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12.11.12

USPTO Sued as the System Collapses Under the Weight of Trolls, Monopolists, and Lawyers/Politicians

Posted in Patents at 1:58 pm by Dr. Roy Schestowitz

The core of this problem requires striking at the root

USPTO building

Summary: The cartel office (USPTO) has become the target of some of its victims, who see their system abducted by bureaucrats and self-serving non-practising blood-sucking leeches

THE USPTO has become the shadow of corporations, cast upon by those in power to repress the creative population. The patent system in the US is rotting because too many lousy patents are granted, often to trolls that hide behind shells and destroy the economy.

The troll known as “Clouding IP LLC” strikes again, joining the likes of Lodsys, which is also suing some more:

There are all kinds of patent trolls making outrageous claims about the technology they “own,” but there’s no question that Lodsys is one of the most infamous. Last year, Lodsys explained how it was generously offering to let the iOS and Android app developers of the world continue to do business—if they pay a patent tax of 0.575 percent of their revenue.

Lodsys gets some patents from Intellectual Ventures, the biggest troll which uses many shells for litigation. This is the largest such cartel and it is backed by ruthless businessmen like Bill Gates. Here is an interesting new report about changes that would impede that racketeering operation:

Figuring out the specifics of Intellectual Ventures’ frighteningly enormous patent portfolio has always been next to impossible. Its roughly 8,000 U.S. patents and 3,000 applications are assigned to an assortment of 1,276 shell companies, few of which have Intellectual Ventures in their name, according to a study published in January in the Stanford Technology Law Review. Nor is the company alone in playing shell games with its portfolio: Devices to mask patent ownership are the exception rather than the rule for companies with a business model of asserting IP rights.

The USPTO, the principal facilitator of such extortion, considers changing its rules due to that. Another bit from the group of Bessen [1, 2] estimates the cost of trolls. To quote:

Today it is perfectly legal for companies to buy and sell the rights to unlimited numbers of ideas, a company is not required to have any interest in making these ideas a reality. It is perfectly legal for companies to sit on patents and wait for others to create before either suing the creator or charging licensing fees. The following pair of quotes is pulled directly from the promotional material on the website of just one prolific patent troll:

“$2 Billion+ cumulative licensing revenue”

“70,000 IP assets acquired and nearly 40,000 in active monetisation programmes”

In fact it is not just legal, patent trolling is an industry on a colossal scale. According to research recently published by Boston University School of Law, last year patent trolls won a cool $29 Billion. One of the most worrying findings of research in to patent trolls is that the mere threat of a suit is enough to put the frighteners on and make creators pay up:

Another parasite, Vringo, got Nokia patents after Microsoft had taken over and then attacked Google. Here is a financial report about it:

This article provides a unique discussion of broad economic conditions in software, energy, human labor, and patents. The discussion highlights upside and downside characteristics in the patent space, and argues software patents are overvalued relative to other industries. The article then provides an investment conclusion of selling Vringo (VRNG) shares and buying Lightbridge (LTBR) shares.

To bypass the macro discussion, scroll down to the bold heading containing the text “Dump Vringo”

Software is hot.

Investors are concerned about bubble-like conditions. Inside this bubble float software patents, gaseous substances which have been reified as solids in public perception. A crescendo of such reification is scored by the America Invents Act, which introduced “first to file” priority, overturning the “first to invent” principle which has been around forever. Instead of inventions, patents themselves are now the property; in a classic sense of reification, words have stolen the identities of the ideas they describe.

We are taking the word “property” far too literally, as if the government had announced a race for land, as if patents were a hard asset like real estate. Fiat currency is a far more appropriate analogy. Patents are inflated and deflated at the whims of politicians, and frequently counterfeited by artistic lawyers in a game of litigation shakedowns. A land run among investors in this now-crowded space occurs atop thin ice.

Paul Kedrosky shows that patent trolling pays well:

Doing useful stuff is apparently for chumps: A portfolio of patent trolls vs the S&P 500 in 2012 pic.twitter.com/ghv3uKEl

The USPTO made this legal and now its head leaves in shame (its heads come from the cartel it protects), having lost some public arguments:

The patent community has had plenty to talk about with two recent actions by David J. Kappos, the Director of the United States Patent & Trademark Office (USPTO).

On November 20, 2012, in an address to the Center for American Progress, Director Kappos gave a full-throated defense of software patents in response to recent public criticisms of software patents stemming from the so-called “smartphone patent wars.” As part of the defense, Kappos recounted several recent efforts to improve overall patent quality, including the quality of software patents. (Read a summary of those efforts here). Then on Monday, November 26, 2012, Kappos announced to USPTO staff that he would be stepping down as Director in early 2013. (See reports here and here.) According to news reports, USPTO deputy director Teresa Stanek Rea will assume the role of acting director upon Kappos’ departure in 2013. Kappos’ resignation seemed to catch a number of commentators by surprise and the USPTO has not yet provided further details or an official release.

USPTO is said to be preparing for lawsuits over its bad practices which pro-fascism politicians like Leahy try to take global:

Congress has passed a bill that would implement two patent law treaties to help American businesses expand into foreign markets, Senator Patrick Leahy (D-Vt.) announced today.

Stop giving the corruptible, corporate-serving USPTO more power abroad. This lets software patents expand. And not just software in fact. For instance, citing the article “Bill Gross Patents Way To Count”, Mike Masnick slams yet more USPTO-granted patents, saying:

I’m reminded of that, after seeing Dealbreaker’s headline about how world famous mutual fund investor, Bill Gross, of PIMCO, has patented the methodology for his bond fund — or, as Dealbreaker correctly points out, he “patented a way to count.” Indeed, the patent in question, US Patent 8,306,892 is somewhat hideous, describing not much more than the concept of an algorithm that weights regions based on GDP.

Here is more from Masnick:

The next big case to pay attention to concerning software patents appears to be the CLS Bank v. Alice Corp. case, which is being reheard “en banc” (by the full slate of judges) at the federal circuit court of appeals (CAFC). The short version of the case is that it involves a patent over the idea of software that conducts a “shadow transaction” to make sure that there are enough funds to complete a real transaction, before allowing the real transaction to go through, thus minimizing “settlement risk” (the risk of the deal not actually being completed). Should that be patentable? Well, that’s part of the argument. The district court tossed out the patent as being simply about an “abstract idea,” which is not patentable, as abstract ideas are excluded from section 101 of the patent act, which lists out patentable subject matter. On appeal, a divided three judge panel overturned the lower court, and said that when you looked at the invention as a whole, it was patentable subject matter under section 101. The full CAFC has agreed to rehear the case, and the amicus briefs are flowing in, as people realize that this case is the next key battleground over software patents.

Of course, as often happens in these kinds of cases, you get amicus briefs with wildly divergent claims. For example, here we’ll show and discuss the briefs from both the EFF and the Business Software Alliance (BSA). Somewhat surprisingly, both of those briefs agree on one thing: that the actual patent in question should be ruled invalid, as in the district court ruling. But that’s about the extent of the similarities between the two — who paint extremely different versions of the world of software patents today. The EFF brief explains how damaging software patents are to innovation and the wider economy while the BSA brief talks about how software patents are the greatest thing ever for innovation. One of these three-letter-acronymed organizations is wrong, and it’s not the EFF.

The EFF is also getting involved now:

The Electronic Frontier Foundation (EFF) urged the full Federal Circuit today to throw out the dangerous patents it previously held valid in CLS Bank v. Alice Corp, arguing that the court’s earlier decision goes against the law and helps foster the recent dramatic increase in patent litigation. In the amicus brief filed today, EFF proposes that the court require patent owners to claim what they actually invent and nothing more.

“The Patent Act doesn’t protect abstract ideas because it would lead to harmful monopolies on simple ideas, like ways of running a business or cooking a meal,” said Staff Attorney Julie Samuels. “Yet we’re still routinely seeing patents issued based on abstract ideas, and having those patents upheld in some courts. In an environment like this, it should be no surprise that company after company decides to buy a lottery ticket in the guise of a dubious software patent and see if it can hit the jackpot. The Federal Circuit has a chance to help curb this new rash of patent lawsuits.”

The system has been abducted by monopolies. It is time to sue it, abolish it, or whatever it takes, but it won’t be easy when everyone including politicians is bought (bribed). The USPTO is not an independent body; it is controlled by its major clients, i.e. companies like IBM, which also control the politicians. People who call for ending the Federal Reserve are perhaps missing another important institution that needs ending and that’s the USPTO, perhaps wirh the exception of trademarks.

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