Archive for innovation
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.
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
At the Marcus Evans Innovate 2014 Conference in Shanghai today, I met Rosalie Wu, the head of marketing in China for the rapidly growing startup, Uber. Rosalie was Uber’s first hire in China and exemplifies the energetic, entrepreneurial spirit that is driving Uber to global success. She spoke about the development of Uber’s innovative business model and the many innovations they continue to add in their unique approach to “glocalization,” wherein a company going global adapts its products and business model to the unique constraints and opportunities of each local market. I see Uber at the poster child for sound and innovative glocalization.
Uber began when one of its founders and first CEO, Travis Kalanick, attended Le Web in Paris in 2008 and struggled to get a cab in snowy weather. He realized there had to be a better way to use the free market to solve the basic problem of getting a ride. His passion for solving this problem resulted in forming a San Francisco start-up that began in 2010 with a mobile app for ride sharing in San Francisco. Today they offer a refined and clever business model with services in over 200 cities. Beijing was #200, and Uber is marching rapidly across China and other parts of the world. Rosalie’s enthusiasm for Uber is contagious and really stirred the audience here at the Hongqiao Marriott Hotel.
Uber’s business model innovation includes systems for registering, insuring, and rating drivers. It offers flexible pricing that helps tap the power of the free market much better than conventional taxi pricing and taxi systems can. With Uber you can select quality drivers and have simple, positive experiences getting to where you need to go when you want to be there. The business model is being extended with many other innovations such as delivery of products and even services (in China, they have even offered the service of having a traditional Chinese lion dance sent to be performed in your office). The innovate their offerings to meet local needs and adapt to local regulations and customs, while finding clever ways to continually make people’s lives better. This will inspire the competition to do more and bring ongoing innovation that will benefit us all. Amazing what a bad snowy night can do when an innovator is around.
Less than a year ago, Uber was valued at over US$3.5 billion. A few months ago in 2014, Uber was valued at around $17 billion. This is the power of doing something that brings people together in new ways.
Uber has faced and overcome a host of innovation barriers. Funding challenges, regulatory burdens, and stiff competition. But they have forged ahead with a relentless focus on making life better for its customers with green, energy saving, disruptive innovation . May the path before them remain wide open. Kudos, Uber!
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.
In a previous post here, I reported a huge loan to a Chinese paper company backed by its mostly Chinese IP as collateral. The 8 billion RMB obtained by China’s Tralin Paper (Quanlin Paper in Chinese, though they use www.tralin.com for their website), one of the biggest IP-backed loans in the world, not only shows that Chinese IP is coming of age, but is now being used to bring some of their technology to the US and to create over 2,000 US jobs. Tralin Paper, renaming themselves as Tranlin Paper for some reason, has just signed a deal with the State of Virginia, obtaining state support as Tralin/Tranlin/Quanlin invests $2 billion to create a new environmentally friendly paper mill and create over 2,000 US jobs. Recent news from the office of Governor Terry McAuliffe of Virginia proudly announces the plans of “Tranlin Paper.” Also see reports at TAPPI.org and MFRTech.com.
As the West continues to decry Chinese IP and innovation, always viewing China as a source of IP theft and job loss for the US, this story may come as a pleasant surprise. Here is an innovative Chinese company that has created and protected their own IP in a green technology, used innovative financial tools (and plenty of solid Chinese guanxi) to obtain massive financing based on that IP, and then brought their money and their technology to the US to create many jobs. At least some parts of this story are going to be repeated in many ways in days to come. The old paradigm of China lacking IP or lacking valuable IP is fading.
After the announcement at ChinaPaper.net, the first report on this story to the English-speaking world, as far as I know, was my original March 6, 2014 report here at InnovationFatigue.com followed by an update here on the Shake Well blog that gave a translation of the Chinese story. It was picked up by Intellectual Asset Magazine and by World Trademark Review, but is still a generally unrecognized but important story.
China still has a long ways to go in overcoming its problems and strengthening innovation and IP, but the trends here are remarkable and should not be discounted. Meanwhile, we should welcome stories like Tranlin’s, and watch for many more to come. But for some US companies, this will mean even tougher competition that won’t be easily avoided with restrictive, protective tariffs or antidumping legislation.
(Similar account cross-posted on the Shake Well Blog.)
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.
Pictured to the left is my potato peeler/fruit peeler which I purchased in Shanghai. It is dutifully based on the design of typical peelers long sold by Western companies. But I suspect this imitation object was copied and manufactured by people unacquainted with the finer points of peeling potatoes. In peeling potatoes, one frequently encounters eyes or other bad spots that need to be gouged out. Good potato peelers have a curved metal end that can be used for gouging potatoes and fruit. My Shanghai peeler has dutifully copied the general shape of other peelers, with a somewhat pointed tip and a concave surface below it, but the tip is made of thick blunt plastic that is useless in gouging. It is a classic example of imitation without understanding the details of how something works. It can look the same, but the results are disappointing.
The innovation efforts of many companies are like my potato peeler: they imitate what they see others doing, but lack the knowledge and experience needed to make the systems actually work. So we get innovation rhetoric, a temporary budget and Big Program, with consultants sailing in and trying to change employees when the real barriers to innovation may be elsewhere. We get brainstorming sessions that lead to nowhere, momentary IP races that waste resources and leave inventors discourage, innovation funnels that become echo chambers, and improvised staged product launch systems that result in decisions made without adequate knowledge and little hope of success. In some cases it all comes down to instinct and gut feel from an omniscient leader imitating Steve Jobs or some other charismatic innovator, while overruling all logic and leaving a wake of confusion.
Innovation requires experience and deep knowledge. It requires systems and cultures designed with innovation expertise, not just a quick fix and temporary effort to imitate others. Innovation leaders need the support and attention of management at the very top, and systems tailored to enhance the innovation culture across the company. Innovation success is far more difficult that it looks when we are imitating someone who makes it look easy. It rarely is. Real knowledge and real patience are required.
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.