Source: https://www.ipwatchdog.com/2017/02/21/inventors-need-fix-patent-system/id=78587/
Timestamp: 2019-04-22 20:49:31+00:00

Document:
For the last 11 years, the U.S. has weakened its patent system to the point that today, patents are liabilities for inventors and startups, and patents are no longer effective at attracting capital to commercialize new technologies. While we have damaged our patent system, China has strengthened theirs. Today, China leads the world in new patent filings. Large amounts of venture capital that once fueled early stage startups in the U.S. have moved to China. As a result, startups are fleeing to China. The U.S. is giving its technological edge away, job creation is stagnant, economic growth is anemic and the America Dream is dying. Congress must act to correct this damage and fix the patent system.
The PTAB is an administrative tribunal within the U.S. Patent and Trademark Office (USPTO). It primarily reviews legitimately issued patents under three distinct procedures: Inter Partes Review, Post Grant Review, and Covered Business Method Review. PTAB procedures are highly destructive rendering most patents valueless for funding at an early stage because with virtually any commercially viable patent investors must anticipate first paying for and surviving a multi-year PTAB challenge process with rules significantly stacked against the patent owner before any money can be derived from the innovation.
Black letter law defines a patent as a presumed valid property right, yet PTAB’s put law into conflict by treating patents as an public right, not a property right. PTAB’s invalidate at least one claim in more than 95% of the patents reviewed. Invalidating just one claim can neuter the enforceability of the entire patent thus destroying it. In fact, a new tactic is developing where challengers seek to take out one, or only a few claims, and then at the culmination of the challenge file for reexamination of the patent, which then shifts the burden onto the patent owner. These strategies (with appeals) can and do easily eat up well over five years of patent life (if not more). An inventor’s cost in defending a patent against a PTAB procedure starts at around $300,000 and can easily run up to $1 million. Big corporations are “gang tackling” small inventors by filing multiple PTAB procedures on the same patent, which often drives the cost of defending a patent into the multiple millions of dollars. Frequently these challenges are in series, which means the patent never escapes the challenge phase.
The PTAB must be eliminated because no matter what changes are made to the rules it is difficult to see how this Board could ever be reigned in after starting and existing for the purpose of killing patents. Just changing the rules will not fix its systemic problems nor create a fairer process for patent owners. PTAB invalidation rates will undoubtedly vary with every new PTO Director, Secretary of Commerce and President. This will leave the patent system perpetually unstable and as such unable to drive economic growth and job creation because patents will never be able to attract investment at early stages.
Title 35 USC is the governing law on patents. It defines the requirements of obtaining a patent, among other things. Within 35 USC, Section 101 is effectively the door into the patent system by defining what is considered patentable subject matter. Supreme Court decisions have fundamentally changed the meaning of Section 101 by creating three exceptions to patentable subject matter: abstract ideas, natural phenomena, and laws of nature. These exceptions have no basis in statutory law, nor were they the intent of Congress. They are purely a creation of the courts.
The abstract idea exception has thrown the meaning of patentable subject matter into chaos by failing to define what is or is not an abstract idea, and conflating analysis intended for 102, 103 and 112 into Section 101’s analysis. Today what is patentable is completely in the eyes of the beholder and often different branches of government come to different conclusions on the validity of the same patent.
Under the abstract idea exception, some USPTO examination groups reject patent applications at rates above 90%, PTAB procedures invalidate around 90% of challenged patents, and trial courts invalidate 54%. Many of these patents are invalidated in preliminary motions without defining the claim terms and without evidence or testimony. It is black letter law that the only way to understand what a claim covers is to construe the claim by referencing the claim language, the specification and the entire prosecution history. Despite this, examiners and judges on every level invalide claims without construing the claims in accordance with well established black letter law. This is significant because exactly how can one know whether the claim covers an abstract idea if the claim is not construed? The entire purpose of the specification is to define terms and concepts. With the abstract idea law arising as an independent stream and violative of so many black letter princicples, investors cannot predict what patent will be invalidated and justifiably assume patents have virtually no value in investment valuations of early stage startups.
The Constitution defines a patent as nothing but an “exclusive Right”, therefore injunctive relief was the default judgement upon a finding of infringement for over 200 years. As a practical matter, injunctive relief served both as a strong deterrent to patent infringement, and as the basis for projecting the future value of a patent at the earliest stages of commercialization. Establishment of that future value is critical to attracting investment to commercialize patented technology.
In 2006 a Supreme Court decision called eBay v. MercExchange effectively eliminated injunctive relief by requiring an impossibly difficult test to prove injunctive relief is in the public interest. Today, courts impose a forced license at an arbitrary value that has no relation to the market for the invention. Investors cannot project the future value of a patent as a result. The net of eBay is that investment in patents has dropped because the most powerful deterrent is removed (now if you steal the invention and take the market, you will keep it), and a future value of a patent cannot be reasonably determined.
The law is supposed to maximize certainty and minimize transaction costs to facilitate an efficient, arms-length negotiation of rights. The law has embarked on a decade long, top-to-bottom restructuring of the patent system. It is no great mystery that the patent system in America is inefficient and private, arms-length bargaining between innovators and innovation users simply no longer happens. This can be directly traced to eBay, which tilted the negotiating balance toward infringers who simply do not have to worry about a patent owner achieving an injunction.
Large entities realize there are a certain number of patent owners that are just simply not going to assert their patents for one reason or another, frequently because they don’t have the money to do so. Then there is another group of those that will assert their patents but will not win. The calculation progresses to realize that there is a small group of those who are likely to assert and prevail, thanks to all the hurdles put in place (i.e., patent eligibility challenges, the PTAB, etc.). The calculation further recognizes that even if a patent owner prevails a permanent injunction is virtually impossible to obtain as the result of the Supreme Court’s decision in eBay v. MerchExchange, and damages are likely to be minimal thanks to a continual judicial erosion in damages available to victorious patent owners who hold valid patent rights that have been adjudicated to be infringed. Therefore, patents are weaker, less capable of being enforced, and much more likely to be successfully challenged.
Accelerated examination was created to speed examination in exchange for additional fees. While marketed as a tool for small entities to get patent protection faster thus helping to attract funding to startups, it has the opposite effect. Most small entities cannot afford the higher fees. However big corporations can and the primary users of accelerated examination are big corporations. In fact, the biggest user of prioritized examination is Google, the entity that leads the charge year after year to weaken America’s patent system for inventors, entrepreneurs and start-ups. The fact that Google Is so eager to get patents quickly should raise a red flag in and of itself. Why are they so desparate to obtain their patents so quickly while at the same time trying to revise the patent system to be virtually impossible to use by the most innovative entities in America?
The net effect of prioritized examination is to sap examination resources from smaller entities in favor of big corporations who can afford to pay the fees; those same big corporations that constantly complain about the patent system in the first place.
There are unfortunate side effects to examiners first learning about new technologies from just a handful of big corporate applicants. First it injects a technology bias into the minds of examiners that acts to devalue other technologies. Second, the regular applications of smaller entities are judged under the sieve of hindsight because accelerated applications are examined first, but were invented as long as ten years after the regular applications of smaller entities, which are evaluated later.
The Constitution grants a patent to the inventor. Under this first to invent system, an inventor only needed to keep records documenting the invention through its reduction to practice to show inventorship. But, first to invent was changed to a first to file system creating the very real possibility that some other person could steal the invention and file for patent protection ahead of the inventor. Moreover, if an invention is disclosed to anyone prior to filing for patent protection, the invention may become its own invalidating prior art making the invention unpatentable.
Inventors must now file for patent protection as soon as the idea is dreamed up and before disclosing it to anyone else to determine the invention’s viability, marketability or cost. This adds thousands of dollars in upfront costs for risky unproven inventions to the people least able to afford that cost and risk. The net effect of first to file is to discourage inventors to the point of abandoning the patent system.
Overall, today’s patent system no longer encourages investment in new technologies. It actually discourages the creation of new technologies by enabling big corporations to crush startups and inventors. Without a real grace period, as the legislative history explained was the intent, the most innovative segments of the American economy are at a severe disadvantage. Congress must act to stop this damage to our economic engine and the American Dream.
Adrian Pelkus is an inventor with 30+ years experience developing over 300 different electronic products and high technology processes that have helped startup several technology companies. Mr. Pelkus is named inventor on fourteen issued U.S. Patents including the "Baby Think it Over" infant simulator, a “Thin Film Flexible Solar Cell”, the FDA cleared "Jaw Elevation Device" and O2MislyTM Wound Treatment System. In 2005 Mr. Pelkus reorganized the San Diego Inventors Forum now a 501(c)(3) to help startup entrepreneurs. Mr. Pelkus serves on the Board of Directors of both United Inventors Association of America (UIA) and US Inventor, organizations dedicated to assisting and educating inventors.
Form a PAC to go after the “patent reformers.” Look at the campaign contributors to the “reformers.” Google is at the top or near the top of contributors.
This is a political battle that Google is fighting.
You’re points about what needs to happen to get the U.S. patent system to were it belongs are pretty much aligned with mine: (1) ditch the unconstitutional IPR/PGR/CBM proceedings; (2) overturn the nonsensical and broken Mayo/Alice framework; and (3) overturn eBay. Besides those you’ve mentioned, I would add one more: (4) overturn Medimmune which, together with eBay, has put the patent owner at severe disadvantage in negotiating any licensing agreement.
Every inventor needs to become familiar with patent, trademark and copyright law instead of relying on others to interpret for them. This doesn’t mean we don’t need IP lawyers—we do. It just means that we all benefit by being informed participants in the legal process.
When we brought a trademark infringement suit against a major corporation in the early 90’s, we found our best offense was in learning all we could about trademark law and past cases so that we could effectively partner with our lawyers in charting case strategy. Our lawyers often told us to “quit playing lawyer,” yet some of our suggestions proved to be pivotal during the trial.
I also agree with putting an end to prioritized examination in the USPTO for the same economic reasons. Laws are supposed to create an equal playing field for inventors. Currently the laws favor those with the deepest pockets.
You mentioned at the beginning of the article that China has strengthened their patent laws. Would you please direct me to some articles to learn more about what they have done?
Thank you for this vital information that I shared on our Facebook page.
Legislatively overrule Citizen’s United and give the voice of the country back to those who have actual allegiance to the country (and diminish the outsized power enjoyed by the large monied transnationals who have no such sovereign allegiance).
Agreed, Citizen’s United is a major factor. Problem is Trump’s SCOTUS pick(s) are not likely to overturn the ruling. Congress is the financial beneficiary of this horrible ruling. It’s hard to see the beneficiaries of this unconscionable ruling vote against their own financial interest. SCOTUS was suppose to be the check in the checks and balances process. Hence, Google can buy Congress and push for legislation that is in their best interest. Might makes right, unfortunately.
Mary Lou Green, Here is a link to one document… http://innovationalliance.net/wp-content/uploads/2016/12/Slide-Deck_final-US-Innovation-+-Overseas-VC_12.09.2016.pdf And another http://watchdog.org/283886/venture-capital-chases-patents-friendlier-climes/ There are more if you search the internet. Lots of reporting on this.
What would an Inventor’s Bill of Rights look like to you?
1. No law, procedure or right in a patent shall be diminished after an inventor files the patent application, or any related thereto.
(For years, every new patent law seems to reduce inventor rights; but once you’ve filed and the application is public, you’ve also lost the trade secret – that’s not fair: the bargain is made at the point you/inventor make the disclosure).
2. Unless elected by the inventor or assignee, Patent Office Fees shall remain the fees on the day filed for a patent application and any related thereto.
3. Challenges to a Patent or Patent application shall constitute res-judicata [aka Findings and admissions] against the challenging party and all parties in interest. A party that loses a challenge to a patent must pay the legal fees and expenses of the Patent holder, plus 3X a reasonably royalty rate for the term of the challenge.
(knock-off artists don’t challenge patents academically — they do it to avoid paying license fees (or worse), and so use EVERY avenue to attack a patent they don’t like — often with the goal of bankrupting the patent holder. This has to end).
4. A party (actual/constructive/party in interest) attacking a patent shall be limited to one proceeding of their choosing. A party that loses a challenge to a patent must pay the legal fees and expenses of the Patent holder, and 3X a reasonable royalty rate.
5. The term of the Patent shall be extended during any Administrative and/or Legal proceeding that delays the constructive enforcement of that patent.
(A patent held in litigation, Inter-parties Reexam, IPR, or waiting on FDA approval, loses value every day it waits; this shouldn’t harm the inventor).
6. No Patent or application shall be abandoned except by express abandonment.
7. Patent Office Procedure shall be in plain English.
(I think perhaps limiting the length of the procedure manual would also be helpful(?) but just using words in their ordinary sense of the meaning would be a great start).
8. Patent Examiners shall have a minimum of a law degree, a degree in the science or engineering art related to their field of examination, and no fewer than two years of non-administrative experience, and speak English to a native proficiency.
10. The inventor(s) shall retain a remainder-interest in the patent for the life of the patent.
(This means that if the patent becomes “orphaned” in a bankruptcy, death of an owner, or other reason, the original inventors regain the rights to their inventions — this gives someone in society an IP interest that can be leveraged to bring a product or idea to market).
Though not a “right” – Fees should be simplified and flat, such as the equivalent of what they were in 1967 (basically, three prosecution fees, and the patent filing fee (regardless of entity size) was less than $600 in today’s dollars. What inventor wouldn’t pay a little more for simplicity and clarity and smaller fees in the long-run?).
While I’m on a roll, why not re-institute the doctrine of equivalents, and reform prosecution history estopple that is not relied on in allowing a claim (effectively being dicta)? Oh yes, I’m just getting started . . .
I think you mean “reined in” – the PTAB is already reigning! (And subsequently raining on everyone’s parade).
How would eliminating “first to file” square with PCT applications, when you are competing in a global market? Not too well, I suspect.
@7: The EPO is a mess on 101. I get 101 rejections in the US and don’t get them at the EPO for the exact same claims —often.
But, the EPO is a weird beast with a swamp to trudge through.
Good article and someone needs to get the Trump administration to focus on reforms as part of generating greater economic activity in this country.
Great job Paul et al…one way to help curb IP theft would be to restore patent application secrecy until a patent is granted. Patent applications are now published 18 months after filing.The average time for completion of prosecution and patent issuance is 25 months, giving foreign IP copycats (on average) a 7 month head-start. .
Paul, I am on board with one caveat: abstract ideas. Abstractness is a 112 problem and not a 101 problem and always have been — thus a basis in the statutory law.
Finally, we cannot simply say that abstractness is a 112 problem without addressing the claims in Bilski. Both the Federal Circuit and a unanimous Supreme Court held they were not addressed to patentable subject matter. Before State Street Bank, they would have simply been held ineligible as business methods.
Finally, I think the law regarding abstractness has taken on a lot of clarity since cases like EnFish. Inventions directed to real software inventions are eligible.
Wow. In this alternative facts universe of yours and of the SCOTeti it sounds like this assertion has been handed down by the always present and ever lasting divinity. How spiritual.
Let the Holy Inquisition commence! Death to all inventive witchcraft practitioners and to their scrivener familiars.
First, repeal the AIA. This is the way to go; not the other way so favored in Congress lately, of fudging the “fix” worse than the already botched so-called ‘reform’ – which usually produces behemoths of monstrous legislative imagination such as Sarbanes-Oxley or the ACA.
Second, open investigations into the ties of anti-patent Federal judges appointed at the behest of Google lobbyists, during the Obama administration: initiate impeachment or recall proceedings, against those whose position is found to have come about through illicit influences.
Third, gather up forces from the research universities to create a narrative with enough academic prestige, to counter the issue poison of authoritative lies from the likes of corrupt Prof. Lemley, besotted Prof. Crouch, and the like.
Fourth, perhaps engage a good writer to create an inventor character as an “economic hero for a new generation” that speaks to younger people today, who were birthed in an era of software-centric devices: this has potential, when one observes the 130,000 attendees of ComicCon! Cartoons WORK, in selling a story – if they’re good enough for Hollywood Billion $ releases in movie theatres; then, they are good enough for this purpose.
Only when the “pushback” we as inventors and patent practitioners generally wish to see, is as well coordinated as this mendacious and so far quite successful attack against the correct (“black letter law”) application of patent holder rights, has been; will there be significant redress of these widely destructive changes.
Paul, a moment here; for a word of grateful appreciation, from this inventor. You have tirelessly taken this fight to the offices of the legislators, in a principled and persistent campaign; without much thanks from the vast majority of people; who, in general, do not fully understand the importance of this issue to their own lives, as these are affected by the U.S. economy, nor the essential details.
Well, this particular inventor thanks you profusely. We all of us, need to pick up some of our attention from the drawing board and testing bench; and acknowledge your efforts and the importance of this struggle.
I don’t trust the figure in the reuters article. Those 1 million applications probably include Chinese utility patents, which are only examined for novelty. Many of them would never be granted under US 103 or EPO regulations.
Benny, Good point. But these are applications not issued patent.
A bigger point is to compare Chinese prosecution to the US system. While examined under 103 in the US system, a substantial number of patents actually issued in the US end up invalidated in PTAB’s and courts under a 101 analysis that confusingly conflates a 103 analysis. So the US system really doesn’t do a 103 analysis either in prosecution. At least not one that the courts accept. That means the US system is really just a very expensive and time consuming registration system where a patent is judged valid or invalid based on tests that are not defined and seems to be defendant related.
I personally think the Chinese system is not a good system, but the numbers prove it is better than the US system.
Step@16, being accurate is important. I consistently opposed the AIA; but one of the most damaging arguments undermining our defense of first-to-invent was the allegation by many including, from this blog, that the original patent statutes were first-to-file. That was as damaging and it was false.
The statement that there is no statutory basis for the exceptions is false. However there is no statutory basis for “abstractness” for being a § 101 problem. The Morse case made clear that the statutory basis for abstractness was the then analog of today’s § 112.
I would not be adverse to a statutory fix for abstractness along the lines of the following: a claim that is patentable under § 112 of the statute is not ineligible under §101 for abstractness.
Edward Heller @15. The argument that business methods should not be patented goes the the core of the reasoning for the patent system in the first place. 101 defines it as method, machine, composition of matter, etc. I don’t know of any requirements that a patentable invention must be a technical invention. And how would that be defined anyway? I view the whole business method is not patentable argument as a construct of those who wish to continue in their monopolistic position by confusing the argument by throwing in undefined words that attribute less than meaningful attributes to the discussion.
Paul@23, I respectfully disagree and would think Congress would have to act. However, Bilski was 5-4. Removing abstract to 112 would effectively make business methods patentable subject eligible.
“Natural” is a false narrative.
There are very few things left on Earth that are “natural” and not in many ways the outcome of human interference (products or byproducts of man rather than nature alone).
Take for example the “natural” (cough cough) fruits and vegetables we buy at our local big box Healthy Foods store. BS. All are products of years of human controlled evolution and cross hybridization.
“Perhaps” it is OK for Clarence the Clown to privately harbor a belief in “natural phenomenon” and so too for a’Bacus Brain Breyer. But a scientifically trained person should be well past such nonsense.
step, I would sincerely appreciate it if you would stop insulting Justice Clarence Thomas. Alice was unanimous, after all. You are coming across to me, and probably to others, as a racist bigot.
Alice/Mayo/Bilski/Myriad have nothing to do with race and everything to do with judicial incompetence, ignorance and vanity.
Unanimous means they are all guilty.
At least Scalia had the honesty to admit in Myriad that he did not understand molecular biology. Going along with the rest in order to get along is not an excuse.
Bilski was 5-4. Alice only followed Bilski/Mayo. Nothing really new there.
The folks who damaged us most were the 5 in the majority in Bilski. Focus there.
As I said, we can fix things by declaring that “abstract” is not a 101 problem, and that claims that comply with 112 are not abstract.
@27 Ed the Ned: Seriously? Making fun of the justices is that? Come on.
There isn’t one among them that doesn’t deserve to be called a clown for signing onto Alice.
Edward Heller @29. I don’t get how transferring analysis of abstract ideas from 101 to 112 will help. Already 101 says “any” method, machine etc is patentable. Yet somehow “any” has the exception of abstract idea. Why would 112 be “any” different? Would the courts not apply the same reasoning to 112? After all, their abstract idea reasoning is untethered to “any” statutory or Constitutional grounding, so why would they care if it falls under 101 or 112?
Paul, “transferring?” Not at all. If a claim passes 112 — supported, not indefinite, etc., it is not abstract, period! This has long been the proposal of many including Night and I believe anon.
If a claim is not supported, not enabled, or not definite is it invalid under 112 — completely statutory. Abstractness would simply be removed from the law by statute.
Edward, OK. I may have misunderstood your comment. Abstract needs to be specifically removed from 101. US Inventor has language that does this. I’ve heard some promote just deleting 101. I believe that will transfer the errant concept of an abstract idea to 112.
And of course by pulling the race card, Ned the Ed(itor of our emotion driven “minds”) has magically erased the question about what constitutes “natural” @26. What a clever slight of hand!
Whatever you do, don’t look behind that curtain. Leave the operator behind the curtain alone ! Pay no attention.
Your screed is infamously incorrect.
Business method patents have NEVER been “outlawed” under US patent law.
If “First to Invent” is restored, won’t more people opt to go abroad because of the ease of “First to File”?
Get Trump to cancel the AIA is the fastest way. Trump is using executive orders to wipe out as much of Obama’s work as he can. The AIA was signed into law by Obama it can be canceled. How can all written in this article get past congress with Google poisoning there minds. Executive order! I’m tired of waiting I’m going to get a China PTC patent and use it to stop copyists importing into USA.
If first to invent is restored, there will be a 12 month grace period before you need to file in the US. If you publicly disclose the invention you may lose priority in some countries. That may encourage you to file abroad. But that is how it works now anyway for foreign applications. The change would only have effect in the US.
Your lack of knowledge about the laws is ‘obvious’ but probably not your fault because after all you are just starting out. Patent law is complex and counter-intuitive.
We have export control laws in this country which prohibit an American inventor from just going to any other country as you suggest.
I think the export control laws you refer to, the Arms Export Control Act and the attendant ITAR regulations, only apply to articles or technical data specifically designed for military application as enumerated on the United States Munitions List. If it isn’t specifically designed for military application, no registration with the Directorate of Defense Trade Controls at the State Department is necessary. It may or may not fall under the export regulations of Commerce Department, but is there any citation you can point to that prevents an inventor from taking his/her/their invention to another country? I don’t think there is one.
However, this license program seems to only apply to patents originally filed in the US. Thus if you don’t file in the US then you don’t have to give the PTO a heads up. That is if you wish to sell in a foreign market and don’t care about selling in the US.
Correct me if I’m wrong here. I just did some cursory research in the past few minutes. Thanks!
One “must” get a foreign filing license if one plans to file abroad.
@34: step back: I think that Ed the Ned is either a paid blogger or that he says these things to try and drum up business. Ed the Ned worships R. Stern the mind behind Benson, and may very well be getting work from Stern.
Anon@34, Business method patents have NEVER been “outlawed” under US patent law.
Well, it depends on whether you consider Hotel Security, which did find that methods of doing business were ineligible under 101, to be part of the patent law. That case was followed consistently by all courts for nearly 100 years until State Street Bank.
Begin reading at 175 and continue through the first paragraph on 176.
Hey Night, well at least I am giving you credit for the idea that if a claim passes muster under 112, it is not abstract. I agree with you in this, and think making this observation and any proposed legislation is important.
Paul, all we have to do is restore first-to-invent with respect to the grace period. As a practical matter, most interferences are decided by the first-to-file principal because the first-to-file is a senior party and normally he or she wins. If we simply put this practical result into the statute by effectively saying with respect to applicants claiming the same invention, the first-to-file a claim to that invention prevails over the second to file a claim that invention.
But this would restore the ability of an inventor to overcome prior art within the grace period by showing prior invention.
Clearly they cannot understand metallurgy or product by process. They are smarter than everyone else, especially the inventor.
Step@50, now that was a public service even though you intended to poke fun. People would be interested to find out where “Alice” can from.
Your view on that case is not correct. You have been told this by none other than Professor Crouch, and Mr. David Stein took the time to deconstruct your views in in great detail.
Do not prevaricate with your usual claptrap here.
The year 1852 was 100 years before enactment of the 1952 Patent Act, enactment of 35 USC 101.
Apparently back in 1852, the Medieval judges of that era did not understand anything about atoms, metallic alloys, grains and worked metals.
You would think that now a days; more than 60 years after enactment of the 1952 Patent Act, some of our Supreme Court justices might be slightly more enlightened about science and reality.
Apparently no. They are still spinning their Freemason fantasies about fundamental truths, principles, motives, power elements, earth wind and fire.
No wonder America is not great anymore and some say (perhaps, I hear it you know) that we have to make her great again in some magical way or another.

References: v. 
 v. 
 § 101
 § 112
 § 112
 §101