Archive for incentives
After seven years of working with intellectual property and innovation in China, I’ve seen some of the ups and downs as well as the gross misunderstanding of Chinese innovation and IP in the West. I’d like to briefly summarize what I’ve seen.
First, when it comes to innovation in science and industry, graduates of Chinese universities are not the drones and clueless copyists that many in the West seem to think they are. Yes, they have been through intense educational processes that emphasize memorizing tons of material and respecting what teachers say, but this hardly means they cannot think for themselves or innovate. In fact, the mastery of material that they have obtained gives many of them the skills needed to apply sound principles in creative ways. he truth about innovation is that in many cases, skills and knowledge matter, and the more you have at your fingertips, the more you can do with it.
But yes, in an innovation session, a facilitator is likely to find a lot of people looking down at the ground and not contributing. This can often be due to having the wrong people in the room and not providing the right setting and incentives. If the boss is there, people might be afraid of showing him or her up or afraid of saying something risky and possibly wrong. So get the boss out of the room. Then turn your event into a competition. Have incentives for contributing. It can be as simple as “no bathroom break until we have 10 ideas in the board” or prizes for the team with the best concepts. But once it becomes clear that there are reasons to contribute and little risk in contributing, you’ll face the problem I see most now: getting the group to slow down and limit their responses. “I just needed 5 concepts, not 30, but thank you!” A friendly competition brings out the best in many Chinese innovators, and I’ve been deeply impressed with their creativity and insights.
Innovation is very healthy in China. China is leading the world in innovation in many targeted areas, greatly outpacing the West in areas such as nanotechnology, green energy, AI, etc. You haven’t seen the power of great smartphone apps until you’ve seen how people are able to use WeChat over here for so many things: paying utility bills, ordering and paying for meal, participating in free videoconferences, sending gifts, finding when the next bus is coming to your stop, reserving seats at a movie theater, easily forming groups to share text, photos, and videos for an upcoming or current event, etc.
China has wonderful brands, cool business models, increasing quality and safety, brilliant entrepreneurs, and a booming market in many fields. It’s a dazzling and beautiful place with great hope for the future.
On the other hand, there are some great “fatigue factors” that make things tough on some innovators and entrepreneurs. The biggest issue may be the uncertainty in regulations. Here in Shanghai, for example, thousands of entrepreneurs who have spent years building their businesses in small shops along many classic streets of Shanghai suddenly found that all the shops in certain areas would be torn down to beautify the street or convert it to high-end hotels or something. Many times all that happened was that a flourishing market was eviscerated and sterile walls were left lining a street that suddenly was missing the flavor it had nurtured for decades. The purging of small businesses has been painful to watch and has also been frustrating to local residents who can no longer get the goods and services that used to be around the corner. Now they have to travel to go to larger stores that are less convenient and often more expensive.
Last week, I was thrilled to learn that the Central Committee of the Communist Party in Beijing sent out a very wise directive to cities in China urging them to be cautious about unnecessarily closing shops and markets on their streets. It noted that this process is removing important economic zones that convey a crucial part of the flavor of China. Amen! I grieve for the thousands who lost their jobs over these painful sweeps, and hope healthy local businesses and markets can continue to thrive for the good of both the entrepreneurs and customers like me. How I miss some of those little shops and businesses that have been such a precious part of my experience in Shanghai.
Unpredictable rule changes can hurt innovators in many ways. Some innovators just get a business going only to learn that a new rule now forbids the import or sale of a product they brought to China. Others learn that an area that was zoned for industry is suddenly no longer open to their business and perhaps an entire factory has to move. These things happen in the West as well, but the process here is less visible and harder to cope with in many cases, in my opinion, so those creating businesses here need to be both flexible and diligent in understanding the needs and plans of government so they can foresee problems or adapt to them quickly. I’m not saying it’s overwhelmingly difficult, but innovators and entrepreneurs do need to be prepared watchful, and always have a plan B. That’s good advice for any nation, of course.
The challenges from rule changes may be most severe for large companies, where a policy change can affect huge areas of one’s business or involve formidable costs. On the other hand, large companies often benefit greatly from relationships with other entities that can give them great advantages in innovation. And fortunately, the government is often understanding of the impact that rule changes can bring, such as the requirement to move a factory, and will often offer incentives that take way much of the pain and make the change possible.
Part of the good news is that officials at all levels in the country are increasingly recognizing the importance of aiding and not hindering innovation and entrepreneurs, and so in spite of some of the risks of rule changes, there is a general climate of encouragement and help for innovation. This can benefit large and small companies. It helps to be involved, to unite with good organizations to stay informed and build increasing influence, and to also be close to your community, making sure that your business is involved in bettering the community and lifting others. Such organizations and innovators who aren’t just looking out for themselves but recognize the greater good and seek to serve can have lasting impact on this nation.
Innovation is real in China and is becoming stronger and more important every year. It is a great place to pursue innovation and a great place to develop and enforce meaningful IP. More on the IP issues later. For now, give China a chance and look beyond the stereotypes that are often projected as if they were facts. China has changed greatly in the past two or three decades. Come see what’s really happening over here!
Many of the greatest inventions in America came from immigrants. See Steve Brachman’s article, “American innovation has been fueled by immigrant inventors” at IP Watchdog. Nearly all of our inventions, in fact, came from people who were either immigrants or descendants of immigrants (sometimes we seem to forget our own roots!). Immigrants with skills and a desire to succeed often become great entrepreneurs that create jobs and wealth that benefit the rest of us. Today, unfortunately, there is a lot of misunderstanding about immigrants.
Sadly, many people with great innovation potential and good education find legal immigration is nearly impossible or takes many years. They are punished with unreasonably high barriers to entry. Making the barriers greater for them will only hurt the economy and our innovation potential.
The Sovereign Man Explorer newsletter (from Sovereignman.com) of Feb. 5, 2017 has an excellent article on immigration to consider:
Everyone Loves a Good Ol’ Immigrant Witch Hunt!
Republicans aren’t the only ones who want to limit immigration. While democrats are crying foul over Trump’s policies towards immigrants, they have initiated a little foreigner witch hunt of their own.
A whole bunch of Democrats in Congress introduced a bill that would have the Secretary of State, and other federal agency directors, create a list of foreigners believed to have manipulated the election, or tampered with American political parties.
It would give the government power to freeze their assets, and bar them from entering the United States.
And this would happen based solely on the investigation and recommendation of the State Department; no due process.
What this means:
This is some pretty weak criteria for having your assets frozen and being barred from entering America. True, Trump’s plan to ban all immigrants from particular countries is extreme as well, but at least he doesn’t plan on freezing immigrants’ assets.
This essentially could rob immigrants’ of the products of their labor, while stifling their international mobility, just because their name ended up on a list.
How much evidence is required to end up on the list? We don’t know. Can they get off the list, have their travel allowance returned, and have their assets unfrozen? We don’t know. Will this be used politically against enemies of politicians? We don’t know.
This is a vague and ill defined bill which gives more power the the Feds to arbitrarily harass immigrants. And it proves this attitude is held by both major American political parties.
Innovation thrives when there is certainty and an environment where the risks of developing a new business or other innovation can bring returns. When there is the risk that government with the stroke of a pen can seize assets without due process or otherwise take everything by changing the rules of the game, there is uncertainty that chokes innovation. Scaring away talented innovators and threatening them with the loss of assets for supporting a political opponent will leave all of us worse off.
Of course, a government so out of control that it will seize immigrants’ assets for arbitrary reasons is a threat to all of its citizens as well. It is the ultimate source of innovation fatigue and worse.
As I watch the decline of the US patent system, I have to marvel at how much loss the world is facing through the crushing barriers to innovation and job creation in the U.S. Once the beacon of innovation for the world, now would-be innovators are afraid to take the risks required to bring their new products and services to the market because they cannot get the protection that should be theirs when IP rights are strong. If a Google or Microsoft takes their invention, the great equalizer of patents will not be there for them.
In the name of advancing innovation, Congress created a monster called the American Invents Act. This was done without input from the small inventors and entrepreneurs of the world, where most innovation and job creation occurs. It was based on input from the giants like Google who despise patents (other people’s patents, that is). But thanks to the AIA, there is now a host of new ways to destroy patents and they are being used with startling effectiveness.
A key component of the war on patents is the new “patent death squad,” that Patent Trial and Appeal Board. Based on the statistics from their work, there is little hope left for patent owners. See Gene Quinn’s excellent report, “Misleading PTO statistics hide a hopelessly broken PTAB” at IPWatchdog.com. Startling, troubling, but accurate.
The war on innovation also includes action from the courts, especially the Supreme Court, which has given judges bold new weapons to invalidate patents by calling their subject matter “abstract” — a deadly word that is vague, which the Supreme Court has not even attempted to define. The possibilities for patent destruction under the Supreme Court’s new Alice test are immense, and I’ve seen some great innovations blown apart with that weapon.
The USPTO, now led by a Google attorney, has repeatedly taken a hostile attitude in how they interpret laws and create policies regarding patent examination. The results are shameful.
The politicians and their gargantuan backers are winning the war against IP and innovation in the US. It’s time for Congress to pare back the damage they have done with the AIA, and for champions of innovation to rise and demand a more equitable system.
Abraham Lincoln said that the patent system “added the fuel of interest to the fires of genius.” Today the fires of genius and the fire of innovation itself is getting doused with something less helpful than fuel. These fires are being cooled and, in some cases, extinguished with harsh attacks on the IP rights that once enabled and motivated lone inventors and small businesses to take the fruits of their genius to the market.
The owners of small businesses, the people who generate most of the innovation and business growth in the United States have good reason to be worried. Their ability to attract funding through valuable intellectual property is being compromised. Their ability to protect their products and innovations from the power of corporate giants is being whittled away. This has come from many quarters, but there is a widespread anti-patent movement driven by politics and misinformation. It’s the bitter fruit of a bitter anti-property rights movement that exaggerates the threat of a few bad actors to justify widespread weakening of property rights in ways that will hurt the economy and our society for years to come.
We have seen a recent series of Supreme Court cases that have made it much harder to obtain patents and enforce them. We have seen massive changes in US patent law that make it easier to invalidate patents after they are granted and make it harder and more costly to stop infringers if your patent survives. Now the bogeyman of “patent trolls” is held up as a threat to America that requires more sweeping “patent reform” to make it even harder to enforce a patent, and it looks like both parties are united in a quest to do “something big” to shake up the IP rights that helped drive the American economy for so many decades. Corporate giants benefit from this reform as it clears away the annoyance of other people’s IP rights standing in the way of their marketing muscle. But the economy as a whole and the rights of many are hurt in this process this amplifies innovation fatigue .
Several recent articles highlight just how serious the problem has become. Louis Carbonneau in “Toxic Asset: The Gradual Demise of the American Patent” (IPWatchdog.com, December 10, 2014), surveys the radical changes in the past two or three years:
On the judicial front, in 2014 we saw no fewer than 5 Supreme Court decisions going against patent holders on the various subjects of obviousness (a key test for patent validity), what constitutes “abstract ideas” (which now undergo a more stringent test for patentability), business method patentability, indefiniteness (how you construe claims), reasonable royalty (how you calculate damages), willful infringement (how you punish the “bad actors”) and fee shifting (making losers pay for winners legal fees). All of these decisions have collectively made it harder for patent owners to: i) maintain the validity of duly issued patents (previously presumed by law), ii) pursue infringement claims, ii) prove damages (let alone treble damages), iv) have open discussions with potential infringers prior to litigating, and have left the unsuccessful patent owner at risks of paying millions in legal fees to the other side if the judges so decides.
Parallel to judicial reform at the federal courts, recent US patent reform with the American Invent Act (AIA) introduced a new post grant review mechanism called Inter Partes Review (IPR) which allows a party to challenge the validity of any issued patent before the Patent Trial & Appeals Board (PTAB). Strangely, despite the PTAB being an emanation of the same USPTO that delivered all these patents in the first place, there is no longer a presumption of validity before the PTAB for the patents being challenged while other rules make it easier to invalidate patents based on prior art.
Finally, on the political front, in 2013 the US House of Reps. passed the Goodlatte bill, which would erode rights conveyed to all patent holders despite being primarily directed at NPEs. It is now expected that the new Republican led Senate will revive the bill -currently on hold- in early 2015 and, with a rare showing of bipartisanship from the White House, it is expected to be signed into law. At the same time, 27 US States have passed or are in the process of passing laws that make it harder for people to assert the patents they own.
Carbonneau goes on to explain that in recent Federal Circuit cases, patent owners are being crushed, and in Inter Partes Review (IPR) cases before the USPTO, nearly 80% of the owners of challenged patents are being told by the USPTO that their patents are not valid over the prior art that the USPTO itself supposedly considered before granting the patent in the first place. Carbonneau puts it rather wryly:
The most interesting statistics come from the PTAB [the USPTO’s Patent Trial and Appeal Board, which processes IPR cases] because it only focuses on validity issues based on prior art; the very same prior art patent examiners are supposed to have found and analyze prior to issuing a patent. Since patents going through IPRs are usually the same ones that being litigated, you would assume that owners did a lot of due diligence before investing in a costly patent lawsuit. Well, the PTAB is declaring 77.5% of reviewed patents invalid! And this is not limited to “abstract” software; patents related to biotech and pharmaceuticals, medical and mechanical devices, are being invalidated at an even higher rate! Remember, this is an offspring of the very same agency that inventors paid thousands of dollars in the first place to review applications and issue their patents. Now, after having to pay a quarter to a half million dollars in legal fees (average cost of an IPR procedure for a patent holder), the same agency is telling patentees nearly 80% of the time: “Very sorry we made a mistake; we would not have allowed your application had we looked more carefully for existing prior art. And no, there is no refund available.”
Personally, I cannot think of any industry that could survive more than a month with a nearly 80% defective rate, let alone by forcing you to spend a fortune for the “privilege” to confirm that indeed your title was invalid in the first place! Only a government can come up with such a broken system and get away with it.
The impact of these anti-patent efforts has been a surprisingly sudden break from the trend of increasing IP litigation, with litigation in 2014 down about 13% from the previous year according to a new 2015 PwC report on patent litigation. The problem of explosively increasing patent litigation, a common excuse to justify the slashing of patent rights, is not supported by the data.
Richard Lloyd, writing for the IAM Blog, draws this observation from the PwC report:
Of these three classes [of patent litigants considered], NPE [non-practicing entity] companies have been successful 31% of the time in patent cases brought since 1995; this compares with a success rate for universities and non-profits of 48% and a lowly 18% for individual inventors. Individual patent owners also do far worse with damages pay-outs, getting a median award of $3 million compared with $11.5 million for company NPEs and $16.2 million for universities/non-profits.
There could be many reasons for individual inventors doing relatively badly. Although the PWC study doesn’t provide any, it’s easy to speculate that small inventors may have lower average quality patents to begin with, while they probably don’t have the same kind of litigation savvy as other NPEs and are much less likely to have access to the same kind of litigation expertise that larger, better funded patent owners can turn to.
But what PWC’s numbers also strongly suggest is that the US patent litigation system is strongly stacked against small, patent owning entities. Bearing this in mind, it is worrying that the main packages of reform proposed in the House of Representatives (the Innovation Act) and the Senate (the PATENT Act) are only going to penalise them further.
Lloyd notes that potential irony now that many lone inventors, recognizing that they have little chance of winning and have almost no chance of affording the punitive legal bills they may face if they sue and lose, may be more likely to turn to NPEs (“patent trolls”) for help as the most practical way to realize any benefit from their work.
There is a need to rebuild an innovation climate in the United States, starting with educating our leaders about the need for IP rights and the value of patents. If we don’t teach this lesson from within, it will eventually be taught rather loudly from without, for Europe and China are both moving to strengthen IP rights and strengthen IP enforcement. Europe’s Unitary Patent system could be a boon to IP there, though much remains to be seen, but the changes in China are strong and dramatic. That nation has gone from no patents and no IP system in the early 1980s to the world’s biggest source of IP generation and IP litigation, with many changes steadily strengthening the nation’s IP system. There is a long ways to go for China still and there have been some setbacks, but at current rates we can see China becoming a leading source of global innovation while the US loses its lead.
Will the flames of innovation be largely quenched in that nation? Much depends on what we do with IP rights now, the rights that will shape our culture and economy for decades to come. May the fires of genius be encouraged with something other than the cold water Congress and Courts have been sloshing.
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.
The recent Alice decision from the Supreme Court threatens patents for many innovators working with computers, software, information, and knowledge–in short, the heart of the modern Knowledge Economy. By waving around the undefined word “abstract”–a word that the Court expressly refused to define–they have ruled that a major part of the economy is simply not eligible for patent protection. An article at the popular IP blog, PatentlyO, seeks to explain if not justify the Court’s ruling. In “Alice, Artifice, and Action,” Jason Rantanen elucidates the thinking of the Court as he explains that the problem with the invention in Alice is that ultimately, what it involved “is just information” and thus intangible or abstract, unworthy of patent protection. I recognize this is a widely held belief, but it is not based on modern science. Maybe superstition, but not science.
It’s time for those in the IP profession to recognize what many scientists and engineers have long understood: that information is physical. Just as e=mc^2 helps us understand the relationship between matter and energy, the laws of thermodynamics plus a good deal of modern quantum mechanics and other fields helps us understand the physical relationships between information, matter, and energy. Entropy is one of the key physical concepts that helps us appreciate that linkage. See Wikipedia’s article on this topic at http://en.wikipedia.org/wiki/Entropy_in_thermodynamics_and_information_theory.
Information cannot be processed without physical, material change often affecting more than just physical entropy alone. That information processing may be in the form of electronic signals, computer chips, magnetic media, graphical interfaces, or chemical reactions with DNA (DNA, of course, is “just information” encoded with a brilliantly simple and tangible system).
In the Industrial Age, we focused on inventions made with cogs and pistons, steel and glass–crude, weighty, and easy to touch or see. Their making and their use involved smoke and flame, clangs and whirrings that nobody could miss. But we have moved into the the Information Age, where the greatest innovations that will drive our economy, the Knowledge Economy, are much finer, often microscopic, involving silent, invisible (to the naked eye) change that is still every bit as physical and real as anything a blacksmith hammered out. To dismiss the workings of the new electronic machines of our day and their many fruits as mere abstractions, intangible, immaterial, the whisps of ethereal spirit devoid of substance, is to miss the reality of the greatest era of innovation and invention ever. To exclude inventions in handling information as inherently unpatentable is a tragic error, one that contributes concretely to the growing innovation fatigue in the U.S.
One of the important new antibiotics discovered and developed by pharmaceutical companies in the past few years is Rifampicin and its relative Rifamycin. These potent antibiotics remain key tools in fighting off serious infection. Their story begins with a soil sample taken from a pine forest on the French Riviera in 1957 that was then studied in an Italian laboratory, where unusual antimicrobial properties were observed in a newly discovered bacterium. eventually an unusual molecule produced by the bacterium was identified, isolated, mass produced–and, yes, patented.
Rifamycin was credited with conquering drug-resistant tuberculosis in the 1960s. These drugs are marvelous discoveries, important pharmaceutical inventions, and became the subject of multiple patents providing protection and incentives to the developers and improvers of this unique products.
Thank goodness these products were discovered and patented decades ago, because today the USPTO would probably reject any patent application out of hand using its newly fabricated and terribly damaging rules that rule out “natural products” as patentable subject matter. This is the result of what appears to be a politically motivated attack on the pharmaceutical industry by the US government, using a Supreme Court decision (Myriad Genetics) as the excuse, but twisting it to go beyond what the Supreme Court said. The political angle is that politicians want to “stick it” to the pharmaceutical industry and appear to be taking steps to lower the cost of drugs by limiting patent scope and other means. But the long-term effect will be reduced innovation and less progress in medication.
If a product is actually novel, useful, and non-obvious, the fact that it had origins of some kind somewhere in nature should not be a barrier to patentability. The fact that an unknown bacterium in some French soil existed in nature does not enable the public to understand and produce a powerful, pure antibiotic useful in treating many diseases. Those who discovered, tested, refined, and modified the compounds produced by the bacterium deserved and needed patent production. Without it, there would be lessened incentives to take on the burdens of discovery, testing and drug development. We would be less innovative, not more, without patents for novel materials with some kind of basis in nature. But today, such patents and such innovations are threatened. It’s another example of innovation fatigue driven by political agendas and political machinations.
If you think about it, every invention has some roots in nature. The protons, neutrons, and electrons used in every object or affected in every process come from nature. Are we sure that we need a vague and indefinite “natural products” exclusion beyond the more sensible previous criteria for patentability?
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.
Prisoners of Hope: How engineers and Others Get Lift for Innovating by Larry Vincent is an unusual book on innovation that I found to be a refreshing guide to strengthening innovation with great practical value. Part of what makes this book unusual and, for some, perhaps highly challenging, is that it is written from the perspective of a preacher turned innovation champion, filled with references to biblical material, including frequent passages cited from scripture and analogies, sometimes extensive and detailed, drawn from the Bible. Although I treasure the Bible, initially this approach caught me off guard. In fact, at first I felt the attempt to find practical secular lessons for innovators from Bible stories was strained, even to the point that I initially disliked the book after the first chapter or two. But after a few more pages, I began encountering many valuable insights and modern case studies that revealed the author really did understand the practical challenges of bringing innovation to life, especially in a corporate environment. Once I got past my initial challenges with the unique angle of the book, I found it well worth my time, even inspiring. I still struggle with some of the passages using scripture to explain innovation and its challenges, but others may enjoy that. On the other hand, I was impressed by his application of Ezekiel’s “dry bones” vision in the Old Testament, where the prophet Ezekiel saw a valley of dried bones that became living humans again. His treatment made it a very apt and interesting analogy for the challenges inventors face in breathing life and commercial success into their inventions.
Lanny Vincent understands innovation and the life and challenges of innovators, especially those in corporations. Inventors and innovators are the “prisoners of hope” of the title, people driven and even held captive by their vision of changing the world with their innovation. It is their faith and hope that drives them forward, and this faith and hope allows for many biblical insights to be relevant. Whatever their feelings about scripture, this book can be valuable for them and for those who guide or influence them. Vincent understands how they can be more successful.
Aspects I especially enjoy are the numerous case studies and examples. While many come from the consumer products industry, especially from Kimberly-Clark Corp. where Lanny Vincent had a great deal of industrial experience, the lessons and practical guidance from the author will help engineers, scientists, and other inventors in many disciplines, and may be especially helpful to leaders responsible for innovation and business development. In these case studies, Vincent draws out key lessons to guide and inspire innovators today.
One of my favorite sections is in the middle of Chapter 6, “Inspiration and Appreciation,” where Vincent recounts how we worked with a team of automotive engineers in Michigan to help them innovate in the area of automotive suspensions. As he observed their responses and discerned that they were there because they had to be, not because they wanted to be, he departed from his normal process. He sought a way to help those jaded survivors of extensive downsizing become more inspired about the innovation task before them. He asked them to tell him the basics of the suspension system, including the history of its development. Admitting his naiveté and asking the engineers to share their knowledge seemed to engage them. They were then asked to draw a timeline of the development of related systems and then to characterize major epochs of the timeline as if they were historians. Then, in light of the past, how would they characterize the next era of development? They energetically and swiftly responded, and then Vincent simply explained that that was the area where they needed to invent. The invention workshop turned out to be highly productive.
One of the interesting insights regarding corporate barriers to innovation is the tendency for companies to promote successful innovators in their ranks to new positions where their rich innovation experience may be unused or essentially lost. The wheels of innovation are constantly being reinvented in companies as those who succeed are moved away from the field where they were able to create success.
Vincent also calls for corporations keep inventors and innovators close to projects as they become commercialized. There is a tendency in large corporations to hand off new products to others and leave those with the original vision and passion out of the picture by the time consumer feedback is being obtained, but Vincent identifies this as a huge missed opportunity. The inventors and innovators may have exactly the insights and knowledge needed to interpret and apply the feedback from the market, and they should play a pivotal role in refining and adapting the product as it moves forward.