing patents used in any “enterprise, product, or service.” This means that any party sued for or charged with infringement can always challenge an extremely broad range of patents at the USPTO. The request for a proceeding need not be related to financial products or services and can be submitted any time over the life of the patent. This proposal would eviscerate the delicate balance that was struck with the other new post grant review programs in the AIA to ensure that patents would not be devalued by limiting serial challenges during the patent’s life.

Got that? The BSA (really: Microsoft pulling the puppet strings) is claiming that because Schumer agreed to use the CBM program as a test in the last round of patent reform (the AIA), that going beyond that would "eviscerate the delicate balance." Uh, no. The purpose of the test was to see if this program worked. And now that we see it has worked, it should absolutely be expanded. But, no, no, no says the BSA letter. If patents could be challenged, companies wouldn't make software any more and that would destroy pretty much the entire economy. And put us all in danger.

This would have far-reaching implications, because data processing is integral to everything from cutting-edge cancer therapies to safety systems that allow cars to respond to road conditions in real time to prevent crashes. Subjecting data processing patents to the CBM program would thus create uncertainty and risk that discourage investment in any number of fields where we should be trying to spur continued innovation.

Got that? If you actually review our patents to make sure they're not shit, you might die in a car crash. This is the most asinine argument I've seen from patent lovers in a long time -- and I've seen an awful lot of asinine arguments. First off, the idea that someone won't invest in writing a piece of software because of the possibility that (1) they might get a patent and (2) at a later date that patent might be challenged and (3) if that patent is crappy, that it might get thrown out, is so stupid that it doesn't pass the most basic laugh test.

And, of course, this leaves out the most important point: if the patents are valid, the CBM program will quickly find them to be valid and they're no worse for wear. The only time CBM will have a serious negative impact on a company is if that company has a ton of really, really shitty patents that they want to use to shake down innovators. So, go ahead and take a look at the list of companies who signed onto this letter, and you've got a list of companies looking to abuse the patent system to shake down innovators with their own crappy patents. And they're basically admitting that their patents are so bad that they can't survive a basic review by the Patent Office.

Then we move on to historical revisionism:

The US patent system for more than 200 years has succeeded spectacularly in promoting “the progress of science and useful arts,” as the Founders intended, in part because it has always provided the same incentives for all types of inventions. To expand and make permanent the CBM program would be to turn ill-advisedly and irrevocably in a new direction — discriminating against an entire class of technology innovation.

This is hilarious. First of all, anyone who is intellectually honest (note: the BSA has never been even remotely intellectually honest) has to admit the nature of the patent system has changed drastically in the past few decades, in particular with how it deals with software. And if there's a "discrimination against an entire class of technology innovation" it's clearly with the current patent system that has pretty much guaranteed that no company can innovate successfully without facing threats from patent holders demanding cash over bogus patents.

Frankly this whole letter is pretty disgusting. It's clearly the work of Microsoft, via the BSA as its sock puppet, and the argument makes absolutely no sense except if you have a ton of crappy patents. Hopefully the Senate won't give in the way the House folded.

Filed Under: bad patents, business method patents, chuck schumer, covered business methods, patent reform, patents, post grant review, software patents
Companies: bsa, ibm, microsoft

By Definition, A Defensive Patent Is A Bad Patent

from the ending-the-myth-of-defensive-patents dept

There's been a lot of talk about "defensive" patents lately, as many companies in the tech industry try to acquire patents and claim they're only doing so for "defensive" purposes -- to act as a kind of deterrent to a patent nuclear war. Of course, this only works against other companies that produce stuff. Patent trolls are immune to defensive patents, since they don't do anything, and thus don't infringe on any patent (though, both Halliburton and IBM have tried to patent patent trolling...).

We've described in the past some of the problems with thinking patents are okay if they're only used for defensive purposes. For example, while they may start out that way, they can later be used offensively, which happens much more frequently than you might think.

But Julian Sanchez brings up a key point in this discussion, which is that a good defensive patent, by definition is a bad patent. That's because the only way a defensive patent matters is if there's some likelihood that lots of other companies would infringe on it. As Sanchez explains:

This only works, however, if other companies are almost certain to have independently come up with the same idea. A patent that is truly so original that somebody else wouldn�t arrive at the same solution by applying normal engineering skill is useless as a defensive patent. You can�t threaten someone with a countersuit if your idea is so brilliant that your opponents�because they didn�t think of it�haven�t incorporated it in their technology. The ideal defensive patent, by contrast, is the most obvious one you can get the U.S. Patent Office to sign off on�one that competitors are likely to unwittingly �infringe,� not realizing they�ve made themselves vulnerable to legal counterattack, because it�s simply the solution a good, smart engineer trying to solve a particular problem would naturally come up with.

Of course, that describes a ton of patents out there. So broad and so obvious that tons of companies infringe. And those are, clearly, the worst, most economically damaging patents around. So, those who are seeking the best "defensive" patents are basically seeking the worst patents the USPTO has granted...

Oh, and should we mention now that Google just bought a bunch of patents from IBM for "defensive" purposes?

Filed Under: bad patents, defensive patents, patent trolling, patents
Companies: google, ibm, intellectual ventures

US Gov't Supports Keeping Patents Difficult To Invalidate

from the government-wants-its-fees... dept

With the Supreme Court agreeing to hear the i4i vs. Microsoft patent case, we're starting to see the amici briefs, and the US government has decided to support those against innovation, by siding with i4i. This is a pretty sad statement about the US government's understanding of patents. If you don't recall, the lawsuit focuses on a single key issue:

In court, parties have to prove their case by some "standard of proof." In almost all civil cases, the standard is "preponderance of the evidence" -- meaning it is more likely than not that the facts are true. When the question is invalidating a patent, however, the U.S. Court of Appeals for the Federal Circuit decided that a defendant trying to prove a patent invalid must do so by a higher standard than normal civil cases, that of "clear and convincing" evidence. "Clear and convincing" means that the facts are "highly probable," which is a much more difficult standard to meet when trying to invalidate a patent than just a preponderance.

That's it. It's pretty simple. The bar for invalidating bad patents should be "the preponderance of the evidence." Anyone who has any experience in actually bringing innovative products to market, and facing a bunch of threats and lawsuits from patent holders who have obviously bad patents would agree that this makes sense (or, rather, would agree that moving in this direction makes sense). In fact, that's why tons and tons of successful companies supported Microsoft in getting the Supreme Court to hear the case.

So pardon me for finding it laughable when i4i's chairman, Loudon Owen, claims that switching the standard would mean innovative organizations can't survive:

"As you can see from the amicus briefs, and from a letter previously sent to the Attorney General by over 260 signatories, this is an absolutely pivotal case that threatens the ability of inventors and innovative organizations to survive,"

Let's be 100% clear here, because Owen is lying. If you have a legitimate patent, you have nothing to fear from this requested change. Even if you have a bad patent, it's unlikely that this change would mean much for you. It's only if you have a ridiculously bad patent that this change would have any impact. And that certainly is not about the ability of inventors or innovative organizations to survive. Oh, by the way, take a guess at the level of quality that i4i has with its patents? Yeah...

In the meantime, if you look at the list of folks who filed amicus briefs supporting i4i, you'll notice that it's basically a bunch of companies who rely on patent licensing, rather than products to get by. There's also a funny one about "leading venture capital firms," which doesn't list any actual "leading" VC firms. No Accel. No Sequoia. No Kleiner Perkins. No Union Square Ventures. Those are the firms that people get excited about. Those are the firms that everyone wants to raise money from. They're all absent. The rest of the list is a mix of "IP" organizations and pharmaceutical companies -- who are hanging onto patents as their last gasp effort to stay alive, since they're failing to actually innovate.

As for the brief from the US government itself, which is embedded below, it's pretty weak if you're familiar with the problem of bad patents. But it basically says the law (which, it should be reminded, was written by a former patent lawyer, and was done before the recent burst of massively bad patents), says we should use the higher standard, so we should. It's also laughable, in that it assumes that the US Patent Office actually does its job in making sure that patents are valid before allowing them.

Finally, we should note that, yes, there's tremendous irony in Microsoft trying to lower the standard for ditching bad patents, at the same time it appears to be relying on ridiculously bad patents in lawsuits itself.

Filed Under: bad patents, evidence, invalidating patents, patents, standard, us government
Companies: i4i, microsoft

Patent Boss Admits That The Patent Office Keeps Getting Flooded By More And More Bad Patents

from the gee...-I-wonder-why... dept

The head of the US Patent Office, Jon Dudas, the same guy who was just hyping up a educational curriculum for children falsely claiming that any inventor "needs" to get a patent, is now complaining that the Patent Office is being overwhelmed with really crappy patent applications. You think? Lerner and Jaffe pointed this out years ago and it's not difficult to see why. With the USPTO approving tons of bad patents, and the courts all too often siding with the patent holder and expanding what's patentable, combined with people who have done nothing getting hundreds of millions just for holding a piece of paper, is it really any surprise that the incentive structure would push people to file for as many bogus patents as possible, in hopes of getting them through the obviously questionable process?

When you set up a system that rewards people for not actually innovating in the market (but just speculating on paper), then of course, you're going to get more of that activity. When you set up a system that rewards those people to massive levels, well out of proportion with their contribution to any product, then of course you're going to get more of that activity. When you set up a system that gives people a full monopoly right that can be used to set up a toll booth on the natural path of innovation, then of course you're going to get more of that activity. When the cost of getting a patent is so much smaller than the potential payoff of suing others with it, then of course you're going to get more of that activity. The fact that Dudas is just noticing this now, while still pushing for changes that will make the problem worse is a real problem. Patents were only supposed to be used in special cases. The fact that they've become the norm, rather than the exception is a problem, and it doesn't seem like anyone is seriously looking into fixing that.

Filed Under: bad patents, jon dudas, patent office, patents, uspto
Companies: uspto

Satellite Abandoned Thanks To Patent On Lunar Flybys

from the promoting-the-progress dept

A ton of folks are all submitting different versions of this story this morning (from a variety of sources), but the original appears to be at Space Daily, where it discusses how satellite company SES Americom has to abandon a satellite that had a botched launch due to a ridiculous patent on the concept of a lunar flyby. Basically, what happened is that SES had a problem with a satellite launch, such that the satellite did not reach the proper orbit (it was intended to be a geostationary satellite used by Echostar). SES then figured out that it could get the satellite into a proper orbit by making use of a lunar flyby. That part is just basic physics. But, at that point, SES discovered that Boeing happens to own a patent on doing this sort of lunar flyby, despite the fact that you can't patent physics. As someone notes in the article, Boeing merely used some jargon to make basic physics appear as a "process." If that sounds familiar, you'll note that it's the same thing that many patent holders are doing to turn math into patents using software patents.

So, rather than just doing it and having to deal with patent infringement lawsuit, SES tried to play by the rules (no matter how ridiculous) and asked Boeing to license the patent. Unfortunately, the two companies are engaged in a separate legal matter that has SES suing Boeing for $50 million. Boeing took the opportunity to tell SES it would license the patent only if SES dropped the lawsuit. Apparently, SES figured that the $50 million was worth more than saving the satellite, and will instead try to collect the insurance for the botched launch, abandoning the satellite. This may get more interesting, as apparently a third party is interested in buying the satellite and potentially taking on Boeing (or maybe just licensing the very questionable patent). Also, the insurance company apparently was not aware of these alternatives and may push SES to take one of them. Either way, thanks to a patent on physics (which, last I checked, is not something "made by man") SES has felt the need to abandon a perfectly viable satellite. I'm sure that was exactly how the Founding Fathers expected the patent system to be used. Update: The patent in question is available here.

Filed Under: bad patents, lunar flyby, patents, physics, satellites
Companies: boeing, ses americom

How Much Harm Do Bad Patents Do To The Economy?

from the billions-and-billions-of-dollars-worth dept

We've been discussing how patents can have a serious economic downside (as was recognized by Thomas Jefferson and James Madison as they designed the patent system). It appears that some researchers are trying to quantify just how much damage bad patents are doing to the economy. Against Monopoly points us to a blog post at Technological Innovation and Intellectual Property that discusses the results of a preliminary study (pdf file) that estimates a loss of $22.5 billion due to bad patents. The researchers admit that the findings are preliminary, but it does create an initial framework by which to look at the negative impact of bad patents on the economy. Among other things, the paper lists out the following ways that bad patents harm the economy:

• Cause consumers to absorb monopoly prices over "inventions" that were already effectively common knowledge
• Direct resources away from productive research and instead towards strategic accumulation of patents already filed over innovations already deployed
• Divert resources to "defensive patenting" or securing offensive "blocking patents
• Direct research away from areas of existing patents that should not have been granted
• Direct resources toward acquiring and enforcing substandard patents and collecting royalties rather than other more-productive fields of economic activity.

We've seen all of these in action lately. And, of course, this doesn't even get into how much is thrown away in legal resources to litigate patents and defend infringement claims on patents that should not have been granted. Also, it's worth noting that the TIIP blog post reminds us that the author's own book Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk comes out next month.

Filed Under: bad patents, economic impact, patents