The FTC’s PAE Study: Doing More Harm Than Good

Recently, the Federal Trade Commission (FTC) released a report of its study of patent assertion entities (PAEs). The report was long anticipated and could have gone a long way to shining some light on patent licensing firms – who they are, how they operate, and so on. After all, patent licensing firms are misunderstood, partially because so much of their activity is not visible to the public. In theory, because the FTC has the power to obtain this invisible information, the study could have provided the data and insight needed to better understand these firms and improve the policy dialogue surround their behaviors. This PAE study had the potential to do a world of good…but unfortunately, the resulting report is likely to do more harm than good

Patent-Eligible Subject Matter... Still Wielding the Wrong Weapon - 12 Years Later

I am delighted to have participated in the Second Annual Intellectual Property Redux Conference and to publish this essay. I rarely look back at my older articles, but in Fall 2018 I was asked to give a keynote address at a conference held by the Biotechnology Innovation Organization (BIO), where the organizers asked me to speak about 35 U.S.C. § 101 and patent-eligible subject matter. In preparing my remarks, I had the opportunity to refer back to one of my earliest scholarly pieces—a 2007 article entitled Ants, Elephant Guns, and Statutory Subject Matter, published in the Arizona State Law Journal.1 It turns out, over the past twelve years, the only thing that has substantially changed in that time is how I refer to the issue, now preferring “patent-eligible subject matter” to “statutory subject matter.” However, there are some recent and coming changes to patent eligibility; in this essay, I will explain how some of these new changes finally move forward the proposals I made in 2007

What Do America’s First Patents Have to Do With Today’s?

I was excited to read Michael Risch’s latest Article,America’s First Patents, in large part because he and I generally agree, especially when it pertains to the topic of patent-eligible subject matter. In this Article, Professor Risch examines patent-eligible subject matter through a unique lens—history based on early patents

Institutional Design for Innovation: A Radical Proposal for Addressing § 101 Patent Eligible Subject Matter

The doctrine of patent-eligible subject matter is a mess, and it is weakening patent rights in this country. Nearly everyone, from the bar to the bench and from academia to industry, has called for reform. Multiple proposals to amend 35 U.S.C. § 101 have been drafted, each aimed at trying to make the doctrine more workable. Although offered with the best intentions, the proposals to fix patent-eligible subject matter are doomed to fail because none of the proposals address which institution is best suited to determine patent eligibility. This Article takes a different, and perhaps radical, tactic. Specifically, patent-eligible subject matter inquiries should be vested solely in the courts. The U.S. Patent and Trademark Office (Patent Office) should not consider patent eligibility of patent applications or issued patents. Although this solution seems incongruous, in looking at the particular institutional competencies of the courts versus the various components of the Patent Office, it becomes clear that if the doctrine of patent-eligible subject matter is to be fixed, the courts are in the best position to do so. In addition to being particularly suited to determine patent eligibility, vesting these decisions in the courts should result in a more workable and certain test for patent eligibility, which in turn should strengthen patent rights and enhance innovation

The Problem with PTAB\u27s Power Over Section 101

The doctrine of patent eligible subject matter under 35 U.S.C. § 101 is a “real mess.” Other apt terms to describe this doctrine, and the jurisprudence surrounding it, include “chaos” and “crisis.” Few question whether patent eligible subject matter is a problem; however, many do not realize how high the stakes are and how dire the consequences. The erosion of patent protection, in part due to the “chaos,” impacts the willingness of companies to invest in innovation. This is especially true in today’s most important technologies where innovations occur in the spaces most likely to be flagged as ineligible subject matter, including life sciences and computer-related investments. A lack of investment in research and development, leading to decreased innovation, is not theoretical. Just recently the United States dropped out of the list of the top ten innovative countries. The crisis is real

Entrance Ramps, Tolls, and Express Lanes—Proposals for Decreasing Traffic Congrestion in the Patent Office

This Article proposes implementing a multitier patent system by the creation of two additional roads or routes that a patent application may follow. Because many patents are not sought with the intention of pursuing the traditional patent reward of commercialization or profit through access control, that is, the exercise of the limited patent monopoly, there is no reason for every single application to follow the current route. The creation of an auxiliary, or side road, would decrease crowding on the current patent grant highway while still allowing the nontraditional applications to enter and traverse the patent grant system with different points of access. At the other end of the spectrum, there are patent applications that would derive more benefit through expediency in the patent grant system. For those applications, this Article proposes the creation of express lanes through the patent grant system. These two additional routes, used in conjunction with the current patent grant highway, would arguably decrease crowding, thus allowing for quicker patent grants as well as more careful analysis by the Patent Office and fewer bad patents. Because the proposed system considers the applicant\u27s intended use for the patent,9 whether for the traditional patent reward of exclusion or otherwise, the patent grant highway is further modified to address the unique needs ofthe applications. These additional modifications may further decrease the traffic congestion. The expected outcome of the implementation of this proposed multitier patent grant system would be improved quality of issued patents as well as decreased time from application filing to patent grant. Part II of this Article discusses the notion of nontraditional patent usage by considering the inventor\u27s intent as well as externalities, such as market realities, that shape how a patent will be used. It also elaborates on the problems of patent quality and speed of issuance alluded to above. Part III then presents a model for categorizing patent applications into three types, based on inventor intent and market realities as understood at the time the application is filed. Part III also identifies the peculiar requirements of each of the three proposed categories of patent applications, considers how the current patent grant system fails to meet these needs, and further, analyzes how these failures affect the speed and quality metrics of the current patent grant system. Part IV proposes a multitier patent system that uniquely addresses each application type described in Part III and discusses how such a multitier system meets the unique needs of each application type as well as leads to overall improvement in patent quality and speed of issuance. Finally, Part V reviews and compares multitier patent systems in existence internationally as well as proposals for multitier patent systems raised by commentators. It further answers why the multitiered patent system proposed in this Article does not suffer the same criticisms as have been proffered for other multitiered patent systems

Rembrandts in the Research Lab: Why Universities Should Take a Lesson from Big Business to Increase Innovation

Universities are typically considered to have two complementary goals: providing education and performing research. While the determination of which objective deserves primacy has long been debated and is not within the scope of this paper, it is indisputable that productive research serves to further a university\u27s goal of education, both directly by adding to the body of knowledge to be dispensed to the students and indirectly by increasing the university\u27s prestige, thereby attracting lucrative grants, quality students, and competitive faculty members to the university. It is, at the very least, safe to say that research is the heart of the academic system. Standing between a university and its goal of research are two basic, but substantial, obstacles: lack of funding and lack of access. Although lack of funding is fairly self-explanatory, a few statistics provide data on how important funding is to the research arm of the academy. Research is a generally expensive pursuit, with primary expenditures including equipment, materials, and labor costs. In 2002, an estimated thirty-six billion dollars was spent on research activities at academic institutions in the United States. The federal government has long been the primary source of academic research funding, with the National Institutes of Health (NIH), the National Science Foundation (NSF), and the Department of Defense (DOD) providing a vast majority of the funds. Although the government continues to allocate resources for university research, there are increasing numbers of universities, scientists, and projects seeking a piece of a finite level of funding, and of course, there is always the concern that other, non-research priorities may require a change in the government\u27s distribution of funds. Because of the high, and often fixed, costs of conducting research, funding is a prerequisite to research. Decreased funding necessarily decreases the amount of research. The natural extension of this relationship is a reasonably settled principle-decreased funding results in decreased innovation. While certainly less settled, as a matter of principle, the problems related to lack of access are perceived to cause no less of an obstacle to university research and the inevitable result of decreased innovation. No study has yet definitively tied a decrease in research and innovation to the availability of patents to and exploitation of patents by universities. Even the first premise, that university patents cause a decrease in funds available for research and a decrease in access to essential resources for research, is tenuous at best. I contend that the answer is not to eliminate university patents or diminish rights available to universities in their intellectual property, but rather to encourage universities to view and exploit their intellectual property assets like a savvy business enterprise would. In fact, the obstacles related to lack of funding and lack of access may actually be mitigated by university patenting, if universities start obtaining and using their patents strategically. It should follow that by removing obstacles to university research, the level of activity and thus innovation should actually increase. While big business did not initially embrace patenting and, in fact, shared many of the same barriers that universities express with respect to entering the intellectual property arena, studies have regularly shown that both patenting by businesses and innovation are rising. While universities are relative newcomers to the patent world, one benefit is that they do not need to reinvent the wheel. Although there are certainly issues that are unique to universities, the barriers to entering and participating in the intellectual property arena are very similar: lack of money, lack of knowledge, lack of infrastructure, and concern about upsetting the culture of academic research. In fact, even the concerns that are unique to universities are, at bottom, variations on the same barriers that businesses face. For example, the wide variety of subject matter being researched at universities may be unique to academia, but at its essence, the barrier is in providing an infrastructure equipped to handle such diversity. Similarly, academic freedom adds a certain twist to the research and development culture, but there exist similar cultural barriers in industry, as evidenced by the open source movement. Thus, a university can and should look to and adapt the guidance and experience of big business to organize and implement an intellectual property management scheme, hopefully to achieve similar positive results

Ignorance Over Innovation: Why Misunderstanding Standard Setting Organizations Will Hinder Technological Progress

On January 17, 2017, the Federal Trade Commission (FTC) sued Qualcomm Inc. in federal district court, alleging antitrust violations in the company\u27s licensing of semiconductor chips used in cell phones and more. The suit alleges, in part, that Qualcomm refuses to license its patents that cover innovations incorporated in technology standards (standard-essential patents, or SEPs), in contradiction of the company\u27s promise to license this intellectual property on fair, reasonable, and nondiscriminatory (FRAND) terms. According to the FTC, Qualcomm\u27s behavior reduces competitors\u27 ability to participate in the market, raises prices paid by consumers for products incorporating the standardized technology, and at bottom, impedes innovation. While there is plenty to criticize about the FTC\u27s action, the lawsuit is evidence of a much larger and more fundamental problem. The FTC\u27s allegations are not based on sound economic analysis nor are they supported by evidentiary findings. This is not due to haste or poor practices by the FTC; it is instead indicative of the FTC\u27s ignorance. Put plainly, the FTC does not understand technology standards and the organizations that develop them. And the FTC is not alone in this lack of knowledge. Many courts and commentators have also demonstrated clear misunderstandings of standard setting organizations (SSOs). Unfortunately, this is not harmless error or mere academic diversion. Important legal, business, and policy decisions are being made based on these misunderstandings. These decisions have the potential to negatively impact the future of technology standards and, ultimately, innovation itself

Why the FTC study on PAEs is destined to produce incomplete and inaccurate results

In the near future, the Federal Trade Commission is going to release the results of its study on patent assertion entities (PAEs). While it is very clear that we need additional information to understand the many complex business models that exist in the patent licensing world, the FTC’s study is unlikely to produce that information because of a few very critical flaws. What follows is an executive summary of my article, Sticks and Stones: How the FTC’s Name-Calling Misses the Complexity of Licensing-Based Business Models, published in the George Mason Law Review

What Do America’s First Patents Have to Do With Today’s?

I was excited to read Michael Risch’s latest Article,America’s First Patents, in large part because he and I generally agree, especially when it pertains to the topic of patent-eligible subject matter. In this Article, Professor Risch examines patent-eligible subject matter through a unique lens—history based on early patents