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Getting the Patent Reform Wars on Track

Mar 17, 2007
Lawrence B. Ebert

Don't believe the hype

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I. The patent statute is directed to disclosure of inventions

The purpose of the patent statute in the United States is to promote public disclosure of inventions by offering some protection to the inventor against theft of the invention. The idea behind this is simple, as may be found in a patent statute from Venice in the year 1474:

We have among us men of great genius, apt to invent and discover ingenious devices... if provision were made for the works and devices discovered by such persons, so that others who may see them could not build them and take the inventor's honor away, more men would then apply their genius, would discover, and would build devices of great utility and benefit to our Commonwealth. Venetian Republic Patent Statute (1474), reprinted in PRINCIPLES OF PATENT LAW 10-11 (Donald S. Chisum et al. eds., 2d ed. 2001).

The patent system is designed to provide incentives to inventors to disclose publicly inventions which are useful, novel, and non-obvious, thereby enhancing the public storehouse of knowledge and hopefully accelerating the rate of improvements to our lives.
The deal between the public and the inventor is the exchange of information in return for a right to exclude for a finite time.

One has to focus on the fact that the patent system is about disclosure of inventions. Although such disclosure may impact innovation, invention and innovation are not the same thing. One looks at various comments distinguishing the two.

Edward B. Roberts: The first generalization is: innovation = invention + exploitation. The invention process covers all efforts aimed at creating new ideas and getting them to work. The exploitation process includes all stages of commercial development, application, and transfer.

Peter F. Drucker: Its [innovation's] criterion is not science or technology, but a change in the economic or social environment, a change in the behavior of people as consumers or producers. Innovation creates new wealth or new potential for action rather than mere knowledge.

Gifford Pinchot III: When an invention is done, the second half of innovation begins: turning the idea into a business success.

One will note that Jaffe and Lerner speak of the "innovation wars" and the "rate of innovation," rather than of invention. One has to keep one's eye on the ball. We want a patent system that gives patents to those who have disclosed inventions which are useful, novel, and nonobvious. If the requirements are met, the inventor gets a right to exclude, and enters the free market. The patent system has done its job.

II. Patent reform as three card monte?

One can find on the internet the text: There is a crisis of patent quality. Vague, overbroad patents lacking in novelty that fail the constitutional mandate of “promoting the progress of science and the useful arts” are being issued. The grant of a high volume of patents (over 350,000 a year [sic]) at a staggering rate (upwards of 90% of patent applications are granted) produces increasing uncertainty about their merit. Low quality patents risk more litigation and confer the economic rewards of monopoly with little benefit to the public.

One can find similar statements, critical of the patent system, in various law review articles, and one can find similar text in the book Innovation and Its Discontents. Nevertheless, one patent attorney wrote: "The critics consist of a tightly knit group of university professors and non-patent attorneys who are critical of the patent system and who favor weakening patent rights. The critics publish countless articles every year and repeatedly cite to one another's work, if not simply to repeat it or provide a synopsis thereof in a different venue, which gives the impression that there are numerous opinions consistently critical of the patent system. This coterie of most frequently published patent critics is so insular and close-knit that no effective independent review of their work is likely." Footnote 1 of the article cites the Jaffe/Lerner book and states "most articles critical of the patent system published since this book [2004] represent synopses of the book in one form or another." [See Patrick Doody, The Patent System is Not Broken, 18 Intellectual Property & Technology Law Journal 10 (December 2006)].

There is merit to the suggestion that the group of legal academics who criticize the patent system are close knit and not entirely imaginative in their analyses. It is also correct that the publications of some accept the conclusions of the Jaffe/Lerner book as a given (for example, 59 SMU L. Rev. 1717). Curiously, however, one of the central "truths" of the patent reform movement, that patents are granted at an excessively high rate (e.g., "upwards of 90%" in the text mentioned above), is based on papers published by former employees of Eastman Kodak, Cecil Quillen (the former General Counsel of Eastman Kodak Company, where he was a Senior Vice President and member of the Board of Directors) and Ogden Webster (a former Assistant General Counsel of Eastman Kodak Company, where he was the Chief Patent Counsel). The initial paper by Quillen and Webster (11 Fed. Cir. B.J. 1 (2001)) contains the text: "if it is assumed that all of the continuing applications represent a renewed attempt to patent the subject matter of their parent applications, then the number of net abandonments is the total number of abandonments less the total number of continuing applications filed. The overall Grant Rate for the 1993-1998 fiscal years on that assumption is 97%."

The manner in which certain pertain reformers have utilized the statement of Quillen and Webster bears certain resemblances to the game of three card monte.

The hype

At one point in three card monte, the dealer allows the mark to see the target card and to seemingly see where the card is placed on the table. This is called the hype. The target card really is not where the mark thinks it is. In patent reform, the utilization of statements that the grant rate is "near 90%," "approximately 90%," or "97%", is like the hype step in three card monte. First, Quillen and Webster never actually said the grant rate was 97%; this was only a bound under certain assumptions, which assumptions were untrue. [from footnote 17 of the first paper of Quillen and Webster: "The authors have been told that in some circumstances it is possible to file a continuation application without immediately abandoning the parent application, and for the unabandoned parent application subsequently to mature into a patent, even though the continuing application and the parent application (which subsequently becomes a patent) are for the same invention. (…)To the extent there may be such patents, the Allowance Percentages and Grant Rates, as calculated in Tables 2 and 6 respectively, could be affected."]

Second, investigation of the method of Quillen and Webster by Robert Clarke (misidentified as George Clarke by Jaffe and Lerner in footnote 163 at page 222) showed the method was inaccurate. As in the hype step of three card monte, the 90%+ patent grant rate is not really there. One can see examples of the hype step in patent reform papers published AFTER the Clarke work in the Harvard Law Review (116 Harvard Law Review 2164 (2003): “The PTO grants approximately 97% of patent applications…”), in the eBay brief to the Supreme Court (at page 40 citing 11 Fed. Cir. B.J. 1, 3 (2001) for estimating the rate of patent approvals by the PTO to be 97% which text was changed on publication in 21 Berkeley Tech. L.J. 999, 1006 (2006) to recite "The PTO approves between 85 to 97 percent of the applications it receives. C. Quillen and O. Webster, Continuing Patent Applications and Performance of the U.S. Patent Office, 11 Fed. Cir. Bar J. 1, 1-21 (2001), and in 61 N.Y.U. Ann. Surv. Am. L. 317 (2005) at footnote 1, finding the first Quillen/Webster paper "showing a grant rate of approximately 90% in the PTO." PRIOR to the Clarke work, Mark A. Lemley in Rational Ignorance at the Patent Office (95 Nw. U.L. Rev. 1495, 1527 (2001)) had written “The Quillen-Webster study suggests, moreover, that they ultimately issue an astonishing ninety-seven percent of the unique applications filed.”

The Mexican turnover

Sometimes, the mark in three card monte figures out where the target card is. Then, the dealer employs the "Mexican turnover" wherein the target card is removed and another card substituted in its place. Examples of this in the patent reform debate are in papers wherein the elevated grant rate numbers are removed from discussion and, for example, a straight up comparison to rates in foreign patent offices is made.

One notes that the NAS report changed during its evolution, removing reliance on elevated patent grant rate numbers. Similarly, Innovation and Its Discontents has at page 143 an argument substituting for the elevated grant rates of Quillen and Webster:

The OECD calculations indicate that the number of important inventions originating in the United States increased by 51% between 1987 and 1998. By comparison, the number of successful applications to the USPTO by US inventors increased 105% over the same period. If the examination standards in the United States were not changing, we might expect successful applications in the United States by US inventors to grow at about the same rate as our measure of internationally important inventions originating in the United States. The fact that the growth in successful PTO applications was, instead, twice as large as the growth of international families is hard to explain in any manner other than declining standards in the US PTO, producing an ever-growing proportion of US patents the patent holders themselves did not think merited patenting elsewhere.

As of March 2, 2007, Shepard's showed 27 citations to the first Quillen and Webster paper, 11 Fed. Cir. B.J. 1 (2001). Papers criticizing the work of Quillen and Webster include 85 JPTOS 335, 86 JPTOS 568, 88 JPTOS 239, 88 JPTOS 726, CHI.-KENT J. INTELL. PROP. 108 and CHI.-KENT J. INTELL. PROP. 186.

Discussion of a crisis of patent quality is based on papers which use invalid numerical and legal methodology. A method which allows a grant rate in excess of 100% is not correct, period. To paraphrase Emerson, the louder she talked of a crisis in patent quality, the more I wondered "whose crisis."

III. Demonizing patent attorneys

At page 168 of Innovation and Its Discontents, one has the text: "The lack of ready dialogue between economists and lawyers about these issues has limited the extent to which the discussion can be raised to the more appropriate --but harder to convey--level of how to maximize the patent system's effectiveness in encouraging innovation.

The people with the greatest economic stake in retaining a litigious and complex patent system --the patent bar -- have proven to be a powerful lobby. The efforts of the highly specialized interference bar to retain first-to-invent is a prime example. (208)."

One might expect that footnote 208 would contain references to papers discussing the efforts of the interference bar to thwart "first to file." In fact, footnote 208 begins "This is not a new problem. For instance, in the 1850's patent lawyers and lawyers led a concerted effort to encourage the patent office to be more permissive in granting patents...." and never discusses anything done by the patent interference bar.

Apart from the fact that the footnote does not support the proposition, examination of the actions of key interference bar members shows the proposition is not true. See Does the Patent Interference Bar Oppose First to File?

Jaffe and Lerner had written unfavorably of patent attorneys in the Harvard Business Review in November 2004; from the talk of Lawrence B. Ebert in Stevenson, Washington before WSPLA/OPLA Joint Conference in 2005:

Adam B. Jaffe and Josh Lerner have stated that "Increasingly, the firm with best lawyers or the greatest willingness to risk litigation wins the innovation wars --rather than the company with the brightest scientists or the most original, valuable ideas." Jaffe and Lerner further assert: "Whatever the solutions, when issues of US patent policy are considered by the courts, the Congress, and the executive branch, you can be sure that the opinions of patent lawyers and patent holders will be heard. While their arguments will often be couched in terms of the public interest, at bottom their focus will be on improving their own profits and livelihoods, not on designing a patent system to foster the overall rate of innovation."

Ironically, Jaffe and Lerner, while demonizing patent attorneys, propose "reforms" such as opposition proceedings, which would benefit patent attorneys, even though there are patent lawyers who have vocally opposed reforms creating opposition proceedings. Thus, Jaffe and Lerner do not mention the publications Joseph Hosteny such as "Post-Grant Opposition: Building on Sand," Intellectual Property Today [IPT], pp. 8-9 (August 2004) or What Now? Post-Grant Oppositions and the Proposed Budget, IPT pp. 8-9 (March 2005).

Patent attorneys have not formed a cabal to thwart patent reform.

IV. Edison, the light bulb, and the big picture

Jaffe and Lerner, in saying "Now, surely Edison's invention was about as novel as they get," both misstated history and misunderstood what was going on with the light bulb. First off, Edison's light bulb patent was about an improvement in a field already filled with patents. Second, Edison did not even disclose the critical improvement, the use of bamboo. Third, Edison already had his innovation game plan in place before the patent.

The basic Edison light bulb patent is US 223,898 (filed Nov. 4, 1879, issued January 27, 1880. The patent text, reflecting Edison's state of knowledge on November 4, 1879, does NOT mention bamboo as a material, or filaments made of bamboo. Note that it was the use of filaments made from bamboo, which knowledge was not obtained until AFTER Edison's patent issued, that allowed a long lasting light bulb and commercialization of the light bulb. Of great significance, Edison formed the Edison Electric Light Company in New York City in 1878 with the backing of several financiers, including J. P. Morgan and the members of the Vanderbilt family, BEFORE Edison filed for the '898 patent, BEFORE the '898 patent issued, and BEFORE the key breakthrough of the bamboo material occurred. The game plan for Edison's innovation was in place BEFORE the patent had been filed and BEFORE the important discovery had been made (or likely even contemplated). Edison's invention of an improvement in incandescent lighting was a small part of a bigger theme.

See also Edison as a Patent Troll, or Where is California Going in Stem Cell Research? and Work criticizing classic paper by Merges/Nelson in Columbia Law Rev. 90, 839 (1990)

Not surprisingly, the venture capitalists of the present have strategies not dissimilar from those of J.P. Morgan and the Vanderbilts of 120 years ago. They view the man and the plan as more important to innovation than patents.

As to the present, "Patents are not why we are investing", Are patents a key feature for venture capitalist investment?, What do venture capitalists really think about patents?

Then there is always Mike at Techdirt:"The success of a product usually doesn't have very much to do with the inventions, but the innovation of how it was brought to market. That is, the actual invention, by itself, is pretty worthless. And, within a later comment: In general patents don't help inventors anyway".

Returning to Edison and the light bulb, one notes that those who can't research the history of past innovation should not be recommending proposals for the future. Further, factual errors not only distract readers but undermine confidence in the work. One notes the quote that appeared in TIME magazine on March 12, 2007 (page 56): "This generation is different. You publish as quickly as possible, create a sensation and get known [academically] that way."

V. Disclosing information relevant to the patent examination process

Following the principles of Deming, our goal should be to get the patent examination done right in the first place. Adding layers of inspection, such as opposition, is not an approach consistent with the principles of quality, as expressed by Deming. (As a side remark, Deming's approach to the treatment of employees should be applied at the USPTO.)

Further, reformers have not made clear that under Rule 1.99, third parties can submit prior art to the USPTO during examination. Look here and here

But beyond the issue of the right to submit prior art, which already exists, is the question of making sure that someone can properly analyze the prior art and establish its relevance to the claims of the patent appliccation. Just because one person, or even thousands of persons, think a given document is accurate and relevant, is no guarantee that it is. Merely as an example of the task faced by examiners, consider the following highly viewed piece from the internet.

In an article entitled "How Does Solar Power Work?", visited 19,701 times as of March 3, 2007; 20,686 times as of March 15, 2007), one has the text:

The PV [photovoltaic] cells consist of a positive and a negative slice of silicon placed under a thin slice of glass. As the protons of the sunlight beat down onto the PV cell they knock the neutrons off the silicon. The negatively charged free neutrons are attracted to the silicon but are trapped by the magnetic field that is formed from the opposing fields. Small wires on the silicon catch these neutrons and when connected in a circuit an electric current is formed.

One notes that PHOTONS of the sunlight, of appropriate energy, excite ELECTRONS from the valence band of the silicon. A better discussion of photovoltaic cells can be found in the article Photo-Voltaic Panels. [In passing, note text within the transcript of oral arguments of Microsoft v. AT&T.]

The point here is that a patent examiner needs more than simple access to databases; the examiner needs sufficient background understanding to sort out correct material from incorrect material. We do not want to complicate the job of the examiner by a "rational ignorance" approach in which the patent database includes documents which are scientifically wrong. At the same time, we do want to include within the patent database documents which are scientifically correct, but which were not of commercial value. [Note the relevance of the uncommercialized work of Lilienfeld to later work by Bell Labs on the transistor as discussed here and here and see Lawrence B. Ebert, Foreseeing a Not Obvious Future, Intellectual Property Today, p. 34 (Sept. 2004)["… the presence of certain prior art, namely the patents of Julius Lilienfeld, probably makes certain classes of transistor, if not all classes, "foreseeable." (…)Bell Labs people became aware of patents to Julius Lilienfeld, which disclosed in the 1930's the concept behind what we now know as the field effect transistor. (J. E. Lilienfeld, US 1,745,175; filed Oct. 8, 1926; issued Jan. 28, 1930; also US 1,877,140; US 1,900,018). The attorneys considered the Bardeen/Brattain device patentable because holes rather than electric fields were functioning as the grid. Bardeen himself was concerned that the Bardeen/Brattain device might not be patentable, and the Lilienfeld patents did bring rejection in November 1948 to two transistor patent applications (the ones concerning the Brattain-Gibney-Bardeen field effect work in November 1947.) (…)In April 2000 in the journal Science (Science, 2000, 288, 656), Jan-Hendrik Schon of Bell Labs reported a realization of a field-effect device that allows switching between insulating and superconducting states, and his first footnote was to J. E. Lilienfeld, U.S. Patent 1,745,175 (1926).]

Other relevant articles include Bad Patents, or Bad Copyists?, Is the Jaffe/Lerner Analysis of Patent Law Correct?

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