America Under Attack
America’s economy is under attack – from overseas and within our own borders. Countries around the world want to take over our place as the leading nation for innovation, research and economic sustainability. Doubling this threat are large American corporations who have extensive ties to these countries and are sending our jobs overseas.
A primary contributor to the long-running success of our nation is our innovative spirit. And even though we are in a recession, it is that same spirit that will pull us out of the economic doldrums as it has done time and again throughout our nation’s history.
But a major threat to U.S. innovation has been engineered by a faction of large American corporations and foreign-owned multinational firms. They have been pushing for the “America Invents Act” over the last four Congressional sessions and until now have been unsuccessful.
However, there is today a perfect storm of political influence in the form of a Sec. of Commerce, USPTO Director and top policy advisor with long histories and strong ties to IBM, Microsoft and other patent reform pushers. As a result, legislation has passed the Senate and is now under debate in the House that will permanently cripple our economy and serve only the interests of foreign economies and American businesses with extensive ties to them.
The proposed reforms are based on misleading statements, skewed statistics and unfounded allegations. A key to propelling patent reform forward has also been keeping the debate out of the public arena and media outlets where public scrutiny would tear down the arguments.
Myth #1 – America Has Lost Its Leading Edge
Patent reform pushers assert that innovation in America is down and that it must be stimulated to create jobs. The fact is that our country is the global leader in innovation.
If you’re not sure, why not hear what Japan has to say about us?
“Representative examples of pro-patent policies advanced in the U.S. in the 1980s include the establishment of the Court of Appeals for the Federal Circuit (CAFC) to specialize in appeals concerning patent infringement, and the extension of patent protections in the biotechnology and software fields. Such extension and strengthening of patent rights is argued to have stimulated business innovation, leading to enhancing US competitiveness. In addition, in the U.S., the amount of damage compensation in connection with patent disputes has recently soared. This increase may contribute to the trend toward strengthening of patent rights as well.” Japan Institute of Innovation Research (2003)
If you’re still not convinced, the 2010 European Union’s Innovation Scorecard said:
“Both the US and Japan are the global innovation leaders… For both the US and Japan innovation performance is well above that of the EU27. Despite some yearly fluctuations, these performance leads have remained more or less stable… The US innovation performance reflects an innovation system characterized by good levels of tertiary education, good linkages between the public science system and the private sector, strong private investment in R&D and a successful commercialisation of technical knowledge.”
European Union commissioner for Research, Innovation and Science said recently that the EU was facing an “innovation emergency” and:
“If Europe stands still we will see the US disappear into the distance just as we feel emerging nations breathing down our necks.”
Surely China is the greatest threat to the US innovation lead. Or is it? A report from the Shanghai Academy of Social Science (March 2011) said:
“To me, the biggest challenge faced by the Chinese economy is not containing inflation or the growth rate dropping, but rather the diminishing of entrepreneurship… Less and less companies, both private and public-owned, have long term vision and are willing to take risks to invest in new technology and new ventures. Only governments at every level appear to be focused on driving innovation, but they do not really know how or do not really want to provide the necessary conditions for innovation because it may cause them to relinquish short-term revenue. If this situation doesn’t change quickly, I believe, sooner or later, we will face real economic difficulties.”
And in terms of a quantitative measure of US innovation, how about Nobel Prizes in the sciences?
Over the years, there have been 591 recipients in Physics, Chemistry, Medicine and Economics. Nearly 50% of these have been awarded to Americans. The next closest nations are the U.K. with 15%, Germany with 12% and France with 5%. The charts below show the awards by category.
Our patent system is the foundation for the success of our country and it must be protected from those who seek to change it to the detriment of all Americans. Those who are pushing the “America Invents Act” are presenting misinformation to promote their agenda. Granted, we are in a recession – but so is the whole world. It is not simply our nation that is troubled. We will recover, as we have always done, unless this legislation gains passage and strips us of the tools we need to pull through.
Myth #2 – Our Patent System is Outdated
House Judiciary Chairman Lamar Smith (R-TX) says that “our outdated patent system has become a barrier to innovation…” Yet we continue to be the acknowledged global leader in innovation. While there are some problems at the patent office itself, the problem is not the patent system or the patent laws. Those have served our nation and inventors well – and continue to do so.
USPTO Director David Kappos has said that patent reform is needed to “move together away from an outdated patent system that hasn’t been improved or updated in 50 years…”
This statement is disturbingly misleading and cries out for public scrutiny. There have been a number of updates and improvements to the patent system over the years. In 1999, sweeping changes were made to patent law – the most encompassing amendments to the law since it was established!
Below is a list of changes during the period Kappos references that demonstrate the inaccuracy of the assertion that our patent laws have been stagnant. These changes, some legislative and some judicial, were made to accommodate emerging technology and to keep in step with the evolving nature of innovation in America:
1954 – Law changed to clarify expanded terms of plant patenting.
1964 – Law changed to allow patents with minor defects to be approved.
1965 – Law changed to apply the presumption of validity independently to each claim of a patent.
1966 – Case law (Graham v. Deere) established testing for obviousness.
1968 – Patent Cooperation Treaty passed to establish cooperation between participating nations for international patent protection.
1971 – Case law (Blonder v. U. of Ill.) established that a final finding by the courts of a patent’s invalidity could be used as a defense in later litigation.
1975 – Amendments to further accommodate the Patent Cooperation Treaty.
1975 – Law changed to modernize the writing of claims in dependent forms.
1980 – Law changed to establish maintenance fees to keep issued patents in force.
1980 – Law changed regarding inventions made with Federal funds.
1980 – Law changed to allow third parties to present prior art to patent office.
1980 – Law changed to allow request for reexamination.
1980 – Case law (Diamond v. Chakrabarty) expands patentability to include “anything made by man under the sun.”
1982 – Law changed to allow for ease in correcting wrongly named inventors.
1982 – Court of Appeals for the Federal Circuit was created – it hears all appeals from District Courts on patent law complaints and was created to clear up what had become judicial disarray in hearing patent cases
1982 – Law changed to set period for design patents at 14 years.
1982 – Law changed to allow arbitration over disputes of patent infringement and invalidity.
1982 – Law changed to liberalize physical inventor signature requirements.
1984 – Law changed (Hatch-Waxman Act) to allow for patent term extension due to delays in FDA drug approval.
1984 – Law changed on obviousness.
1984 – Law changed to clarify requirements of joint inventorship
1984 – Law changed to allow arbitration of interference claims.
1984 – Law changed to expand infringement to include exporting materials to produce patented materials that would otherwise amount to infringement domestically.
1984 – Law changed to establish Statutory Invention Registration to put inventions in the public domain that are not being pursued for patenting.
1987 – Law changed to expand patent protection internationally under Patent Cooperation Treaty.
1988 – Law changed to allow for patent term extension due to delays in FDA veterinary drug approval.
1988 – Law changed to relax restrictions on filing for foreign patent protection by US patents holders.
1988 – Law changed to expand infringement to include imports of products produced overseas that would infringe a US patent.
1988 – Law changed to reverse the burden of proof in some instances of infringement of process patents.
1988 – Law changed to amend infringement standards related to FDA applications related to patent expiration terms.
1988 – Law changed (Patent Misuse Reform Act) to define that misuse of a patent did not make it unenforceable unless patentee was a market power.
1990 – Law changed to expand infringement to any acts committed in space on US controlled space vehicles/stations.
1992 – Law changed to hold state governments liable for acts of patent infringement.
1993 – Law changed to allow establishment of prior invention to acts in NAFTA countries.
1994 – Law changed to allow establishment of prior invention to acts in WTO countries.
1994 – Law changed to allow for provisional patent applications.
1994 – Law changed patent term from 17 years of grant to 20 years from earliest filing date with possibility of extension for certain types of delays in granting.
1994 – Law changed to expand infringing acts to include importation or offers of sale.
1994 – Law changed to reverse burden of proof in certain process patent infringement cases.
1995 – Law changed to protect certain biotechnology processes from obviousness issues if it results in a new and non-obvious product.
1996 – Law changed to end infringement remedies for infringement of surgical process patents.
1998 – Case law (State St. Bank v. Signature Fin.) rules that business method patents are allowable if they meet requirements of novelty, usefulness and non-obviousness.
1999 – Case law (FL Educ. Exp. Board v. College Savings Bank) held that 1992 change that held states liable for patent infringement was found to be unconstitutional.
1999 – Law changed (Intellectual Property and Communications Omnibus Reform Act) on a number of topics – the most widespread changes since establishment of the law.
- Established a prior use defense for business method infringement
- Curbed deceptive practices of invention promotion companies
- Established a patent term guarantee
- Implemented rules for early publication of certain patent applications
- Established optional inter partes reexamination
- Established requests for continued examination
- Reorganized the USPTO in terms of committees, commissioners, oversight, personnel numbers, etc.
- At least 20 other adjustments to applications, claims, drawings, small entity status, etc.
2002 – Law changed to allow adjustment and expanded utility of reexamination practices.
2002 – Law changed to clarify impact of third-party Patent Cooperation applications on later filed US patent applications.
2003 – Law changes to amend Hatch-Waxman provisions to address issues.
2004 – Law changed (Cooperative Research and Technology Enhancement Act) to exclude from prior art considerations any prior unpublished work by JV partners from obviousness consideration
2006 – Case law change to establish injunction as an equitable remedy in patent infringement.
Myth #3 – We Need to Harmonize Our System to Other Countries
Patent reform pushers claim that we need to change our system from First to Invent to First to File to get in step with the rest of the world. No, we don’t. Why should we?
- We are the acknowledged leader in global innovation. (see above Myth #1)
- Our patent system is the foundation for that success and a role model for other nations. The nation closest to us in innovation achievement is Japan. In a report prepared by their Institute of Innovation Research (2003) they conclude that to improve their innovation “establishment of a patent court modeled on the Federal Circuit Court of Appeals in the U.S. would be an important step.”
- Most industrialized nations conduct patenting activities with respect to our system. In the same report out of Japan, it says: “IP managers stressed US Patent Office’s quick move toward new technology protection and relatively broader coverage of patent claim. As a result, globally operated firms set IP strategy along US standards, and pay little attention to Japanese [sic] system.”
- Many international patent offices are plagued with problems. Here are just a couple of examples: India has seen a number of allegations of significant conflicts of interest and favoritism in the patent process, such as patent examiners writing claims for certain applicants and bribery to approve applications preferentially. Also, there is the issue that they process 30,000 applications annually at a rate of 245 applications per examiner – not an indication of patent quality. In China, culturally, people believe IP rights should not be private, but state owned. Because IP rights are relatively new in this nation, their legal system (judges and attorneys) have little experience. There are no clear judicial tests for patent infringement and foreign corporations have found that the Chinese courts unfailingly rule for Chinese patent owners in infringement disputes with no regard for the weight of evidence.
- There is little harmonization of other types of laws that are of global concern. Criminal and extradition laws seem like a better candidate for the harmonization push. Banking and finance are also global concerns that are not harmonized. Each nation is sovereign and its laws are its own, agree or disagree.
Myth #4 – Patent infringement lawsuits are on the rise and damages are out of control
Paul Michel, former Chief Judge of the Court of Appeals for the Federal Circuit, is a voice of both expertise and reason in the debate over patent reform. He felt so strongly about the issue that he retired specifically to fight the false information perpetuated by patent reform pushers.
In a 2009 speech, Michel revealed the following about patent infringement litigation and damage awards:
- Patent litigation has been constant – at a rate of roughly 1% of patents in-force
- Roughly 3,000 patent suits are filed each year and 90% of these settle out of court
- Of the 10% of suits that proceed, most are resolved by summary judgment without costly litigation
- Less than 100 cases per year actually result in a trial
- Of the 10 largest patent damage awards, four were set aside
- Most damage awards are relatively small, around $6.5 million, but it is the rare really large award that skews the statistics up
- For the really large awards, the award was proportional to the damage caused by the infringement
Michel says that the misinformation by patent pushers has simply been “repeated so vociferously so many times, they simply become accepted as true despite the absence of support in the form of representative examples and statistics.”
He concluded his speech with a warning: “Our prosperity and our sovereignty and our independence as a country rest heavily on economic health, which in turn rests heavily on the American innovation system… we are rich in every material and intellectual way you can imagine. Those riches are at risk now in a way they have never been at risk before.”
The bottom line is – the “America Invents Act” (S.23 & H.R. 1249) is bad for America, will cost more U.S. jobs if passed and will irreversibly damage the system of innovation that is the foundation for our economic success. Act now – call your Congressman today and tell him/her to “Say NO to the America Invents Act (H.R. 1249)!”
