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A World Without Patents?

July 17, 2014

Last months, electric car company Tesla caused a stir by announcing that it was adopting an “open source” philosophy for its patents: “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

Tesla claims that its efforts in this regard are designed to ultimately bolster the electric car market as a whole against the gasoline-guzzling Goliaths, a move in which it will ultimately benefit. Others see more complex motives, but everyone is talking about it.

Including NPR, which recently aired a segment as to what would happen if we got rid of patents altogether.



Playing Defense Inoffensively—The License on Transfer Network

July 10, 2014

Six major companies—Google, Newegg, Canon, Dropbox, SAP, and Asana—have launched a program designed to retain the defensive value of patent portfolios while thwarting the future threat of patent trolls. Under the name License on Transfer Network, and as described in Ars Technica, these companies have joined forces—and asked others to join—in a relatively simple pact. Members agree to pool their patents, and to license those patents to all other members of the network—but the license only kicks in when a patent is transferred out to a non–network entity. In other words, the owners can use their patents to go after competitors they believe to be infringing or to defend themselves in lawsuits filed against them by others. What they agree not to do is to sell (or out–source) their patents to a non–network entity who can redirect those patents back at network members— think, a patent troll, whether free–standing or acting in league with the patent’s original owner.

For companies opposed to patent troll behavior, but not willing to abandon the patent system or their own portfolios altogether, throwing in their lot with the LOT network may be worth the annual membership fee of between $1,500 and $20,000 (scaled to a company’s revenue).

A Historical View of Independence Day

July 3, 2014

What’s a more American holiday than the Fourth of July? Fireworks, apple pie…and patent laws.

Happy 178th anniversary to the Patent Act of 1836. Giving this country such useful reforms as the actual examination of patent applications before patents were issued.

Abstract Art for Alice

June 30, 2014

While the rest of the nation has switched its focus from Alice’s Adventures in Patent Land to Alice’s Contraceptive Coverage at Hobby Lobby, we would be remiss if we didn’t offer an amusing diversion in the form of directing our readers to the first installment of “Law Comics,” appropriately titled “Alice in Patent Land,” authored by Julia Powles and reprinted at Patently-O. Enjoy.

The Supreme Court Wakes Alice From Its Curious Dream Of Patent Eligibility

June 19, 2014

In a unanimous opinion, written by Justice Thomas, the Supreme Court has held that the addition of a generic computer to an abstract idea does not render that idea patent–eligible. In the opinion, the Supreme Court makes clear that the two–step analysis it set out in Mayo v. Prometheus applies just as readily to abstract ideas as laws of nature. First, a court must inquire whether the claims at issue are drawn to a patent–ineligible concept, such as a law of nature or abstract idea. If yes, then, second, the court must ask whether the claim’s elements individually and as an ordered combination transform the nature of the claim so as not to simply cover the abstract idea itself. That is, the court must look at the “inventive concept” embodied in the claims. With respect to computer–implemented claims, “the mere recitation of a generic computer cannot transform a patent–ineligible abstract idea into a patent–eligible invention.” It is not enough to state an abstract idea, then tell the reader to apply it with a computer.

The Court further held that the form of the claim—method, system, or computer–readable medium—did not affect the outcome in this case because “the system claims are no different from the method claims in substance,” and so fall under the same analysis. Because Alice’s method, system, and computer–readable medium claims all added nothing of substance to an underlying abstract idea, they were all patent–ineligible.

Justice Sotomayor, joined by Justices Ginsburg and Breyer in concurrence, would have gone farther, concluding that business methods are not patent–eligible “processes” at all.

With this statement of a two–step test, and its direct application to business method claims, the Supreme Court has given district courts a useful tool that, we hope, they will be able to use early in litigation to weed out low–quality patents that do nothing more than instruct readers to implement a basic concept “on a computer.”

Patent Trolling Affects Entrepreneurship—And Not In A Good Way

June 13, 2014

A common defense of patent assertion entities (a/k/a patent trolls) is that their licensing and litigation–based business model enhances the value of intellectual property, which in turn rewards entrepreneurs. A study published by Catherine E. Tucker of MIT’s Sloan School of Management suggests the opposite (HT: Ars Technica). Her study asked how the increase in patent litigation affects entrepreneurial activity, e.g., investment in start–ups and job–creation; and also what effect patent litigation filed by patent assertion entities had on entrepreneurs.

Her conclusions are stark: (1) venture capital investment would have been at least $8.1 billion higher over five years but–for patent litigation brought by frequent filers (and possibly as high as $41.8 billion); and (2) venture capital investment would likely have been approximately $109 million higher over five years but–for patent litigation brought by business that are not frequent filers.

That is, the most litigious patent–holders have the strongest negative effect on innovation. By contrast, the highest–quality patents—those approved in not just the US, but the EU and Japan as well—are less frequently litigated.

As if these figures are not chilling enough, Tucker cites the individual experiences of South Carolina–based X–Plane, which was forced to abandon product upgrades and new product lines in the aftermath of patent litigation; and California–Based, an eyewear company whose valuation dropped $3 to $4 million in light of patent litigation. Although the case was ultimately dismissed, that didn’t happen before Ditto had to lay off employees to pay lawyers.

Legislation, Take Two

June 6, 2014

Omnibus patent reform may have been kicked off the legislative agenda this year, but Congress has not lost its interest in IP–related legislation.

A little over a month ago, Senators Coon and Hatch proposed the Defend Trade Secrets Act, which would allow an owner of a trade secret to pursue a civil action in federal court for misappropriation of a trade secret (used in interstate or foreign commerce). This is significant, in that primary enforcement of trade secret claims has traditionally been through mechanisms of state law—specifically, for the near–totality of states that have adopted it, the Uniform Trade Secrets Act. The federal legislation expressly notes that it is not intended to preempt any other provision of law, so presumably, plaintiffs retain a right of choice.

A catchier title captions the legislation introduced by Representatives Farenthold and Cardenas, who unveiled the “Trade Protection Not Troll Protection Act” last week. Spurred by reports that the International Trade Commission (“ITC”) has increasingly become a refuge for non–practicing entities, the bill provides that the complainant may not rely upon activities by its licensees unless the license leads to the adoption and development of articles that incorporate the claimed patent, copyright, trademark, mask work, or design for sale in the United States.  The bill would require the Commission to conduct a preliminary investigation of whether it is likely that an industry in the United States exists or is in the process of being established when a complainant relies on licensing activities in whole or in part.


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