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February 6, 2009

The Invisible Edge

It's refreshing to read a patent study that stands up and shouts sense. Mark Blaxill and Ralph Eckardt, in "The Innovation Imperative: Building America's Invisible Edge for the 21st Century" look to the past as a candle to light the way forward. They begin by quoting Mark Twain (pictured) in A Connecticut Yankee in King Arthur's Court, 1889: "The very first official thing I did in my administration--and it was on the very first day of it too--was to start a patent office; for I knew that a country without a good patent office and good patent laws was just a crab, and couldn't travel any way but sideways or backwards."

The executive summary posits the peril faced by this country from those with an anti-patent agenda, and those in Congress legislating in ignorance.

Today, the chief export of the U.S. economy is innovation. American inventors have built a strategic reserve of intellectual property rights that is every bit as strategic as our domestic energy reserves - in our view, it is America's "invisible edge." In fact, the American economy, now reeling from the mortgage crisis and its ripple effects, has typically found its most sustainable competitive advantage in precisely this resource: innovation.

The single exception was one tragic period from the 1950s through the 1970s when overconfident regulators squandered American innovation assets. Their misguided policy interventions gave away American know-how to overseas competitors at fire-sale prices, compromising our national competitiveness and economic well-being.

 Today we are in danger of repeating those mistakes.

Policymakers appear not to have learned the lessons of history. In recent years, the American patent system, long one of our greatest institutional strengths, has come under increasing attack, with policymakers not only leaving this strategic reserve undefended, but also in some cases actively undermining its integrity.

A well-crafted historical perspective is provided, illustrating the growth of prosperity blossoming from innovation, and its withering from officious misguided bureaucratic power. The villain of the piece is the Federal Trade Commission (FTC), who, in the name of antitrust, illicitly gave away America's edge in several key technical areas. The FTC continues the tradition today of misanthropic hatred of patents as "anti-competitive."

This fact-filled, insightful and thought-provoking paper richly rewards the reader with the hard lessons of history, and solid suggestions for protecting America's invisible edge. Crucial reading.

Even better, this paper whets the appetite for their book, due next month: The Invisible Edge: Taking Your Strategy to the Next Level Using Intellectual Property.

Posted by Patent Hawk at February 6, 2009 11:08 AM | The Patent System

Comments

Posted by: Michael F. Martin at February 6, 2009 11:32 AM

Hawk, you can do the stats, but here's my purely intuitive thought. On the question whether the US benefits from a "strong" patent law, it really does matter who are the owners of all those patents. If we assume that all owners of US patents are US nationals, and all infringers are not, that's one thing. But if it's domestic US industry that's infringing a host of US patents owned by aliens, well then the boot's well and truly on the other foot.

I don't see this aspect discussed in the Paper at all.

And it should be, because we learned yesterday that, for the first time ever, more than 50% of all patents issuing from the USPTO are in the hands of aliens. And the trend in that direction hasn't really got going yet, for China has not yet arrived on the scene.

Be careful what you ask for, I would suggest.

Posted by: MaxDrei at February 6, 2009 2:30 PM

PH,

I enjoyed the quote from Mark Twain. Twain always did have common sense. I only wish Congress and our courts (especially SCOTUS) had the some when it comes to the patent system and why it's important to America's competitive advantage world-wide.

Posted by: EG at February 6, 2009 3:06 PM


The FTC is an anti American/pro big business outfit.

They are still, after many years rabidly pursuing their mission to destroy Rambus (even though the CADC totally shot down their legal reasoning and their factual standing as the FTC totally failed to introduce ANY supporting evidence to their outlandish assertions!!)

Just like Xerox which had a patented invention with global impact that forever changed our world was deprived of their constitutional property rights, Rambus, who solved the CPU/Memory bottleneck and enabled the computer speeds we have known in the last 9 years (with their revolutionary synchronous DRAM inventions) has had to endure the totally unjustified persecution of the FTC that operates with impunity, hand in hand with Rambus's biggest competitors in the DRAM industry ("the DRAM cartel")

The FTC persecution of Rambus largely contributed to the US treasury loss of tens of billions of dollars in direct TAX generated from the income of alien corporations dollars, capital gains TAX from Rambus stock trading and a gigantic lost opportunity by not utilizing the best and fastest DRAM technologies (RDRAM, XDR, XDR2 etc) while clinging to the inferior DRAM architectures (laden with Rambus infringed upon patents) that the JEDEC oligopoly has forced upon the world.

The FTC is a tool wielded in the hands of the highest bidder and I hope Obama will do something about that (not holding my breath though...)

Posted by: Regata De Blank at February 7, 2009 1:50 AM

What is an alien? Serious question.

Take Honda. They build cars and motorcycles all over the world - quite a bit in the USA. They employ lots of Americans at factories, dealerships, and even R&D/design. I (an American) own HMC stock (actually ADRs, but close enough). Aliens?

What about Transocean? (deepwater driller, trades as RIG, been in the news for patent litigation more than once). Management and most (if not practically all) employees are American. But they drill holes for anyone in any ocean in the world with the $$ and desire for an oil well in the ocean. And they're incorporated in the Cayman Islands to avoid oppressive US corporate taxes (something you will see more of as the US takes the lead in corporate tax rates). Aliens?

Posted by: Man in Black at February 8, 2009 2:58 PM

Can someone tell me why we permit foreigners (even foreign companies for that matter) to file for a patent here? You guys always talk about our "strategic intellectual property" and ridiculousness like that, when a huge number of the patents issued today are NOT EVEN AMERICAN OWNED.

Posted by: 6000 at February 8, 2009 8:00 PM

6000,

Maybe because it's the law? You might check out some of the interebational treaties in your spare time.

Posted by: Noise above Law at February 8, 2009 8:49 PM

Noise, I think 6000 was being facetious (and seeing if there is anybody out there simple enough to rise to his bait). The more interesting question is: why does the USA ever sign up to any International Convention? I'll answer it for you. Because it's in the US national interest. In patents, US industry would like to exploit its innovations beyond US shores, so needs foreign governments to give US industry foreign patents. In other words, innovative US industry needs foreign patents more than the aliens need US patents. You agree, don't you?

Posted by: MaxDrei at February 8, 2009 11:59 PM

MaxDrei,

good morning (evening) to your snarky self.

Haven't you read enough of 6000's postings to realize that the aformentioned post was NOT made with intelligence?

As for your loaded question regarding patent market and which is "needed" more (US or foreign), you ARE being facetious, and, well trite and boring.

It would be more intersting to discuss how with the two different legal basis (i.e. common law), the coverage of international treaties may progress to a truly world patent. It is in the viewpoint of such a discussion that I actually enjoy your repetitious posts on the glory of the EP system.

Posted by: Noise above Law at February 9, 2009 4:16 AM

Probably not E6k aka 6.

I've never seen him be xenophobic or even nationalistic.

Posted by: MIB at February 9, 2009 7:37 AM

Actually, Noise, I think that it's a fair question, whether a patent in the USA is more important than one everywhere else in the world. From what I can discern of the lobbying power of voters in the USA, those who care only a US patent are in the majority, to the distress of patent reformers all over the USA, whether they be in computers or in big pharma. It might be snarky, but I don't see how it's trite. Boring is to discuss the world patent, because it's unattainable so there's no point. I'm here to learn. Mostly I do that by provoking responses. Sorry if I come across as snarky. As a communicator, I still have much to learn.

Posted by: MaxDrei at February 9, 2009 10:30 AM

Oh, it's me alright.

Here, allow me to be more clear. Why is it the law that we accept foreign applications? If we need the foreign disclosures then in 90%+ of the cases we could simply pay to have the copies they filed in other countries translated to english. You're telling me that placing a "patent tax" on all those techs that we could be using free of charge is worth those extra ~9%- filings? Ridiculousness. Reminder, those 9% are probably the most worthless of the disclosures.

And let me be clear, I'm not against having it be the law. But everyone constantly toots the patent system's horn by saying that we have such great IP property built up here and all blah blah blah. WE DO NOT EVEN OWN A HUGE PORTION OF IT. The rest of the world is now getting an EQUAL share (actually more) of that same IP property. Why are you tooting the patent systems horn if we don't even have most of the patents owned? Seriously, at what point does foreign ownership become a problem for those holding up our IP holdings in this country as a great thing? When 70, 80, 90% of all patent apps granted are filed by foreigners? Or do we still hold up our 10% in "triumph"?

I'll be 100% honest, I don't see how granted legal rights to exclude over an american citizen(s) to a foreigner could possibly be in the country's best interest. Even with a disclosure that wouldn't be given away for free to the US by them filing in the EU etc.

Posted by: 6000 at February 9, 2009 12:23 PM

6K, are you suggesting President Obama should withdraw from the Paris Convention (Treaty) to lighten the PTO's workload? I suspect a $3 trillion (or $30 trillion) stimulus would lighten the PTOs workload to the exact same extent. :-)

From the very beginning, we've issued patents to foreigners. It was, in the beginning, a way of educating American inventors as to the advancements overseas (remember our then agrarian society and the "let our workshops remain in Europe" attitude).

The patent system, if I understand it correctly, was implemented to promote the progress of the useful arts without regard to national borders, with the attitude that that such broad-ranging progress would ultimately be good for America. Those days of such an ideal have long vanished.

"I'll be 100% honest, I don't see how granted legal rights to exclude over an american citizen(s) to a foreigner could possibly be in the country's best interest."

Well, I'm sure if we don't give foreigners IP protection, then they won't give Americans IP protection in their countries. Care to fathom a wild guess about who would "lose out" in such an arrangement? (Don't just count patents issued to/in each country - there is often a qualitative difference in the kinds of patent protection U.S. and foreign companies seek - having to do with differing mindsets relative to innovation.)

Posted by: NIPRA anonymous at February 9, 2009 7:01 PM

"Well, I'm sure if we don't give foreigners IP protection, then they won't give Americans IP protection in their countries."

I'm failing to give 2 shts. And I'm guessing who losses out is not America. This is especially true when considering that in most of the ROW their patent systems suc big ones from what I hear. I should add, much of the ROW would still give us patents because guess what, their laws say things about "foreign countries" all lumpted together just like ours do now. One country disallowing them patents hardly makes them have to change their statute unless they want to. Which I would have 0% of a problem with them doing. But I'm sure there's some really awesome reason as to why I should more of a problem with that.

Personally I'd rather not have 1000 koreans suing my little startup because I'm infringing their IP when I have no reason what so ever to sue them in their country.

But hey, tell me how we lose out, I'm listening. Can you address the situation where it is 80% of all patents filed here are owned by foreigners while you're addressing the current 51% situation?

And I appreciate the bringing up the old times to show why it was implemented. That makes sense. Its usefulness seems to have died out and become little more than an encumberance that looks like it will do nothing but grow.

Posted by: 6000 at February 9, 2009 8:24 PM

If you're feeling really long winded maybe you can tell me how patents help startups. It seems to me like making just about anything in a startup is just begging the giants to step in and crush you with overwhelming litigation. As a person considering such a prospect later in life I would like to know startups survive at all in such a system. Is it just a "pray they don't notice you until you're big enough to crush them" kind of thing?

Posted by: 6000 at February 9, 2009 8:30 PM

"But hey, tell me how we lose out, I'm listening. Can you address the situation where it is 80% of all patents filed here are owned by foreigners while you're addressing the current 51% situation?"

I cannot address the 80% situation from a nationalistic view (it would be impossible), but my guess is we won't be there in the next 50 - 100 years (and if we do get there it will mean we have tons bigger problems than our patent system). But one mistake I think you're making is you're lumping "pioneer" and "improvement" patents together (in your patent counts) and saying, "The sky is falling!" because there are more foreign "improvement" patents than U.S. "improvement" patents. But consider this: when I start communicating with you over a French (or Korean) internet or wireless network, or when our computers have German architecture, or when fuel is refined with Japanese technology, or the standards organizations are based in China, or if I have to get my visa renewed to have the best medical treatment, then I'll start to be concerned. See here for some historical perspective:

http://corporate.britannica.com/press/inventions.html


"This is especially true when considering that in most of the ROW their patent systems suc big ones from what I hear."

Max in 4... 3... 2... 1...

"One country disallowing them patents hardly makes them have to change their statute unless they want to."

The U.S. is not just "one" foreign country. It is the biggest market. I dare say 95%+ of the inventions that foreign companies consider the most important (except inventions related to manufacturing equipment and to a certain extent, manufacturing processes) are also filed in the U.S. That actually benefits our examination process (though you'd better search Japan, China, and Korea if it's anything to do with electronic fabrication, because it likely won't be in the U.S. documents).

Posted by: NIPRA anonymous at February 9, 2009 8:45 PM

"If you're feeling really long winded maybe you can tell me how patents help startups."

My gosh, look at Segway, they're free from any significant competition as far as I know. Do you think they wouldn't have been clobbered by Asian companies by now were it not for patents? Any idea what the profit margin on a Segway personal transporter is?

In electronics, let's look at NVE - they make high-tech sensors and transceivers for the government/military. Sure, perhaps (I do not know) they need to license base technology from IBM, Freescale, MIT, etc. to bring products to market. But (assuming arguendo IBM is NOT operating in NVEs field of production) it doesn't benefit IBM etc. to crush out NVE - it's better to get [reasonable] royalties from them to report back to IBM shareholders. And (assuming arguendo IBM is operating in NVEs field of production), if NVE has patented essential improvements, the NVE has the power to lock out [injunction] IBM from making products with the patented essential improvements just the same way IBM has the power to lock out NVE [over the patented base technology], so cross-licensing almost always ensues as a safe option for both players (money does change hands in most cross-licensing arrangements).

Posted by: NIPRA anonymous at February 9, 2009 9:15 PM

"But consider this: when I start communicating with you over a French (or Korean) internet or wireless network, or when our computers have German architecture, or when fuel is refined with Japanese technology, or the standards organizations are based in China, or if I have to get my visa renewed to have the best medical treatment, then I'll start to be concerned. See here for some historical perspective:"

In your hypo americans couldn't make wireless routers? Computer architectures? We can't refine fuel? IEEE moved to China? You already don't have to have your visa renewed to get the best (and cheaper) medical treatment? Surely you jest NIPRA.

The only thing scary is that germans might start hording secrets. Then we might be in trouble. But I doubt they will. They owe us for WW2 for the next 200 years at least.

Furthermore, what of their tech couldn't be easily stolen/backwards engineered or more so, looked up in THEIR patent catalog (that I presume is publicly available)? Their laws don't apply to people with know how that we import over here and pump for info.

Bottom line, it's a needless patent tax and any other position is dam near ludicrous on its face.

And that's not all! All this is assuming that people in industry even look to patents for inspiration anyway. Which I'm pretty sure that everyone agrees is a rarity, if it even happens at all. When we figure that in, the importance of the foreign disclosure diminishes even further, and the importance of them being able to exclude us from making things in OUR OWN COUNTRY is rather magnified.

Are we a sovereign nation or wut? I'm guessing "wut".

Posted by: 6000 at February 9, 2009 9:24 PM

P.S. Honda started with a single piston ring patent, making piston rings for Japanese engine and heavy machinery manufacturers. That gave them manufacturing expertise and distribution channels. After WWII they used their manufacturing expertise to produce motorized bicycles with war surplus components (and good piston rings), they continued to innovate and then they made motorcycles, and then cars (they even got one of the pioneer patents on 4-wheel steering). And how many Americans does Honda employ today?

Do you know

Posted by: NIPRA anonymous at February 9, 2009 9:34 PM

"In your hypo americans couldn't make wireless routers? Computer architectures? We can't refine fuel? IEEE moved to China? You already don't have to have your visa renewed to get the best (and cheaper) medical treatment? Surely you jest NIPRA."

Yes, we do all those things already/still, that's why I'm not worried and am not xenophobic.

"All this is assuming that people in industry even look to patents for inspiration anyway."

I would say the software industry does not look to patents for inspiration, but many other industries do. But this is perhaps a failing of the patent system which can and should be corrected. You need to assess and understand the cause....

Posted by: NIPRA anonymous at February 9, 2009 9:42 PM

6000 is right. The USA has a different balance between patent ownership and the rest of society than any other country in the world. Maybe one day, the rest of the world will come round to the US point of view on patents? After all, the whole world drinks Coca-Cola and Starbucks, eats McDonalds, listens to American music and watches fims made by Hollywood, no? Or maybe the balance adopted by the rst of the world will permeate America as well. Who knows.

Posted by: MaxDrei at February 10, 2009 12:41 AM

Come to think of it, countries seem to end up with a patent system that suits their strong points. Thus:

Germany/ME/eg auto/1000 patents per vehicle

Asia/EE/ electronics/1000 patents per chip

UK/pharma/30 patents on molecule X

The USA/start-ups

The interesting thing is that the USA is the world leader in stuff that you can't get a patent on. Maybe free competition suits the USA best. So, maybe 6000 should lose his job?

Posted by: MaxDrei at February 10, 2009 1:46 AM

"They owe us for WW2 for the next 200 years at least."

truly embarrassing 6000.

Posted by: Noise above Law at February 10, 2009 4:06 AM

"Yes, we do all those things already/still, that's why I'm not worried and am not xenophobic."

I'm not particularly "worried", all I'm saying is that we may as well repeal the foreign patent tax we're placing upon our businesses. Talk about stimulus!

"truly embarrassing 6000."

Hardly.

"So, maybe 6000 should lose his job?"

I wouldn't be that worried. Do me a favor already. Don't get me wrong though, it would be a huge pita.

"But this is perhaps a failing of the patent system which can and should be corrected. "

The only "failing" which causes this "failing" is that the patent system is not set up to provide meaningful (to industry) disclosures in all too many cases. And even the ones that do are not well organized. I would be fairly easy to address this problem with legislation, but it would *gasp* be good for innovation, and bad for patent owners.

Having 1000000000 disclosures isn't as good as having 1 only half decent disclosure that you need/want when you need/want it. Personally I'm kind of surprised at the overall disarray which the patent system allows people to disclose inventions in. There could be guidelines easily set forth to organize things. But really, nobody seems to care just as long as the number of patents is going up, everything is cool.

Posted by: 6000 at February 10, 2009 1:21 PM