The More the Merrier: The Journal Joins the Times in Complaining about Patents

By Kevin E. Noonan --

The anti-patent virus seems to have moved across town in Manhattan, from the 8th Avenue editorial offices of The New York Times to 6th Avenue, from the aristocratic edifice ruled by the Sulzberger family to the business environs of the hardscrabble upstart Aussie, Rupert Murdoch at The Wall Street Journal.  The theme (and even some of the rhetoric) are the same, but instead of an erudite academic, we have Peter Huber (below), senior partner of Kellogg, Huber, Hansen, Todd, Evans & Figel and fellow of the Manhattan Institute, giving us his views on what is wrong with the U.S. patent system.

The piece, entitled "Digital Innovators vs. Patent Trolls" and published on Monday, concerns the Supreme Court's consideration of the Microsoft v. i4i appeal, and as has been done elsewhere, attempts to create a dichotomy between productive, innovative companies and non-practicing entities, using the pejorative term "patent troll" to describe them.  The dichotomy is false as a general rule (although there are certainly NPEs that aggregate patents from failed companies and assert them; what the piece does not address is the reluctance of some established companies to honor patent rights and license innovation rather than expropriating it, and the extent to which this behavior contributes to the difficulties that cause innovative companies to fail).

Mr. Huber finds significance in the Supreme Court's interest over the past ten years in patent law, after a hiatus that permitted the Court of Appeals for the Federal Circuit (created by Congress to harmonize U.S. patent law) to get its institutional legs under it.  What is unmentioned and perhaps forgotten is the motivation for the creation of the Federal Circuit:  the difficulties U.S. inventors and companies had at a time when foreign competition was threatening the U.S. economy and preeminence in the world.  While one of the two cases Mr. Huber mentions (KSR Int'l Co. v. Teleflex Inc.) involved a perception (created by the lawyers who crafted the certiorari petition) that patents on "obvious" inventions were being improvidently granted, most of the cases under Supreme Court review have involved harmonizing Federal Circuit precedent with other regional courts of appeal on standards for declaratory judgment actions (MedImmune, Inc. v. Genentech, Inc.) and injunctions (eBay Inc. v. MercExchange, L.L.C.), as well as the scope of the appellate court's supervisory role over the U.S. Patent and Trademark Office (Dickenson v. Zurko), and in patent matters having little to do with patent quality, such as the extraterritorial extent of U.S. patents (Microsoft Corp. v. AT&T Corp.), patent exhaustion (Quanta Computer, Inc. v. LG Electronics, Inc.) and how far the statutory safe harbor for preclinical activities protect potential infringers (Merck KGaA v. Integra Lifesciences I, Inc.).  Indeed, two cases most clearly exemplifying the differences between the Supreme Court and the Federal Circuit (Warner-Jenkinson Co. v. Hilton Davis Chemical Co. and Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co.) had to do with the doctrine of equivalents, which actually extends the scope of the patent right beyond the literal meaning of the claims and in which, surprise!, the Supreme Court reversed efforts by the Federal Circuit to limit application of the doctrine in favor of narrower patents.

So while there is the perception that "poor quality" patents are being granted, fueled in large part by big companies who would rather not be bothered respecting the patent rights of small ones, Supreme Court decisions are not the cause of it.  Indeed (although Mr. Huber could not have anticipated it), the Supreme Court appeared unimpressed by the idea, advanced by Microsoft, that lay juries should be permitted to overrule the considered opinion of the Patent Office using a preponderance of the evidence standard for invalidity.  Although the Court seemed more receptive to the idea in cases where the Office did not consider the art, the Justices also seemed less concerned than Microsoft that juries could understand that the quantum of evidence needed to constitute "clear and convincing" evidence could be less for invalidity arguments based on such unconsidered art.

In places Mr. Huber sings from the same hymnbook used across town at the Times, that examiners are overwhelmed and cannot properly do their jobs, and that it is only in the fire of litigation that the validity of patents can be properly assessed.  The force of this argument is blunted, however, by the fact that "only 2% of patents end up in court," and while some of this is due to licensing and settlement rather than litigation, the statistic certainly implies that patents are not clogging court calendars.  Mr. Huber seems to think that patent examiners are less skeptical of patentability than judges or juries; in reality, examiners in the Office operate under no presumption of validity, and construe claims as broadly as they can reasonably be construed, which tends to expand the scope of relevant prior art and make it less likely that a patent will be granted.

Ironically, in view of recent charges of ad homimen argument raised by a suggestion that actual experience could be useful in making and assessing arguments about patent quality, Mr. Huber's article advances the argument that one reason patent quality is stifling innovation is that the percentage of patent cases being heard by juries has increased from one in seven in the 1980's to seven in ten today, and in particular that many of those juries sit in the Eastern District of Texas (where "[a] patent is property, good Texans believe in property rights, and that pretty much settles it").  "Masterminds" behind these lawsuits hire lawyers who are "happy to switch from PI to IP," these attorneys being "local" counsel who "supply the neighborly face in the courtroom."  Ad hominem, indeed.

Mr. Huber also believes that the fact that the Office is issuing 4,000 patents a week is another indication of poor quality.  An alternative explanation is that we live in the most technological age since the Industrial Revolution, that emerging economies in China and India are beginning to seek U.S. patent protection for their inventions, that the Office has hired almost 6,000 examiners in the past 5 years and that the Office spent about 4 years denying patents (the allowance rate shrank from about 60% to about 42%), and that those applicants who weathered that storm are now getting patents allowed; the "bubble" is much more likely to be the result of these forces than that the entire examining corps has decided to "allow, allow, allow" instead of performing their duties substantially as they always have.

The end of Mr. Huber's piece invokes the specter of contingency fee cases, which are relatively rare in patent infringement litigation, and chides "members of the business community" who support patents and has even harsher words for "some conservative pundits [who] applaud the trolls, believing that this is how the market moves private property into the hands of the people who value it the most."  The piece ends predictably:

The issue isn't whether intellectual property rights should be enforced, it's whether we have a reliable process for working out who really supplied the intellect.  We don't.  A system that issues and upholds junk patents will devalue intellectual property much faster than one that scrutinizes patents more carefully and enforces only the good ones.

But the issue is precisely whether intellectual property rights should be enforced or ignored, because there will always be a sector of the business community (although recently it always seems to be the same sector) that will believe (and try to get others to believe) that they are the only repositories of "innovation" and that anyone (especially anyone without their economic resources) who asserts rights in their own inventions is a troll.  Once again, it ain't necessarily so.

Comments

[David Koepsell]

Finally, an issue on which liberals and conservatives can agree!

No worries, though Kevin, the IP-Industrial Complex will thrive despite the critiques by academics (and lawyers). There's millions of dollars in fees at stake in perpetuating the bureaucracy.

And shame on Huber for stooping to ad hominem, but I fail to see the irony.

all my best,
David

[Skeptical]

Dr. Noonan,

You have captured many of my feelings on the general rise of the anti-patent movement.

It is a shame that people with an obvious agenda, and an equally obvious lack of understanding feel that "Patents are evil" in spite of the complete lack of any advanced society to embrace a "patent-free" system.

Reality, it seems, is under attack.

[6]

"the "bubble" is much more likely to be the result of these forces than that the entire examining corps has decided to "allow, allow, allow" instead of performing their duties substantially as they always have."

I wouldn't bet my life on that. Fact of the matter is more examiners are "grown up" now and not making the obviousness call quite as often, as older examiners are wont to do. Furthermore, as I explained to you awhile back, it isn't exactly a secrit that the office will be less reluctant to allow in certain fiscal situations.

"You have captured many of my feelings on the general rise of the anti-patent movement."

You guys ain't seen nothin' yet. :)

"So while there is the perception that "poor quality" patents are being granted, fueled in large part by big companies who would rather not be bothered respecting the patent rights of small ones"

And poor quality patents being issued...

"An alternative is that we live in the most technological age since the Industrial Revolution, that emerging economies in China and India are beginning to seek U.S. patent protection for their inventions, that the Office has hired almost 6,000 examiners in the past 5 years and that the Office spent about 4 years denying patents (the allowance rate shrank from about 60% to about 42%), and that those applicants who weathered that storm are now getting patents allowed; the "bubble" is much more likely to be the result of these forces than that the entire examining corps has decided to "allow, allow, allow" instead of performing their duties substantially as they always have."

Yet another alternative is a mixture of your idea and his and that your sentence was definitely a run-on.

"But the issue is precisely whether intellectual property rights should be enforced or ignored, because there will always be a sector of the business community (although recently it always seems to be the same sector) that will believe (and try to get others to believe) that they are the only repositories of "innovation" and that anyone (especially anyone without their economic resources) who asserts rights in their own inventions is a troll."

Um, Kev, he's the one bringing up the issue and telling you squarely what HIS issue is, you cannot tell him what HIS issue is as it is his own issue. Just because that is an issue you'd like to setup as a strawman is not particularly relevant to his article.

[max hensley]

Finding Huber's piece in the WSJ editorial pages was like finding a screw in your morning oatmeal. Aggravating, and not what one would expect, what with the Journal's usually consistent support for property rights. I took it as demonstrating the power of the Silicon Valley free lunch crowd. To get biased polemics like these in the WSJ and Times within a week of so of one another is quite an accomplishment. It ought to get defenders of IP to sit up and take notice.

[Mike]

Why do they continue to lump i4i in with patent trolls. i4i had a product, microsoft stole it, now microsoft doesn't want to pay. If there is a troll here it's Microsoft with 1000's of so-so patents and little innovation.

[Patrick]

I came up with this resposne to someone who referred to me in a comment on Gametime IP as a patent troll. I'm going to start using this response, or some derivation of it whenever I encounter writers and lawyers referring to "patent trolls."

Patent troll is a derogatory term that is designed to ellicit an emotional response, not a rational one. It is an appeal to biases, not reason. Granting exclusionary rights to inventors and authors is morally right, and misappropriating inventions and content is morally wrong. You can disagree with this premise if you wish, and I won’t marginalize your opinion because of it.

[K.]

Huber says: "Another recent case made it easier to get a judge to review validity soon after a patent is granted." Cannot figure out what case he is talking about.

[6]

"i4i had a product, microsoft stole it, now microsoft doesn't want to pay. "

OMG! How many copies did they steal and where/when did they steal them? I didn't even see anything about this on the news. Was it several major break-ins or just a concerted effort to steal during store hours?

[KIR]

Geez, Kevin, that's a lot of strawmen you beat up.

So while there is the perception that "poor quality" patents are being granted

Really, Kevin. Whitewashing the facts (e.g., the fact that the USPTO issues at LEAST dozens of invalid patents every week) just makes you look like a wanker.

Poor quality patents ARE being granted, every week, by the USPTO. There are more poor quality (e.g., invalid) patents being granted now than ever before. This is not disputed by reasonable people.

The question is whether the legal means for removing them from the system is adequate, less than adequate, or overcompensating.

[KIR]

Patrick "Granting exclusionary rights to inventors and authors is morally right"

Nice strawman. What about third party corporations who have never invented a thing and who don't produce any products and who do absolutely nothing except sue people? Is it "morally right" for such parties to shut down manufacturers who employ thousands of human beings and produce products enjoyed and consumed by millions of others, simply because such parties possess a piece of paper "examined" by a barely literate computer science major working for the same government that the sueing party continually accuses of being incapable of doing anything right?

[Kevin E. Noonan]

OK, KIR, I'll make this easy. Re: bad patents - if there are so many, name one granted in 2011, and then prove it's invalid. Should be a snap.

[Skeptical]

KIR,

It appears that you do not understand what the term "strawman" means and further, you assume the very points of your position that you would need to prove.

I am skeptical that you are a patent attorney, much less an attorney at all.

[KIR]

if there are so many, name one granted in 2011, and then prove it's invalid. Should be a snap

I'll do better than that. I'll find one granted in the past month. Hold onto your shorts until the weekend.

[KIR]

Skeptical : "It appears that you do not understand what the term "strawman" means"

I understand what it means. It means arguing against a statement that isn't at issue, for the purpose of creating the illusion of "winning." And that's what you're doing. Nobody here is claiming that granting rights to inventors is "morally wrong." So why are you arguing about it?

"you assume the very points of your position that you would need to prove."

I didn't assume anything. I asked you a question. Or is it your belief that non-practicing entities who buy patents for the purpose of sueing large practicing entities do not exist? That's another question for you. Please answer.

"I am skeptical that you are a patent attorney, much less an attorney at all"

That's nice. I think you're very likely a 21 year old living in his mom's basement. Can you please answer the questions I asked you?

[Skeptical]

KIR,

Let's be clear - You are addressing more than one person. I am not Patrick. I did no "arguing" on what is or is not morally wrong. That answers your first question.

Further, your definition of "strawman" is not correct. The illusion of "winning" is not correct. A strawman argument is indeed won - no illusion necessary. It is, however, an argument that is purposefully set up to win and often one not ventured by the opposing side.

As we have established that you have not asked me a question (prior to my comment), my comment on your assumption of the points you need to prove stands.

Your question now of "Or is it your belief that non-practicing entities who buy patents for the purpose of sueing large practicing entities do not exist?" is a non sequitur. It has no place and means nothing in the discussion.

Perhaps you are mistaken in thinking that somehow such entities are illegal or immoral. They are neither. If you understood that patent rights are property rights and are fully, legally and yes morally available to be bought and sold, you may have chosen a different argument to throw around in your last response. You do realize that "non-practicing entities who buy patents for the purpose of sueing large practicing entities" are fully legal and moral, do you not? Yes they exist. So what? That answers your second question.

I am not a 21 year old living in my mom's basement. While not a question, I thought I would clarify that.

Now, are we clear?

[KIR]

Skeptical **Your question now of "Or is it your belief that non-practicing entities who buy patents for the purpose of sueing large practicing entities do not exist?" is a non sequitur. It has no place and means nothing in the discussion.**

Sure it does. You accused me of "assuming the very points of my position". My question was one way of getting you to clarify which points I was assuming. Your answer appears to be "none." Let me know if I'm mistaken.

**You do realize that "non-practicing entities who buy patents for the purpose of sueing large practicing entities" are fully legal and moral, do you not?**

No, I don't see that NPEs (aka trolls) are "fully moral". Perhaps you equate acts that are "legal" with acts that are "moral". Please let me know if that is case.

[Skeptical]

KIR,

The full normal use of one's property rights are perfectly legal. It appears that you are accepting this. At least it appears so as you indicate a continued argument only on moral grounds.

It is quite disingenuous of your first assumption of my answer ("Your answer appears to be "none"). There is no way for you to honestly reach that position as I indicated that that very first position remained extant. Why do you think it appropriate to make the assumption of the opposite of what I stated and confirmed?

If your attempt was to get me to clarify WHICH points you thought that I thought you were assuming, your attempt failed. A direct question would have been more appropriate that a flat cursory "I didn't assume anything" statement that you used.

Your follow up question was to my belief. I answered that question. Nowhere do you actually ask me what specific points of yours are the ones I feel that you have assumed.

That is the case.

Let's take a look at your loaded question that prompted my comment:

Is it "morally right" for such parties to shut down manufacturers who employ thousands of human beings and produce products enjoyed and consumed by millions of others, simply because such parties possess a piece of paper "examined" by a barely literate computer science major working for the same government that the sueing party continually accuses of being incapable of doing anything right?

By loaded (which you will agree is the case) you paint the infringer as a fully noble entity that only has the positives of employing people and manufacturing an actual item that consumers enjoy. You paint the other side as only an entity with a seemingly baseless "claim" trying to extort the infringer with the calamitous results of either stopping the manufacture of the goods or paying a ransom or both.

You leave out the fact that the infringer is using property that he has no right to use. That is the definition of infringer and there is no way around that definition.

The points that you have assumed are:
the infringer is morally correct
the patent holder is morally incorrect.

That is the case.

You have further assumed, in your blanket statement, that ALL patents are suspect since you only present examination as done by "a barely literate computer science major working for the same government that the sueing party continually accuses of being incapable of doing anything right".

You have no basis of equating the sueing party as one accusing the government.
You have no basis that the examiner was barely literate.
You are assuming that the patent - that all patents - are not valid.

That is the case.

You further denigrate "the right" as a mere holding of a piece of paper. As you flippantly comment about "living with your mother", I do not want to assume that you do NOT live with your mother, so please excuse my dragging your mother into this. Your mother, though, has a house secured by a similar mere piece of paper (It is called a title). Are you then classifying ALL PROPERTY as "mere pieces of paper"? How deep does your antipathy towards property run?

Now as to "morality." I do not equate legality with morality. However, I do see that morality does serve as a foundation to legality. The foundation of property is also moored to morality. Protecting one's property is a perfectly moral action, would you not agree? That includes protecting one's property through the society's sanctioned process of legal channels, would you not agree? (Or perhaps you would rather have a wild-west-self-help regime?)

Since as I have indicated - and you have not refuted - there is nothing wrong with the buying and selling of property, whether that be a house, a piece of land, or a "mere piece of paper" signifying patent rights; yes, I see that NPEs are fully moral.

That is the case.

Can you now address some of your assumptions (the points your need to actually prove) and can you now explain your own position on morality?

Please answer my questions.

[KIR]

Skeptical: "You leave out the fact that the infringer is using property that he has no right to use."

Yes, I am ignoring the "legal right" and focusing on the "moral right". I thought that was perfectly clear. You seem unable to separate the two types of "rights" intellectually, even though you acknowledge the existence of the distinct terms.

"Protecting one's property is a perfectly moral action, would you not agree?"

It depends on how one's property was acquired, does it not? And how it is being protected?

"Are you then classifying ALL PROPERTY as "mere pieces of paper"?"

No.

"How deep does your antipathy towards property run?"

When did you stop beating your child?

[KIR]

Some really junky patents granted this past Tuesday:

US 7,927,387
US 7,927,184
US 7,929,904
US 7,929,687

Took about twenty minutes; scanned about 25% of the gazette.

[Skeptical]

KIR,

On what basis do you justify leaving out ANY right? On what basis do you now charge that I cannot separate the two types of "rights" intellectually?

Answering in blithe terms and making unwarranted accusations when you need to be providing actual answers is inappropriate for this forum.

Please provide actual answers to my questions.

And if you want to "move the goalposts" and NOW stipulate that the property to be protected was acquired legally (which, by the way, is implicit in my statements) - I will gladly oblige and make that condition EXPLICIT. And I will add that if you take the opposing view, that is YET ANOTHER ASSUMPTION that you need to address. To your question of "And how it is being protected?" I have alreasy stipulated that answer - "society's sanctioned process of legal channels" - in fact I asked you a follow up question to that very stipulation - yet another question you have not yet answered.

The question to the depth of your antipathy is a fair question, given how loaded your original comment was regarding the property of patent rights - please answer the question.

I can find your type of half-baked commentary, hand-waiving and non-answers over at Patently-O. The good Doctors here do not want that type of discourse. I answered your questions thoroughly. Show a little respect and do the same.

I am more than a little skeptical that you will not do so.

[patent litigation]

The recent Intellectual Ventures suits present just one example showing that the NPE (“patent troll”) business model is fast becoming dominant in the world of IP. Thomas Edison held over 1,000 patents, but practiced none of them. He invented, which is what he did best, and let others manufacture products from his inventions. If an inventor cannot sue for patent infringement and recover damages, they why should anyone invent anything? Only vigorous patent enforcement rewards inventors for their inventions and incentivizes others to invent.
http://www.youtube.com/watch?v=LkQELhZeDYQ

[Skeptical]

Buried in the sands of time is the lack of response from KIR.

I remain skeptical that any answers will be forthcoming.