Thursday, May 25, 2017

Professor Stephen Haber - Patents and Wealth of Nations

Tonight, I recommend reading Professor Stephen Haber's article Patents and Wealth of Nations. This article debunks the myth that the US economy is harmed by patents. I haven't read the entire article, but whatever I read made sense and was interesting. For example, please check out this passage addressing Bessen and Meurer's misleading claim that PAE's resulted in a $29B tax on innovation:

"There is also no convincing evidence that PAEs negatively affect innovation. Professors Schwartz and Kesan, for example, analyze the data and methods employed by Bessen and Meurer to produce the widely cited claim that in 2011 PAEs generated a direct tax on innovation of $29 billion.

Their analysis effectively undermines the Bessen-Meurer claim. Kesan and Schwartz point out that the Bessen-Meurer estimate is generated from a survey of eighty-two business enterprises regarding their experiences with PAE litigation, but those firms were neither randomly selected nor chosen so as to generate a representative sample. Rather, Bessen and Meurer relied on a survey sent to “‘about 250 companies,’ which include ‘RPX clients and nonclient companies with whom RPX has relationships.’” RPX is a business enterprise that describes itself as a defensive patent aggregator. There are therefore multiple reasons to be concerned about sample selection bias.

Kesan and Schwartz also demonstrate that Bessen and Meurer conflate “costs” with “transfers.” Slightly less than one-quarter of their $29 billion figure ($6.7 billion) represents actual litigation costs; the vast majority of the $29 billion is composed of settlement, licensing, and judgment amounts, which are the rewards that patent holders should have received for their intellectual property in the absence of infringement.

Kesan and Schwartz also point out that Bessen and Meurer do not ask whether the $6.7 billion in litigation costs is a large number in relation to some benchmark. They ask how $6.7 billion compares to the amounts spent by operating companies that regularly sue each other for patent infringement (e.g., cases such as Apple v Samsung). We would point out deadweight losses are usually assessed as a percentage of GDP, and on that basis the $6.7 billion in PAE litigation costs in 2011 amounted to only 0.05 percent of America’s $15.5 trillion national product. To put this in context, $6.9 billion was the amount Americans spent in 2015 on Halloween.

Finally, Kesan and Schwartz note that any analysis of costs must be balanced by an analysis of benefits, but these are ignored by Bessen and Meurer. Recall here the history of the laser. The initial patents generated lengthy and costly litigation financed by a PAE. But who would maintain that those costs represented a deadweight loss to the U.S. economy in light of the hundreds of billions of dollars generated by the commercialization of laser-based products over the past five decades?"

Copyright © 2017 Robert Moll. All rights reserved.

Tuesday, May 16, 2017

PWC - 2017 Patent Litigation Study - Change on the Horizon?

Tonight, I recommend reading Price Waterhouse Cooper's 2017 Patent Litigation Study - Change on the Horizon? Here are few findings of the PWC study with my comments:
  1. In 2016, US patent cases dropped 9% from 2015. Thus, we continue the downward trend in patent cases filed from 2013. Lobbyists pushing the "out of control patent litigation button" to persuade Congress to pass more anti-patent reform may have a credibility issue.
  2. Patent owners saw a 74% success rate in jury trials and 52% success rate in bench trials in 2016. This rate of success at trial was surprising, but is a subset of patent owners that overcame pre-trial motions, summary judgment and challenges in AIA trials.
  3. The median damage award of $10.2M in 2015 has decreased to $6.1M in 2016.
  4. The median jury award was 15 times greater than median bench awards in last five years. Give that fact, I am not sure why any patent owner wouldn't request a jury trial.
  5. Jury trials to bench trials have increased from 75/25 in 2015 to 80/20 in 2016. The report states the increase in jury trials is due to their larger awards and success rates.
  6. Medical devices and telecommunications median awards are significantly higher than other technologies such as consumer products. 
  7. Top five districts for patent cases filed: ED Texas, Delaware, Northern District of California, Illinois Northern, and New York Southern.
  8. Damage awards for non-practicing entities (NPEs) are 3.8 times greater than for practicing entities. This is surprising given the negative press about "patent trolls" that should undermine jury damage awards to NPEs.
The PWC study is based on the Lexis Advanced database and 2,446 district court decisions since 1997.

Copyright © 2017 Robert Moll. All rights reserved.

Friday, May 12, 2017

AIPLA - Proposes Legislative Amendment to Subject Matter Eligibility Test Under 35 USC 101

The US Supreme Court's decisions in Alice and Mayo have generated considerable uncertainty and confusion on what subject matter is patent eligible since 2014. Although the Federal Circuit somewhat clarified the subject matter eligibility test in 2016, the current test is still uncertain. It makes no distinction between the separate requirements set forth in 35 USC 101 (subject matter eligibility), 35 USC 102 (novelty and statutory bars), and 35 USC 103 (obviousness). For example, without rigorous comparison to the prior art, decision makers are free to speculate on whether the claim has an "inventive step." Note "inventive step" is an European patent term for what we refer to as non-obviousness in the US. All statutory sections come into play in unpredictable ways in the Alice/Mayo subject matter eligibility test. Yet Judge Rich a primary architect of US patent law of 1952, cautioned that 35 USC 101, 102, and 103 are independent requirements in determining patentability. Unfortunately, the wisdom of this insight appears to be lost.

Thus, courts now talk about whether the claim is an abstract idea based on how they viewed prior subject matter eligibility cases. Yet any patent lawyer knows each patent case has it own facts so it is hard to know the outcome of subject matter eligibility. Sometimes it is eligible and sometimes not. The Supreme Court's unwillingness to define what is an abstract idea in so called step one invites decision-makers to exercise their opinion without much if any limit. Those attacking validity of the patent argue the abstract idea of any claim is a high level idea that none of us would be happy to see patented. Former Federal Circuit Judge Markey told us reducing a claim to the "gist of the invention" is legal error! Now it is the first step of Alice. What happened to the rule the claim determines the scope of the invention. To let each defendant rewrite a carefully drafted detailed claim to its gist clears the way for straw man arguments. Anyway, after step one the decision maker continues to opine on whether the claim limitations he or she read out of the claim constitute "significantly more" than the abstract idea. To put it bluntly 35 USC 101 subject matter eligibility is what the decision-maker decides.

As people especially those with novel and nonobvious software related inventions have grown impatient with the unworkable nature of this uncertain confusing legal test, the largest organization of patent attorneys, that is, the American Intellectual Property Law Association (AIPLA) has stepped in and announced a reasonable legislative proposal for amending 35 U.S.C. §101 to address the confusion and uncertainty in patent ineligibility.

Here's the AIPLA announcement verbatim:

The AIPLA proposal preserves most of the language of the current Section 101, but replaces the judicial exceptions to eligibility with a new framework that uses clearly defined statutory exceptions. It is intended to provide a clear and objective test for eligibility and to expressly reaffirm the gatekeeping conditions of patentability in Sections 102, 103, and 112. The AIPLA Board of Directors approved the following resolution:

RESOLVED that the American Intellectual Property Law Association (AIPLA) favors, in principle, amending 35 U.S.C. § 101 to recite the following:

35 U.S.C. § 101—Inventions Patentable

(a) Eligible Subject Matter.—Whoever invents or discovers any useful process, machine, manufacture, composition of matter, or any useful improvement thereof, shall be entitled to a patent therefor, subject only to the conditions and requirements set forth in this title.

(b) Sole Exceptions to Subject Matter Eligibility.—A claimed invention is ineligible under subsection (a) only if the claimed invention as a whole exists in nature independent of and prior to any human activity, or can be performed solely in the human mind.

(c) Sole Eligibility Standard.—The eligibility of a claimed invention under subsections (a) and (b) shall be determined without regard to the requirements or conditions of sections 102, 103, and 112 of this title, the manner in which the claimed invention was made or discovered, or whether the claimed invention includes an inventive concept.

The Legislative Proposal derives from the work of the AIPLA Patent Eligible Subject Matter Task Force, which spent over two years considering the current state of the law and a wide variety of alternative solutions. It concluded that the Supreme Court can no longer be expected to remedy the confusion and uncertainty that its rulings have created among the courts, the USPTO, and inventors.

To read the AIPLA Legislative Proposal and Report on Patent Eligible Subject Matter, click here."

Copyright © 2017 Robert Moll. All rights reserved.