Patent Docs: Media Commentary

Media Commentary

January 04, 2015

December 18, 2014

More Misinformation Regarding the Patent System and Non-Practicing Entities

By Michael Borella and Andrew Williams --

The press has been all too eager to decry the so-called "broken" U.S. patent system and the alleged "scourge" of non-practicing entities (NPEs). However, few if any articles attempt to provide an even-handed analysis of these issues. Recently, Jon Potter and Julie Samuels published a piece in Roll Call, urging Congress to pass comprehensive patent reform legislation to clamp down on NPEs, while James Bessen, in The Atlantic, lauded the Supreme Court's recent Alice Corp. v. CLS Bank Int'l decision for already having a deleterious impact on business method patents. Samuels was formerly of the Electronic Frontier Foundation (EFF), a group with an anti-patent agenda.

The need for patent reform has arguably diminished. Three decisions handed down by the Supreme Court last year, Alice, Octane Fitness, LLC v. Icon Health & Fitness, Inc., and Nautilus, Inc. v. Biosig Instruments, Inc., each addressed one of the alleged weakness in the patent system that so-called trolls are thought to exploit. These cases have been credited for the drop in patent litigation seen since the end of the Court's last term. Moreover, the Patent Trial and Appeals Board ("PTAB") has been accused of becoming a patent "death squad" because of the large number of inventions that it has recently found to be unpatentable.

These articles, therefore, appear to be desperate attempts to flame the anti-patent fervor that existed last year. As we have come to expect, both articles present only one side of the story, and do not consider the negative consequences that further anti-NPE legislation could bring about, and that the Alice decision has already produced. Further, the authors make unsupported assertions, draw questionable conclusions, and exhibit a profoundly flawed understanding of patent law.

For example, as with similar articles, the Potter and Samuels's article starts from the presupposition that "our patent system is out of balance," citing the Alice decision for support. The unsuspecting reader will assume that this is a forgone conclusion. Nevertheless, it is through their explanation of how this decision and proposed legislation are meant to "solve" the supposed crisis, the authors reveal a lack of understanding of the historical and philosophical basis of the patent system.

To that point, the authors equate "trolls" with NPEs (non-practicing entities). The term NPE, however, encompasses all entities that do not manufacture products, including most universities, research institutions, and individual inventors. Interestingly, Ms. Samuels's previous organization, the EFF, accused universities of fueling the patent troll problem. Patent asserting organizations have been acknowledged by most, including the White House, to serve an important role as mediator between such NPEs and operating companies often necessary to commercialize inventions. In fact, the United States' patent system purposefully encourages such actions by making patent property rights freely assignable and eschewing a "working" requirement. This philosophy goes back to the framers of the Constitution, and allows the patent system to be accessible to everyone, not just those with abundant resources.

Potter and Samuels go on to assert, without citing any support, that NPEs "grievously injure innovators, bankrupt small companies, and waste judicial resources." Yet, the current functioning patent system is essential to the business models of these same innovators and small companies. Without patents, the innovations of a small software company can be easily reverse engineered and copied by larger players with more market clout, or foreign companies with lower overheads. Trademarks, copyrights, and trade secrets do little to help in these situations.

In addition, the authors fail to consider the fact that these "innovators" and "small companies" (or any defendant in a patent litigation case for that matter), might actually infringe a valid patent. If so, should they be allowed to freeload off the labor of others without penalty just because the patent at issue encompasses a business method or software, or happens to be owned by an NPE?

Bessen states that a recent the Government Accountability Office ("GAO") report "attributed 89 percent of the increase in patent litigation [in the 2007-2011 time frame] to software patents." This report, however, conflated actual software patents and business method patents, collectively referring to both as "software patents." In fact, the GAO found that "operating companies brought most of the patent infringement lawsuits from 2007 to 2011." Additionally, the report indicated that the number of defendants in software and business method patent litigation increased 89 percent, but the number of lawsuits increased more modestly. According to the report, the increase in the number of patent lawsuits in 2011 "was most likely influenced by the anticipation of changes in the 2011 Leahy-Smith America Invents Act (AIA), which made several significant changes to the U.S. patent system, including limiting the number of defendants in a lawsuit, causing some plaintiffs that would have previously filed a single lawsuit with multiple defendants to break the lawsuit into multiple lawsuits."

Of course, even if there was an increase in software patent litigation, it would have likely been a reflection of the increased importance of software in our everyday lives. The 2007-2011 time frame tracks the rise of the smartphone and always-on computing, dramatic growth in social media, and a multimedia streaming revolution led by Netflix and YouTube, among other factors. Like it or not, software is now an integral part of our personal and professional lives, as we carry our laptops, tablets, phones, e-readers, and digital fitness trackers with us whether we are going to work or on vacation. An increase in the number of software patents granted, as well as an increase in software patent litigation, is a natural consequence of the ubiquity of software.

Certainly, no one is denying that there are bad actors that abuse the litigation system both with regard to intellectual property rights and otherwise. However, elevating this minority of cases to be representative of the norm is not a reason to dispense with the entire system. In fact, Bessen's methodologies for assessing the cost of so-called patent trolls have been called into question. See, e.g., Schwartz & Kesan, Analyzing the Role of Non-Practicing Entities in the Patent System, Cornell Law Review, Vol. 99:2, pp. 425-56 (2014). As a result, the implications that can be drawn from the data with regard to the impact of NPEs on the system are dubious at best.

With respect to the Alice decision, both sets of authors ignore the damage that this case has already caused to the patent system. Under Alice, when determining whether a patent claim meets the statutory requirements for patent-eligibility, one must determine whether the claim is directed to a patent-ineligible law of nature, natural phenomenon, or abstract idea. If so, then one determines whether any additional claim elements transform the claim into a patent-eligible application that amounts to significantly more than the ineligible concept itself.

This two-prong test has been widely criticized for its vagueness and subjectivity. The Supreme Court refused to define what it meant by the term "abstract idea," leading to consternation among patentees, patent attorneys, and even federal judges. For instance, Judge Wu of the United States District Court for the Central District of California criticized Alice for setting forth an "I know it when I see it" test. Judge Pfaelzer, a colleague of Judge Wu, wrote that the Supreme Court's patent-eligibility cases "often confuse more than they clarify [and] appear to contradict each other on important issues."

The Supreme Court also blurred the lines between the assessment of patent-eligibility and other patentability requirements. The patent law requires that, among other things, claims must be novel and non-obvious, as well as encompassing patent-eligible subject matter. In 1981, the Supreme Court clarified that each of these inquiries were separate and distinct, and that it was "inappropriate to dissect the claims into old and new elements and then to ignore the presence of the old elements in the analysis." Alice, as well as its 2012 predecessor case Mayo Collaborative Servs. v. Prometheus Labs., Inc., turned this notion around. Now, when conducting a patentable subject matter review, claims can be analyzed element by element and compared to prior art.

As many commentators have articulated since the Mayo opinion was handed down, determining whether the breadth of a claim is appropriate is better served by conducting the well-understood and more objective and established analyses of novelty and obviousness. Despite the lack of any suggestion from Congress that patent-eligibility is to be used for these purposes, the Supreme Court, now followed by the Federal Circuit, has made patentable subject matter a perverse weapon for the unsupported rejection and invalidation of claims.

The well-understood obviousness analysis asks whether the differences between the claimed invention and the prior art would have been obvious to one of ordinary skill in the art. The Alice test, for a claim that incorporates a preexisting algorithm or a longstanding practice, inquires if the claim adds "significantly more" to that algorithm or practice. The substantive difference between the two is that the obviousness test is grounded using prior art as a reference point for what is known, while the Alice test is not. This eliminates much of the objectivity from the Alice analysis, putting thousands of patents in a state of legal uncertainty. The "validity" of such patents may depend on which judge or panel conducts the test.

Bessen goes as far as to suggest that while the Alice decision is limiting the number of granted business method patents, it hasn't gone far enough to similarly limit software patents. But why should we view patents in such sweeping terms, with the connotation that business method and software patents are inherently bad? Patents are either valid or invalid, regardless of the technology claimed therein.

Furthermore, the implication that software should not warrant patent protection unfairly singles out one of the greatest drivers of the U.S. economy over the last forty years. A major aspect of innovation is to make products and services faster, cheaper, and better. The patent system is intended to incentivize individuals and organizations to publicly disclose such inventions, and as a result receive a limited exclusive-use property right thereover. Despite contentions of the deleterious impact of a "broken" patent system on the software industry, the computer and information industry as a whole continues to grow, as evidenced by recent record-breaking stock values, billion-dollar acquisitions, and successful initial public offerings. A broad exclusion of computer-implemented inventions is illogical and disregards the fundamental tradeoff on which the system is based.

Graphic of troll (above) by JNL was modified (cropped) from a graphic available at the Wikipedia Commons, pursuant to the Free Art License. Any use of the modified graphic is subject to the same license.

Posted at 11:47 PM in Media Commentary, Patent Litigation | Permalink | Comments (8)

March 31, 2014

Dr. Cook-Deegan Brings the Medical Community Up to Date on the Myriad Case

By Kevin E. Noonan --

In an article in The Cancer Letter entitled "Robert Cook-Deegan's Viewers' Guide To the Super Bowl of Gene Patent Cases," Professor Robert Cook-Deegan (at right) of the Institute for Genome Sciences & Policy and Sanford School of Public Policy, Duke University provides his colleagues in the medical arts with an update on the progress of the Myriad case, specifically the several pending district court actions, now consolidated before Judge Robert Shelby in the District of Utah. Continuing the pervasive presence of kitsch in everything Myriad (recall Judge Moore's disdain for Acting Solicitor General Katyal's "magic microscope on these grounds), Dr. Cook-Deegan analogizes patent litigation to a "blood sport," complete with analogies between hemorrhage and spilled ink/lost profits. Dr. Cook-Deegan's focus is on Judge Shelby's recent denial of Myriad's preliminary injunction motion, as well as providing broad hints to the court and defendants regarding other legal avenues for attacking Myriad's patents. Dr. Cook-Deegan is not a thoughtless partisan in this debate (indeed, he provided an insightful basis for invalidating Myriad's probe-and-primer claims based on traditional patent law concerns with novelty; see "Caught in a Time Warp: The (In)validity of BRCA1 Oligonucleotide Claims"), but he has certainly taken a side.

The article starts with Judge Shelby's 106-page ruling; as with most articles on the Judge's decision its length is apparently a relevant supernumerary for the correctness of the Court's conclusion (brevity being the soul of wit but clearly not a hallmark of judicial acumen). Dr. Cook-Deegan correctly points out that the Court understood that Myriad might in fact suffer irreparable harm to its BRCA gene testing franchise but that this likelihood was trumped by the Court's determination that Myriad was unlikely to prevail on its patent infringement claims. Dr. Cook-Deegan characterizes the Court's assessment as being that "the claims to DNA molecules -- mainly to DNA primers used to amplify the DNA in its tests -- are in trouble; and the claims to methods are in very deep trouble." He cites the Myriad franchise in BRCA gene testing as having generated $2.8 billion in revenues since 1996, and asserts that Myriad's "monopoly" on testing (it always a tell for a writer's opinion on patents to describe them as a monopoly) ended in June 2013 with the Supreme Court's decision in AMP v. Myriad Genetics.

Dr. Cook-Deegan (much like Judge Shelby in his opinion, one of the reasons it is 106 pages long) then follows with a synopsis of the Supreme Court's decision in the Myriad case, recognizing that Justice Thomas's opinion, while more straightforward than most of the Court's pronouncements on patent law did not produce "a map locating [the] Rubicon" between patent ineligible and patent eligible forms of DNA. (This characterization is somewhat unfair to the Court's opinion; it seems clear that the Court decided that merely being synthetic in nature was not enough, but that the DNA sequence itself could not occur in nature.) The article sets forth what has transpired since the Supreme Court's decision, specifically Myriad's activity in suing anyone offering a BRCA gene test and there being several potential or actual Myriad targets filing declaratory judgment actions against Myriad for invalidity based on the Supreme Court's decision. This list includes Ambry Genetics, Gene-by-Gene, Ltd. (this defendant has since settled with Myriad); Quest Diagnostics; GeneDx; InVitae; Counsyl Genetics; and LabCorp.

Dr. Cook-Deegan notes that these lawsuits generally involve Myriad's assertion of several of the hundreds of claims remaining after the ACLU's suit against 7 claims of 15 patents. The article questions why Myriad would sue in view of its track record before the Federal Circuit (as to some of its method claims) and the Supreme Court, and of course mentions Myriad's profits as a motive (recall that patents are intended to garner money damages upon infringement), and that the $10 million that Myriad purportedly "set aside" for patent litigation represents "one week's profits" from a purported $520 million in revenues (not profits) Myriad made "in its most recent fiscal year." In fairness to Myriad, Dr. Cook-Deegan also acknowledges that the company thinks it will win, particularly because these lawsuits are more traditional patent infringement actions and very different from the "court of public opinion" that the ACLU manipulated so expertly in the AMP case. But he also correctly notes that Judge Shelby's ruling on Myriad's preliminary injunction motion has changed the odds against Myriad, returning to the sports theme by drawing an analogy with the Denver Broncos recent unsuccessful experience in the Meadowlands relating to meeting a strong offense with a strong defense. This section of the article ends by noting that up until now the issue has been one of patent eligibility, and there may be other grounds for attacking Myriad's claims that may be raised in the pending lawsuits.

At this point the article veers more closely to advocacy, with Dr. Cook-Deegan making a case for invalidating Myriad's claims to the BRCA2 gene (and any that depend, logically or legally, on Myriad's claim to having invented the isolated form of this gene) based in Section 102(g) of the (1952) Patent Act. This section can be used to invalidate a claim if the claimed invention was made prior to the patentee's making of the invention by a first inventor who did not "abandon, suppress or conceal" the invention. This argument involves factual issues from the time during which several laboratories, including those of Mark Skolnick (Myriad's inventor) and Mary-Claire King in Seattle, were trying to identify human genes that were involved with an increased propensity for breast and ovarian cancer. Dr. Cook-Deegan, citing Kevin Davies's book Breakthrough, concedes that the Skolnick lab "won" the race to isolate the BRCA1 gene. The situation is different for BRCA2, according to Dr. Cook-Deegan, and he lays out in detail the "case" for third party invention of BRCA2.

According to this article, a British group, led by Michael Stratton, first provided linkage analysis data showing the gene now know as BRCA2 resided on human chromosome 13 in 1994. As it turned out, Myriad filed its BRCA2 patent application three days before Dr. Stratton announced his team's discovery of BRCA2 in the scientific journal Nature. In a sentence no doubt intended to illustrate the frenzied nature of the scientific race for BRCA2 (but that also seems to imply Myriad-associated shenanigans), Dr. Cook-Deegan asserts that "[t]he scientific scuttlebutt has long been that Myriad scientists learned of the pending publication and filed just in time. But was it really in time?" This quasi-allegation is followed by a timeline of events as follows:

The Stratton group, working with Andrew Futreal of Duke, filed a UK patent application on BRCA2 on November 23, 1995 (UK patent 2,307,477 was published on May 28, 1997). The Stratton team submitted their BRCA2 paper on December 5. Stratton's UK patent application was thus filed almost a month before Myriad's US application for BRCA2, and the Myriad/Utah team did not publish on BRCA2 until March 1996, three months after Stratton's team. The Stratton team also got a US patent (6,045,997). That patent was allowed to lapse when the first maintenance fee was due, but the US patent and patents in 18 other jurisdictions do establish a presumption of priority from Stratton's UK patent.

The plot spun in the article thickens, Dr. Cook-Deegan stating (correctly) that the U.S. Patent and Trademark Office is precluded from granting patents on the same invention (stated in the article slightly differently, that the Office is "not supposed to grant overlapping claims"). He also notes that the Office did not declare an interference proceeding, the way that priority disputes between separate inventors were resolved under the previous "first to invent" patent regime (that changed with the enactment of the Leahy-Smith America Invents Act). He then states tantalizingly that "[t]he current litigation could finally bring to light the documents that would establish who knew what when, both who made the discovery and who deserves any patent rights on which mutations and the wild type sequence of BRCA1 and BRCA2." The reader will be excused if she gets the impression that Dr. Cook-Deegan fervently wishes this eventuality to come to pass (and who he thinks will turn out to be the first inventor).

The article then turns to the question of whether Myriad's primer (and probe) claims satisfy the requirements of 35 U.S.C. § 101. Much of this section of the article unfortunately relates to the recently issued Guidelines from the U.S. Patent and Trademark Office regarding patent eligibility in view of the Supreme Court's Mayo v. Prometheus and Myriad decisions. While it is true that Judge Shelby's decision was made in consideration of these Guidelines, they do not have the force of law and represent merely how the Office (for now) is interpreting the Supreme Court's decisions. They are certainly relevant to how claims in pending applications are being examined; they are of dubious relevance to the legal question of where the Court drew the line with regard to the patent eligibility of DNA primers and probes.

The article then discusses whether Myriad's primer and probe claims satisfy the written description and enablement requirements of Section 112. The grounds for this challenge are that Myriad uses primers that flank BRCA gene exons and thus fall outside the scope of the claims reciting primers and probes that are fragments of BRCA cDNA (in view of the fact that these primers and probes are not expressly described in the BRCA gene patent specifications). This argument seems to conflate whether these primers fall within the scope of Myriad's claims (and thus that construing the claims to so include these sequences may render them invalid for lack of descriptive support) and whether the practice of BRCA gene diagnostic testing by others using these non-exonic primers and probes would infringe Myriad's primer claims insofar as they are properly cabined within the confines of exonic sequences. But Dr. Cook-Deegan is correct when he states that the validity vel non of these claims may depend on how they are ultimately construed by the District Court.

The article also focuses on claim 6 of U.S. Patent No. 5,747,282 which is not directed to DNA amplification methods and that would doubtless "capture" genomic DNA molecules clearly invalidated by the Supreme Court in Myriad. These are also the types of molecules Dr. Cook-Deegan and colleagues showed to be invalid under 35 U.S.C. § 102, and the article briefly reviews the scientific basis for this conclusion.

Dr. Cook-Deegan further attempts to implicate the government's rights in the BRCA genes (stemming from National Institute of Health support for the basic genetic research underlying discovery of the BRCA genes). It is worth noting that the "march-in rights" he cites as part of the Bayh-Dole Act have been available for the entirety of the time Myriad has held and threatened to assert its BRCA gene patents, and that the government has never used these march-in rights under any circumstances (although, famously, the government threatened to do so regarding the availability of the antibiotic Cipro in the wake of the anthrax scare after the terrorist attacks on September 11, 2001). And it is further worth noting that the government has not acted even in the face of calls by Senators to do so after Myriad filed its lawsuits against BRCA genetic diagnostic test providers in the wake of the Supreme Court's decision invalidating some (but not all) of its claims. Here, Dr. Cook-Deegan invokes not only Bayh-Dole but the Stevenson-Wydler Act (relating to rights in inventions made in government laboratories), as well as assorted misfeasances by Myriad having to do with reporting and other requirements with regard to whether the government can and should act. And in this regard Dr. Cook-Deegan cites the knowledge (and possible testimony) of Dr. Andrew Futreal, who the article describes as:

[A] pivotal figure in understanding the discovery process in court proceedings. He was a coauthor and co-inventor on the Myriad/Utah team that first characterized BRCA1 when he was at NIEHS, and then coauthor and coinventor on the Stratton papers and patents that first reported BRCA2. . . . He is thus the only person who was coauthor and coinventor for the first papers and patents for both BRCA1 and BRCA2.

In view of these assertions, it is surprising that the article doesn't supply defendants' counsel with Dr. Futreal's address.

Finally, Dr. Cook-Deegan points his readers (and defendants' counsel) to Myriad's litigation against OncorMed in 1997 over U.S. Patent No. 5,654,155, one of the patents Myriad is now asserting but that it attempted to invalidate in the prior litigation. Dr. Cook-Deegan presents no information about any relevant evidence from this earlier litigation, but speculates that "[t]he 1997 litigation may have left a paper trail that the discovery process will unearth" because "[c]laims in the OncorMed patents were likely to be revoked or considerably weakened in 1997, and they are no more likely to be robust and enforceable now."

Finally, after noting more putative evidence of Myriad's bad behavior (here, with regard to "hoarding" its BRCA gene mutation database as a trade secret, complete with reference to "tart words" from Judge Shelby in dicta from his preliminary injunction decision), Dr. Cook-Deegan confesses that:

The historian in me wants this to go to court so we can learn what happened two decades ago. Litigation is very costly, however, and the trial and appeals process is protracted, saps management attention, and poses recurrent decisions about whether and how to proceed further. Moreover, litigation is a very expensive and not entirely reliable way to document historical events. No one predicted a safety on the first play from scrimmage in the Super Bowl; any number of outcomes can still emerge from the litigation over BRCA1 and BRCA2. The business models that emerge, however, are likely to entail more competition than Myriad's unitary genetic testing service that prevailed 1996-2013.

Perhaps.

Posted at 11:18 PM in Media Commentary, Patentable Subject Matter | Permalink | Comments (4)

March 30, 2014

New York Times Op-Ed Argues Law Takes Misguided Approach to Software Patents

By Michael Borella --

On March 28, Professor Robin Feldman of the University of California Hastings College of Law wrote an op-ed piece in the New York Times entitled "Slowing the Patent Trolls". Unfortunately, like so many articles of its ilk, Professor Feldman's offering uses misleading hypotheticals and unsupported assertions to allege that the mere existence of software patents is allowing the so-called trolls to harm our economy.

Ostensibly written in anticipation of Monday's Alice v. CLS Bank oral arguments scheduled to be heard by the Supreme Court, Professor Feldman writes that the case "offers the court an opportunity to resolve two decades of economically harmful confusion over how the law grants patent protection to computer software." Professor Feldman, however, seems to be focused not on the specific facts that lead to the Court's review of Alice's patents, but instead on her erroneous belief that software patents are, by their very nature, too broad.

She immediately starts off on the wrong foot by stating that "[s]ince the mid-1990s the software patent system has operated by its own rules . . . compared with patents for other innovations, those for software are granted using a very broad and lax standard of invention." This is untrue, even as an opinion. There certainly are specific rules regarding computer-implemented inventions, particularly with regard to subject-matter eligibility (see, e.g., the USPTO's post-Bilski and post-Mayo examination guidelines). Additionally, several well-known Federal Circuit cases have resulted in the requirement that, for inventions that operate on a general-purpose computer claimed in means-plus-function format, the specification must provide an algorithm that performs the claimed functions (see, e.g., M.P.E.P. 2181(II)(B) for an overview of the case law).

If anything, computer-implemented inventions are held to a higher standard than most other types of inventions due to these additional requirements. Rather than acknowledging that the computing arts have been singled out in this fashion, Professor Feldman contends that "[o]rdinarily, the law requires inventors to explain not just the result of an invention, but also how the invention actually works. If you invent a car that drives on water, you have to explain exactly how you get it to stay afloat. Not so for software: the mere idea of a floating car is enough."

This statement is a misrepresentation of the law. If Professor Feldman can cite to an issued patent that claims software for a flying car but does not disclosed how the invention works, I will happily join her in condemning that specific patent for being vague and overly broad. But even if such a patent comes to light, Professor Feldman's statement is yet another example of the hyperbole that is drowning out reason in an otherwise important debate.

Surely, not all patent applications that claim software should be allowed. Some claims will be anticipated, obvious, or vague. But this analysis is currently carried out on a case-by-case basis by USPTO examiners who apply the guidelines cited above, as well as a comparison of the claims to prior art. Professor Feldman's flying car hypothetical would simply not pass muster under the existing examination standards.

Professor Feldman provides another hypothetical about a "software program to assess the riskiness of a driver for car-insurance purposes . . . based on how much the person texts while driving, combined with other risk indicators." She adds that "[u]nder the current software patenting paradigm, providing the description above without much more could be enough to merit protection." As discussed above, this notion is unsupported by the facts.

Regardless, she proposes that if one were to "specify the particular inputs used -- texting frequency, credit score, hobbies, driving history -- along with the weights and multipliers and software approach used to produce the risk score" the resulting invention would be patent-eligible. Maybe. The problem with approaching the topic of patentable subject matter at such a high level of abstraction is that patentability decisions are made based on the specific language of the claims when read in light of the invention as disclosed in the specification. Hypotheticals may be useful thought exercises, but patent eligibility decisions must be made based on facts and the law.

Now turning briefly to her patent troll contentions -- Professor Feldman fails to acknowledge that the United States' patent system purposefully encourages the existence of non-practicing entities by making patent property rights freely assignable and eschewing a "working" requirement. This is thought to help make the patent system accessible to those without abundant resources. Indeed, public universities, such as the one that employs Professor Feldman, are permitted to acquire and hold patents related to the inventions fostered by research conducted under their auspices. Further, as we have pointed out recently, calculations of the supposed harm due to such non-practicing entities are questionable at best.

The issues of patent-eligible subject matter and patent "trolls" are neither simple nor black-and-white. There is a need for a rich, informed public discourse regarding both. But this discourse is not aided by drawing questionable conclusions from an incomplete view of patent law.

Posted at 11:11 PM in Media Commentary, Patentable Subject Matter, Supreme Court | Permalink | Comments (7)

March 13, 2014

A Rebuttal to The Economist's "Stalking Trolls"

By Michael Borella and Andrew Williams --

On March 8th, The Economist published an article deriding both so-called "patent trolls" and "software patents" as being impediments to innovation in the United States. Unfortunately, as we have seen all too often when the mainstream media discusses the patent system, the article contains unsupported assertions, draws questionable conclusions, and displays a profoundly flawed understanding of patent law. Such commentary is particularly troublesome in this case because of the wide circulation of this periodical.

At the outset, the article contains a proclamation that the United States' patent system is "dysfunctional," suggesting this fact is a forgone conclusion to the uninformed reader. Nevertheless, in explaining how the reported developments are meant to "solve" this supposed crisis, the author reveals his unfamiliarity with the philosophical basis of the patent system in this country. For example, the article equates non-practicing entities ("NPE") with "trolls." The term "NPE," however, encompasses all entities that do not manufacture products, including most universities, research institutions, and individual inventors. Even the reviled "patent assertion entities" have been acknowledged by most to serve an important role as mediator between such NPEs and operating companies often necessary to commercialize inventions. In fact, the United States' system purposefully encourages such actions by making patent property rights freely assignable and eschewing a "working" requirement. This is thought to help make the system accessible to everyone, not just those with abundant resources.

Certainly, no one is denying that there are actors that abuse the litigation system in this country, both with regard to intellectual property rights and otherwise. However, elevating this minority of cases to be representative of the norm is simply unproductive. So is the dissemination of questionable statistics. For example, the article states as fact that patent "trolls" cost U.S. companies $29 billion in 2011. It is presumed that the author is referring to the research of James Bessen and Michael J. Meurer, which has come under recent scrutiny because of the particular methodology used. See, e.g., Schwartz & Kesan, Analyzing the Role of Non-Practicing Entities in the Patent System, Cornell Law Review, Vol. 99:2, pp. 425-56 (2014). As a result, the implications that can be drawn from the data with regard to the impact of "trolls" on the system are questionable at best.

Moreover, the article's description of the patentability requirements in the United States also betrays the author's lack of understanding of the topic. With regard to patentable subject matter, the article uses "boiling water to make tea" as an example of a "common idea" which certainly must be a law of nature, natural phenomenon, or abstract idea. However, not only is this example not apropos, but it actually supports the counterpoint. Heating water itself might occur in nature, but the application of that "natural" process to "make tea" does not. And, even though people were certainly brewing tea before the United States' patent system was formed, does this mean Keurig was undeserving of a patent to its K-cups, which were essentially a new way to make tea?

Even worse, to support the allegation that the United States is issuing non-novel and obvious patents, the article mentions a single patent directed to "upgrading computer software over the internet." Noticeably missing, however, was the patent number, title, inventor(s), and date of filing, without which it is impossible to determine just what would qualify as prior art. The article appears to be referencing U.S Patent No. 5,771,354, which was the subject of a This American Life episode in 2013 ("When Patents Attack . . . Part Two!"). If so, contrary to the suggestion in the article, the invention claimed in that patent dated back to the early 1990s, and was ultimately found to be invalid by a jury not because the invention was being practiced in the prior art, but because the correct inventors were not listed on the patent.

Nonetheless, the reference to the "computer software upgrade" patent is yet another example of how the media mistakenly characterizes a patented invention in a few short words, rather than by the patent's allowed claims. While gospel to patent attorneys, the well-established principle that "the claims define the invention" gets little attention elsewhere. Instead, it is easy for a commentator to read the patent's title, abstract, part of its summary, or a few of its drawings, and then provide an over-simplified synopsis of what the patent allegedly covers. Such an interpretation is not in accordance with U.S. patent law, where special court hearings are used during litigation for the sole purpose of defining the scope of asserted claims. Simply put, one cannot determine what a patent actually protects by attempting to determine the "gist" of the invention from the specification -- a careful evaluation of the claims is required.

This type of fundamentally flawed analysis is often directed to software and business method patents. Never mind that neither type of patent is actually defined by the author, or that many patents purportedly directed to either of these technologies explicitly claim computer hardware or other types of physical devices carrying out, or being impacted by, the steps of a method claim. Perhaps software in particular is an easy target for such bullying, because it is less tangible than say, a cotton gin or a light bulb, and often operates invisibly.

However, the implication that software is too abstract to warrant patent protection unfairly singles out one of the greatest drivers of the U.S. economy over the last forty years. A major aspect of innovation is to make products and services faster, cheaper, and better. The patent system is intended to incentivize individuals and organizations to publicly disclose such inventions, and as a result receive a limited property right thereover. Despite contentions of the deleterious impact of a "broken" patent system on the software industry, the computer and information industry as a whole continues to grow, as evidenced by recent record-breaking stock values, billion-dollar acquisitions, and successful initial public offerings. A broad exclusion of computer-implemented inventions is illogical and disregards the fundamental tradeoff on which the system is based. A ban on software patents would make as much sense as, for example, barring any invention that uses plastic from being patented.

To the extent that criticism of the patent system might be warranted, the notion that software and business methods should be unpatentable per se is gross overreaction. In addition to having to meet the patent-eligibility bar for subject matter, a claimed invention must also be novel, non-obvious, and described in such a way that it can be practiced by one of ordinary skill in the art. The inventions of Bilski v. Kappos, Mayo v. Prometheus, and Alice v. CLS Bank have only been analyzed for validity under the subject matter rubric. In these cases, the Supreme Court has applied (or in the case of CLS Bank, is being asked to apply) the blunt knife of subject matter eligibility rather than the more incisive tools of novelty and obviousness.

As noted by the Court in 1980's Diamond v. Diehr, "[t]he 'novelty' of any element or steps in a process, or even of the process itself, is of no relevance in determining whether the subject matter of a claim falls within [patentable subject matter]." This understanding was in accordance with that of Judge Giles Rich, coauthor of the 1952 Patent Statute, who wrote "[a]chieving the ultimate goal of a patent [requires] having the separate keys to open in succession the three doors of [patentable subject matter, novelty, and non-obviousness]."

The Court's recent Mayo decision has been roundly criticized for combining considerations of novelty and obviousness into the patent-eligibility inquiry in a way that requires determining the "gist" of the invention. Consequently, Mayo runs counter to the statute, the Court's own precedent, and well-established practices of claim interpretation. And yet, Mayo may be the standard under which CLS Bank is decided. The problem lies not in the topic of these patents, but in the inherent subjectivity of the Mayo analysis. The fractured, six-opinion Federal Circuit ruling in CLS Bank demonstrates that ten federal judges, who are experts in patent law, could not agree how Mayo should be applied.

Surely, not all patent applications that claim software or business methods should be allowed. Some will be too broad, obvious, or vague. But this analysis is best carried out on a case-by-case basis by well-educated USPTO examiners who apply workable and reasonably objective standards.

The article ends with yet another oft-asserted falsehood -- that copyright would be a "perfectly adequate means of protecting and rewarding software developers for their ingenuity." Copyright does not protect inventions -- it protects expressions of ideas. In the case of software, this would be the source or object code itself. If software innovators were required to rely on the weak protection that copyright provides, the computer industry would become rife with clean-room copyists who misappropriate the ideas behind innovative software by developing cloned applications. And the so-called "trolls" are supposed to be a drain on the economy?

Posted at 11:39 PM in Media Commentary | Permalink | Comments (10)

January 01, 2014

November 12, 2013

When NPR Podcasters Hit the Patent System – An Update

By Andrew Williams --

In May of this year, the NPR podcast "Planet Money" released an episode entitled "When Patents Hit the Podcast." At that time, we reported on this podcast, and the misconceptions of the patent system that the show perpetuated (see "When NPR Podcasters Hit the Patent System"). NPR rebroadcast the episode last week, including an update related to the podcasting patent that was featured in that show, owned by Personal Audio LLC ("Personal Audio"). Even though that patent does not deal with the Biotech or Pharmaceutical industry, the criticisms that the show levied against the patent system affect all patents. Therefore, an update of our story seemed appropriate.

As suggested, the majority of the Podcast was a straight repeat of the earlier show. One of the updates provided was a description of the recently introduced patent-reform legislation. The only other update was a report that, as Planet Money host Zoe Chace put it, the Electronic Frontier Foundation ("EFF") recently filed "a complaint" with the Patent Office saying that the podcast patent "should not exist." The EFF is an organization that describes itself as a "donor-funded nonprofit" that "has championed the public interest in every critical battle affecting digital rights." The originally aired episode explained that the EFF was seeking to invalidate this patent at the United States Patent Office. The EFF has now filed a petition for inter partes review of U.S. Patent No. 8,112,504 ("System for Dissmeinating Media Content Representing Episodes in a Serialized Sequence"), the so-called podcasting patent. Interestingly, the EFF basically crowd-sourced both the cost of filing the petition, and the technological substance found within the petition. A link can still be found on the EFF website for the "Save Podcasting" donation page, on which it is reported that the original goal of $30,000 was met in under 10 hours. The website solicited donations at levels from its Silicon/Student Member ($25) to as high as its Super Major Donor ($2,500). The site reports having received $76,890 to date, although it does not indicate what it will do with the excess money, other than its work to "stop trolls and stupid patents for good."

With regard to the art cited in the petition, the EFF appears to have crowd-sourced this information also. The EFF website contains a link labeled "Prior Art," which opens an "Ask Patents" webpage requesting help to "bust a patent being asserted against podcasting." Claim 31, the claim that has been asserted against several podcasters, reads as follows:

13. Apparatus for acquiring and reproducing media files representing episodes in a series of episodes as said episodes become available, said apparatus comprising: a digital memory, a communications port coupled to the Internet for transmitting data requests for data identified by specified URLs, for receiving downloaded data identified by said URLs in response to said requests, and for storing said downloaded data in said digital memory, and a processor coupled to said digital memory and to said communications port for executing one or more utility programs for: performing, from time to time, one of a sequence of update operations, each of said update operations comprising: downloading via the Internet the current version of a compilation file identified by a predetermined known URL, and storing attribute data contained in said current version of said compilation file in said digital memory, said attribute data describing one or more episodes in a series of episodes, said attribute data for each given one of said episodes including one or more episode URLs identifying one or more corresponding media files representing said given one of said episodes, accepting a selection of a particular episode described by attribute data stored in said digital memory by the operator of said apparatus, downloading and storing the particular media file identified by an episode URL included in the attribute data for said particular episode if said particular media file is not already stored in said digital memory, and reproducing said particular media file in a form perceptible to said operator.

This patent claims priority back to October 2, 1996. The Planet Money hosts noted that Personal Audio originally distributed magazine content via audio tapes. They joked, therefore, that the patent could be invalidated by any teenager in the 1980s that created a mixed tape. Clearly, such a tape would not invalidate the above claim (which speaks volumes regarding the patent sophistication of the Planet Money reporters). The EFF, on the other hand, has an understanding of the patent system, even if they are skeptical of it. They requested on the webpage "prior art that describes accessing a series of media files organized as episodes, tracks, installments, or the like, through the use of "compilation" data that (a) available to be downloaded by a client device, and (b) updated to describe the media files that are currently available." To date, they received 107 answers.

The inter partes review petition for the '504 patent references three different prior art "publications" that were alleged to anticipate or render obvious at least claims 31-35 of the patent. The first piece of prior art included was the "Geek of the Week" Internet talk radio show. The first two grounds referenced in the petition were (1) the website www.ncsa.uiuc.edu/radio/radio.html, appearing on April 22, 1993, and (2) the April 22, 1993 edition of the SurfPunk Technical Journal. These "publications" were cited as 35 U.S.C. § 102(b) prior art. The first of these publications was one of the webpages for the "Geek of the Week" Internet talk radio show. The SurfPunk Technical Journal publication, on the other hand, republished the "Geek of the Week" webpage as it existed on April 22, 1993. The petition also included a third ground for invalidity related to the Geek of the Week publications themselves. In an abundance of caution, the EFF alleged that the Geek of the Week publications collectively contained all of the limitations, and therefore rendered the claims 31-35 obvious. To help provide some context of these early "podcasts," the Planet Money updated episode contained some of the audio from these early "Geek of the Week" shows.

The second prior art reference was a Canadian Broadcasting Corporation ("CBC") Radio Article, which appeared on January 1, 1996, and which described an Internet radio trial that was available on demand beginning in December 1993. This article allegedly described the "availability of regularly-updated episodic radio programs on a web page at a predetermined location." This was cited as 35 U.S.C. § 102(a) prior art. Finally, the third prior art publication was the "Internet CNN Newsroom," which was a master's thesis submitted to MIT in May 1995, and made available on August 10, 1995. Apparently the limitation of an "updated" compilation file was missing from the publication, but the EFF alleged that such a file would have been an obvious design choice.

We take no position on the merits of this inter partes review petition, but we will continue to monitor its progress. As we noted at the time, such a proceeding is a completely legitimate mechanism to address these so-call "bad" patents that people consider to be overbroad. It would appear that if the EFF's characterization of these prior art publications is correct, even if they do not serve to invalidate the claims, it is a distinct possible that the claims will be narrowed such that Personal Audio will no longer be able to assert them against podcasters. This is because the cited art appears to be similar to the same activity that gave rise to the demand letters and infringement lawsuits (such as the dissemination of podcasts like Marc Maron's WTF podcast and "The Adam Carolla Show"). Of course, we have not yet heard from Personal Audio, because they have filed no response yet with the Patent Office. Nevertheless, it would not be surprising if Personal Audio was able to identify some distinction between their claims and these Internet radio shows from years earlier.

Posted at 11:59 PM in Media Commentary | Permalink | Comments (2)

October 07, 2013

In Defense of the Federal Circuit: A Response to Judge Wood

By Edward Reines --

Edward Reines (at right), a partner at Weil, Gotshal & Manges, frequently argues before the Federal Circuit and is chair of the court's Advisory Council. Prepared remarks for Judge Wood's Sept. 26 talk at the Illinois Institute of Technology Chicago-Kent College of Law can be downloaded here.

The Chief Judge of the U.S. Court of Appeals for the Seventh Circuit, Diane Wood, recently delivered a speech provocatively titled "Is It Time to Abolish the Federal Circuit's Exclusive Jurisdiction in Patent Cases?" While it is trendy to criticize the patent system, Judge Wood's prominence and her colorful critique have raised eyebrows. Frequently mentioned as a potential Supreme Court nominee, Judge Wood's far-reaching proposal deserves close consideration -- and honest rebuttal.

The judge's focus on the Federal Circuit is understandable. Although historically patent law was considered an esoteric backwater, it is now recognized as a dynamic legal field involving fascinating subjects and great financial stakes. Our world is filled with amazing new inventions that improve the way we work, how we are entertained, and our healthcare. Patent appeals now attract the finest advocates and garner national media attention. In many ways, the Federal Circuit's patent docket has become the envy of the system.

Judge Wood did not mince words in advancing her proposal to redistribute patent appeals back to the regional circuits. In her live remarks, she critiqued the Federal Circuit for a lack of "intellectual ferment," highlighted the frequency of Supreme Court review, and described the court as too "specialist." She proposed a dual jurisdiction system, allowing appellants to elect between the Federal Circuit and the regional circuits, with the Judicial Panel on Multidistrict Litigation resolving conflicts by lottery.

The meteoric rise of technology, to be sure, has tested the patent system. The Patent Office's inability to cope with the deluge of applications is well documented. Patent assertion abuses, especially by so-called trolls, plague the system. But are Judge Wood's criticisms of the Federal Circuit itself valid?

Judge Wood suggests that having eleven regional circuits join the Federal Circuit in addressing patent law would add intellectual heft and avoid group think. She theorizes that the Federal Circuit's culture of consistency stifles the freedom the regional circuits would have to make "big mistakes" that might advance patent law.

The Federal Circuit was created in 1982, after studies showed that the regional circuits' handling of patent appeals was dysfunctional. Renowned Second Circuit Judge Henry Friendly criticized the "mad and undignified" race to the courthouse stemming from regional circuit management of patent appeals. A study cited by Judge Wood reported that patents in the Eight Circuit suffered an 88.8 percent invalidity rate -- meaning virtually all patents were ruled invalid. It is doubtful that a return to such a free-for-all would raise the quality of discourse.

In contrast to Judge Wood's concerns about Federal Circuit unanimity, the bar of the court often complains that each judge holds independent views, creating too much panel-to-panel variability. If those from afar consider a court's jurisprudence too uniform, and those up-close consider it too diverse, the likelihood is that the court has struck about the right balance.

Judge Wood's critique of the Federal Circuit based on the rate of Supreme Court review is in tension with her suggestion that it deserves a worthy counter-weight. On the big issues, such as whether genetic tests may be patented, the Supreme Court has not been shy about its role. And although the Supreme Court has historically heard as many as 20 Federal Circuit cases per term, more recently it has only decided a handful per term. It is capable of addressing any perceived Federal Circuit bias.

The portrayal of the Federal Circuit as too "specialist" overlooks the varied docket of the court, which includes veterans' appeals and trade disputes. It also underrates the rich diversity and high caliber of the judges on the court. This includes generalists with backgrounds as respected Supreme Court advocates and high-performing federal trial judges. Of President Obama's six Federal Circuit appointees, only one is a patent expert, former Patent Office star Ray Chen, who would elevate the performance of any circuit.

Judge Wood's proposal to reintroduce the regional circuits to patent appeals is, respectfully, impractical. It would give litigants an incentive to race to appeal to obtain their preferred circuit law. Trial courts would not know if they were governed by Federal Circuit or regional circuit patent law when they made decisions. Simply put, adding the option of regional circuits to the Federal Circuit would worsen the unacceptable pre-1982 forum shopping.

Finally, the idea of using the MDL panel to select the appeal court by lottery is dubious. Judge Wood cites existing uses of this scheme. But it has only been sparsely used in niche areas. One real-world example provides a cautionary tale: In an attempt at forum shopping, appeals were filed in 11 different regional circuits including the D.C. Circuit. The MDL panel selected the Eighth Circuit by lottery. The Eighth Circuit then transferred the appeal back to the D.C. Circuit. Given the fast pace of patent litigation, such appellate roulette would be intolerable.

In the end, calls to return patent appeals to the regional circuits cannot survive study of the pre-Federal Circuit mess. A hybrid system with the Federal Circuit and the regional circuits competing for jurisdiction, while imaginative, would be a big mistake. The Federal Circuit has presided over a technology boom like no other. We know from hard-worn experience that the grass is not greener on the other side.

The above article was originally published on October 7, 2013 in The Litigation Daily, and is being reprinted here with the author's permission.

Posted at 09:59 PM in Media Commentary | Permalink | Comments (16)

September 18, 2013

The War on Patent Trolls -- Congress Prepares for Battle

By Andrew Williams --

In case it was not clear that Congress is serious about combatting the perceived problem of "patent trolls," Sen. Patrick Leahy (Vermont) and Sen. Mike Lee (Utah) published an opinion piece this week on the POLITICO.com website, which is now entitled "America's Patent Problem." Both Senators are members of the Senate Judiciary Committee, chaired by Sen. Leahy (at right), the committee which has jurisdiction over patents, copyrights, and trademarks. The article started from the premise that there are patent holders that are abusing the system, and that this abuse has resulted in a drag on the economy. The example of "patent misuse" that the article highlighted is a patent holder that insists that Wi-Fi routers infringe its patents. Sen. Leahy and Sen. Lee (below) took the position that, even if this patent holder's infringement allegations are legitimate, it should only be allowed to sue the companies that make and sell the routers, not the small businesses that are using these routers. But, the small business examples to which the authors pointed included "hotels or small coffee shops" -- entities which others have referred to as "end-users" of the technology. It is hard to believe, though, that these small businesses are using these routers for non-commercial purposes. Even if the "hotels and coffee shops" don't charge their customers for the use of the Wi-Fi, it is almost certain that they seek to attract customers with the service. More importantly, a patent holder's rights are not limited to preventing the making and selling of a patented product. Instead, 35 U.S.C. § 271(a) provides that "whoever without authority makes, uses, offers to sell, or sells any patented invention, within the United States or imports into the United States any patented invention during the term of the patent therefor, infringes the patent" (emphasis added). Thus, it is unclear what the justification is for excluding such "end-users" in this case, especially when the "end-users" is more likely than not using this technology for commercial purposes. The Senators did not provide an answer.

To be fair, we are not taking any position on the merits of the case to which this example refers. Indeed, the Senators themselves did not provide any specifics; for example, no parties or patent numbers are cited. Instead, Senators Leahy and Lee focused on the fact that certain patent holders are targeting small businesses for the sole reason that the cost of settling can be far less than defending against a lawsuit. This may be true. However, it is difficult to distinguish between such alleged tactics and the licensing efforts of "legitimate patent holders." Instead, the authors concluded (without much explanation) that "this misuse of the patent system" does not belong to "the patent system provided for in our Constitution."

But is this true? Not if an article that appeared on the Forbes website on Tuesday is to be believed. Former undersecretary of commerce and director of the U.S Patent and Trademark Office Jon Dudas (at right), and author of the book "Rembrandts in the Attic," David Kline, wrote a piece entitled "Thank the Founding Fathers for the Open Market in Patents." Contrary to the sentiment expressed by Senators Leahy and Lee, and almost every report in the mainstream press, Mr. Dudas and Mr. Kline (below) explained that the founding fathers not only anticipated non-practicing entities, they encouraged them. Of course, these are the same founding fathers that provided for a patent system in the Constitution, and helped to draft that first patent act. The authors pointed out that the young American economy needed a kick-start because, at that time, "the U.S. had a lower standard of living than many South American countries." The founders looked to the British patent system, but according to Bowdoin College historian Zorina Khan, this system had high fees ("11 times the per capita income of the average citizen") and a working requirement (they had to practice the invention). The article continued by citing the work of historians Naomi Lamoreaux from Yale and the late Kenneth Sokoloff of UCLA, who explained that the founders wanted to design a system that would "stimulate the inventive genius and entrepreneurial energy of the common man," even if such individuals could not commercialize their own inventions. They accomplished this by instituting fees much lower than in Britain, not imposing a working requirement, and by expressly allowing the sale and licensing of patent rights. The article continued to cite the work of professors Lamoreaux and Sokoloff, who explained that new intermediaries (think non-practicing entities) "'lowered the transaction costs and improved the efficiency' of the trade in and commercialization of patented technology." Mr. Dudas and Mr. Kline concluded that this system, which is currently embodied by universities and industry NPEs, has sparked many new products and businesses over years.

Mr. Dudas and Mr. Kline warned, therefore, that not all non-practicing entities should be lumped together into the designation of "Patent Troll." Nevertheless, this appears to be exactly what Congress is doing. Senators Leahy and Lee explained that their committee is working "on a bipartisan basis" to address this so-called Patent Troll problem. In addition, they are coordinating with the Representative Bob Goodlatte, chairman of the House Judiciary Committee. The stated goal for this legislation is to "make it harder for bad actors to succeed, while preserving what has made America's patent system great." Of course, that is easier said than done, and the difficulty is narrowly crafting such legislation to specifically address the perceived problem without also ensnaring all of the so-call "legitimate patent holders," or without introducing unexpected negative consequences for the patent system as a whole. Some of the suggested legislation includes increasing transparency of patent ownership, protecting the end-users when the manufacturers should be the real defendants, and improving the process for reviewing patents at the Patent Office (although it is unclear why Sen. Leahy did not mention the post-issuance review procedures of the Leahy-Smith America Invents Act in his article). We have previously reported on some of the proposed legislation, and we will continue monitor and report on the activity of Congress. It is likely that with so much momentum and apparent public support, there will probably be some sort of bill passed in the next year or so. We can only hope that in doing so, Congress does not toss out the proverbial baby with the bathwater.

For additional information regarding this and other related topics, please see:

• "The GAO Issues a Report on Patent Litigation Trends -- It Turns Out that the Sky Is Not Falling," August 29, 2013
• "New Patent Litigation Bill Introduced in House," July 16, 2013
• "Congress Continues Efforts to "Reform" U.S. Patent Law," June 10, 2013
• ""When the Patent System is Attacked!" -- The White House Task Force on High-Tech Patent Issues," June 4, 2013
• "The More the Merrier: The Journal Joins the Times in Complaining about Patents," April 20, 2011
• "In Defense of Patents (And Even Their "Trolls")," Fenruary 21, 2007

Posted at 11:59 PM in Media Commentary, Patent Legislation | Permalink | Comments (5)

September 11, 2013

A Reply to the New England Journal of Medicine

Editor's Note: Yesterday, we reported on a perspective, entitled "Patents, Profits, and the American People -- The Bayh–Dole Act of 1980," that was published in the August 29 issue of the New England Journal of Medicine. Earlier today, we received an e-mail from Joseph Allen, who noted that he had authored a reply to the NEJM article. His response was originally published on IPWatchdog, and is being republished here with the permission of IPWatchdog founder Gene Quinn. Patent Docs thanks Mr. Allen and Mr. Quinn for allowing us to republish Mr. Allen's response.

By Joseph Allen --

In its August 29, 2013 edition, the New England Journal of Medicine saw fit to print two "perspective" pieces attacking the Bayh-Dole Act. The primary article is by Dr. Howard Markel entitled "Patents, Profits, and the American People -- The Bayh–Dole Act of 1980." It repeats previously refuted charges that patenting and licensing federally funded inventions harms the public interest. To give the author due "credit," Dr. Markel does invent some new allegations as well which simply cannot go unanswered.

The Bayh-Dole Act was passed because Congress was rightly concerned that potential benefits from billions of dollars of federally funded research were lying dormant on the shelves of government. Government funded inventions tend to be very early stage discoveries -- more like ideas than products -- requiring considerable private sector risk and investment to turn them into products that can be used by the public.

Under prior patent polices, government agencies took such inventions away from their creators and offered them non-exclusively for development. There were no incentives for the inventors to remain engaged in product development. Not surprisingly, few such inventions were ever commercialized even though billions of dollars were being spent annually on government R&D. This failure spurred two Senators from opposing sides of the aisle, Birch Bayh of Indiana and Bob Dole of Kansas, to form a remarkable partnership seeking a remedy.

But here's how Dr. Markel characterizes the impetus for Senator Bayh's involvement:

In 1978, a group of constituents representing Purdue University lobbied Bayh to seek ways of reaping profits from government allocations for university-based research, arguing that although the United States spent billions of dollars annually funding more than half of all academic research and owned 28,000 patents, it had little to show for the investment.

Unlike Dr. Markel, I was actually in that meeting. Ralph Davis, who then ran Purdue's technology transfer office, is no longer with us to defend himself. Neither Ralph nor anyone else present was looking for "ways of reaping profits from government allocations for university-based research." Quite the contrary, Ralph said that Purdue had made several promising inventions under Dept. of Energy grants which would never benefit U.S. taxpayers unless they were effectively licensed and developed.

This motivation was reflected in Senator Bayh's statement on introducing the bill:

The bill addresses a serious and growing problem: hundreds of valuable medical, energy and other technological discoveries are sitting unused under government control, because the government, which sponsored the research that led to the discoveries, lacks the resources necessary for development and marketing purposes, yet is unwilling to relinquish patent rights that would encourage and stimulate private industry to develop discoveries into products available to the public.

The cost of product development exceeds the funds contributed by the government toward the initial research by a factor of at least 10 to 1. This, together with the known failure rate for new products, makes the private development process an extremely risky venture, which industry is unwilling to undertake unless sufficient incentives are provided.

The consequences of our inadequate government patent policy have not gone unnoticed. In the energy area, bureaucratic delays caused by case-by-case review of each patent application are now running behind by almost two years. . . .

But nowhere is the patent situation more disturbing than in biomedical research programs. Many people have been condemned to needless suffering because of the refusal of agencies to allow universities and small businesses sufficient rights to bring new drugs and medical instrumentation to the marketplace. The exact magnitude of this situation is unknown, but we are certain that the cases we have uncovered to date are but a small sample of the total damage that has been done and will continue to be done if Congress does not act.

Dear Colleague letter from Senator Birch Bayh on the introduction of Bayh-Dole, Sept. 6, 1978.

Senator Bayh's wife was then suffering from a cancer which would later take her life. Senator Bayh was very grateful for the help she received from the doctors at the National Institutes of Health. His determination to enact Bayh-Dole to ensure that new treatments for relieving human suffering were being developed was driven by a passionate concern for patients, not "reaping profits."

Markel repeats the discredited allegation that technology licensing was more successful before Bayh-Dole than claimed by proponents of the law. This charge used to be widely circulated leading my colleagues Norman Latker and Howard Bremer to look up the actual source materials the critics cited. Perhaps not surprisingly, they found the critics were misreading the data. See "The Bayh-Dole Act and Revisionism Redux," pp. 9-10.

Dr. Markel lightly dismisses as "[m]ore difficult to confirm" the meticulous work that Lori Pressman and her team (which included economists at the Department of Commerce) put into a ground breaking study estimating the significant economic impact of university patent licensing on the U.S economy. Lori documented the methodology behind the study which until now, no one has challenged. Perhaps Dr. Markel's "difficulty" would be solved if he actually read the paper. To make it easy, here's the link: "The Economic Contribution of University/Nonprofit Inventions in the United States: 1996-2010."

Adding insult to injury, Markel continues: "Indeed, the law's many critics question how much it has actually benefited the economy (as opposed to individuals and stakeholders) and the extent of its social costs."

Here's some data that may help Dr. Markel and the other critics:

• Since 1980 more than 9,000 new firms have been created around university inventions, more than 4,000 of which are still in business. These companies tend to locate in the same state as the university, spurring economic growth.

• 705 new companies were created by university patented inventions in FY 2012 alone, along with 591 new commercial products introduced for consumers to use. Not a bad performance in an economy otherwise stuck in the doldrums.

• There are now more than 40,000 active licenses and options in place on university inventions, the majority of which are with small businesses.

• No new drugs were commercialized when the government took inventions away from universities before Bayh-Dole. Since then at least 153 are now on the market fighting the scourge of disease world-wide according to a study published in the New England Journal of Medicine. See "The Role of Public-Sector Research in the Discovery of Drugs and Vaccines."

A new Forbes magazine analysis calculates that it now costs $5 billion to develop a new drug -- expenses that are borne by the private sector. If the critics ever get their way and succeed in undermining Bayh-Dole, we could return to the days when we again pull the plug on drugs developed from federally funded research. One has to wonder where those suffering will then turn for relief. It's unlikely the critics will be able to offer them much solace.

While not in Dr. Markel's article, publications covering it surmised from his characterization of its legislative history that enactment of Bayh-Dole was "fluke ridden" (University of Michigan Health.org) or a "rocky and somewhat inglorious road to passage by a lame duck Congress" (Tech Transfer News blog). Such language reflects a fundamental lack of understanding of the legislative process. Bayh-Dole passed on its merits in the full light of day, not through any legislative sleight of hand.

The bill not only went through all of the steps for passing a new law that you read about in civics class, it was subjected to additional scrutiny not normally required for legislation: it needed a unanimous vote of approval in the closing days of the Congress. Bayh-Dole was even attacked by its bureaucratic opponents after enactment who sought to undermine the new law by wrecking the regulations needed for its implementation. See "The Enactment of Bayh-Dole, An Inside Perspective."

Dr. Markel saves his "best" for last:

It's time for Congress to recalibrate Bayh-Dole. Profits and patents can be powerful incentives for scientists, businesspeople, and universities, but new and ongoing risks -- including high prices that limit access to lifesaving technologies, reduced sharing of scientific data, marked shifts of focus from basic to applied research, and conflicts of interest for doctors and academic medical centers -- should be mitigated or averted through revisions of the law. All Americans should be able to share in the bounties of federally funded research.

Oh my, where to begin? Would Dr. Markel feel better knowing that a survey of academic researchers concluded that "patenting does not seem to limit research activity significantly, particularly among those doing basic research," with only 1% of their random sample of 398 academic respondents reporting a project delay of more than a month due to patents on knowledge inputs necessary for their research, and none reporting abandoning of a research project due to the existence of patents? See Final Report to the National Academy of Sciences' Committee Intellectual Property Rights in Genomic and Protein-Related Inventions: Patents, Material Transfers and Access to Research Inputs in Biomedical Research (Sept. 20, 2005).

Would he feel better knowing that Bayh-Dole has not shifted the focus of federal R&D from basic to applied research? See "The Bayh-Dole Act and Revisionism Redux," pp. 11-12. This is hardly surprising as federal agencies fund research either in pursuit of expanding the frontiers of knowledge or to meet their mission needs. With industry abandoning basic research, being able to partner with our unparalleled public research institutions is a tremendous competitive advantage for the United States. Bayh-Dole makes this possible.

Perhaps Dr. Markel will feel better knowing that all Americans can only share in the bounty of federally funded research when embryonic ideas are taken from the lab and turned into new products they can actually use, while creating new jobs and companies where they can work. The United States is leading the world in this regard -- thanks to the Bayh-Dole Act.

About the Author

Joesph Allen is a 30-year veteran of national efforts to foster public/private sector commercialization partnerships, and author of numerous articles on technology management for national publications. Mr. Allen served as a Professional Staff Member on the U.S. Senate Judiciary Committee with former Senator Birch Bayh (D-IN), and was instrumental in working behind the scenes to ensure passage of the historic Bayh-Dole Act. Mr. Allen has served as the Executive Director of Intellectual Property Owners, Inc., a trade association representing major R&D companies, he was involved in the creation of the Court of Appeals for the Federal Circuit, and he also served at the U.S. Department of Commerce as the Director of the Office of Technology Commercialization. From 1992 until 2004, Mr. Allen was with the National Technology Transfer Center (NTTC), becoming President in 1997. Clients included NASA, the Department of Defense, EPA, the Department of Veterans Affairs, and the Department of Commerce. Between 2004 until 2007, Mr. Allen was the Vice President and General Manager of the West Virginia High Technology Consortium Foundation. In 2008, he founded Allen & Associates to continue to facilitate public/private partnerships between universities, federal laboratories, and industry.

For additional information regarding this and other related topics, please see:

• "NEJM Perspective Calls for Recalibration of Bayh-Dole Act," September 10, 2013
• "Senator Leahy Urges NIH to Use March-In Rights on Myriad BRCA Test," July 17, 2013
• "Patent Docs Author Testifies at Genetic Diagnostic Testing Hearing," February 16, 2012
• "AUTM Survey Shows Significant Increases in University Patent Filings and Issuances in FY2010," October 5, 2011
• "USPTO Recognizes 30th Anniversary of Bayh-Dole Act," December 9, 2010
• "University Start-ups and Licensing Activity Held Steady During Recession," October 7, 2010
• "AUTM Survey Shows Drop in Issued Patents," March 9, 2010
• "BIO Comes out Swinging against SACGHS Report," February 4, 2010

• "Patent Haters Take Notice! University Innovation Fuels Robust Economic Activity," IPWatchdog, August 7, 2013
• "Intellectual Dishonesty About Bayh-Dole Consequences," IPWatchdog, May 10, 2013
• "The Good Steward -- Turning Federal R&D into Economic Growth," IPWatchdog, August 2, 2012
• "University Tech Licensing Has Substantial Impact on Economy," IPWatchdog, December 10, 2012
• "AUTM Survey: University Licensing Strong Despite Economy," IPWatchdog, December 17, 2010
• "Statement of Senator Birch Bayh on the 30th Anniversary of the Bayh-Dole Act," IPWatchdog, December 5, 2010

Posted at 11:55 PM in Licensing, Media Commentary, Patent Legislation | Permalink | Comments (2)

September 10, 2013

NEJM Perspective Calls for Recalibration of Bayh-Dole Act

By Donald Zuhn --

In a perspective published in the August 29 issue of the New England Journal of Medicine, Dr. Howard Markel outlines the events leading up to the enactment of the Bayh-Dole Act and states that "a review of [the Act's] origins and consequences supports the idea that policies governing the fast-changing worlds of medicine and biotechnology merit frequent reappraisal and reform." In the article, entitled "Patents, Profits, and the American People -- The Bayh–Dole Act of 1980," Dr. Markel, the George E. Wantz Distinguished Professor of the History of Medicine, and Director for the Center for the History of Medicine at the University of Michigan, notes that "Bayh–Dole's inspiration was not a perceived need to transform the conduct of research but the economic doldrums of the 1970s." Following a helpful summary of the history of the Act, Dr. Markel explains that "[w]hen the Bayh–Dole Act was written, its aim was primarily to stimulate economic growth by more efficiently mining the untapped scientific riches of hospitals, laboratories, and universities." He argues, however, that "[m]uch has changed since then."

While Dr. Markel provides no proposed changes to the Act, he contends that "some of the most vexing quandaries weren't fully addressed in the original legislation." As for examples of such "quandaries," he suggests that revised legislation should address several questions:

Who should benefit from discoveries pertaining to nature or the human body? . . . [W]hat conflicts of interest must be identified and contained in order to protect patients? How can scientific discovery proceed if all innovations and research tools are patented and the discoverers control access to them?

Dr. Markel (at left) concludes his article by declaring that "[i]t's time for Congress to recalibrate Bayh–Dole," adding that "[p]rofits and patents can be powerful incentives for scientists, businesspeople, and universities, but new and ongoing risks -- including high prices that limit access to lifesaving technologies, reduced sharing of scientific data, marked shifts of focus from basic to applied research, and conflicts of interests for doctors and academic medical centers -- should be mitigated or averted through revisions of the law."

Posted at 11:59 PM in Licensing, Media Commentary, Patent Legislation | Permalink | Comments (2)

September 05, 2013

Op-Eds in The Scientist Debate Impact of the AIA

By Donald Zuhn --

Two Op-Eds appearing in The Scientist over the summer present competing views on the impact of the Leahy-Smith America Invents Act. In an article published in July, Dr. George Lewis, the Chief Scientific Officer and co-founder of ZetrOz, a biotech company based in Connecticut, argued that "[t]he controversial law . . . reflects our nation's bias toward corporations over smaller businesses and independent or university-affiliated scientists" (George Lewis, "Opinion: Racing Toward Invention," The Scientist, July 23, 2013). As a result of the move to a firs-to-file regime, Dr. Lewis contends that corporations can "submit[] a new application with an updated version of an idea anytime they deem appropriate, [and thereby] block less-endowed inventors who simply cannot afford to file an application due to the costs involved." He also asserts that the AIA will inhibit open communication among researchers due to the loss of the pre-AIA grace period, and therefore, that the AIA also constitutes a "setback" for academic institutions.

In an article published last month, G. Nagesh Rao, the co-founder of the public-private partnership, Made in America, and a former patent examiner and senior policy advisor for the U.S. Patent & Trademark Office, countered that while "there has been much criticism of the changes imposed by the Leahy-Smith America Invents Act (AIA)," such criticism has been "either incorrect or missing key pieces of information to explain why the law operates in a particular fashion" (G. Nagesh Rao, "Opinion: AIA Does Not Discriminate," The Scientist, August 21, 2013). Mr. Rao argues that "the passing of AIA did not result in a 'first to file' system, as Lewis and others argue," but rather "adopt[ed] a modified 'first inventor to file' system, which preserves some of the protocol matters of the former 'first to invent' system, including the 1-year filing grace period." He also asserts that the AIA provides "other added benefits for biotech, such as the implementation of three levels of examination procedures: accelerated, regular, or decelerated." Mr. Rao concludes that "no legislation emanating from a democracy is going to be perfect given the various stakeholders in play, but the passing of AIA was a step in the right direction for keeping the United States’ competitive edge in a globalized economy."

Posted at 11:59 PM in Media Commentary | Permalink | Comments (5)

July 31, 2013

In Defense of the Patent System: How the Mainstream Media's Representation of it is "Broken"

By Andrew Williams --

The mainstream media continues its attack on the patent system. This problem has become significant, because the average American does not appear to understand the purpose (and benefits) of the patent system. With all of the misinformation being reported, it is no wonder that lay people have the perception that the patent system is "broken." This blog has reported in the past about NPR's criticisms of the patent system, which have occurred on such shows as "This American Life" and podcasts as "Planet Money" (see "When NPR Podcasters Hit the Patent System"). We pointed out that one of the downsides of these various reports was that the NPR hosts and reporters did not appear to understand the patent system. But, on the plus side (if it can be considered as such), these reporters did not hide the fact that they did not understand the system, and they certainly did not profess to be patent law experts.

A different tone has been taken in an article recently published on Wired.com by Patrick Hall entitled "Patent Law Broken, Abused to Stifle Innovation." Mr. Hall's article is written from the perspective of an "expert" in the field, beginning with the axiomatic proposition that the system is not only broken, but that its abuse is stifling innovation. However, a review of this article with even a minimal understanding of the patent system suggests that not only is Mr. Hall not actually an expert on the subject, but that he may even lack an understanding of even the most basic tenets of U.S. patent law. This would not be so disconcerting but for the fact that his piece was published on a site that has a wide-reaching readership, and there was no indication or suggestion provided that the opinions expressed were just that -- opinions by someone who appears to believe that software patents are "bad."

To be fair, the focus of Mr. Hall's article is almost entirely on software patents (even though he does appear to suggest that mechanical patents, such as those that would cover automobiles, are absurd). This software focus on its own might not be of much interest to the readership of this blog. However, the provided "recommendations," and the criticisms provided as a whole, are not limited to software patents, and therefore could impact pharmaceutical, chemical, and biotech patents. Moreover, the more public bashing that software and business-method patents take can only result in a detriment to the patent system as a whole, especially when this is the only exposure to the system that most Americans ever receive.

Mr. Hall's piece begins with the assumption that the patent system is broken. However, any support for this proposition was anecdotal at best. For example, the article complained that Apple received a patent for its glass staircase in 2003. No explanation was given as to why such a patent was undeserved, but the clear implication was that there is a problem if companies are receiving patents on staircases. No patent numbers were provided, so we are left assuming that the article was referring to Design Patent No. D478,999. If Mr. Hall understood the difference between utility and design patents, it was not included in his article. As explained on the Patent Office website, "[a] design patent protects only the appearance of the article and not structural or utilitarian features." So, "a 'utility patent' protects the way an article is used and works (35 U.S.C. 101), while a 'design patent' protects the way an article looks (35 U.S.C. 171)." Id. Therefore, instead of the absurd proposition that Apple has patented the staircase, as the article suggests, Apple has instead simply protected the way its staircases look.

Mr. Hall's article also cited three "absurd" patents as evidence of a broken system: the motorized ice cream cone, the banana suitcase, and the gas grabber (we are not supposed to ask about this last one). There is apparently support for the proposition that these patents are absurd -- they were all featured on the "Patently Absurd" website. But, Mr. Hall's article did not explain why he thought these patents were absurd (other than the fact that absurdity must be self-evident). Looking at the first example, the motorized ice cream cone, it would appear at first glance that this is a patent to a novelty product. But, is the article suggesting that novelty products are undeserving of patent protection? And a simple web search reveals that at least someone was marketing such a device at some point (it was even featured on Katie Lee and Hoda, a video for which can be found with the same web search). Is Mr. Hall suggesting a new category of inventions that are not patent eligible? But fear not, if you want to create your own motorized ice cream cone, you can do so without threat of suit from U.S. Patent No. 5,971,829 -- that patent expired for failure to pay a maintenance fee around 2011. Of course, this highlights one of the points that Mr. Hall's article fails to address -- obtaining and maintaining a patent can be an expensive proposition, and that if a patent is truly "absurd," it is unlikely someone is going through the cost and effort of obtaining or enforcing one.

As one of the most puzzling examples of how the "current" patent system is broken, Mr. Hall's article cites U.S. Patent No. 549,160, which issued in 1895 to George Selden. This patent claims a "road-locomotive" with "a liquid hydrocarbon gas-engine of the compression type," or as the article puts it, an automobile. As with the other examples, the article does not explain why a car should be underserving of patent protection. But all is well, according to article, because Henry Ford allegedly successfully challenged this "absurd" patent in 1911. Except that isn't quite what happened. A simple Internet search that digs a little deeper than the Wikipedia page for Selden's patent reveals that his patent was never found to be invalid. It is true that his patent was surrounded by controversy, but that was because his application was filed in 1879. Mr. Selden was apparently able to keep his application pending for close to 20 years, until others had gotten into the business. It appears that Mr. Selden was using a "submarine" patent more than half a century before Jerome Lemelson. Mr. Selden's downfall occurred not because his patent was determined to be invalid, but rather the type of combustion engines that automobile manufacturers were using at the turn of the century were different than those use in 1879. Therefore, Mr. Ford successfully appealed a finding of infringement. Of course, such a "submarine" patent is not feasible anymore, both because almost every application is published after filing, and more importantly, the expiration date of patents are now limited by the filing date. Therefore, under the patent system that actually exists today, Mr. Selden would have only have been able to assert his patent for a couple of years. Not surprisingly, these subtleties are missing from Mr. Hall's article.

Mr. Hall's article culminates with "seven simple changes" to fix the patent system. However, the article makes statements and assumptions about the patent system that are incorrect, but a layperson reading the article would have no idea that this is the case. The starting point for these seven "fixes" were similar proposals for software patents offered by the "Defend Innovation" initiative of the Electronic Frontier Foundation ("the EFF"). Without taking a position on the EFF's proposals, we note that Mr. Hall's article's exposition on these fixes is not limited to software patents. In fact, it is in the article's expounding of these proposals that the most confusion would be introduced for those unfamiliar with the patent system. For example, the EFF has suggested that software patents be required to provide an example of the software code for each claim. Patents already have a requirement that the claims be sufficiently enabled and described, in order to satisfy 35 U.S.C. § 112. Mr. Hall's article, however, provides no indication that such a requirement exists. Instead, the following question is posed: "[d]o I deserve a patent for a hovering skateboard that I cannot create?" The article gets the answer right ("Absolutely not"), but posing the question in the first place suggests to the reader that there is currently no enablement requirement. Such a reader is therefore left with the impression that the Patent Office is issuing patents on "ideas" that the inventor has no idea how to implement.

As another example, the EFF has suggested that all patents and licenses be made public. In fact, such a proposal to require the recordation of real parties-in-interest has been included in many of the legislative proposals that have been recently proposed (see "Congress Continues Efforts to "Reform" U.S. Patent Law"). However, Mr. Hall's article suggests that this proposal is necessary because, without it, no one would know that a particular patent existed. "Otherwise," the article asks, "how can innovators know if they are infringing on a patent." Such reporting leaves the lay-reader with the impression that issued patents (or even published applications) are not publically available. Not only is this incorrect, it is counter to the purpose behind the patent system -- to provide a period of exclusivity in exchange for the disclosure of an invention.

Many of the other proposals are simply unworkable or impractical. For example, the EFF had suggested a patent term for software patents no longer than five years from the date that the application was filed. It is unclear how they derived that the ideal term for software patents is five years, but at least the EFF recognized that this proposal might cause a problem with international treaties. Mr. Hall's article ignored this complication, and instead expanded the original proposal by suggesting that "[p]atent lengths should reflect the speed of innovation within individual industries." No guidance is provided, however, as to how this "speed of innovation" is to be calculated. In fact, if his proposal was codified, then there is no reason that the converse should not be applied -- that industries with slower innovation speeds be given patent terms longer than the current twenty years from filing date. More importantly, Mr. Hall's article does not take into account the logistical nightmare of how to categorize into which industry a particular patent falls -- and who would be responsible for that determination.

The final proposal in the article is perhaps the most ironic. The article reiterates the EFF's request that Congress hold hearings to determine whether software patents are beneficial to society. However, the starting point of this article already assumed this conclusion -- that the system is broken, and is being abused to stifle innovation. But if this is true, why should Congress waste its time with such a study? Maybe the article's underlying premise is not as strong as it would lead the readers to believe. The article refers to scholarly studies that apparently have concluded that patents do not, in fact, protect economically useful inventions. However, no such study is cited or even mentioned. Making such statements without providing support is irresponsible journalism.

Mr. Hall's article concludes with the statement that "[o]nly countries with enlightened legal institutions can sustain long-term economic growth, facilitate innovation, and benefit from the genius of resourceful creators." On this point, the article is probably correct. Nevertheless, this article provides mostly unsupported statements as fact, which leads the reader to assume that our country does not have such a legal institution. There is nothing wrong with Mr. Hall having such an opinion, or even his putting his opinion on the internet. However, when a media outlet such as Wired.com posts such an article, without disclaimer or qualification, it invites the reader to assume that the piece represents reality. It is no wonder that public outrage over the patent system is mounting. Instead, the mainstream media needs to apply a balanced approached to the issues, present the merits and weaknesses of both sides, and allow the readers to reach an informed conclusion for themselves. Of course, this is probably too much to ask.

Posted at 11:17 PM in Media Commentary | Permalink | Comments (14) | TrackBack (0)

June 12, 2013

When NPR Podcasters Hit the Patent System

By Andrew Williams --

There has been a lot of discussion recently in the mainstream press regarding the U.S. patent system and its perceived failings. The current outcries stem from the apparent proliferation of "Patent Trolls," also known by the less derogatory term Patent Assertion Entities (or PAEs). Prompted by this apparent threat, President Obama has proposed a series of legislative recommendations and executive actions, and Congress has introduced several new pieces of legislation, likely precipitated by the remarks of the President earlier this year. In fact, the Chief Judge of the Federal Circuit, Judge Randall Rader, recently wrote an Op-Ed piece for The New York Times, with Colleen V. Chien and David Hricik, suggesting that judges might have the ability to curtail trolls by making them pay for abusive litigation ("Make Patent Trolls Pay in Court," New York Times, June 5, 2013). Judge Rader explained that Section 285 of the Patent Act and Rule 11 of the Federal Rules of Civil Procedure gives judges the authority to shift the cost of litigation abuse from the defendant to the trolls. It will be interesting to see if anything changes based on this response from all three branches of the U.S. government.

Nevertheless, probably no one would argue that there has been in increase in abusive patent litigation in recent history, and that at least some of these problems stem from non-practicing entities. However, it is clear that the mainstream media is not providing a balanced analysis of the issues involved, tending to quickly label any individual or organization that asserts its patent rights as a troll. Lost in this discussion is a presentation of the merits of the patent system and the potential advantages of non-practicing entities (as even President Obama report acknowledged). For example, NPR has mounted what appears to be an all-out assault on the allegedly "broken" patent system. This recent barrage of criticism was anchored by an episode of "This American Life," which aired a little over a week ago and focused almost exclusively on a single patent case stemming from an investigation of Intellectual Ventures (we provided some commentary on this episode; see "'When the Patent System is Attacked!' -- The White House Task Force on High-Tech Patent Issues"). Shorter versions of this episode have been featured on other public radio shows since that time.

One example that this episode touched on briefly was about a patent holder that has been asserting one of his patents against prominent podcasters, alleging that he invented podcasting back in the mid-'90s. To further elaborate on this story, NPR's own podcast, "Planet Money," released an episode on May 31, 2013, entitled "When Patents Hit the Podcast." In this episode, Planet Money host Zoe Chace and correspondent Robert Smith explored the story of inventor Jim Logan and his company Personal Audio LLC ("Personal Audio"). Personal Audio had recently obtained a favorable jury verdict against Apple for infringing patents listing Mr. Logan as an inventor. The parties later settled. Mr. Logan has now turned his attention to podcasters themselves, thereby prompting the story. The podcast did include a disclaimer that Planet Money had not been sued by Personal Audio, nor had it been approached about obtaining a license. However, the clear implication was that if podcasters could be sued, anybody else could also. In fact, during the Podcast, Mr. Logan's licensing attorney, Richard Baker, joked with Ms. Chace that because she had a playlist of summer songs, she owed him 15 cents. "OK, sounds kind of scary, but he was actually joking," Ms. Chace explained.

The episode was crafted to paint Mr. Logan in the worst possible light. Listeners to the podcast unfamiliar with the patent system would definitely come away from the episode believing that Mr. Logan was attempting to hijack somebody else's idea and extort money out of them. This story began in the mid-'90s, when Mr. Logan had the idea to provide audio content to customers in an episodic fashion. He envisioned that this could be accomplished over the internet, but unfortunately the technology had not caught up with him yet. Therefore, he established a business offering magazines on tape, which he named Personal Audio, by which customers could select different stories from different content providers and an audio version of those stories would be delivered on cassette tape. This was mockingly referred to as the first podcast. Mr. Logan applied for a patent, but his business never got off the ground, and all of his attempts at developing a player for digital content failed. Mr. Logan had other ideas, though, such as pausing live TV (think TiVo), deep-tagging in videos (think YouTube), and enhancements to touch screens (which he sold to 3M). But, except for the last one, all were deemed failures by the podcast.

Years later, Mr. Logan and his attorney discovered that Apple was utilizing a playlist in most of their products, and that this playlist functioned essentially how Mr. Logan had envisioned it when he filed his patent application. After successfully suing Apple, Mr. Logan was said to have set his sights on the podcasters themselves. First, he filed a divisional application with claims that could more easily be read on podcasting. Of course, Ms. Chace didn't use the word divisional application, but explained it in a more sinister manner ("[S]o he pulled up the patent and added to it to make sure the part he thought covered podcasting was emphasized"), and Mr. Smith expressed surprise that it was completely legitimate to go back and "tweak" your patent. After obtaining this divisional patent in February 2012, Mr. Logan approached select podcasters, such as Marc Maron of the WTF podcast, to inquire about licensing his patent. When he was asked about these threats, Mr. Maron suggested that his podcast might have to shut down if they were carried out. Personal Audio has filed suit against several podcasting organizations, including ACE Broadcasting Network, LLC, distributors of "The Adam Carolla Show," one of the most successful podcasts. The Planet Money podcast concluded with an interview of Julie Samuels of the Electronic Frontier Foundation ("the EFF"), an organization seeking to invalidate this patent at the United States Patent Office, although it was unclear whether any such proceeding has yet been initiated.

In discussing this podcast, Patent Docs is not commenting on the merits of Mr. Logan's patent or the actions of Personal Audio. For those interested, the asserted patent is U.S. Patent No. 8,112,504, and according to the ACE Broadcasting complaint, Personal Audio is asserting at least claim 31 of this patent. Patent Docs is also not taking a position on the EFF's actions at this time in attempting to invalidate Mr. Logan's patent. In fact, the patent system allows EFF and organizations like it to seek reexamination at the Patent Office if they are able to uncover legitimate invalidating prior art. The problem with the Planet Money podcast is that at best it was misleading, but at worst it got several crucial patent concepts wrong. And, considering the size and make-up of the audience that it reaches, it was unfortunate that this podcast did do a better job at presenting the positive side of the patent system. It is no surprise that public opinion of the patent system appears to be waning.

As a brief refresher, the ability to, and reasoning for, establishing a patent system can be traced back to the beginning of this country. The U.S. Constitution, in Article 1, Section 8, Clause 8, says:

[The Congress shall have Power] [t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

Also, as explained on the Patent Office website, "[a] patent is a property right granted by the Government of the United States of America to an inventor 'to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States' for a limited time in exchange for public disclosure of the invention when the patent is granted." In other words, the inventor gets something (a limited period of exclusivity), but the public gets something also, disclosure of the invention. Without the patent system, innovators would be incentivized to keep any new invention as a trade secret, thereby depriving the public of the ability to learn and improve upon the invention. Unfortunately, most accusations that the patent system stifles innovation are based on extrapolations of individual anecdotes and are often unsupported by any data.

The first misconception perpetuated by the Planet Money podcast was that the patent system should only reward inventors if they create a new "thing." For example, Mr. Smith lamented that "patents stopped being about protecting your gizmo from someone else's gizmo and making money off of this protected space." First of all, this completely ignores all of the valuable patents that have been granted for methods of using a "gizmo," or methods of making a "gizmo." But, more importantly, the implication was that if the patent holder did not make the "gizmo" himself, society has not benefited. This is not the case. In order to ensure that the invention is disclosed to the public, the patent must teach those skilled in the art how to make and use the invention (see 35 U.S.C. § 112). For this public disclosure to occur, it is irrelevant whether the inventor ever actually made the invention. In fact, the Patent Office stopped requiring the submission of models in 1880. Ms. Chace was on the right track when she asked Mr. Baker, Personal Audio's licensing attorney, whether "[i]f you have the idea of the thing, don't you have to invent the way to get it?" Of course the answer is yes, but Mr. Baker didn't directly answer the question, but instead stated that the '504 patent provides a roadmap to how to do podcasting. Interestingly, Ms. Chace followed up with the question: "Do you think that the guy that invented iTunes, like, read your roadmap?" Of course, the answer is that it does not matter, but anyone listening to the question would come away with the impression that iTunes developer did not, in fact, read the patent. Now, we do not know either way, but what if they did? Would that matter? If so, it can easily be imagined that the script would flip, and Apple would then be the bad guy for stealing someone else's invention and without providing them any compensation. But this perspective was not provided.

Another issue that was at least misleading in the podcast was the suggestion that podcasters are the "end users" of the technology. The podcasters are not the typical end users that come to mind. Instead, most people would consider the term "end user" to refer to anyone that has ever listened to a podcast. The only reason that this use of the term might make sense here is that claim 13 of the '504 patent covers an "[a]pparatus for acquiring and reproducing media files representing episodes in a series of episodes as said episodes become available." And even though it is incredibly unlikely that podcasters like Mr. Carolla are infringing the patent because they have made such an apparatus, they are still using such an apparatus (whether it is covered by the asserted claim or not). Again, without taking any position on the merits of the case, we find it difficult to believe that ACE broadcasting does not benefit in some way from its podcast offerings. To make the point, Mr. Smith used the example in the podcast that this case was akin to someone having a patent on the automobile, but instead of suing rival manufacturers, they sued the owners that bought and drove the cars. This is not an appropriate analogy. The more apropos analogy for this particular scenario would have been to compare the podcasters to taxi drivers -- sure, the taxi drivers do not make the automobiles that this hypothetical patent covers, but the drivers sure do profit from using them. It is likely that the same can be said of most commercial podcasters.

Probably the most frustrating thing about this podcast was that the term "patent troll" was thrown around without ever truly being defined. In fact, Ms. Chace never referred to Personal Audio as a troll herself, but instead she reported that:

Julie Samuels [of EFF] uses a term for Jim and people like him, she calls them Patent Trolls. It just means someone who doesn't build, doesn't make, doesn't create jobs. A patent troll extracts money from people who do those things.

The problem is that in this case, Mr. Logan was one of the original inventors on the patent at issue. Therefore, this was not a case of a large patent-holding company that buys up other people's patents in an effort to assert them against others. In fact, perhaps unwittingly, the podcast painted Mr. Logan as the quintessential small inventor trying to stand-up against Apple, the large corporation. But, instead of the hero of American ingenuity, he was made to be the villain. And why? Because he was unsuccessful at developing his invention that he envisioned all those years ago. Of course, it is easier to paint Mr. Logan in a negative light now because he is has been targeting podcasters, and that probably hits a little too close to home for Planet Money. But, we must continue to ask ourselves whether there is a place in the U.S. patent system for the small inventor, and if so, what is that place. It is these inventors that may not have the financial or technical resources to compete with the larger corporations without the protection of a patent, but they now risk being labeled a troll for asserting their patent rights, or worse yet, capitalizing on their invention by selling their patents to non-practicing entities that might have more leveraging power to help the patents receive full value. Unfortunately, Mr. Logan might not be the best example, but the on-going debate should present both sides fairly in order to allow the public to come to an informed decision.

Posted at 11:59 PM in Media Commentary | Permalink | Comments (9) | TrackBack (0)

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