The great challenge in innovation is not coming up with a discovery or great invention. The challenge is in making it stick, in nurturing it and growing it so that it spreads and changes the world. Numerous antibodies and barriers are ready to snuff out every great idea, even when it offers a solution that the world is clamoring for. The story of scurvy in the British Navy, as shared in Chapter 10 of Conquering Innovation Fatigue, illustrates this principle.
Scurvy cost the lives of thousands of sailors and soldiers around the world for centuries. For the British Navy, that disease was one of the greatest challenges it faced. On long voyages, 30% or more of the crew might die from scurvy. Through confusion and error among England’s educated elite regarding scurvy, misinformation about its cause and its cure would persist into the 20th century. However, there was credible medical information in the early 1600s pointing to citrus fruits as a key aid in preventing and curing the disease. [See Stephen R. Bown, SCURVY: How a Surgeon, a Mariner and a Gentleman Solved the Greatest Medical Mystery of the Age of Sail (New York: St. Martin’s Press, 2003).]
Physicians on land and at sea would later provide evidence in the mid-1700s that citrus or other fresh fruits and vegetables reduced the risk of scurvy, but this knowledge was not only ignored or resisted by those in the Navy, it was resisted by the mainstream European medical community who perpetrated a form of “strategy fatigue” by making a general understanding of the nature of disease their primary quest, being uninterested in “merely empirical” work aimed at curing a given disease. For example, the work in the 1730s of physician John Bachstrom in Holland pointing to fresh fruits and vegetables as the decisive cure for scurvy was dismissed by the medical community of his day, for he was “a mere empirick” in the eyes of his elite peers. [Kenneth J. Carpenter, The History of Scurvy and Vitamin C (Cambridge, UK: Cambridge University Press, 1988), pp. 44-45.]
The adoption of the innovation of citrus fruit in treating scurvy took more than compelling evidence. It took someone with powerful connections to champion the innovation. This man was the prominent Scottish physician, Sir Gilbert Blane, who was only 4 years old when a detailed study on the cure for scurvy was published by James Lind in 1753 – only to be ignored for decades. (To be accurate, the information from Lind and others was obscured by terrible confusion about physiology and disease, and continued to point to the dangers of various “airs” and climatic factors as key contributors to scurvy, obscuring the fact that it was a nutritional deficiency.) [See James Lind, A Treatise of the Scurvy. in Three Parts. Containing an Inquiry Into the Nature, Causes and Cure, of that Disease. Together with a Critical and Chronological View of What Has Been Published on the Subject, Edinburgh: Printed by Sands, Murray and Cochran for A Kincaid and A Donaldson. Portions of the original reproduced online by the James Lind Library. Also see Carpenter, op. cit., pp. 51-52.]
In London, Blane became the private physician to Lord Rodney and sailed with him to the West Indies in 1779. Blane’s efforts to keep sailors healthy were increasingly successful, and through his connections to Rodney and others naval leaders, Blane was able to give lectures to senior leaders and gain support for improved practices across the entire navy. Drawing upon past work and a further demonstration of his own, he would introduce compelling evidence to naval leaders that lime juice prevented scurvy, leading the Navy to adopt lime juice in its global operations beginning in 1795. [David Nash Ford, “Biographies: Sir Gilbert Blane (1749-1834),” Royal Berkshire History (Finchampstead, UK: Nash Ford Publishing, 2005).] For nearly two centuries, the British Navy had been closed to a safe, inexpensive innovation from outsiders that solved what may have been its most vexing and costly problem. The citrus “sales pitch” fell on deaf ears until someone with the right connections to senior management could deliver it. It’s a tragic lesson of the dangers of closed innovation, of organizational rigidity, of devaluing the work of innovators, of listening to the wrong voices, of “not invented here,” and the importance of delivering the story of an innovation to the right people, through those who have the right contacts. It doesn’t need to be this way, but it often is. Thousands of needless deaths over centuries: welcome to the fruits of innovation fatigue.
Incidentally, innovation-related lessons from scurvy continued long after 1795. Though citrus juice was adopted in the British Navy, the nature of the disease and the reason for the cure were still unknowns. Without careful efforts to preserve knowledge and best practices, erosion can quickly occur. Thus when the Royal Navy undertook arctic expeditions in the 19th century, the leaders took with them a belief that good hygiene, good morale, and regular exercise prevented scurvy. Not surprisingly, scurvy was a recurring problem in these voyages. In the 20th century, when Robert Scott trekked into the Antarctic, tainted canned food was believed to be a cause of scurvy. The connection between vitamin C and scurvy was not discovered until 1932. Likewise, we have seen many organizations lose best practices, healthy processes, and even technical capabilities and knowledge when efforts weren’t taken to preserve and pass on what they had.
(The above is based on an section of Conquering Innovation Fatigue, Chapter 10.)
At an IP Conference in Shanghai yesterday, I discussed the current decline in IP rights in the United States with a US attorney who was speaking on recent changes in US patent law. Like many in the IP profession, he recognizes how painful the loss is in the U.S. and how bad this will be for the future of innovation there. As he’s learned more about China, he also recognizes, as many of us here do, how strong China’s current IP trajectory is. As IP law and practice is strengthened here, innovation will be strengthened and further incentivized. End result: China wins. In the innovation battle and future IP battles between East and West, China will take the lead. That’s my prediction.
Here’s one little example. Look at the incredible machines China can build. Here you see a brilliant example of innovation and the spirit of the new China as a Chinese company tackles the ancient problem of building bridges, an area where China has ancient strengths and now a modern lead:
The steady loss of IP rights in the United States is alarming. Big companies like Google and Apple tend to preserve or expand their market power and in IP battles, they tend to get their way through their money, influence, friends in high places, and market clout. But for lone inventors and smaller companies, the IP landscape has become forlorn. The patents that were essential for establishing a business and protecting themselves from outright theft (including theft from the big companies that tend to get their way) are now much harder to obtain. Once obtained, they are much harder to enforce. Patent opponents are now given broad new powers to invalidate patents. Incredibly, the IPR system (inter-partes review) that allows a challenger to easily attack an already issued patent is resulting in nearly 80% of challenged patent claims being found invalid.
What this means is that the USPTO, charged with the responsibility of issuing only valid patents, after all the rejections and challenges they give to inventors in the patent prosecution process, is essentially saying that their quality control process is so bad that they have goofed 80% of the time and issued claims that never should have been allowed. Something is seriously wrong here.
The vast new uncertainties in America’s IP system is crushing innovation. Innovators are wondering why they should file in the U.S. Some are going to other nations to launch their business. Others are abandoning hope. This comes at a dark time on the economic landscape when we need innovation and hope more than ever before. Giving Google more power than ever to crush competitive patents is not the answer. Eliminating software and knowledge-economy-based inventions as patentable subject matter is not the answer. Allowing patents to be easily invalidated is not the answer.
Americans need to demand a return to respect for IP rights and create an innovation-friendly society again.
On October 15, 2015, Appleton, Wisconsin’s Paper Industry International Hall of Fame will be inducting six people into the Hall of Fame. One of them is an innovator and leader from ancient China who can be considered as China’s answer to Gutenberg. Gutenberg is frequently honored in the West as one of the most important inventors ever for giving us the world’s first book printed with movable type, a remarkable achievement from around 1455. As with many inventions long thought to have had European origins, there’s a touch of Eastern flavor in this one, for Gutenberg’s Bible came 142 years after the world’s first mass-produced printed book made with movable type, the large Book of Farming (Nong Shu) from China, printed in 1313 by Wang Zhen.
Wang Zhen was a Chinese official who recognized that vast amounts of agricultural technology scattered across China needed to be preserved to help all of China reduce famine and be more productive. He took a Chinese invention, movable type, and improved upon it to make a practical way to print an entire book. He used carved wooden blocks for each character, and developed a sophisticated way of arranging them on two rotating tables to allow typesetters to quickly find needed characters to place them in his press. The Nong Shu was printed and preserved many notable inventions in China, including an early form of a blast furnace driven with a reciprocating piston attached to water works, something long that to be a later European invention.
Recognizing Wang Zhen for his important role in the advance of printing is a fitting step for the Hall of Fame, and I look forward to many more Asian inventors, scientists, and business leaders being recognized in the Hall of Fame in future years. The historical contributions of China in numerous fields have received far too little attention, and I’m delighted to see folks in Appleton taking the lead in rectifying this problem. Kudos to the Paper Industry International Hall of Fame!
I’ve noticed that many companies tend to emphasize patents in their IP strategy. Sometimes that’s almost all they consider. Sound IP strategy, however, requires applying a variety of tools. A broad approach to intellectual assets is more important than ever. Patents of various kinds, trademarks, trade secrets, copyright protection, and low-cost publications can all play a useful role.
Utility patents can protect your products, their components, the machines for making them, the methods of making them, and methods of using them, among other things. Design patents can protect aesthetic elements. Copyrights can protect commercial expression (ads, for example) of that function. Trademarks protect the brands that are based on the consumer perception of the product. Packaging relevant to your products may also be protected with utility patents, design patents, trademarks, and copyright.
The power of trademarks in protecting a company is illustrated in a recent case involving Adidas, owner of trademark for a tennis shoe with three stripes on the side. In May 2008, an Oregon jury ruled that Payless Shoes should pay $308 million to Adidas for infringing that trademark. (Payless appealed but subsequently abandoned its appeal after agreeing to an out-of-court settlement with Adidas.) Payless may have hoped to evade the three-strip trademark of German-owned Adidas by using four stripes, but Adidas successfully argued that their stripes create a distinctive mark that is a sign of origin, and that both two-stripe and four-stripe shoes may cause confusion in the minds of consumers. Three simple parallel stripes have become a distinctive part of the Adidas brand. This coverage may last as long as the brand does, unlike the limited coverage afforded by patents. Adidas, of course, relies on both utility and design patents as part of its IA strategy.
In recent years, U.S. trademark rights have been expanded to cover not just traditional logos and names, but to also cover colors, scents, characteristic sounds, and three-dimensional shapes. Examples include:
- Yamaha’s distinct water spout from its WaveRunner® personal water craft. As U.S. Trademark 74321288 states, “The mark is comprised of a three-dimensional spray of water issuing from the rear of a jet propelled watercraft and is generated during the operation of the watercraft.”
- Tiffany’s famous robin-egg blue gift box (US Trademark 75360201).
- Intel’s five musical notes (US Trademark 78721830).
Trademarks can have an unlimited life, unlike the 14-year-life design patents have from the date of filing, or the 20-year life of regular utility patents. Under U.S. law, trademarks can be used to sue both manufacturers and distributors of infringing products.
We recommend that innovators look for creative combinations of both trademarks and patents, as well as other forms of intellectual assets.
One of those other forms can be called “digital intellectual assets,” a broad category that includes domain names. They may be trademarked, but if you don’t own the domain name, you’ll have an expensive battle trying to wrest it from someone else. As soon as you consider candidates for trademarks, quickly register the related domain names. Also consider getting the related Gmail accounts, Facebook accounts, Twitter accounts, Youtube channels, Pinterest accounts, etc. Those are free or inexpensive and can be worth a great deal if your brand name becomes important.
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 leading IP professionals working with the US patent system are growing increasingly concerned about the weakening of the IP system there. Some are so concerned that they are wondering what steps can be taken to save it. Save it from what, you might ask? Save it from erosion of the basic property rights that the Constitution sought to protect. Solve it from the capricious destruction of the incentives that inventors need to create and share their work. Save it from judges and politicians who see patents and property rights as problems.
One man who wants to save our IP system is Rep. Dana Rohrabacher (R) from California’s 48th District and a member of the House Science and Technology Committee. He recently authored a piece for the Washington Times called “Patent ‘reform’ is killing the right to invent: How a congressional misstep could imperil creativity” (March 1, 2015). I agree with much of what he says.
He warns that Congress’s zeal to stop “patent trolls” will actually result in them simply doing the bidding of powerful companies who are annoyed by little guys able to defend themselves with patents. In effect, Congress is being manipulated into apparently “reforming” the US patent system but in reality they will be weakening it for small inventors and making it more friendly to the big empires that see patents as unpleasant sources of cost and annoyance. Here is some of what Rohrabacher has to say:
With the best intentions, and naively going along with the corporate world’s hugely financed publicity machine, Congress is about to stomp on America’s most creative citizens, its inventors.
The target is not the much-hyped “patent trolls.” They are a minuscule matter. What’s at stake is average Americans’ constitutional right to own what they’ve created. We’re really up against corporate lawyers acting like ogres, devouring the little guy’s innovative accomplishments.
Many of my colleagues, without understanding the legislation’s impact, will soon vote on “HR 9,” a misnamed “patent reform,” also dubbed “pro-innovation,” that is anything but. In reality, it deforms our patent system beyond recognition.
This legislation — pushed by my Republican colleague, House Judiciary Committee Chairman Bob Goodlatte, and deep-pocketed multinational corporations — appears on its way, again through the House, to the Senate, thence to an eager President Obama for signing.
When that happens, America’s exceptional system of invention will be shoveled into the depths of mediocrity, there to seep into the murk in which less scrupulous global competitors spend their resources.
In the last session, a bipartisan band of my Republican friends (some of whom made their pre-political marks as patent-holding inventors); members of the Black Caucus; and a heroic Ohio congresswoman, Democrat Marcy Kaptur, failed to dissuade our House colleagues that the bill was not the litigation-curbing effort as advertised.
The bill went to the Senate where, fortunately, it stalled. It’s back, this time resurfacing in the House with just one hearing. A whole class of small inventors, among the many who will be injured, is being kissed off as scarcely deserving a voice. All in a day’s work for the corporate influencers who shaped HR 9 from start to finish.
Just because a measure holds itself up as “tort reform” should not mean it escapes the scrutiny of free-market Republicans. It should instead call for a skeptical second look, and then more throughout its progress. Guaranteed: Such close-eyed analyses of this bill will encourage deep suspicion.
Fair-minded members will find themselves aghast at how this leaves defenseless our individual inventors, small and midsized companies, researchers, even universities who depend financially on their patent portfolios. It is a coup in the making by the biggest and best protected operators….
Legislative reform efforts invariably build on a narrative of great injustice. This one moves wildly beyond the need to fix real abuses, wherein at considerable cost companies must defend their legitimately acquired patents against unscrupulous claimants.
But the term “patent troll,” directed against such bad actors, has been transmogrified by corporate marketers to include legitimate small inventors — many of them minorities, which is why my Black Caucus friends sized up the issue astutely — who are outgunned and outspent when they try to protect their intellectual property.
Almost all infringement cases are brought by people who own a patent legitimately. If not, such cases should be decided in court. There is nothing wrong with bringing such matters to court — a cornerstone, not of crony capitalism, but of the free market itself.
Our economy and culture depend on the disruptive nature of innovation. Our Constitution deliberately made all people equal, giving no advantage to those of social status, wealth or position. The founders, even before they added the Bill of Rights, secured the right to hold patents in the Article I of the Constitution itself, the only right mentioned prior to the amendments.
We all know our country’s history of innovation. Large companies reject new ideas. It is the innovator who challenges the status quo, not the corporation.
Under the proposed bill, the pretrial discovery process — just one part of many dubious sections — tilts heavily against the small inventor, who of course must share his or her secrets with an opposing corporation’s well-armed legal team. In another era, I might have considered this an innocent, unintended consequence of ill-considered drafting. Not now.
I implore my colleagues in both the House and Senate to stop this monster aborning.
In a few days, I’ll be speaking about IP and innovation in China at the RISE 2015 conference in Miami, Florida, sponsored by INDA (a professional organization for the nonwoven fabrics industry). In my presentation, I’ll be sharing my “Dangerfield Theory” of IP and innovation in China. The Dangerfield Theory is based on comedian Rodney Dangerfield, who famously and repeatedly complained that he got no respect. China, in spite of remarkable advances in IP and innovation, continues to get no respect. Like Rodney himself, China is also a heavyweight, now leading the world in patents and IP litigation, and leading in the pursuit of many key technologies. Their innovation and IP is no laughing matter, but continues to just get no respect. This make China like Dangerfield, and for those companies and nations that ignore the threats and opportunities China creates, Chinese IP and innovation will also become “danger field.” Ignoring this field of danger and opportunity is foolhardy. It’s the kind of sleepy, lazy response we seen when a company or nation is beset by innovation fatigue.
The tendency of Chinese IP and innovation to be invisible to the West is an issue I raised in 2011 right after the Thompson Reuter Top 100 Global Innovators report for 2011 included nothing from China, Taiwan, or Hong Kong in its list of 100 top innovators based on international patent filings over the past three years. I was astonished at how Chinese IP could be so invisible and overlooked, given that Foxconn/Honghai Precision, the Taiwanese and Chinese partner of Apple, compared to Apple itself actually had 3 times as many US patents in the time period of interest. Honghai had roughly 50 times as many US patents field as some companies that made the list. Other heavy international filers like Huawei, ZTE, and Lenovo were also neglected.
I contacted Thompson Reuters to complain, wondering also if they had made errors in their search or forget to include Honhai Precision in their search terms. I was told that they had done the analysis accurately, relying on a proprietary algorithm that requires a company to file in the US, the EPO (Europe), and Japan for a patent to count as an “international” patent. This definition tends to discriminate against Chinese IP, in my opinion, for Chinese companies, when they seek international protection, are usually content with IP in China and the US, plus some other specific nations, but tend to do relatively few filings with the EPO or with Japan. Japanese companies naturally file their first, just as Chinese companies file first in China. Given the high political tensions between Japan and China, and the relatively small market it is for Chinese companies, the motivation to file in Japan is small, regardless of the quality of the invention. Insisting on filing in Japan rather than China puts China at a great disadvantage and favors the many Japanese companies that make the list. Requiring that a patent be filed in the EPO and Japan in addition to the US sets a very high bar that does not properly reflect whether an invention is good enough to be pursued with international IP.
In 2012, the Thompson Reuters Top 100 Global Innovators report still had nothing from China. Its 2013 report finally mentioned Taiwan, but not Honghai/Foxconn. Only the Taiwanese semiconductor giant TMSC broke into the top 100. But the latest report from the end of 2014 finally mentioned a mainlaind Chinese company: Huawei. It’s about time. It’s not like Huawei just barely broke into the ranks of companies pursuing international IP. For several years they, like ZTE, have been in the top 5 international filers, according to the World IP Organization which administers PCT (Patent Cooperation Treaty) filings. Huawei is actually the world’s #1 international filer and has been for some time. Looks like they managed to barely break past whatever algorithmic blinders Thompson Reuters has, and for that tiny bit of progress, I guess we have to congratulate the folks at TR.
My soft and hesitant congratulations, though, may not be heard amid the roar of complaints that TR is facing for its related report, China’s IQ (Innovation Quotient), which praises China for its rapid rise in innovation and patent filings (in spite of meagre recognition on the Top 100 report). Some loud voices immediately complained, reminding us that Chinese innovation is weak and most of its patents are low quality. On Dec. 13, 2014, the influential magazine, The Economist, ran an editorial, “Patent fiction: Are Ambitious Bureaucrats Fomenting or Feigning Innovation?,” criticizing TR for their positive report on China and reminding us that China’ does not file as high a percentage of international patents as Japan, and suggesting that Chinese innovation and IP is “feigned” by bureaucrats and not driven by real inventions from real innovators. Still no respect!
Yes, there is a problem with poor quality patents in China driven by tax breaks. But that is changing as companies increasingly look to patents as strategic tools for the future, and are striving to increase quality. The quality problems in China may more severe than they are in the US, but the quality is improving, and expensive international filings are increasing, with China now #3 in the world, ahead of Germany, and likely to overtake Japan in a few years.
It’s true that Japanese patents are much more likely to be filed overseas than Chinese patents (something like 30% for Japan versus 5% for China), but this is not necessarily a reflection on the quality of the patent. The economic value is also an important issue. Japan is a small market. Its businesses prosper by selling products to many large foreign markets like the US, Europe, and China. There are strong economic reasons why Japanese companies would seek foreign patent protection. China, on the other hand, represents a huge and growing market. Apart from manufacturing for foreign companies using foreign IP, Chinese companies producing and creating their own products tend to find the Chinese market to be a big enough opportunity to keep them busy for years to come, and rely much less on exporting these to the confusing and uncertain overseas markets in the US and Europe. The economic incentives to seek IP overseas is less for many Chinese innovators than it is for Japanese innovators, and naturally we can expect foreign filings to be somewhat diminished, even when the invention is of high quality.
There is a tsunami of quality IP and advanced innovation coming from China. China is learning and rapidly improving its approach to IP. Those who continue to ignore the threats and opportunities coming from this very change will find that the “Dangerfield Theory of Chinese IP and innovation” ultimately means the joke will be on them.
Many intellectual property practitioners worldwide are scratching their heads over what is happening to IP in the United States. There’s a revolution underway that over the past few years seems to have steadily eroded the value of patents and any semblance of predictability and order in the law. Patents can still be valuable, if you are lucky and have the right connections. For ordinary people and companies, patents, once the great equalizers against big companies, are now an unreliable tool. The erosion of IP rights is becoming a major factor in the growing problem of innovation fatigue in the United States.
This erosion has been achieved from a confluence of powerful currents are leading in one strong downhill direction. Congress has enacted patent reforms that make it vastly easier to challenge and destroy a patent and much harder to realize value, all of which favors those with marketing muscle, political influence, and existing market share. The Supreme Court has handed down a series of patent decisions that have eroded the value of patents. These blows have been especially forceful in the pharmaceutical and biotech fields, wiping out the value of many patents linked to “natural products,” and in the software and business method areas (e.g., Bilski and most recently Alice), making it extremely difficult to obtain IP in the technical fields with the greatest potential for innovation and growth as we move from the coarse manufacturing of the industrial revolution into the knowledge economy. Alas, in such fields and many others, the Supreme Court has created a new subjective tool against patents by ruling that anything “abstract” cannot be patents, while refusing to give any clear, non-abstract definition for “abstract.” This vastly adds to the uncertainty and chaos in many IP areas. In addition to these and other abuses of IP rights from the courts and Congress, the USPTO itself has gotten into the act with its own interpretations of judicially created rules that go even further than required by the courts in limiting IP rights. Sadly, we can expect ongoing hostility toward IP from the USPTO now that it is led by someone from one of the most powerful anti-patent (or, more accurately, anti-everyone-else’s-patent) force in Corporate America, Google, the former employer of Michelle Lee. Her selection as Director of the USPTO by President Obama came as a real surprise to many IP workers, but it was less of a surprise to those who see the political power Google has amassed.
These troubling events are now compounded by one of the most troubling IP cases in recent memory, a dramatically unjust case in which the Court of Appeals for the Federal Circuit (CAFC) totally disregarded the extensive fact-finding of previous courts, a jury, and the USPTO regarding the non-obviousness of some patents, and instead turned to so-called “common sense” to fill in the missing details of the prior art to render patents invalid after they had withstood repeated and thorough tests finding them to be valid and non-obvious. This was done in violation of the duty of the CAFC to respect the factual determination of the previous trial court in an appeal. Instead, the CAFC acted like a trial court, but without the information and testimony needed. “Common sense,” like “abstraction,” can be pulled out of the air at whim to poison a patent–when the rule of law is weakened and those charged with respecting the law instead make their own law as they go.
The case I’m referring to, not surprisingly, involved a company suing Google for patent infringement. We can expect to see more of this kind of thing, big companies with influence getting off free when infringing the patents of smaller companies (especially if they can be called “trolls”). For details, see Jeff Wild’s article, ” IP/Engine v Google, AOL et al – the most troubling patent case of 2014” in the IAM Magazine Blog, Dec. 22, 2014. This case involving the company Vringo deserves careful scrutiny (and howls of outrage).
Sometimes revolutions are necessary for the good of mankind, but many turn out to be excuses for someone to seize power, loot innocents, and create chaos. Until the US returns more fully to the rule of law in the IP arena and strengthens its laws to respect IP, especially for small companies and innovators who need an equalizer when facing Goliaths (or Google-liaths), we will face ongoing chaos, looting, and innovation fatigue as we reduce incentives and increase risks for the most innovative segments of our society, the small companies and lone inventors who are striving to create the future that giant companies are often to slow or risk averse to pursue.
At the IP Business Congress Asia 2014 (IPBC Asia 2014), a collection of IP experts from around the world are here in Shanghai, China sharing best practices and advice to help fellow IP workers. Yesterday during a panel discussing ways to build a world-class in-house IP team, a comment from the audience provided a valuable example of how management can stimulate innovation in a company inexpensively. At Aruba Laboratories, a social event was held in which a number of people cam wearing a T-shirt that said “Thought Leader.” Before the event, such T-shirts had been ordered for every person who had submitted an invention disclosure in the past year. There was buzz about what the T-shirts might mean and why some were wearing them. Then an executive spoke and congratulated those with the shirts, explaining what they meant. This simple, inexpensive act of recognition created an incentive to submit invention disclosures, which more than doubled that year. A 200% increase in invention disclosures shared–that’s a great return for a small amount of effort.
It’s important that management work to consistently recognize and show appreciation for the innovators in the company. It doesn’t require large bonuses, though I recommend that cash incentives also be used to recognize IP creation. Creating a culture of innovation above all requires the attention of management and leaders throughout the company.
There are many other issues to consider. For example, the attitude of the Legal Department in interacting with inventors can affect inventor attitudes for good or bad. When IP attorneys are aloof and bureaucratic, it can be a barrier. When they interact regularly with innovation teams and get to know and like the potential innovators of the company and take simple steps to encourage them, this can draw out important contributions. Facilitate innovation. Small things can become big barriers or big incentives. Pay attention to these factors and constantly gauge the health of your own innovation culture.