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01.09.16

China-US Trade Wars With Patent Raids, Confiscations, Embargoes, and Low-quality Patent Stockpiling

Posted in America, Asia, Patents at 7:34 am by Dr. Roy Schestowitz

Companies can now literally steal other companies’ products because they claim that patent infringement is “theft”

Executed
Death penalty: killing people to demonstrate that killing is wrong

Summary: Companies from the US are trying to teach companies from China that ‘stealing’ (alleged patent infringement) is wrong by basically stealing (literally!) their products in a trade show in the US, even though both China and the US have a notoriously low bar for patenting (includes abstract concepts, as long as they’re not framed as such)

TWO countries where the quality of patents is notoriously low (hence a high number of patents) are China and the US. We wrote many articles about it before. Quite a few Chinese companies are now building up/amassing stocks of thousands of patents, catching up with their US-based counterparts (which manufacture all their products in China anyway). Who benefits from this? Conglomerates and their lawyers, at everybody else’s expense.

“Quite a few Chinese companies are now building up/amassing stocks of thousands of patents, catching up with their US-based counterparts (which manufacture all their products in China anyway).”Years ago we showed how trade shows had been transformed into raiding opportunities [1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13], causing a major scene out in public, degrading confidence, and destroying the reputation of certain events/trade shows. These raids are now a reality in the US because Onewheel from Future Motion decided to go litigious with patents and actually confiscate another company’s products, which it can make itself in China. This has raised quite a few eyebrows. What would attract east Asian companies to America (or the US), where you can officially — but without notice — be raided over patents? All this disruptive U.S. Marshals’ involvement because of patents alone? As a little background to this, see TechDirt‘s coverage: “One of the big stories coming out of CES this week is the bizarre situation in which US Marshals showed up here at the event yesterday and completely shut down the booth of a Chinese company, named Changzhou First International Trade Co. This happened after a judge granted a motion for a temporary restraining order, filed by US company Future Motion, following a seven minute hearing about the matter, in which Changzhou was not present and had no say. [...] In other words, there’s a fair bit of evidence to support that the patent infringement case is fairly strong. That said, it still seems quite troubling for US Marshals to then get involved and completely shut down Changzhou First International Trade Co.’s booth at CES right in the middle of the show, when the company doesn’t get a chance to present to the judge until January 14th, long after CES has packed up and left town.”

This story involves a Chinese company coming to the US. China and the US have some things in common when it comes to patents, as both countries’ patent offices (SIPO and USPTO) have very low-quality patents and approve almost everything (poor quality control). Patents for patents’ sake, regardless of the consequences! In the US, unless you’re a rich and highly determined defendant, you never know if a patent is worth something unless challenged for years in the courts. USPTO examination is being grossly rushed, so prior art search is somewhat of a joke. We wrote about this for years. There is this new article titled “U.S. and Chinese Courts’ Software Patent Requirements” and it says that “In China, software inventions that comprise only rules and methods for intellectual activities are not patentable. Thus, a claim that describes an algorithm, mathematical rules, or computer program “as such” and alone may not be patented. However, software inventions that comprise both rules and methods for intellectual activities and technical features of means in order to solve technical problems and obtain technical effects can be patented. Software that (a) uses a technical solution to (b) solve a technical problem concerning (c) a law of nature, may comprise patent eligible subject matter and are subject to patent law protection. The subject of the patent must pass the three part test and still must satisfy the basic requirements for patentability—novelty, non-obviousness, and usefulness—the same as in the U.S.”

“A lot of startups in the US are rightly worried about software patents.”Notice the use of the term “as such” and recall how Brimelow arguably brought to Europe or made it possible to bring to Europe software patents.

A lot of startups in the US are rightly worried about software patents. A couple of days ago somebody published “Arguments you can make against software patents as a startup CTO” [via Bessen and Henrion].

To quote some bits from it:

Most software engineers believe that software patents are bad for innovation, and shouldn’t exist. Unfortunately, this isn’t a good argument against filing for software patents, since it’s essentially a complaint about the rules of the game, but as a startup CTO you still have to play the game, regardless of what you think of the rules.

Many CTOs of seed or A-round companies find themselves under pressure from non-technical co-founders and investors to spend time and money on software patents. While I don’t always win the debate, I can say with confidence that the return on investment on all of this time and effort was precisely $0 in every case.

[...]

When people ask about my “IP defensibility” strategy, I generally argue for trade secrets. They’re free, require no effort, you’re not disclosing potentially important information to competitors, and they basically lack any of the other shortcomings I describe above.

IBM’s Manny Schecter/Schechter has just published this paper. It speaks about the effects of Alice on business method patents, not just software patents, which Schecter and his employer support [1, 2]. “Many sources track aspects of PTAB outcomes,” says the abstract, “but none have specifically analyzed CBM outcomes at both the institution and final decision stages by ground. Practitioners, policymakers, patentees, and petitioners can benefit from an empirical analysis of outcomes. Our study analyzes CBM outcomes according to the basis for the challenge and examines whether the Supreme Court’s ruling in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014) (Alice) makes § 101 grounds more popular in CBM petitions. We also investigate the effect of Alice on CBM petition filing and success. We determined that there were more § 101 challenges in CBM filings post-Alice.”

Patent lawyers are rightly worried (for themselves) that a lot of patents would no longer withstand challenges in/from a court of law. There is more uncertainty for them. Whether or not these patents are worth something, injunctions, embargoes and even raids remain a scary prospect to companies that actually produce things.

“Though force can protect in emergency, only justice, fairness, consideration and cooperation can finally lead men to the dawn of eternal peace.”

Dwight Eisenhower

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