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Bridging the Gap Between IP Awareness and Understanding – A response to IBM’s Chief Patent Counsel

February 28, 2019 by Bruce Berman 2 Comments

by Professor Ruth Soetendorp

In a recent article, Manny Schecter, Chief Patent Counsel at IBM and President of the IPO Education Foundation, was right to point out that increased IP awareness does not necessarily reflect people’s genuine IP understanding or their IP literacy[1].  But what does that matter, and to whom?

The ‘general public’ is a complex mix of IP illiterati including people whose IP curiosity will probably never reach beyond a vague awareness of wrongdoing for enjoying illicit downloads or counterfeit designer brands.  For them, the education system is beginning to wake up to the importance of including IP references in school citizenship classes.  They may never be concerned about how IP fuels our innovation economy or facilitates creative thinking, but they need to be protected from the potential criminality to which their lack of IP knowledge could lead.

Different, but no less lacking in IP knowledge, is the segment of the public whose IP awareness, however vague, has resonated with them. They may be entrepreneurs who realize IP’s relevance to their commercial success.  They are the group to whom international and national IP institutions (USPTO, UKIPO, EUIPO, WIPO etc) are keen to make available the short catchy sound bites that may capture attention but fall short on vital information.  These resources will never compensate for a lack of a deeper IP understanding.  They can trigger an expectation that IP problems will have a right answer, that should be easy to reach.

The public doesn’t need more catchy phrases about what IP rights are. Instead, IP institutions should be braver about telling the public that IP is difficult.  They need to encourage a more critical approach by the general public to the IP they encounter, prompting them to think about the relevant questions that could be posed to colleagues, professional advisers or online resources capable of providing relevant information.

Prime Target

College students are a prime target for IP education that will encourage them to respect and question the legal regimes that will shape their careers and enable them to graduate as more enlightened members of society.  For them, patents will be important, alongside trademarks, copyrights and design rights.  For all, the rules relating to confidentiality and trade secrets have a crucial significance.  Faculties are encouraged to allocate time to convey IP education. There is clear evidence that it would be well received.  Research that supports this strategy was undertaken by the Intellectual Property Awareness Network[2] with the UK National Union of Students into student and academic attitudes to IP education[3] and IP policies in Higher Education institutes[4].

A recent approach I have used with participants from the UK’s Arts and Creative industries sector on the Boosting Resilience Arts Council England project[5], involves using an Intellectual Property Management Decision Tree. The Tree is a graphic representation designed to provide a framework to assist discussion by the general public of an IP issue.  Around the roots are listed the intellectual property concepts that may be relevant to the issue.  Using the Tree helps if an educator is familiar with the concepts.  But if they are unfamiliar the trunk holds addresses of online resources that will provide basic explanatory material.  Most important, the branches hold five key questions to be answered when faced with an IP problem.  When used by Boosting Resilience workshop participants (senior managers of UK Arts and Creative industries enterprises) feedback suggested the Tree had proved a useful device to stimulate small group discussion of IP problems.

No Easy Answers

Encouraging questions about IP matters challenges assumptions and establishes that there are no easy and few definitive answers.  This, in turn, builds confidence to seek out the best advice when faced with IP challenges – to draw upon the best resources.  The public may well never fully understand IP rights or how they achieve their intended purpose. That should not deter IP enthusiasts from their responsibility to help the public tackle the big IP questions that are intrinsic to their lives and future.

__________________________________________________________________

Ruth Soetendorp is a pioneer in promoting IP education for non-lawyers, across all disciplines. Professor Soetendorp has published research with EUIPO, UKIPO, IPAN and the National Union of Students, and has worked with WIPO, EPO and the EC to bring IP education to the international community. She is currently Professor Emerita and Associate Director of the Centre for Intellectual Property Policy & Management at Bournemouth University and a Visiting Academic at Cass Business School, City University of London.

[1] https://www.ipwatchdog.com/2019/02/03/closing-gap-intellectual-property-awareness-understanding/id=105866/

[2] wwww.ipaware.org

[3] https://www.nus.org.uk/PageFiles/12238/2012_NUS_IPO_IPAN_Student_Attitudes_to_Intellectectual_Property.pdf

[4] http://ipaware.org/wp-content/uploads/2016/10/IPAN_NUS_University_IP_Policy_16aug16.pdf

[5] https://www.boostingresilience.net/

Image source: epmagazine.com; boostingresilience.net

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A responsive patent system requires time and participation: a response to Jay Walker’s IPAS 2018 speech

December 10, 2018 by Bruce Berman 1 Comment

GUEST COLUMN:

At the IP Awareness Summit held at the Columbia University on November 29 Jay Walker, entrepreneur, prolific inventor, TEDMED curator and founder of Priceline.com, spoke about a “broken” patent system and need for a Constitutional Convention to fix it. In the following response to Walker’s speech, Brenda Pomerance takes a different view. 

 

Improving the Patent System:

Independent Inventors Need Apply

By Brenda Pomerance

At the IP Awareness Summit held by the Center for Intellectual Property Understanding on November 29, 2018 at the Columbia School of Journalism, Jay Walker gave a keynote presentation asserting that the Patent System was irreparably broken for individual inventors lacking “deep pockets.” He based his position on five problems, and called for an entirely redesigned Patent System.

In fact, two of these problems are features, not problems. The existing Patent System can be tweaked to provide individuals with a fairer playing field for the other three problems.

First, clarity: Walker says that patent claims are impossible for him to understand.

Lack of clarity, for laypersons, is due to the need for a claim to only distinguish from the prior art, not to explain how to make an invention and to distinguish that invention from the prior art.  Walker can eliminate his clarity problem by telling his patent attorney to write claims that are essentially a production specification for the invention, but the scope of these claims will be much narrower than is needed. Examiners will love these production specification claims and prosecution will be faster.

Also, the Patent System enables a claim to encompass something that the inventor did not specifically think of when the patent application was filed, if claims are suitably written and there was no discussion of this issue in the prosecution history, but an inventor can relinquish this flexibility via clearer claims that are limited to exactly what the inventor invented.

Second, reliability: Walker says that because so many patents are invalidated, a patent is not a reliable property.

Walker can hugely improve validity by telling his patent attorney to write claims that will survive most litigation challenges (a very high standard), rather than claims that an examiner will allow (a lower standard). But, the inventor will have to (a) do the comprehensive prior art search that litigation defendants do (costing up to $100,000 for the search), then (b) figure out why it would not be obvious-to-try to combine this prior art to arrive at the invention, and finally (c) explain non-obviousness in the disclosure, which requires a detailed in-context understanding of each piece of prior art and vastly more care expended on the background section of a patent application.

An excellent prior art search along with an explanation distinguishing the claims from the prior art will speed up prosecution, but will substantially increase the cost of patent application preparation, possibly making it too costly for shallow pocket individuals.

Third and Fourth, cost and time: Walker says that it is too expensive and takes too long to enforce a patent.

Here are some tweaks to address enforcement cost and time problems:

(A) Require that all prior-art based challenges to a patent be presented in an IPR Request that is filed within nine months (not one year, to reduce gamesmanship of multiple IPR filings) of the lawsuit’s filing, unless plaintiff consents to addressing prior art invalidation in litigation, with a prohibition on staying the lawsuit for the IPR until the IPR Request is granted, and an automatic lawsuit stay after the IPR Request is granted unless the parties agree to concurrent litigation.  During litigation, this would leave mainly inequitable conduct available to invalidate a patent during litigation unless and until defendant negotiates for prior art, perhaps via accelerated discovery or payment.  It requires that the PTAB consider as prior art more than merely printed publications.

(B) If PTAB denies the IPR Request (the current PTAB denial rate is 40%), the patent is presumed valid over prior art against the challenger in all Patent Office and court proceedings.   This will speed up enforcement against defendants who make only small changes but keep infringing to force patent owner to file new lawsuits.

(C) If all claims, asserted in litigation at the time of IPR Request filing, are invalidated in an IPR based on a prior art rejection (references and motivation to combine) that the patent owner was notified of by the patent challenger at least three months prior to the filing of the IPR Request, then the patent owner has to pay the challenger’s attorney fees for preparing and filing (but not prosecuting) the IPR Request.  This encourages defendants to quickly share their most relevant invalidity arguments, and punishes plaintiffs who ignore relevant prior art and waste defendants’ resources in an IPR, but the punishment is limited by not including prosecution costs so as not to be too scary for good faith plaintiffs.

(D) After an IPR Request has been disposed of via denial or an IPR, a deep pocket defendant must begin paying half of the monthly cost of litigation attorney fees for a shallow pocket plaintiff based on redacted attorney invoices.   If the judge or jury finds the defendant is not liable for any infringement damages, then the plaintiff must repay the attorney fee payments.

(E) For a patent that has survived IPR, via IPR Request denial or an IPR, and that a defendant has been shown to infringe, restore the presumption of irreparable damage for patent infringement that was destroyed by eBay v. MercExchange, 547 U.S. 388 (2006), leading to an injunction absent exceptional circumstances, regardless of whether patent owner licenses or practices the patent.

(F) Provide a rebuttable presumption that the patented technology is frequently used by all accused products and services of an infringer, and require that damages be based on how often a technology is actually used to provide a product or service, so that rarely used features have relatively small damages awards, while frequently used features can have large damage awards.   The incentive of rebuttal should encourage defendants to provide discovery, instead of the current gamesmanship of withholding discovery.

(G) For a prevailing shallow pocket individual plaintiff, a deep pocket defendant must pay 200% of the plaintiff’s attorney fees absent exceptional circumstances.  This penalizes deep pocket litigants for litigation gamesmanship.

Fifth, price discovery: Walker says that it is difficult to predict what infringement damages will be.

The pre-litigation part of this difficulty is because parties like to keep confidential the cost of licenses and settlements; but confidentiality should be their right.

The litigation part of this difficulty is because defendants are extraordinarily reluctant to provide discovery on what portion of their business infringes and the revenue associated with doing so; D-G above, especially F, will reduce such reluctance.

Conclusion

I agree with Walker that, at present, the enforcement part of the Patent System is hostile towards under-funded individual inventors.  However, the Patent System is still quite viable and can evolve to be friendlier towards individuals. Independent inventors are a fabulous source of ideas and patents reflect the diligence to make the fruits of their ideas available in commerce, which benefits all of us.

_____________________

The audio file for Jay Walker’s speech can be found at https://www.ipawarenesssummit.com/recorded-speakers

Brenda Pomerance has almost 30 years of experience in prosecution of approximately 2,000 patents, including Appeal, Ex-parte Re-examination, Reissue, Inter Partes Review and Interference. Clients have included Research in Motion (now Blackberry), MIT, AT&T, Lucent, IBM, Sony and Canon. Ms. Pomerance has represented clients in licensing, in several patent infringement lawsuits and in a software copyright infringement lawsuit. She is a solo patent attorney in the Law Office of Brenda Pomerance in New York City. b.pomerance@verizon.net

Image source: canadaipblog.com

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Et tu, TechCo? Some potential patent licensees should be outed for abusive behavior

November 13, 2018 by Bruce Berman 0 Comments

What is the appropriate response to a legitimate request for patent licensing?

If you are an information technology company comfortable taking full advantage of confusion in the patent system, and unfettered by business ethics, it may be tossing the offer in the garbage can — just because you can.

Can a business simply ignore a reasonable licensing offer or does it have an obligation, ethical or otherwise, to take seriously a reasonable request to consider a license to an invention it requires or may already be using?

For an executive at one inventor-owned business, Personalized Media Communications, being totally ignored when a legitimate request to discuss a patent license is presented is an abusive practice and a threat to innovation that must be stopped.

The Real Issue

“Too often, this abusive behavior is conflated with ownership models to deflect attention from the real problems,” said Aaric Eisenstein, VP Licensing Strategy. “PR efforts targeting ‘trolls’ have warped stories of threats to mom & pop businesses to cast large companies as the equally helpless victims of these ruthless predators… the real issue is abusive behavior, and that’s what needs to be targeted…

“The responsibility for ending abuse rests not only with the Patent Office and the federal courts but also with the stakeholders in the patent system themselves. The stakeholders cannot simply complain and lobby for one-sided solutions. They must work together to improve the system upon which they all depend.

“The responsibility for ending abuse rests not only with the Patent Office and the federal courts but also with the stakeholders in the patent system themselves.”

“Following these rules eliminates both problems: skimpy-to-ridiculous notice packages and throwing legitimate packages in the trash.  It doesn’t matter whether the companies are large or small or whether they’re direct operating competitors or have completely different ownership models. The critical point is that these standards are targeted to prohibit abusive behavior per se…

“The US patent system was the envy of the world for generations.  It can be again if we’re honest about its shortcomings and address them in direct and balanced ways.”

The TROL Act in the House of Representatives reintroduced legislation with apparent bi-partisan support that would give the Federal Trade Commission and the state attorneys general authority to issue civil penalties up to $5 million for sending misleading or bad faith letters demanding patent licenses.

There is no indication that penalties will also be instituted for bad faith on the part of businesses that ignore legitimate offers to license good patents, forcing owners to file suit.

Eisenstein is grateful to USPTO Director Andrei Iancu for having “reminded patent system stakeholders what US inventors have given the world and the right way to enhance the system.”

For the full article, go here.

Image source: seapine.com

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More patent holders (and buyers) are valuing perception over reality

October 1, 2015 by Bruce Berman 2 Comments

Lack of certainty and the high cost of monetizing patents are motivating some businesses to acquire impressive looking patents, not necessarily valid or essential ones.  

A reputation for innovation or R&D prowess has become a far more valuable asset since the American Invents Act was passed a few years ago.

IBM, among others, has sold unproven patents for tens of millions of dollars to the likes of Alibaba, Twitter, Facebook and Google, attesting to the power of source brand when it comes to invention rights.

In all but a handful of instances, no one gives a hoot about what an IT patent is really worth in the marketplace or even whether it is valid. There Perception-Realityis nothing new about securing batches of patents for affect, especially if it is unlikely that they will be enforced and subject to the scrutiny of litigation.

With licensing revenue down and patent sale prices 30% or more lower, there is little motivation for an alleged infringer to take a licence or settle a dispute.  The search is on to identify alternative methods of profiting from IP. Drawing upon a portfolio or family’s implied value can have more meaning than its actual worth — which is becoming increasingly more difficult to establish.

As Good as Gold

In the current (November) IAM The Intangible Investor looks at “Perception is reality for some patent holders.”

A golden reputation for innovation is easier to establish than value for most individual rights. Thus, a patent portfolio or family in conjunction with a recognizable brand can constitute a formidable pairing. “Perceived patent value” holders, those with a
reputation for innovation, may be in a better position to profit today than business that actually hold valid and infringed patents. Proven patents need to survive the PTAB and perform in court, and require capital to monetize; a reputation for IP can be built over time and managed.

We may recall the Intel Inside® advertising campaign of a decade or more ago that touted the branded processor inside the PC. It not only encouraged product sales but provided the company with the ability to license at a premium the patents covering the component.

There was less a qualitative difference in the microprocessor (vs. say AMD’s) than an implied one based on Intel’s consciously cultivated, and largely deserved, reputation for innovation. 4If issued patents are even less reliable than in the past, then invention rights that appear to be good are the biggest winners. It is no coincidence that the most significant R&D spenders also happen to be among the world’s most valuable brands and significant patent holders. The top ones exceed or are just under $10 billion in annual R&D spend.

Reputation, whether it is deserved or not, makes buying decisions easier — a welcome relief to at least some cash-rich buyers in the market for coverage who cannot wait for patents to issue.

The full IAM piece, “Perception is reality for some patent holders,” can be found here.

Image source: askskipper.com; wparesearch.com

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US Tech Cos are Bulking-up On Software and Methods Patents

January 22, 2015 by Bruce Berman 0 Comments

More than half of Google and Microsoft’s 2014 US patent grants were in methods-related classes. IBM and Apple also were active filers in these areas.

By Maulin Shah and Bruce Berman

Patent values are down, partially a result of recent court decisions and legislation. But not everyone is writing-off software and method patents, even though they are among the most difficult to defend. In fact, software and methods patents comprise surprisingly high portions of four leading US companies’ 2014 grants.

Better than half of the patents issued to Google and Microsoft by the United States Patent and Trademark Office (USPTO) in 2014 were methods-related patents, and more than one-third to IBM and one-quarter to Apple. This is according to data collected and analyzed by Envision IP, a law firm specializing in patent research.

CLS Bank v. Alice decided in June by the United States Supreme Court made the bar for affirming software patents considerably higher than in the past. Software inventions now have to show that they are not directed to mere abstract ideas or that they are not simply existing solutions that have been expressed with a computer.

The Patent Trial and Appeal Board (PTAB), which was established as a result of the American Invents Act, also made proving validity more challenging, especially for methods patents.  Reviews to date have invalidated nearly 78% of claims in cases instituted by the PTAB, with almost a quarter of all AIA petitions filed in fiscal year 2015 directed towards methods claims.

Despite the new case law and recent legislation some active patent filers continue to pursue and receive patents in significant numbers in USPTO classifications 700-708, 715, 717, 726 and 902, which are associated with software and methods. (Class 705, business methods, also is reflected in the bar graph, above, and pie chart, below.)

The Numbers Tell a Story

Companies intent on obtaining method patents include Google, for the first time in 2014 in the top ten of US patent recipients, in eighth place just behind Toshiba and Qualcomm. Of the 2,599 US patents granted last year to Google, 1,522, or 59% were in the methods classes. Microsoft, with 2,847 patents received, had 1,575, or 55%, that fall under the heading of methods.

2012_2014_Software_Methods_Issuances_EnvisionIPPerennial US patent recipient leader IBM secured 7,540 patents, and received the most methods-related patents with 2,916, 39% of its total grants for last year. Not to be outdone was Apple, with 2,037 patents, 538 or 26%, which are associated with software and methods. Samsung, LG, Qualcomm, Panasonic, Canon and Toshiba, all top-ten US patent recipients for 2014, secured less than 10% in methods.

Methods patents were up slightly for IBM, Microsoft and Apple from 2013 and 2012. However, Google received 69% more methods patents in 2013 than it did in 2012 (1,225 vs. 723) and 24% more in 2014 than the previous year (1,522 vs. 1,225).

Our analysis indicates that many of the foreign multinational technology companies that top the list of US patent recipients are focused on receiving hardware and non-software related patents.

For example, less than one-tenth of the patents issued last year to Samsung Electronics, Canon, Toshiba, Panasonic, and LG Electronics, all top-ten US patent recipients, were in the methods and software-related classes that we analyzed. This is not necessarily surprising, as these Korean and Japanese technology icons have for decades been known for their diversified consumer electronics products, notably televisions, cameras, and media players.

Microsoft, Apple, Google, and Sony tend to sell products that are software or methods-dependent and are connected to smart devices powered by cloud technologies. We would expect these companies to have a higher percentage of recently issued patents in software and methods-related classes.

Filing Strategy

The data also suggest that some large filers may believe that their software and methods-related patents are better than others that have been previously granted and can be defended, if necessary. Another possibility is that recent methods recipients believe there is little likelihood that their patents will ever be tested in court or at the PTAB.

_________________________

Maulin Shah, Esq., is Managing Attorney of Envision IP, a specialty law firm focused on patent research and invalidity studies. He holds dual BSc degrees in Electrical and Biomedical Engineering from Duke University and practiced patent law at Snell & Wilmer LLP before starting Envision IP.

Bruce Berman heads Brody Berman Associates, a strategic communications firm that helps to differentiate IP rights and holders. He is responsible for five books, including From Ideas to Assets and The Intangible Investor.

Image source: envisionip.com
*A previous version of this post ran on IP Watchdog.

 

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Leading Blogger Unloads on Patent Critics and the Real Bad Actors

October 16, 2014 by Bruce Berman 3 Comments

Innovation is not threatened by patent “trolls,” says a Virginia IP attorney, but by half-truths about the failure of the patent system spread by businesses looking to defend their turf.

The publisher of IP Watchdog, one of the most widely read blogs in the patent field, went from watchdog to bulldog this week, taking on businesses and lawmakers who falsely deride the patent system.

Gene Quinn, a seasoned patent attorney, says that the patent system is not dysfunctional. It’s many of the most established technology companies looking to stay on top who are.

Silicon Valley’s Anti-Patent Propaganda: Success at What Cost? is required reading for everyone affected by IP, especially those who believe that patent enforcement is ruining innovation and destroying the economy. Patent holders, small and large, NPE and operating company will find the article revealing if not relevant.

Motown Comes to the Valley

Whether we wish to believe it or not Silicon Valley is knee-deep in mature businesses. It is vaguely reminiscent of Detroit’s golden age, when new ideas in the automobile industry and real competition were considered a nuisance. Don’t let the overstuffed patent portfolios of many technology companies fool you: These are not patent friendly businesses and won’t be until they figure out, as Microsoft and Philips have, how to profit from good patents. One wonders if some Silicon Valley tech companies have become too big not to fail? 

Gene-12-10-2013“This [rhetoric about the failing patent system and rampant litigation] has led the media, the public and members of Congress to incorrectly believe that there is a ‘patent troll problem,’ which has influenced decision-makers all the way from Capitol Hill to the United States Supreme Court, who increasingly seems to be deciding patent cases with one eye firmly on what is a completely non-existent problem…”

“So how has such a factually baseless narrative been able to dominate the discussion? This propaganda was promoted by some of the elite Silicon Valley companies over the years, with Google leading the charge. But Google is a high-tech company. Why would they want to damage the patent system by spreading half-truths and reckless misrepresentations?…”

“Despite what some have been lead to believe, Google is a company that was founded on strong patent protection, having filed two patent applications prior to even obtaining the domain name Google.com. These patents related to Google’s proprietary page rank algorithm. The Google search algorithms, protected by patents, were how Google moved from fledgling start-up to eventually dominate the likes of Yahoo! and Microsoft.

“Simply stated, like virtually every other Silicon Valley start-up Google relied on the exclusive rights provided by patents and now that they are dominant they would prefer the patent system to evaporate so that the next round of dorm-room start-ups won’t be able to challenge Google in the same way that Google supplanted Yahoo! and Microsoft.

“The truth is Google is just one groundbreaking algorithm away from becoming old news.”

Sharing the Blame

Quinn says there is plenty of blame to go around:

“To a large extent Apple, Microsoft and many other Silicon Valley innovators went along with the anti-patent rhetoric perfected by the Google machine because they were facing what they called a ‘patent troll problem.’ This caused even innovation based leaders to throw in with Google and others in an attempt to vilify innovators and a patent system run amok. Such a myopic strategy risked the innovative future of these companies by putting their own patent portfolios in grave jeopardy in order to address the problems they were having with a relatively small number of truly bad actors who were clearly abusing the litigation process.”

*****

“The quickest way to get less innovation is to destroy the patent system. This should be self-evident to everyone, but sadly there are many intellectually challenged individualspinocchio-concept-250-225 who refuse to believe this objective truth. If patents inhibit innovation then why don’t countries without a patent system have run away innovation? If patents get in the way of innovation why do countries with the strongest patent rights have the most innovation?”

*****

Whether you agree or not with Gene Quinn he is a leading IP voice, unafraid to call it as he sees it in “Silicon Valley’s Anti-Patent Propaganda: Success at What Cost?”

Quinn’s strong words remind us that we live in a still great country with an active if imperfect legal system and a free press that, like patents, sometimes must be used to be fully appreciated.

Image source: ipwatchdog.com

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IBM’s Huge Lead in Patents: Under the Microscope

December 4, 2012 by Bruce Berman 1 Comment

Big Blue may be caught in its image as the perennial patents-received leader, for better or worse.

Obtaining large numbers of patents is often more effective for large companies than securing a handful of really good ones.

U.S. patent count leader IBM, which has boldly dominated patents-received for two decades, has made something of an art in the science of securing IP rights. It has obtained 46,000 U.S. patents since 2000, and more than 6,000 in 2011 alone. Of those, it has allowed about two-thirds to lapse.

aggregate-patents

Until recently, companies like Google and Apple had chosen not to compete in this costly and somewhat cynical numbers game. Winning the patent count race means more to large IT businesses than others. However, the patents a business receives should not be confused with those it holds or is able capitalize on because of the inventions they read on.

Does IBM know something about IP management that other companies do not? Or are cash-rich Google and Apple simply prepared to make bold purchases or settlements when necessary for defensive purposes? Some think that IBM is caught in its own IP image, believing to appear innovative more patents are inevitably better.

When Narcissus fell in love with his reflection in a pool of water, he got soaked. If I recall my Greek Mythology correctly it was Nemesis that attracted Narcissus to the pool in the first place.

*     *     *

The value of IBM’s volume strategy, which is generally more meaningful to large consumer products companies, such as smart phone makers, may be less readily cost-justified than it once was. Many companies like H-P and AT&T are filing about the same number of patents or even fewer than in the past, concentrating on balancing patent counts, quality and current needs.

IBM vs Key Competitors

In the January IAM magazine (number 57), which will be published next week, the Intangible Investor is devoted to IBM’s out-sized lead in obtaining patents. (They allow most to lapse within about 24 months, suggesting that for some holders it is as important to keep patents out of the hands of the wrong parties as it is to maintain them.) Emphasizing their patent-securing prowess has until now has worked for Big Blue, an IP licensing powerhouse that is seldom sued for infringement.

With its business model now focused on services, and the public smarter about IP rights, IBM is not in need of more patents, but better ones. Of course it depends on how they intend to use them and on how they choose to measure performance.

In “The need to lead: IBM under the microscope,” out next week in IAM, Brody Berman Associates compiled “aggregate totals” for US patents granted to leading IT companies from 2000 to 2011. Over this period IBM (46,292) was granted, 2.5 to four times as many patents as Microsoft (18,120), HP (17,699) and Intel (17,484).”

*     *     *

IBM is unabashedly proud of its out-sized dominance in  patent counts, besting some innovative competitors by 20-fold. (See the graphic from IFI Claims, above.)

Is Big Blue’s volume approach — which it shares with Intellectual Ventures and several defensive-mined Japanese companies like NEC, Hitachi, Sony and Canon — a relic of patent wars past?

Patent portfolios are a means to support innovation and and facilitate performance, not an end to qualify them.

Illustration sources: Brody Berman Associates; IBM Annual Report

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Guest Column: Russell Parr

March 8, 2012 by Russell Parr 0 Comments

“Something Must Be Done About Daubert”

By Russell L. Parr, CFA, ASA, CLP, RPOP[i]

Expert witnesses in patent infringement cases often are the subject of intense scrutiny. Zealous opposing counsel may invoke innovative lines of questioning in the hope of casting a negative light on experts or  their testimony.

In the sometimes comic article below patent valuation expert Russell Parr, author of eight books on IP which have been translated into five languages, writes about how the Daubert motion, like an eccentric family member, can wreak havoc on an otherwise orderly gathering. Be sure to read the first citation.

Russell’s previous contribution to IP CloseUp was “Patents: Use Them or Lose Them.” He is President of Intellectual Property Research Associates, Inc. (IPRA). 

*     *     *

Every family has one, a strange cousin or uncle that is just a little emotionally disturbed.[ii] Let’s call him Daubert. These miscreants can be found at family gatherings, usually sitting quietly in a corner unengaged. Most of the time they happily entertain themselves by watching a small stain of drool slowly grow on their shirts.

It’s okay. Daubert is part of the family and everyone should be in attendance. The family happily swirls around him enjoying the warmth of a holiday party. Below the surface however the entire family feels a slight sense of fear. Purveying the joyous occasion is a sense of fear felt by everyone in attendance. A question fills everyone with dread, “Is our strange little family member going to blow?” Invariably, one of the partiers, usually a lawyer in the family, approaches the drool stained Daubert and triggers an unnecessary and wasteful explosion.

Daubert immediately enters into an uncontrollable fuming rage, screaming, running, knocking over furniture, breaking glasses, and eventually accusing the family cat of incompetence. It seems that Daubert is upset that Fluffy does not kill mice by the traditional method of shredding the pest with force from its hind legs. Fluffy prefers to perform pest control services with simple actions that require only the use of its front paws and claws. This departure from tradition is an affront to Daubert and he can’t control himself from raising a fierce protest to the family elder, demanding that Fluffy be immediately and forever removed from the proceedings for unconscionable behavior and the use of cat methods contrary to accepted practice.

Eventually cooler heads prevail and the celebration returns to normal. Fluffy is exonerated and allowed to kill pests in whatever manner she likes. Unfortunately the outburst was completely unnecessary.

Providing a Deposition

I was recently giving a deposition.[iii] Questions were being raised regarding a few details about my educational background. I was happy to answer them. A slight pause in the action was followed by a question that asked if I had performed a regression analysis. My mind raced. I was wondering if there was a possibility that I should have performed an analysis correlating my course grades with my age. I guessed that such analysis might show that my grades had increased with age as I gained wisdom or, hopefully not, had deteriorated as age and alcohol consumption resulted in lost brain cells.

Maybe I should have correlated my grades with what I had eaten on the day of finals for each course, which of course would have been impossible to perform because I do not keep dietary journals extending back to my college days. Not sure about the question I asked for clarification. My question generated the response, “Don’t you know about regression analysis?” I hesitated to answer while thinking, “Of course I know about regression analysis, you dolt, I can do regression analysis in my head”[iv]. Instead I responded that I wasn’t sure how the question related to the topic of my education.

It turns out, we were done with educational questions and the pause before the regression analysis question indicated that we had begun a new line of questions. It turns out that it was a simple question, “At anytime in your analysis, did you do a regression analysis using any data”? For the matter at hand the answer was no. For the matter at hand there was no data to correlate. In fact the defendant had refused to provide information that might have been regressed but for the record it really didn’t matter because a regression analysis would not have taught anyone anything useful. Nonetheless my questioner, actually now accuser, wanted to know if I had bothered to perform a useless statistical exercise. I said that I had not. With great pleasure, my accuser then asked if I had conducted any consumer surveys, demands curves, or econometric models? My confusion cleared almost immediately, I was being set up for a Daubert motion.

For those readers that have been away from the planet for awhile I will briefly and generally described a Daubert motion. All others are asked for forgiveness as I drag you through the obvious. A Daubert motion is a specific type of motion in limine.  It is raised before or during trial, to exclude the presentation of unqualified evidence to the jury. A Daubert motion is used to exclude the testimony of an expert witness not possessing the requisite level of expertise or using questionable methods to obtain data.

A Daubert motion is the outcome of 1993 Supreme Court case, Daubert v. Merrell Dow Pharms., 509 U.S. 579 (U.S. 1993).  Rules 702 and 703 of the Federal Rules of Evidence govern the admission of scientific evidence in federal court. The rules allow expert witnesses greater leniency in their testimony because it is presumed that the expert will have a reliable basis in knowledge and expertise in his field.  The court in Daubert required that trial judges act as a gatekeeper and determine the scientific validity of scientific evidence before admitting it.  The guidelines in the decision is now been expanded to include technical and specialized knowledge testimony as well.

Basically this sounds like a good idea. Protecting the jury from hearing the ideas of a wacko certainly should improve the judicial system. Of course, all good ideas are pushed to the extreme and eventually off a cliff. As it currently stands, whenever a lawyer hears an opinion at a deposition he or she doesn’t like the focus of the deposition dramatically departs from anything of substance and seeks all manner of crap that can be thrown against the wall for use against the expert in a motion to exclude them from testifying at trial. Unfortunately, in response, all experts must now incorporate additional, and often useless, elements to their already comprehensive and well reasoned opinion. The remainder of this article will attempt to provide guidance to offset the attacks of those preferring form over substance.

Demand Curves

Somewhere along the way, in patent infringement cases, the idea emerged that demand for a particular patented feature should be demonstrated instead of solely showing demand for underlying product that incorporated a specific patented feature. As an example, if a cell phone was improved by incorporating a beard trimmer it could be important to show that sales of the cell phone were directly driven by consumer demand for the beard trimming feature. Not a bad idea, but how can this be accomplished?  I suspect that also somewhere along the way a judge heard the phrase “demand curve” and wanted to see such an analysis in every case they presided over. Unfortunately, a classic demand curve in no way can provide any insight into any consumer’s desire for a specific patented feature. Let me explain.

In economics, a demand curve graphically shows the relationship between the demand for a product and the different price points at which it is offered. This usually requires years of data. When the price for a commodity is a low, sales volume is high because more consumers are able to buy a commodity at low prices. As the price of a commodity increases, sales volume drops as fewer consumers are able to afford purchasing the product. Presented below is a demand curve for cocaine based on information obtained from a Mexican drug cartel that cannot be identified.[v]


Interestingly, the demand curve is not “smooth”. Not until prices become excessively high is there a steep decline in demand. There is another meaning to “smooth”. Occasionally, adjustments to the underlying data are needed to “smooth” out aberrations such as when spikes in inflation distort the results of the overall. Such adjustments are similar to seasonal adjustments made to employment and retails economic indicators.

The graph above provides information about the overall demand for cocaine as prices change but it can tell us nothing about demand for the cocaine with the patented bubble gum pink color.

More important is to consider the reality of most patent infringement proceedings. In most cases[vi] the period during which the product accused of infringement is sold is only a few years and the price at which the product sold remained constant. Here is the associated demand curve. It can be universally used for most cases.[vii] Really useful yeah?


 

 

Consumer Surveys

                Since demand curves cannot provide a connection between a patented feature and consumer’s preferences another method is required. How about asking a bunch of consumers for their opinion?[viii] Well, this is not going to work in many cases. Consider an established product generating millions of units in sales and extraordinary profits. Now add to the equation a manufacturer that invents a new patented internal component making manufacturing infinitely less expensive. Profits then become extra-extraordinary. When competitors discover the new internal component and copy it in order to remain competitive an infringement lawsuit results. Showing consumer demand for the patented internal component is not possible. Product users do not know or care about cost saving inventions. They aren’t even aware of how the product works. Nonetheless, expert reports should present customer surveys. Feel free to use the follow results to a question I asked 100 people at random[ix].

YES                                                              87%

NO                                                                13%

GET AWAY FROM ME ASSHOLE   100%

 

Regression Analysis

In statistics, regression analysis includes many techniques for modeling and analyzing several variables, when the focus is on the relationship between a dependent variable and one or more independent variables. More specifically, regression analysis helps us understand how the typical value of the dependent variable changes when any one of the independent variables is varied, while the other independent variables are held fixed. To grasp the basic concept of regression analysis, take the simplest form of such an analysis: a linear, bivariate regression, which describes an unchanging relationship between two phenomena.

Now suppose you are wondering if there is a connection between the time high school students spend doing homework and the grades they receive. These types of data can be plotted as points on a graph, where the x-axis is the average number of hours per week a student studies, and the y-axis represents exam scores out of 100. Together, the data points will typically scatter a bit on the graph. The regression analysis creates the single line that best summarizes the distribution of points. This may be interesting but it is useless for patent infringement damages calculations. Yet criticism abounds for those that do not consider a regression analysis as part of a damages analysis. To help out, here is a regression analysis that can be inserted into report.

                The data graphed above shows the relationship between the income of 60 year old men and the number of conquests of 30-year-old women they experienced. Of course this analysis is irrelevant to any patent infringement case but when asked, “Did you do any regression analysis?”, you can answer affirmatively.

 Footnotes

Copious footnotes are recommended, the longer the better. They should pontificate and ramble. As you may have noticed this article includes many footnotes that do nothing to improve a reader’s understanding of the material being presented. Apologies are extended for the brevity of the footnotes associated with this article. I am still adjusting to the need for polluting superfluous information into my writings. I am sure that this can be remedied by a survey of educational conferences that are offered by professional societies. I am certain that a course is offered about making long footnotes while saying nothing but still looking impressive. My search begins shortly.

Conclusion

Experts being extended the compliment and honor of testifying at trial should always present their ultimate efforts by providing the best analysis that can be accomplished with information available. Unfortunately such an analysis must now also be accompanied by additional materials of less usefulness.[x] This article does not recommend in any way the abandonment of substance but sadly recommends the addition of useless junk until our disturbed Daubert relative stops being abused by some of our overly aggressive family members.

I wish to extend my undying gratitude to judges that quickly deny superficial Daubert motions.

[i] Russell L. Parr is president of IPRA, Inc. He is an expert at the valuation of intellectual property. The designation CFA stands for Chartered Financial Analyst awarded by the Chartered Financial Analysts Institute. The designation ASA stands for Accredited Senior Appraiser awarded by the American Society of Appraisers. The designation CLP stands for Certified Licensing Professional awarded by the Licensing Executive Society. The designation RPOP stands for Really Pissed-off Professional awarded by the newly created Society for Professionals Frustrated by the Demand for Form over Substance.
[ii] It should be noted that a survey has not be conducted to statistically show the number of families with strange family members and this supposition is only supported by anecdotal evidence the author has experienced over his lifetime of experience.
[iii] I have deposed by too many lawyers to remember so please do not attempt to identify this fictional exchange with a particular individual – just don’t go there.
[iv] Truth be told, I cannot actually perform regression analysis in my head. I was just being dramatic. I rely on elegant software that easily performs regression analysis on the occasions that such an analysis is useful for gaining insight which was absent for the referenced fictional instance. Also swirling in my head were judgmental thoughts about being accused of not understanding regression analysis by someone I suspected spent most of their undergraduate years experimenting with Margarita recipes and impregnating cheerleaders. I also suspected that my accuser had only attended law school in order to delay entrance into the real world, not having any meaningful idea of what to do with their life.
[v] Readers should not be surprised that Mexican drug cartels retain volume and pricing data as these organizations behave in a sophisticated manner rivaling that of many multi-national corporations. The results of the information presented should not be interpreted as representative of the experiences of all drug cartels such as those found in other South American countries or in Asia.
[vi] “Most cases” is not supported by any rigorous statistical analysis but based on my best guess which of course is speculative and therefore obviously open to a Daubert challenge.
[vii] id
[viii] A “bunch” of consumers will absolutely result in ridicule because the sample size of those questioned will be accused of not being representative of the entire market. This problem can be solved by asking every current and potential purchaser in the world of the product for their opinion. If this is accomplished, the wording of the questions asked to the entire world will be criticized as misleading. Language translation will surely be involved in the criticism.
[ix] Full disclosure requires that I report that while questioning three young mothers their baby spit-up on me and two small children kicked me (their mothers are among those answering NO).
[x] Experts wishing to decorate their reports with bells and whistles should feel free to use any of the information in this article.
Guest Column, Litigation, Research, Uncategorized
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U.S.-Funded Alternative Energy Patents Fall into Foreign Hands

November 21, 2011 by Daniel Scotto 1 Comment

Solar Subterfuge

By Daniel Scotto, Whitehall Financial Advisors LLC

The value of energy assets has taken a giant leap backward. What used to be simply bricks and mortar has transformed into billions of dollars’ worth of Research and Development that can now be acquired for nominal cost.

U.S. Companies invested vast sums in developing intellectual property and, as such, creating valuable intangible assets which can now be obtained for little or even zero consideration.  Substantial funding, with heavy contributions from the government in the form of loan guarantees, tax credits and political capital, have aided in the advancement of alternative energy assets and companies of all types.

Overlooked and Undervalued IP
These government subsidized commitments often reside on the balance sheet as undervalued tangible and/or intangible assets. This raises the question as to where the dollars from federal assistance programs have gone. The alternative energy industry now is struggling for financial stability, as exemplified by the proliferation of alternative energy company bankruptcies.

The future of alternative fuel technologies in theU.S.is bleak. The vulnerable financial status of manyU.S.alternative energy companies has provided a forum for non-U.S. companies to gain inexpensive access to federally funded proprietary technologies and developments often protected byU.S.patent laws.

The most glaring example of this poaching is in the area of solar power.  The high-profile bankruptcy of Solyndra, in which the government loaned $535 million prior to the company’s filing for a Chapter 7 liquidation brings to light a disturbing new trend – opening the door for other entities to gain intellectual energy advances at discounted prices (see Solyndra Debacle).  Solyndra has parceled up its assets in such a fashion that foreign buyers, notably the Chinese, can forgo the purchase of hard assets and instead focus on intellectual assets, arguably creating more wealth, on face value, for the bankruptcy estate.

A Win-Win for Foreign Bidders 

The U.S.Department of Energy has moved to block the sale of solar panel manufacturing patents to Chinese companies. Yet, Solyndra is a “win-win” for any foreigner seeking specific assets instead of the burden of having to take the traditional bundle of bankruptcy estate assets.  This approach only serves to give away the billions of federal investment in new technologies (see Solyndra Patents).

There is a growing failure rate of alternative energy companies, another example being Evergreen Solar (see Evergreen Patents) a manufacturer of solar panels. Evergreen is also in the process of liquidating (rather than reorganizing), raising again the question of who gets the patent rights and ultimately the patent protection.  Evergreen’s patents as well as other intangible assets have effectively been underwritten by the U.S. Government. Evergreen embarked on a reshuffling of its assets and cost cutting pending its demise. This has only served to reinforce the new “norm”.  Evergreen has already shifted some of its production to China and is expected to remain an ongoing business pending talks with Chinese investors.  Evergreen received a $58 million financial aid package from theU.S. government.

Exporting Innovation – Unintentionally

A clear trend appears to be developing here. It appears that domestic alternative producers cannot find viable domestic markets. Accordingly, the intangible benefits, more specifically patents and other intellectual property developed with the financial aid of Federal and State grants, are being exported to foreign (often unfriendly) countries at a deep discount, as the market for American alternative projects proves to be too costly.

A further example of an alternative energy supplier facing financial distress is Beacon Power Corp., a flywheel-based energy storage solution which has been forced into bankruptcy. On November 18th a Bankruptcy Judge considered limiting the company’s use of $43 million in backing used as part of the Department of Energy’s Aide Program. The value of the patents in a sale is one of the points being argued by Beacon on behalf of the DOE (see Beacon Power Corp).

________________________________________________

Daniel Scotto is the founder and Chief Executive Officer of Whitehall Financial Advisors, which specializes in the economics of the energy and transportation industries.  Mr. Scotto has over 30 years of experience analyzing and advising energy companies, and has been an active participant in the forensic valuation of assets, rate case testimony and as a strategic advisor to both public utilities and alternative energy companies.

Mr. Scotto was ranked the #1 energy and utility analyst by Institutional Investor for an unprecedented 10 years. He has served as Director of Research for BNP Paribas, Bear Stearns, DLJ, L.F. Rothschild and Standard & Poor’s. scotto@whitehallfinancial.com.

Image Source: 123rf.com, dclcorp.com

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“Patent Failure” Fails to Recognize Danger of Too Much Repair

October 26, 2011 by Guest Columnist 0 Comments

A Reply to Professors Bessen and Meurer’s Book About the Difficulty of Perfecting the Patent System

By Roya Ghafele and Benjamin Gibert

The publication of Patent Failure: How Judges, Bureaucrats and Lawyers Put Innovators at Risk (Princeton University Press, 2008) by James Bessen and Michael Meurer challenged the conventional wisdom on the relationship between patents and innovation.

The authors basically posit that the poor boundary definitions of patents result in over-litigation. Arguing that the costs of litigation create disincentives for innovators, Bessen and Meurer suggest that the IP system has fundamentally failed as a system of property rights for public firms in the USA. Industry analysts and public commentators have jumped on the findings to justify various positions in patent reform debates. Patrick Anderson and Joff Wild have already responded to some of the shortcomings in the Patent Failure study, particularly with regard to the interplay between infringement suits, stock prices and NPEs.

Assessing the Damage

Bessen and Meurer have clearly taken a leaf from their own book. The conclusion that badly defined patent scope results in costly litigation is based on narrow definitions of patent trolls, public firms, high-technology industries and litigation costs. While this narrow scope is necessary to make their analysis feasible, the accompanying qualifications to their conclusions seem to have been lost in the ensuing storm. Patents do still provide incentives to individual inventors and to the chemical and pharmaceutical industries. They are also likely to provide positive incentives for private firms operating in multiple sectors. Yet, round after round of Chinese whispers has morphed the study into a declaration that the patent system is fundamentally broken, rather than an exploration of where it is challenged, why it faces problems and how we can solve them.

That major high-technology firms supported the study, which concluded that patents on software are too abstract and ill-defined, naturally raises some questions. It is not surprising that major software patent infringers would welcome a declaration of a broken patent system. However, regardless of funding, these types of studies still fulfill important roles: 1) they encourage debate on the efficacy of the current IP system; 2) they identify avenues for possible reform. Perhaps it is here that Bessen and Meurer have the most to offer.

Specialized courts such as the Federal Circuit have expanded their influence over patent law in the past twenty years. Whether or not this means patents no longer work, it is important to recognize this development and understand its impact in the USA. Identifying detailed mechanisms to render patent claims more transparent and improve patent search is another welcome contribution. Yet the suggestion that increased patent fees can reduce the number of patent applications may come at the cost of locking out smaller innovators and gearing the patent system towards large corporate actors.

No Easy Solutions

While the economic and philosophic underpinnings of Patent Failure are easy to follow and coherent, there seems to be less reflection about the possible consequences of their recommendations. Other suggestions, such as exemptions from infringement repayments when technology is invented independently from the patent owner, seem useful on the surface but may prove extremely difficult to implement in practice.

Perhaps Bessen and Meurer’s most important contribution is simply the idea that the patent system must recognize the limits of its grasp, regardless of whether we currently know how to set those limits. By recognizing these limits we can start to understand how national institutions can support patent law to fuel innovation in an era of new challenges and opportunities.

____________________________________________________________________

Dr. Roya Ghafele is the Director of Oxfirst Limited, a boutique consulting firm focusing on the economics of innovation and IP. Within the University of Oxford, she holds Fellowships at the Said Business School, the Oxford Intellectual Property Research Centre and St. Cross College. Dr. Ghafele worked as an Economist with the U.N.’s World Intellectual Property Organization (WIPO) and the Organization for Economic Cooperation and Development (OECD).  After having toured for five years as a ballet dancer she began her career in 2000 with McKinsey & Company. Dr. Ghafele is a consultant to Brody Berman Associates. roya.ghafele@oxfirst.com

Benjamin Gibert is a Research Associate with Oxfirst Ltd. Prior to joining the firm he was a research Associate in the University of Oxford where he graduated with distinction from Oxford and from Warwick University.
benjamin.gibert@oxfirst.com

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Guest Column: “America Invents Act Will Slow Investment”

September 16, 2011 by Irving S. Rappaport 0 Comments

Veteran IP Exec Says Patent Bill Will Have a Strongly Negative Impact on Economy & Jobs –

America Invents Act Will Encourage Anything But
by Irving S. Rappaport

The recent passage of The Leahy-Smith America Invents Act of 2011 is a blow to innovation and U.S. innovation investment, as well as to the economy as a whole.  This inaptly named bill will have the exact opposite effect of what its title suggests.

As a result of the changes in the law, the Patent and Trademark Office (PTO) will become more dysfunctional than it already is.  It will be buried under an avalanche of additional work for which it will receive no additional resources or funding.

Continuing diversion of PTO fees will further cripple the PTO under an ever-growing mountain of work.  I believe fee diversion is unconstitutional.  The fees are not public monies, but belong to the patent applicants.  There is no statutory  basis for Congress to take these funds.  It represents an unauthorized tax on innovation.  Yet the politicians all claim that they are unwilling to levy new taxes.

Sec. 18 essentially guts any patents relating to the financial industry.  I believe this provision is discriminatory and unconstitutional as it unfairly favors a particular industry by making it necessary for inventions relating to the financial industry to overcome more obstacles than any other type of inventions.  I think this provision will be challenged in the courts and may well be overturned.  Just as the banks were let off the hook for the 2008 meltdown, the financial industry is being given a free pass on financially related patents.

First to file will definitely favor the big companies over individual inventors and small companies.

The Post Grant Reviews allow prior art in the form of prior use and public disclosures to be presented before the PTO, even though the PTO is not set up for handling that kind of evidence.  All software and business method patents have become weaker and less likely to be found valid.

Because there are so many changes in the new law, it will take the courts 10 to 15 years to sort out what these new provisions really mean.  I believe the PTO will have a difficult time coming up with a meaningful definition of “technological invention” under Sec. 18.

Infringers are going to have a much easier time avoiding liability and patent owners are going to have a much more difficult time getting their patents through the morass at the PTO and greater difficulty in enforcing their patents.

Overall, the U.S. Patent System has been dealt a serious blow, significantly weakening it for years to come. Not only will this new patent law fail to create more innovation and investment in innovation, but it will also destroy more jobs and discourage individual inventors, as well as investments in innovation.  Additionally, this comes at the worst possible time when the U.S. economy is on the verge of going into another deep recession, if we are not already in recession.

The infighting among individual Senators and Representatives to get their favors in the bill for specific companies and industries is shameful and disgraceful.  The manner in which this patent “deform” legislation was passed represents a microcosm of what ails our current economic, financial, and governmental systems – they all no longer work because the special interests are totally in control of the country.

Although the entire system is in gridlock, hopefully the voters will decide to take this country back from the special interests.

Primary image source: american.com                                                                                                   ___________________________________

Irving Rappaport has served as the head of IP departments at Apple, National Semiconductor and Medtronic, and held significant positions at Data General and Raytheon. He was recruited by Bally-Midway to chase Pac-Man clones during the first video game revolution, and came to Silicon Valley as Associate General Counsel for Intellectual Property and Licensing at Apple, where he built its IP department (1984-90). Irving also was a consultant to Intel and was responsible for suggesting the much copied Intel Inside® campaign. He has served as an expert witness in 32 cases and is a co-inventor on 16 U.S. patents. Earlier in his career he served as a USPTO patent examiner and a U.S. Army officer.


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Rampant IP Piracy is Hurting U.S.

June 17, 2010 by Bruce Lehman 0 Comments

China-U.S. IP Policy:

Not a Two-Way Street

The United States International Trade Commission (ITC) held a public hearing on June 15 and 16 that focused on China’s IP policies and their effect on the U.S. economy.  The ITC, which hears Section 337 investigations involving unfair IP competition, is a relatively fast-track option to district courts.

Among the organizations and witnesses testifying was Hon. Bruce A. Lehman, former USPTO Commissioner and Undersecretary of Commerce from 1993-1998 and President of the International Intellectual Property Institute, an un-affiliated IP think tank. Lehman believes the U.S. IP relationship with China, which was negotiated on good faith in the 1990s, is failing miserably.

“Between 1998 and 2008 the U.S. trade deficit with China grew from$81.8 billion to $268 billion,” notes Lehman.

“The underlying assumption [of the Clinton Administration] was that the United States would permit China and other developing countries to benefit from their comparative advantage in labor costs, while we would benefit from our comparative advantage in technology. Ideally, this would work to the benefit of both parties.”

Unfortunately, full value of U.S. technology and products have not been realized because piracy and IP rights infringement is rampant and constitute a significant and still growing part of the Chinese economy.

“Taken all together the various aspects of the emerging Chinese intellectual property system combine to disadvantage IPR based imports,” continues Lehman, “sheltering domestic technology and information based industries from effective foreign competition, while the Chinese create their own export-competitive industries.”

The full text of Lehman’s testimonycan be found at this link. It’s worth reading and remembering.

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