Archive for fatigue factors
Many intellectual property practitioners worldwide are scratching their heads over what is happening to IP in the United States. There’s a revolution underway that over the past few years seems to have steadily eroded the value of patents and any semblance of predictability and order in the law. Patents can still be valuable, if you are lucky and have the right connections. For ordinary people and companies, patents, once the great equalizers against big companies, are now an unreliable tool. The erosion of IP rights is becoming a major factor in the growing problem of innovation fatigue in the United States.
This erosion has been achieved from a confluence of powerful currents are leading in one strong downhill direction. Congress has enacted patent reforms that make it vastly easier to challenge and destroy a patent and much harder to realize value, all of which favors those with marketing muscle, political influence, and existing market share. The Supreme Court has handed down a series of patent decisions that have eroded the value of patents. These blows have been especially forceful in the pharmaceutical and biotech fields, wiping out the value of many patents linked to “natural products,” and in the software and business method areas (e.g., Bilski and most recently Alice), making it extremely difficult to obtain IP in the technical fields with the greatest potential for innovation and growth as we move from the coarse manufacturing of the industrial revolution into the knowledge economy. Alas, in such fields and many others, the Supreme Court has created a new subjective tool against patents by ruling that anything “abstract” cannot be patents, while refusing to give any clear, non-abstract definition for “abstract.” This vastly adds to the uncertainty and chaos in many IP areas. In addition to these and other abuses of IP rights from the courts and Congress, the USPTO itself has gotten into the act with its own interpretations of judicially created rules that go even further than required by the courts in limiting IP rights. Sadly, we can expect ongoing hostility toward IP from the USPTO now that it is led by someone from one of the most powerful anti-patent (or, more accurately, anti-everyone-else’s-patent) force in Corporate America, Google, the former employer of Michelle Lee. Her selection as Director of the USPTO by President Obama came as a real surprise to many IP workers, but it was less of a surprise to those who see the political power Google has amassed.
These troubling events are now compounded by one of the most troubling IP cases in recent memory, a dramatically unjust case in which the Court of Appeals for the Federal Circuit (CAFC) totally disregarded the extensive fact-finding of previous courts, a jury, and the USPTO regarding the non-obviousness of some patents, and instead turned to so-called “common sense” to fill in the missing details of the prior art to render patents invalid after they had withstood repeated and thorough tests finding them to be valid and non-obvious. This was done in violation of the duty of the CAFC to respect the factual determination of the previous trial court in an appeal. Instead, the CAFC acted like a trial court, but without the information and testimony needed. “Common sense,” like “abstraction,” can be pulled out of the air at whim to poison a patent–when the rule of law is weakened and those charged with respecting the law instead make their own law as they go.
The case I’m referring to, not surprisingly, involved a company suing Google for patent infringement. We can expect to see more of this kind of thing, big companies with influence getting off free when infringing the patents of smaller companies (especially if they can be called “trolls”). For details, see Jeff Wild’s article, ” IP/Engine v Google, AOL et al – the most troubling patent case of 2014” in the IAM Magazine Blog, Dec. 22, 2014. This case involving the company Vringo deserves careful scrutiny (and howls of outrage).
Sometimes revolutions are necessary for the good of mankind, but many turn out to be excuses for someone to seize power, loot innocents, and create chaos. Until the US returns more fully to the rule of law in the IP arena and strengthens its laws to respect IP, especially for small companies and innovators who need an equalizer when facing Goliaths (or Google-liaths), we will face ongoing chaos, looting, and innovation fatigue as we reduce incentives and increase risks for the most innovative segments of our society, the small companies and lone inventors who are striving to create the future that giant companies are often to slow or risk averse to pursue.
At the IP Business Congress Asia 2014 (IPBC Asia 2014), a collection of IP experts from around the world are here in Shanghai, China sharing best practices and advice to help fellow IP workers. Yesterday during a panel discussing ways to build a world-class in-house IP team, a comment from the audience provided a valuable example of how management can stimulate innovation in a company inexpensively. At Aruba Laboratories, a social event was held in which a number of people cam wearing a T-shirt that said “Thought Leader.” Before the event, such T-shirts had been ordered for every person who had submitted an invention disclosure in the past year. There was buzz about what the T-shirts might mean and why some were wearing them. Then an executive spoke and congratulated those with the shirts, explaining what they meant. This simple, inexpensive act of recognition created an incentive to submit invention disclosures, which more than doubled that year. A 200% increase in invention disclosures shared–that’s a great return for a small amount of effort.
It’s important that management work to consistently recognize and show appreciation for the innovators in the company. It doesn’t require large bonuses, though I recommend that cash incentives also be used to recognize IP creation. Creating a culture of innovation above all requires the attention of management and leaders throughout the company.
There are many other issues to consider. For example, the attitude of the Legal Department in interacting with inventors can affect inventor attitudes for good or bad. When IP attorneys are aloof and bureaucratic, it can be a barrier. When they interact regularly with innovation teams and get to know and like the potential innovators of the company and take simple steps to encourage them, this can draw out important contributions. Facilitate innovation. Small things can become big barriers or big incentives. Pay attention to these factors and constantly gauge the health of your own innovation culture.
A small start-up company fighting one of the great giants of all time: it’s a classic story of David vs. Goliath, or in this case, David vs. Googleliath (a.k.a. VSL vs. Google).
Many small companies have claimed that Google misappropriated trade secrets or other IP, but rarely has Google graciously (and accidentally) cooperated in providing smoking-gun evidence the way they apparently did for Vedanti Systems, Ltd. (VSL). In this case, they allegedly left sticky notes on VSL’s trade secret materials showing their questionable intentions to take Vedanti’s technology. If VSL prevails against this giant, it may be more a case of Googleliath falling on its own sword than David being great with a sling.
VSL and their partners are now suing Googleliath for infringement of patents and theft of trade secrets in two courts. The suits are against Google (here also known as “Googleliath”) and their subsidiairies, YouTube and On2 Technologies. London-based Vedanti Systems Limited and their U.S.-based parent, VSL Communications, Inc., have turned to Max Sound for help in enforcing IP rights. The patent suit was filed in U.S. District Court for the District of Delaware, while the trade secret suit was filed in Superior Court of California, County of Santa Clara.
The complaints claim that Google executives met with Vedanti Systems in 2010 to discuss the possibility of acquiring Vedanti’s patented digital video streaming techniques and other trade secrets. Vedanti’s compression technology for streaming audio and video files is far superior to what Google had, Google’s own standards for streaming video t the time led to “jittery, low-quality video and sound for large-sized video files,” according to the patent complaint.
As part of the talks with VSL, Google had access to trade secrets such as VSL’s proprietary codec for encoding and decoding a digital data stream. That codex has proprietary techniques for “key frame positioning, slicing and analyzing pixel selection of video content to significantly reduce the volume of digital video files, while minimizing any resulting loss of video quality.”
Shortly after the negotiations began, Google allegedly began implementing VSL technology into its WebM/VP8 video codec, applying what they had learned from VSL but not letting VSL know. The WebM/VP8 video codec is extremely important for Google. It is used in many of their services and websites including YouTube.com, Google TV, the Android operating system, and Chrome web browser. They had inferior technology, but by allegedly stealing Vedanti’s, they were able to quickly advance their business at virtually no cost.
There’s just two pesky little problems for Google:
1. Vedanti has patents for its technology and is not afraid to sue. Now you might see why Google seems to really hate software patents (rather, other people’s software patents). They have been a leading force in some of the patent reform measures and related steps that have made protecting IP rights harder than ever for little guys like Vedanti. This giant, with its easy access to the White House and many other influencers, has also been an important voice against software patents, and may have helped influence popular opinion and the courts into recent devastating attacks on software patents. But Vedanti’s patents are still alive for now, so Google has cause for concern.
2. Google seems to have assisted VSL’s case by returning VSL’s trade secret materials with tell-tale sticky notes all over them showing their intent. Huh? This is really an amazing part of this story.
When the VSL Google talks ended, VSL demanded the return of its files. The returned documents were covered with incriminating Post-it notes that had apparently been left behind by Google employees. Attorney Adam Levitt claims that the notes said, among other things, that Google might possibly be infringing VSL’s then-pending patent and that Google should “keep an eye” on VSL’s technology and sweep it into a Google patent. In addition, notes warned Google engineers not to be caught “digging deep” and to “close eyes to existing IP.”
The complaint alleges that Google began to amend its preexisting patent applications and file new applications using VSL’s technology. Then in early 2012, VSL noticed that there were significant improvements to the video quality of Google’s Android operating system as well as other Google software. In June, the staff at VSL analyzed Google’s publicly available code only to discover that the code contained VSL trade secrets. Levitt asserts that the “Defendants’ theft of VSL’s trade secrets pervades virtually every website and product offered by defendants.”
“The use of new technology by established companies should be based on original creation and innovation,” said Adam Levitt, head of Grant & Eisenhofer’s Consumer Protection practice, who is representing the plaintiffs. “Vedanti Systems created groundbreaking digital video technology — technology that has forever changed the way that video content is streamed and displayed over the Internet.”
The lawsuits allege that Google willfully infringed Vedanti Systems’ patent and did so deliberately and knowingly, while recognizing the serious shortcomings of their own video streaming capabilities prior to the infusion of stolen IP.
Whether the suit will succeed or not remains to be seen, but I find Google’s lapse in leaving sticky notes on the borrowed materials to be rather hilarious, if it is true. One thing is for sure: If Vedanti’s allegations are factual, their chances of seeing some degree of justice are vastly greater by virtue of having a patent than if they did not. Software patents are essential for protecting innovations in the hugely important arena of information technology. This is the Knowledge Economy, folks, not the Iron Age. Economic growth and progress is more likely to come from advanced software and IT innovations than from hammering out better cogs and gears, and we need an IP system that understands this. Most judges and politicians ranting against software patents or patents in general do not understand this. Recent ruling that make many software innovations not even eligible for patents show that we have judges and influencers very ignorant of the physical nature of information and computer systems. Innovations like those of Vedenati are not tantamount to mere abstraction and mental exercises. They should have just as much right to be considered for a patent (provided they are novel, nonobvious, and useful) as any tool wielded by or widget hammered out by an innovative blacksmith.
Software patents matter, and they are vitally important for the best innovators of our day if they are to stand against the anti-patent giants that want anything but a level playing field. VSL vs. Google, or David vs. Googleliath, is a compelling reminder of that.
VSL’s patents in Europe are already causing pain for Google. Here is an excerpt from “Court Seizes Google’s Infringing Android Devices in Germany at IFA,” Stockhouse.com, Sept. 11, 2014:
SANTA MONICA, CA–(Marketwired – September 11, 2014) – VSL Communications, creators of Optimized Data Transmission technology and Max Sound Corporation (OTCQB: MAXD) (MAXD) creators of MAX-D HD Audio solutions, have been granted multiple preliminary injunctions from the District Court Berlin against OEM’s (Original Equipment Manufacturers) to stop the sale of certain Google Android devices in the Federal Republic of Germany at the Premier show IFA in Berlin (Internationale Funkausstellung, http://www.ifa-berlin.de/en), the world’s leading fair for Consumer Electronics and Home Appliances).
Max Sound, under agreement with VSL Communications, is enforcing intellectual property rights on VSL’s behalf and has obtained preliminary injunctions against Shenzhen KTC Technology Co. Ltd and Pact Informatique S.A., France. German Customs authorities further inspected several other exhibitors of smartphones and tablet PC’s with Android operating system. Shenzhen KTC Technology Co. Ltd. is one of the largest Chinese electronics groups operating worldwide, and Pact Informatique is a French electronics company operating in many European countries under the brand Storex. Max Sound’s actions were based on infringement of VSL’s European Patent EP 2 026 277 concerning an Optimized Data Transmission System Method. The Infringement was found on the basis that Google’s Android OS implements the H.264-Standard for video encoding, which is protected by VSL’s patent. A bailiff seized all smartphones and tablets of KTC and Pact at the trade fair IFA in Berlin on September 10, 2014. The injunctions have no automatic time limit, and opponents can file an opposition.
So what will Google do? For starters, I’m predicting we’ll see VSL and their allies soon being called some kind of “troll.” I also think we can rely on Google’s friends at the USPTO and beyond to find all sorts of reasons why Vedanti’s patents aren’t even drawn to patent eligible subject matter, regardless of how novel they may be. But the trade secret case is where I think tiny Vedanti might have a fighting chance, thanks to Googleliath’s cooperation with the sticky notes. Who said IP law wasn’t entertaining? Weird Al could have a lot of fun with this story. Suggestions for what tune to use in his spoof?
Note: The US cases referred to are captioned as: Vedanti Systems Ltd. and Max Sound Corp. v. Google, Inc., YouTube, LLC, and On2 Technologies, Inc., No. 1:14-cv-01029 (D. Del., filed Aug. 9, 2014) and Max Sound Corp., VSL Communications Ltd., et al. v. Google, Inc., et al., No. 114-cv-269231 (Cal. Sup Ct.).
- Max Sound Corp. Files Two Lawsuits Against Google, Accusing Search Giant of Misappropriating Proprietary Digital Video Streaming Technology (PRNewswire.com)
- Story at Yahoo! News
- Android Devices Seized in Europe (Stockhouse.com)
- Originally posted at JeffLindsay.com
My latest post here at Innovation Fatigue lamented the actions of the USPTO in their apparent war on patents involving natural products. New information makes the story even more troubling than before, indicating that more than just judicial error and bureaucratic blindness was involved. The steps taken appear much more deliberate and political than that, and reflect an increasingly revolutionary attitude toward patent rights holders, where IP is viewed as the problem, not as a vital tool to benefit society.
First, new insight into the actions of the USPTO comes from a leaked USPTO PowerPoint used to train patent examiners on the radical new USPTO guidelines implementing their extreme response to the Myriad decision. A PDF of the PowerPoint slides, coupled with the USPTO guidelines and some vital commentary have been compiled by Hal Wegner and are kindly provided by a great champion of IP (quality IP, that is), Greg Aharonian, Director, Center for Global Innovation/Patent Metrics. Wegner observes that the new guidelines, which require inventions involving natural products to be “significantly different” than what may be found in nature provide no concrete, objective test to determine when a claimed invention is “significantly different” from ineligible subject matter. Is a creative device made out of wood significantly different from naturally occurring wood? Is a new anti-cancer drug extracted from a newly discovered fungus significantly different? Who knows? The uncertainty created by the test can be disastrous for property rights holders. Wegner points out that a much more useful and concrete test already exists: the Papesch test for determining whether the claimed invention as a whole is nonobvious from the prior art. But this was never mentioned by the Supreme Court in the infamous Myriad decision and has been neglected by the USPTO as well.
In a recent email to his subscribers, Greg Aharonian shares an email sent to him by a biotech patent examiner within the USPTO. It helps explain some of the motivation behind the seemingly crazy USPTO action, which isn’t so crazy at all from the perspective of politics:
1610 examiner here again. We examiners in biotech at the PTO also would like to know ourselves who wrote those ridiculous guidelines. We are being told to stretch 101 as much as possible. The guidelines say that, for example, if claim 1 is an assay method, with steps such as centrifugation, column chromatography, mixing reagents in a test tube, spectrophotometric measurements, if each category of technique was known at the time of the invention (is routine/well known/conventional), forget about whether the step was ever done with the molecules in the claim, we have to write how each step is 103-obvious w/o using 103’s word “obvious”. We have to write somehow how the combination is 103-obvious, w/o the using 103 word “obvious”. Then we have to reject the claim under 101. We don’t know if the PTO requires art cited for each step that is obvious.
Now, Funk Bros. v. Kalo Inoculant, one example in the guidelines, is a decision in which the patented composition, which I think is amazingly clever, was considered not to be inventive. The decision involves 103, not 101. How could the PTO so thoroughly confuse 101 with 103?…
Myriad was politically motivated, filed by the ACLU, because poor people can’t afford the BRCA1 gene test. OK, this is the Obama era, max political correctness. Current politics ruled. The test, however, is expensive and difficult to do. It’s not in the test strip category, like a pregnancy test.
But Mayo v. Prometheus takes the cake. The drug and its metabolites are not natural products. So what is the natural phenomenon that the justices never mentioned? And the clever part is looking for a target concentration of one synthetic metabolite in red blood cells.
What seems to be forgotten is that patents are intellectual property and that patented inventions are new and useful. When intellectual activity is maligned rather than rewarded, the economy goes with it. The PTO seems to be under pressure from the White House, because biotech patents don’t jive with Obamacare, which is backfiring.
Yes, it is high time for patent attorneys to fight back (don’t laugh Greg). David Kappos cut our time for examination, but he increased customer service. Time for the customers to demand more service.
The biotech community seems afraid to speak out too loudly on these outrages, but I think savvy investors see a dimmed future and have begun pulling some of their money out of the field (my guess about the recent plunge). The patent community and the business community is remaining far too silent, perhaps afraid of attracting political wrath, but the losses of IP rights could seriously set back innovation in the US and beyond.
China is ramping up its IP system and strengthening protection, while America is declaring IP to be the problem and weakening IP rights. Who’s going to own the future? I’m living in beautiful Shanghai now, where a lot of the future seems to be sprouting in an increasingly pro-IP environment. Meanwhile, I hope America will come to its senses and return to vigorously protecting IP rights and promoting innovation, not innovation fatigue.
In response to recent court cases, the USPTO has dramatically revised its approach to dealing with a wide variety of patents. Its new guidelines to patent examiners on subject matter eligibility for inventions involving natural products seem to go way beyond the legal decisions on which they are allegedly based, adding extremely high barriers to patentability. If your invention uses natural products, as almost every tangible invention does to some degree, you now must show that what you claim is “significantly different” that what might be found in nature or from natural phenomena. This vague requirement gives examiners a new club. I’ve already seen it abused.
One client from a previous employer of mine was on the verge of having her patent allowed, but instead just received a ridiculous rejection based on the new guidelines. The invention is a real breakthrough in consumer products that replaces a potentially harmful active ingredient with a novel formulation of several natural compounds with unexpected benefits. The value of the invention is potentially huge, but the examiner notes that since all the ingredients are natural and not significantly different from what can be found in nature, the overall invention is not patentable. End of story. I hope this examiner doesn’t realize that every atom, electron, and photon used in any invention can be found in nature.
Those in the biotech industry are highly agitated by this development. “IP Practitioners ‘Horrified’ by USPTO Guidelines on Myriad” is a recent article from Managing IP Magazine with the following:
Sherry Knowles, principal at Knowles Intellectual Property Strategies [said]:
I think the guidelines that were promulgated by the Patent Office are horrifying to the pharmaceutical and biotech industry. That is probably the nicest thing I could say about them. According to the utility guidelines that came out in March this year, not only is no natural product patentable in the US, arguably derivatives of natural products may also not be patentable. That is a clear change in the law.
She said the guidelines include a number of questions to find out if something is patentable. The first is: is it a natural product and does it include chemicals derived from natural sources such as antibiotics and proteins. Knowles noted that 47% of drugs over the past 30 years include derivatives of natural products.
“According to the guidelines, if it is not a natural product you look at whether it is ‘markedly different’ from the natural product. That’s the test. Of course that is clear as mud and that will be defined over time in case law. But let’s say two-thirds of approved drugs that are derived from natural products are markedly different you are still down to 390 drugs over the past 30 years that arguably under the utility guidelines are not patentable. I find that horrifying. I am very concerned,” she said.
These new guidelines, as well as the questionable court cases behind them, reflect a growing anti-patent mentality among our judges, politicians, and bureaucrats. We need to educate a new generation to understand that intellectual property is a critical tool to lift all boats by encouraging innovation and the sharing of secret knowledge obtained by inventors. We need to reverse the popular trend of pointing to patents and trolls as the biggest barriers to progress, when it is not that way at all. Sound patents, properly examined and granted, encourage innovation and lead to gains in knowledge for all.
One of the great innovation killers in the Corporate world is the traumatic change that can come with a merger and acquisition. Through rough handling and several forms of neglect, some of the brightest would-be innovators for the transformed company can be driven out or, if they remain on board, turned from enthusiastic contributors to bitter observers.
Those who generate IP or have the best potential to do so need special attention during M&A activity. They need to be considered carefully during due diligence, but that often does not happen. If there is one well-known star who is the obvious source of an important product line, perhaps he or she will get careful attention, but a larger body of innovators easily be left out of the picture and damaged in the transition.
These problems can even happen during internal changes in the company, when perhaps one unit is moved to a different sector. In large companies especially, different business units may have different cultures, so the joining or moving of one group to another area in the company can be just as difficult for some as if they had been acquired by a strange outside group. Alienation and loss of trust can easily occur as things that were viewed as promised and commitments from the company are suddenly changed, or as appreciative management suddenly becomes newly skeptical and sometimes even hostile to the innovation efforts that were underway from a creative team.
I know of one case in one of the world’s most highly praised companies where a large team of creative, productive people fled after their unit was moved to a different group. The intent was to keep them and maintain their innovation work, but out of over several dozen talented people, only two or three chose to stay. Many left en masse after a few weeks because they found the new environment to be hostile. This was a tragedy that set that company back significantly in a key market. Foolish and unnecessary.
How can such bleeding be reduced when there is major change? Here are some tips:
- First, take an inventory of the creative potential of the units being affected. What kind of IP is being generated? Who are the generators? What are the incentives they have worked with? What is the innovation climate?
- Talk with IP generators during the transition. Have a meeting aimed at understanding innovation and keeping innovation alive. Let them know they matter. This should apply to all affected people, but there needs to be a meeting worked into the routine where innovation is a special focus.
- Form bridges between innovators in the incoming groups and innovators in the parent organization. Those connections and relationships may be the key to preserving innovation post-merger.
- Beware of the tendency of current managers and directors to treat incoming groups with skepticism and disrespect. Monitor this carefully and tolerate no bad behavior. This involves regular communication with affected groups. Pay attention and be ready to make further changes to keep innovation alive.
There is no need to lose the hearts and minds of bright people coming into your organization. No need to turn them off and create enemies from those who should become your allies. Attention to the tenuous bonds that link employees to their employers can keep the relationship healthy and reduce the innovation fatigue that often sweeps through groups shaken by change.
A few years ago, K2 Energy, an innovative start-up with a breakthrough in smart batteries offering several performance advantages over existing battery technologies in the market, was on the verge of finally commercializing their technology. They had just won the support of significant investors, and over $20 million in funding was about to be received. Then came a nearly fatal blow from an unexpected source: government help. Not help to K2, but to their largest competitor, A123 Systems. Out of the blue came news that A123 was receiving a grant of $249 million as part of the Federal Government’s plan to stimulate green energy.
This help to a competitor did more than just strengthen the competition. Now that A123 has failed and filed for bankruptcy, we can also say that this case of government help was more than just a huge waste of money that harmed the economy in general. We can also say it was more than just another government-sponsored failure that threatened to transfer US technology to foreign nations (how much technology, if any, was given away in the now-on-hold A123 deal with China is unclear).
For K2, the help was nearly fatal because its own investors, when they saw the news of the massive government grant to A123, decided to abandon K2. They felt there was no way little K2 with $20-something million from investors could ever compete against A123 with that kind of government backing. K2’s investors pulled out and that would have been the end of the story for K2, were it not for extremely tenacious and brave founders and leaders who insisted on forging ahead on their own. K2 clung to life, resisting innovation fatigue, and now was emerged with leading products and a global presence. The future is bright again for this tenacious company. No thanks to help from the government.
Selective funding of individual companies by the government always sounds like a great idea, at least to those who feel good about “doing something” and being generous, and certainly to those who receive the funds. But there are almost always overlooked consequences to this giving, and when one considers who and how such decisions are made, it should be no surprise that the allocation of funds to companies is often a misallocation. The odds of a poor decision are high because the politicians and bureaucrats who make these decisions often lack the market and technical knowledge to pick the best and most promising companies to fund, and instead may be tempted to make decisions on the basis of political expediency, favoritism, or other reasons influenced by murky agendas. But even if the decision is brilliantly made with top-notch intelligence, it is still inevitably a distortion of the market. Favoring one company means pulling funds out of the economy, funds that could have been part of natural market growth in needed areas, and moving those funds artificially to a favored target. What is the justification for that? Sure, there’s always an excuse offered, but rarely a justification.
Favoring one target artificially can actually mean destroying several others unintentionally, especially small innovators without vast political connections who may have the best solutions for the future. When it comes to innovation, I recommend letting “natural” market forces pick the winners and losers. When bureaucrats do it, it’s often worse than just wasting the money that could have helped the economy naturally. It can be a lethal blow to those with the most promise.
In many large corporations, there’s a painful and frequently repeated scenario of invention theft that we treat in several ways in the book, Conquering Innovation Fatigue. The invention theft I’m thinking of today is not from foreign spies or evil competitors. It is internal theft, wherein a powerful employee or team within a corporation takes credit for another individual’s or team’s innovation. Sometimes the theft is so blatant that a powerful person files a patent in his or her own name, leaving off the name of the real inventor. Sometimes the real inventors are told to drop the project completely and hand over the keys of the new vehicle they have created so that someone else can ride it across the finish line and take all the glory.
When this happened to a truly brilliant man in a large company where I was providing some guidance in the past, I warned him that his kind of behavior was deadly for the future of their company. When people lose trust for their company and fear that their innovations will be stolen, they clam up, shut down their innovation engines, and save their best thinking for someone else, such as their own business one day or a future employer. When people don’t get any credit for what they do, they quit doing. If a company tolerates or even rewards internal invention theft and doesn’t zealously seek to reward true inventors, real inventors move toward secrecy or inactivity and the light of innovation goes dark. This is the fast and easy way to bring your company to your own version of the Dark Ages.
Yes, time travel is easy. You can go back in time by decades or centuries when you crush innovation by allowing it to be stolen from within. Going backwards is surprisingly fast. Once you feel the pain of your mistake, clawing your way back to the modern world might take a little longer than your think. Actual, most companies shrouded in the mists of the Dark Ages never realize what they’ve been doing wrong because they are out of touch with the voice of the innovators within. They can spend a lot on consultants solving the wrong problems and talking to the wrong people and never rebuild the trust they have shattered. When it comes to long-term corporate innovation success, trust between employees and the company is everything.
At Tissue World 2012 in Shanghai this week, a conference related to the booming business of producing tissue paper, I had a sobering conversation with a former employee from one of the world’s great equipment companies. I overheard a current employee at this company state that things were slow, in spite of the global surge in tissue production. In fact, if I heard correctly, this leading company “had no orders” for their machines. A disaster. Hundreds of employees may lose their jobs in coming months, as far as I can tell, in spite of this segment of the industry being healthy and active.
The former employee explained the disaster to me. From what I can gather, the problem stems from the decision by management to perfect their processes and standardize their offerings for ultimate efficiency. That sounds like good business, right? It’s what any good MBA would want to do, right? Sure. But what it did was take the focus of the company away from meeting the diverse needs of their customers and instead tried to force customers to conform to the needs and desires of the supplier. Customized orders were given punitive pricing, and pricing of standardized products was made completely inflexible. The company developed highly efficient, nearly perfect systems, and lost their customers. Disaster. When massive cost reduction becomes massive customer reduction, you’re toast.
We live in an iTunes world. People are increasingly expecting the products they buy to be tailored to their needs. They expect offerings to be flexible, customizable, adapted to their needs. If you can’t build flexibility into your product line and into the service you offer your customers, if you can’t understand and meet their individual needs, your relationship, though decades long, can suddenly evaporate. They can close your web page and in moments find a different vendor that they can work with. You must adapt the way you do business and have ways of customizing what you do and how you do it without adding exorbitant fees.
You may need to rethink your business model to do this. You may need to consider adding some new partners in your supply chain, and perhaps retooling your apps and website to provide a more customized feel for those placing orders or learning about your products. You may need training of your sales staff and marketing teams. But you can’t ignore that we are in an iTunes world with flexible competition everywhere. You must innovate and adapt to better meet the needs of your customers and keep your business, even a very mature business, alive.
One of the most serious factors contributing to innovation fatigue in the U.S. and many other nations can be the failure of government to protect and enforce property rights, including intellectual property rights. When the fruits of invention can be plucked by anyone without benefit to the inventor, when the risks and costs of innovation provide no benefit to the innovator apart from a first mover advantage in the market place, then the incentives to invest, to sacrifice, and to bear the pains of innovation are diminished. Frankly, why spend ones time and money inventing and innovating if the results cannot be protected to benefit those who sacrificed and paved the way?
As we argue in Conquering Innovation Fatigue, that nations with good IP systems tend to have stronger, more vibrant economies. China gets this and is building its future with a growing emphasis on IP, even as the West thinks China has no IP. Meanwhile, many in the West seem to have bought into the lie that IP hinders economic progress, and have joined the anti-patent bandwagon. It’s a fast road to innovation fatigue.
Sadly, the latest to join the anti-patent parade is one of the most powerful entities on earth, the Federal Reserve Bank of the United States. That’s right, the secretive, unelected, unaccountable organization that has overseen the erosion of about 95% of the value of the dollar since its inception, the institution that repeatedly turns to “legal counterfeiting” with non-stop printing of money created from thin air as the addictive cure-all for America’s economic problems, now dares to expand its influence into not just eroding your financial property, but also your intellectual property, with a call for the elimination of patents: “the final goal cannot be anything short of abolition.” Ouch.
The mega-government, Keynesian mentality behind Quantitative Easing and the other voodoo tools of the Fed can naturally lead to a hostility toward property rights of all kinds, so the assault on patents is not necessarily out of character for the Fed, though certainly far afield from their supposed area of responsibility and certainly far from any hint of expertise. Yet they have had the audacity to publish a report pretending to offer economic analysis into the harm of patents with a call for the ultimate demise of patents. This is disturbing stuff.
The failure of the USPTO and the patent problems that are given so much publicity are generally not inherent to IP rights but are largely due to the failure of the USPTO to ensure that quality searching and examination is done. Issuing loads of worthless patents can create serious problems. It is easy to focus on the loss caused by bad patents, as we do in a chapter of Conquering Innovation Fatigue, but one must also consider the even greater loss caused by no patents and easy theft of IP. The solution, again, is not to abolish IP, but to strengthen the USPTO so they can and must perform quality examination, prevent the siphoning of funds by Congress from the USPTO, and strengthen our patent system so it is less capricious (real patent reform, perhaps beginning with eliminating the vague and unpredictable 101 assaults on patents when some computer method is involved).
We must say no to the Fed’s attempt to add yet another devastating failure to its track record, or rather, to prevent one more success in reducing the value of the property held by Americans.