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Monday, January 14, 2008

New York Times Article Sets the Stage for Upcoming Patent Reform Debate Renewal

The New York Times had an interesting feature on the soon-to-be-renewed fight in Washington over patent reform. The reporter, John Markoff, highlighted that the big corporations were for patent reform, and that certain individual inventors are against it, and summarized some of the reasons given for the positions of both sides (e.g., huge NTP-RIM damages award out of proportion to the inventiveness and validity of the NTP patents in one corner, the chance that patent reform will change the incentive for inventors in the other). Unfortunately, the article seemed to miss the third wheel here: the biotech industry's opposition.

The individual inventors featured in the article were Dean Kamen and Steve Perlman. There is no doubt that Kamen and Perlman are not "patent trolls," despite that the article seems to improperly lump them with the trolls. There are extensive quotes from Perlman. I have a few problems with Perlman's conclusions about how the proposed patent reform will impact inventors like him.

First, Perlman claims that patent reform is unnecessary in light of two recent Supreme Court cases: eBay v. MercExchange and KSR v. Teleflex. This makes little sense. Sure, the threat of injunction has been greatly reduced for trolls. But that won't stop the Acacias and Global Patent Holdings of the world from suing massive amounts of defendants. Further, many patent trolls are simply conducting "research" to take advantage of the "CSIRO loophole" to eBay. In addition, KSR is of little help in jurisdictions that rarely if ever grant summary judgments. Patent holders will still be able to sue on clearly invalid patents, get no stay pending reexamination, and put tremendous pressure on defendants to settle or face massive verdicts.

The proposed patent reform addresses these problems. In the words of Mark Lemley, quoted in the article, "I have to say I'm frankly astonished that apportionment has been this controversial. I can't think of a straight-faced argument that you as a patent owner are entitled to more than your invention has contributed to a product."

Perlman also is concerned because in the computer industry, innovation reduces cost. According to Perlman, under patent reform, if you reduce the cost of your device, then your apportionment becomes less and less. Huh? I sure hope he was misquoted there (the problems with newspaper interviews - I'm sure there's a 1,000-word explanation that makes his point better). But if you invent a tremendous improvement in computers, that drives the market, the current patent reform bill will allow you to get the entire market value. And if you just invent a tweak that's very useful, you can still use experts to prove how much your improvement is worth as a percent of the overall invention. What's controversial about that?

Finally, Perlman opines that under patent reform, "Microsoft will clone a crummy version of one of [his] inventions, and [he]'ll be bowled over." Yes, and if they do that, then under patent reform, you still will be able to get an injunction and enhanced damages for Microsoft's willful infringement.

To be sure, there's more to the current patent reform bill than damages apportionment and venue reform. Some of it I support, some of it, well, I could live without it (first-to-file!). And I'm sure there will be many changes ahead. But I sure hope that the individual inventor community does better than "damages apportionment will lead to the end of innovation as we know it" and "let the Supreme Court fix it, and don't touch the laws, Congress."

Update: The following blogs are also covering the NYT story:
Immodest Proposals has a blog titled "This Congress Might Get Something Right?!?"
Leveraging Ideas has a story titled "Patent Reform: Boring But Important"
ZDNet has a Government Blog titled "Patent Reform: Stopping the Insanity or Inventor Ripoff?"
TechCrunch has a blog titled "Patent Reform Act Focuses on the Wrong Problem" (the real problem is poor patent quality, says the blog.


Anonymous said...

Hey TT,

Please don't play us for fools !

Proving infringement of a *valid* US patent in court is hard enough for small patent holders.
In most cases it involves hugely expensive reverse-engineering and involvement of paid experts
Add to this an additional (and huge) expense of providing a second group of paid experts to argue patent's economic value in court, and voila: the patent infringement damage award becomes LESS than the combined expense of the patent trial...
A perfect situation for big tech multinationals and the end of small independent inventors and undercapitalized tech startups in this country

So PLEEEEEZE, don't try to play us or fools !!!

Independent Inventor

P.S. I seriously think that academic clowns like Lemley should be explicitely removed from any real-world patent debates
They can do nothing but harm by misinforming general public and decision-makers...

Michael Martin said...

Reasonable people on both sides of the question agree that we want patent damages to reflect an accurate valuation of how much value the invention patented has contributed to a commercialized technology.

The issue is WHO gets to decide that? A federal judge (or judicial clerk) with no background in the technology, who's incredibly busy with other cases, including criminal prosecutions? Or two private parties around a negotiating table, at least one of whom has probably the best information avaiable about exactly how much the technology is really worth.

If the judge, then woe to the small company (much less independent inventor) who cannot afford the legal fees for the most experienced lawyers.

Anonymous said...

Michael Martin said:
"Reasonable people on both sides of the question agree that we want patent damages to reflect an accurate valuation of how much value the invention patented has contributed to a commercialized technology."

Reasonable people would agree that any law (including patent law) should be written in such a way as to discourage its violation.
Deliberate violation of any law should be discouraged by some stiff punitive measures.
In patent cases the only available form of discouragement is the amount of monetary damage award
(after Ebay injunctions are largely unavailable to small patent holders asserting patents against large manufactureres)

What you are proposing amounts to encouraging big serial patent infringers to infringe even more...

Heck, in this situation I have an even better proposal:
Get rid of the entire stinking patent system altogether !!!

The US Patent System was NEVER intended by the Founding Fathers as an instrument to screw the little guys out of inventions

Apparently our beloved Congress has a different perspective nowadays... green is their favorite color
Looking forward to hear about some new scandal ala Jack Abramoff (maybe this time with so-called "democrats") in Washington DC...

Anonymous said...

What is up with this reform? What about the Sen. Sessions amendment which is still in this draft which deals with the get out of jail free card for the Banks? This seems so unconstitutional.

Anonymous said...

I disagree with you all. I am not convinced at all the Patent Reform Act will bring a plus the way it has been drafted. How can someone be assured that you will find reasonable people on both sides of the equation agree on the patent damages to reflect an accurate valuation of how much value the invention patented has contributed to a commercialized technology? Let’s take a simple example: the braking system of a car. A car cost lets say between $10,000 and $100,000. First question: would you purchase a car without brakes? Between two cars would you favor a car that claim it has a better brakes against the one that does not? Would you agree to say that what appears to be a small component of a final product can or will make the difference in your decision to buy or not to buy? Would you agree to calculate the value of the royalties based on a different value basis that the cost of the brakes if this patented brakes make you buy this car? Some will say for instance that the ABS braking system is considered as the major decision factor before to purchase a car. Is anyone can recognize here that one single invention can be the valuable selling point for a product? Therefore the patent owner of the ABS braking system may lose big if the patent reform act passes. America has been the cornerstone of innovation, larges companies that have been harsh critics of the current patent law are very powerful anyway, and do you really want them to be even more powerful that they are now? For the same reason you don’t withdraw such good show as CBSnews "60 minutes” from the air, it will be a huge mistake to penalize the UNITED STATES by incorporating a deficient patent system to our economy. Remember when Experts and Politicians were saying how “good” was the Free Trade Agreement (Nafta) between Mexico and the US that if it passes it will be good to our economy. Don't listen always to the one that complain but rather support those that will create tomorrow's innovations, our Inventors.

Anonymous said...


since TT is obviously an in-house legal councel for one of those big tech serial infringers, it naturally follows that he has only one side of this argument covered in his blog...

Thanks for not deleting dissenting comments anyway...

Anonymous said...

You are all missing the point. The real issue with patents is that most everything is patented. If I'm developing a new piece of software, or a service, I now have an extra step in my business plan. See if you can spot it:
1. Build my software or service ($)
2. Market ($)
3. Sell the product and build a business ($$)
4. Survive lawsuits that I am infringing on patents such as grids on tvs, or making telephone calls on the internet. ($$$)
5. Survive and sue the hell out of any competitors with my own now large patent portfolio. ($$)

Isn't this pretty much what happened to Vonage and RIM?

Anonymous said...

The real problem with this New York Times article is that it almost entirely quotes someone who is not even an attorney, much less a patent attorney, [just an inventor on a few patents] for pending patent law and its legal effects. That is no more appropriate, especially for that newspaper, than quoting my plumber on the techniques and effects of cardiac surgery even if he had some done on him.

Anonymous said...

Right, because patent "attorneys" know the law any better than some guy off the street? Patent prosecutors are some of the worst lawyers I've ever met (but usually good technicians), and many patent litigators aren't much better.