We are at a major decision point in our country’s economic future. Big business is again trying to kill the financial incentive for American inventors by further destroying the American patent system upon which innovators and inventors rely to get the start which creates the small businesses which create the jobs which our economy needs so badly.
“The patent system adds the fuel of interest to the genius of invention.” – Abraham Lincoln 1858.
To small entities, the patent system is the engine that fuels and sustains our creativity, and which has done so for 221 years since it was established in 1790. Virtually every major business today, both large and small has dealt with issues of patent protection. It is ironic that many of the very big businesses that are now trying so hard to kill the patent system and eliminate that “fuel of interest” for small businesses relied on that fuel, that patent system, to become big. Steve Perlman, former VP of Microsoft, and the genius behind much of its software gives a super explanation of how S23 would have likely stopped him form causing Microsoft to get the protection it needed to become big. http://www.tplgroup.net:8080/pdf/110228%20-%20Steve%20Perlman%20S.23%20Letter%20to%20Senator%20Boxer.pdf How ironic that Microsoft now leads the call to pass S23.
The millions of dollars being spent on a plethora of patent litigation recently on smart phones is clear evidence of the importance businesses place on patents. The dramatic increase in patent filing to over 400,000 per year is testimony to the growing international importance of patents. More than half of these are from the small entities that we all recognize are the developing businesses, the giants of tomorrow, that will create the jobs we all need so badly to turn around our stagnant economy. Naturally the entrenched giants of business do not want new businesses to replace them and are fighting hard to prevent it.
One method big businesses use to raise profits is cutting costs. Some do this by cutting R&D expenditures and instead just stealing technology and producing things at the lowest wage possible regardless of where that might be. Anyone who shops at Wal-Mart has seen how prevalent that has become, and it is increasingly difficult to find a competitively priced product that is “Made in America.” That is how the Japanese and Chinese and Indian businesses with their low wage structures are able to develop and grow – by just swiping American technology without paying just compensation for the technology. Much of this American technology comes from small inventors and university researchers engaged in startups. Patents are the means by which our innovative small businesses protect against theft of invention so they can attract investment and hire people, which creates American jobs, and is why S23 worries us so much.
Others business grow and increase profits by by creating new and better products. The best known current example is Apple and their iPod, iPhone and now iPad. These innovators either do this by spending on R&D and patents or by stealing technology like the cost cutters. Innovators could make their products in the USA if they were protected by patents against competitors, because their products are new and in demand even at a higher price. When they are big business with overseas production, however, the new products are produced where wages are lowest, and America sees imports and job loss rather than exports and job growth. However, these innovators, when small businesses, necessarily start where they live, in the USA, and are the ones generating most new jobs. America needs to be protecting innovative small businesses, not the big businesses and cost cutters who are stealing the new technology only to send the production jobs overseas.
Still other businesses grow not so much by new products but rather by inventing new and more efficient production methods. Henry Ford did this and created a great car industry. The Japanese and Korean car producers more recently with their efficient production methods have risen to dominate the world auto market. A frequent byproduct of better production methods is higher quality and more reliable products. American vehicle manufacturers have learned this the hard way and have spent decades now playing catch up.
Yet another source of new jobs is innovative new companies with entirely new technologies. Microsoft is an example of such a company with its great software. Amazon and eBay with their online buying technologies, Facebook with its social networking, and Google and Yahoo with their search engines and web portals using the Internet are examples. It is ironic that Microsoft now has become so big that it has joined the cost cutters and is trying to distort the patent system to protect large business. The “reforms” of S23 are “deforms” to small business as in each case they are strictly intended to favor the giants of industry and to thwart the innovation of small businesses and start-up companies by creating additional obstacles to enforcement of American patents so that big business can more easily steal inventions. This letter will explain how S23 proposes to help big business steal inventions. It is our hope that you will look into your heart, ignore the big business lobbyists feeding you lies about how patent reform will stimulate innovation, and use your common sense to recognize that S23 will hurt not help innovation, and cost American jobs.
S.23 which has reached the Senate floor is nothing like the large firms who crafted it would have you believe. It will not improve the patent system for small business. It will make it far worse. It will make patents harder and more expensive to get and harder and more expensive to enforce. To date, Congress has largely ignored the needs of small businesses in writing the bill, though small businesses create the lion’s share of new jobs and breakthrough discoveries. According to recent studies by the Kauffman Foundation and economists at the U.S. Census Bureau, “startups aren’t everything when it comes to job growth. They’re the only thing.” This bill or anything like it will severely damage our ability to obtain the funding which is already very difficult to get. As a result, S23 will be a wholesale slaughter of US jobs.
Put yourself in the position of an inventor trying to profit from the invention by starting up an innovative new business with new jobs here in America. The first concern is how will to protect the invention so that it doesn’t get stolen by large competitors, both domestic and foreign. That is done by patents or by keeping it secret. If the invention is a product to be sold, it can’t be kept secret as once it is sold it is available for competitors to see and copy. So, a patent is necessary as the only Constitutionally authorized way to protect it while still selling it so the public actually benefits from it. Indeed, the public benefits not only from getting the new product but from the disclosure of the patent which tells the world how to duplicate it once the patent expires. If we deprive patentees of the limited period of exclusivity provided by patents, we discourage those disclosures and technical progress suffers. If we deprive patentees of the limited period of exclusivity provided by patents, we deprive the patentees of time to start their new businesses and generate those new American jobs. The founders such as Thomas Jefferson, who personally examined the first patent, and George Washington who signed it, recognized this 220 years ago. Thomas Edison recognized this so well that he obtained 1093 patents and we have some of the greatest inventions in the world as a result and even the General Electric Company he founded with the proceeds. And yet, today here is GE joining the proponents of this job-killing, anti-invention legislation deceptively mislabeled “Patent Reform.” That happens when businesses become large and entrenched with each trying to “protect it’s turf” by stopping new innovative businesses from gaining market share.
So, how does S23 propose to stop small businesses from protecting their inventions? The table of contents is reproduced below with the effect of each provision briefly described. See if you can detect what the provisions have in common.
Sec. 1. Short title; table of contents.-lists the provisions.
Sec. 2. First inventor to file. – switches to a system that gives the patent to the first inventor to file rather than the actual first inventor, because big businesses know about patents and how to quickly file their application so big business will have a huge advantage and can more easily steal inventions by simply filing quicker.
Sec. 3. Inventor’s oath or declaration – allows big business to file in the name of the business without having to get the inventor’s signature, so that big business won’t have to negotiate with inventors and can screw over its employee inventors and screw over university researchers and more easily steal inventions.
Sec. 4. Damages – decreases damages for deliberate infringers like big business and makes damages much harder and more expensive to prove as that forces small inventors out of court due to costs so that big business can more easily steal inventions. This is going in the wrong direction. We should instead be trying to increase damages and make infringement litigation less expensive for inventors.
Sec. 5. Post-grant review proceedings – allows continual expensive challenges to patents with resultant delays in related patent litigation so that big business has multiple avenues of attack and small inventorscannot afford to defend their patents so big business can more easily steal inventions. We should instead be making patents more certain and less susceptible to challenges.
Sec. 6. Patent Trial and Appeal Board – Eliminates interferences, which determine who the actual first inventor is since they allow a real first small inventor to get the patent rather than a big business first to file second inventor so big business can more easily steal inventions. We should instead be simplifying and keeping interferences.
Sec. 7. Preissuance submissions by third parties – allows big business to gum up and delay small inventor patent examinations on small inventor patent applications by submitting alleged prior art and forcing examiners to delay normal patent application processing to look at and consider such submissions so small inventors will not get as many patents and big business can more easily steal inventions.
Sec. 8. Venue – allows big business patent infringers to transfer small inventor patent infringement cases out of low-cost,pro-patent forums to an high-cost, anti-patent forums so small inventors patent enforcement can be more easily defeated so big business can more easily steal inventions.
Sec. 9. Fee setting authority – locks in super high patent fees so that small inventors are priced out of the patent system and big business can have it to themselves and more easily steal inventions.
Sec. 10. Supplemental examination – allow patent owner to seek further examination while not letting the results to cure any inequitable conduct or misconduct, so big business patentees correct their patents, but small businesses which cannot afford the cost will not, so big business can more easily steal inventions.
Sec. 11. Residency of Federal Circuit judges – removes life tenure of CAFC judges so that big business lobbyists can get them replaced if they turn out to be against theft of inventions so that big business can more easily steal inventions.
Sec. 12. Micro entity defined – defines a new more restrictive type of small entity so that reduced fees can be more limited and fees raised for small businesses to limit the number of patents they can afford so big business can more easily steal inventions.
Sec. 13. Funding agreements – decreases the amount of large Government contractors’ licensing revenue going to Govt and increase amount going to pay contractor’s R&D costs, as these contractors are generally big businesses and this gets the taxpayers to pay for their R&D so big business contractors can more easily steal inventions that taxpayers funded.
Sec. 14. Tax strategies deemed within the prior art – rules out patents for inventions involving tax strategies, without defining what a “tax strategy” means or what portion of the invention must be a tax strategy, so everyone can more easily steal inventions involving lowering of taxes. This means that people who devise tax lowering strategies which are useful, new and non-obvious are not to be rewarded, so they will be required to keep their strategies secret. This also opens up any patent which might result in a tax saving to be attacked as a tax strategy and invalidated, so infringers can more easily steal inventions.
Sec. 15. Best mode requirement – eliminates failure to meet the best mode requirement as a defense to patent infringement – this is the one provision in the bill that favors small inventor patentees, indeed all patentees. Big business wants it so that big business can obtain patents without disclosing their best ways of making the patented invention, that is so that big business can “hide the good stuff” and disclose junk and still get a valid patent. That will favor all patentees as it removes a ground for challenging patents, but makes patent disclosures less beneficial.
Sec. 16. Technical amendments. These are mostly to remove limitations on correction of errors in patents even if done with deceptive intent. These will allow purchasers of patents to correct errors even where the applicants or prior owners lied about various things such as inventorship, foreign filings, etc. The first such “technical amendment” is to permit big business to lie about inventorship name an inventor and still correct the defect later when they are caught so they can more easily steal inventions without penalty. The second is to allow foreign filing licenses to be granted retroactively to patentees that deceptively file applications in foreign countries without a foreign license.
Sec. 17. Clarification of jurisdiction. This merely clarifies the exclusive jurisdiction of the US District Courts and CAFC relative to patents.
Yes, what they have in common is to allow big businesses to more easily steal inventions. Small inventors and startup businesses are where new industries arise. Big businesses generally start small with a great new idea and protect that idea while they begin to grow, develop new ideas, protect those new ideas while they grow and expand, and eventually get to be major players in their field, at which time they now have to switch grears and try to maintain their dominance. One way to maintain dominance is to not let any new small businesses become big. Stealing their inventions and then sending them overseas to be produced at super low wages is one of many ways. Patents are an obstacle to that practice and an equalizer since the patent does not care if the alleged infringer is big or small, only whether it infringes or not. So big business tries to make patents expensive, make infringement suits expensive and minimize damages so small businesses lose the benefits of patents but big businesses keep the benefits. Reduced fees for small entities is one way the patent system tries to equalize things. S23 seeks to minimize fee reductions. Injunctions is another, as an injunction does not care whether the party enjoined is large or small, but rather only whether the injunction is obeyed. S23 seeks to minimize injunctions. Enhanced damages for deliberate infringement is another equalizer. S23 seeks to minimize enhanced damages. Forcing the patent to be filed in the inventor’s name is another equalizer, as it forces big business to negotiate with inventors. S23 seeks to eliminate that requirement. Giving the patent to the first inventor rather than the first big company to file a patent application is another equalizer. S 23 eliminates that equalizer.
In short S23 is a big business bill designed to keep big businesses big by allowing them to more easily steal inventions from small businesses. We have explained how. Next we want to explain what real patent reform would look like, and it is nothing like S23.
Overall, the changes small entities need include:
- Speed the time it takes to get patents and decrease their cost.
- Make the PTO more responsive to small entity needs. For several years now the PTO has been noticeably hostile to our needs.
- Restore the ability to get injunctions.
- Make it easier, not harder, to get enhanced damages and willfulness findings. Otherwise, large infringers have no incentive to stop stealing inventions, putting more strain on the courts and jeopardizing our ability commercialize our inventions.
- Restore the inadmissibility of settlements as evidence for determining reasonable royalty. Otherwise, pre trial settlements are less likely to occur, putting further strain on the courts.
- Tighten the standard for granting a reexam. The burden should be on the requestor, not the PTO or the patentee. The present system makes the PTO adverse to the patentee. Instead, the system should put the burden on the requestor to prove invalidity with the PTO in a neutral position so as to avoid bias. Such an approach would also minimize the demands on the PTO. If small entities cannot rely on their issued patents after fighting for years to get them, we cannot get funded and we will no longer innovate.
- Ensure future hearings on the bill focus on small entity testimony so as to overall offer a balanced view between large and small entities.
- In general, level the playing field for small entities so large competitors must respect our property rights.
- Increase penalties for large firms who develop a track record for infringing the patent rights of small firms.
As it now stands there is no credible threat to large firms to not infringe. If infringers are caught and lose a patent infringement case (which is getting rarer all the time), they simply pay a reasonable royalty, which they would have to do if they were licensed anyway. S23 would make this situation much worse, however by introducing new features designed to let big business more easily steal inventions. Without injunctions and triple damages for example, we do not have a fair chance of commercializing our inventions. Any inventor who has been through the system knows better the second time around than to even start. That is why small entity filings at the Patent Office are significantly down and first office action abandonments substantially up.
Please help us create a patent system that is fair and transparent for all entities, large and small. S23 is a disaster for small business creativity. It is a job-killing piece of legislation that itself needs to be killed so jobs can be created here in America rather than sent overseas because the American inventions which are created by American ingenuity make new American jobs possible should not be stolen from American small inventors so easily. Congress should be helping keep American jobs not helping them get stolen in an unwise and foolish attempt to appease big business lobbyists.
Sincerely and respectfully,
Bruce E. Burdick
Registered Patent Attorney since 1974,
Patent attorney representing small inventors and small business for the last 20 years
Formerly patent attorney for big business for 20 years before that
Owner & Founder, The Burdick Law Firm, Alton, Illinois (near St. Louis, MO)
President & Founder, The Great Midwest Inventors Club
Member, The Inventors Association of St. Louis
Past Secretary and Past Acting President, Illinois Innovators & Inventors Association
Licensed, US Court of Federal Claims & US Court of Appeals for the Federal Circuit
Member of the State Bars of Texas, Illinois & Missouri
Publisher of the www.burdlaw.com intellectual property portal and burdlaw IP blog