Why Bother To Invest In Small Start-Ups When The U.S. Supreme Court Has Made it Easy To Avoid Patents?W

The world of intellectual property has become bipolar. The U.S. Supreme Court just affirmed for Walt Disney Co. 20 more years of copyright protection on Mickey Mouse of 1928 as well as protection for hundreds of thousands of books, songs and movies, including Gone with the Wind. Congress’ 1998 20-year copyright extension was affirmed as constitutional. It is easy for any small or large outfit to copy and duplicate Mickey Mouse. Therefore, big media business needs copyright protection to prosper. Notice how big media business lobbied both the Congress and the U.S. Supreme Court to get its wayBut the opposite is true for the needs of big business when it comes to patent protection. Little guys and most big guys cannot compete against IBM, GM, Hitachi, Sony, Dow Chemical and the Fortune 500. The reason is simple. IBM owns millions of man-years of know-how, a fortune in reputation and a worldwide service and support network. IBM and the Fortune 500 really don’t need patents to keep competitors out. The market barriers of high tech know-how, loyal employees, wealth and marketing savvy were powerful enough to push RCA, Univac, Singer Friden, Honeywell, NCR, Burroughs and others from the mainframe business. It was not IBM patents that crunched the competition.Fortune 500 firms use patents as gentlemen’s trading chips, stock value chips and licensing royalty instruments. However, small to medium businesses and individual inventors need patents to survive because simple products are easily knocked off without a patent to protect them.America’s patent system is systematically being weakened by the Fortune 500 and the majority of the 30,000 or so patent lawyers who are employed by giants (directly or indirectly). Last month 50 patent lawyers in Denver participated in a seminar that focused on a ten-year legal trend in Congress, the U.S. Supreme Court and the Federal Circuit (appeals court for patents) to weaken the U.S. patent system.

Why is corporate America undermining our patent system? Because it is cheaper to steal an idea from a little firm than to do the research in-house. Another reason is to harmonize U.S. corporate interests with multi-national giants like Hitachi and Siemens. What is good for worldwide corporate giants is being pushed in America’s congress and courts. (One difference: in Europe a corporation may be the inventor; here the inventor is an individual, although the patent is often assigned to an employer.)

I resent this trend since I service over a thousand small firms and inventors who provide hundreds of jobs in Colorado. About 75% of America’s employment base consists of small businesses. I believe that simple but novel products invented by an American deserve the protection intended by the U.S. Constitution.

Here is a short laundry list of dirty deeds by our Congress and courts. Billions of dollars are siphoned from the Patent Office to pay for general government expenses. Thus an inventor is taxed twice as much as an ordinary citizen. This is the subject of a class action lawsuit out of Puerto Rico. The proposed fee increases for the Patent Office will simply keep most of the little inventors out altogether. In the meantime the patent office is two years behind in filing patent assignments and five years behind in granting software patents. The 150-year-old Doctrine of Equivalents created by the U.S. Supreme Court to allow words to more readily capture the essence of an invention has been virtually killed by the Court. Two new doctrines of death for a patent were created by the Federal Circuit in the past year. They are the doctrine of prosecution laches (better not delay in presenting your patent just because money is tight) and the dedicate to the public doctrine (if you describe it and don’t precisely claim it, you gave it to the “public,” which equates to the Fortune 500 who can afford to launch your product).

Wal-Mart has more than 50 patent theft lawsuits against it at any one time. Countless small inventors don’t even bother to fight a Fortune 500 gorilla. Thus the small firm based in American never blossoms, and a child labor sweatshop puts out an American idea. Only a few corporate shareholders reap the profits from the American inventor, who doesn’t know what hit him.

The Supreme Court essentially affirmed the death of the doctrine of equivalents for any claim element narrowed by prosecution of the patent. I estimate about a third of the value of the million or so current U.S. patents went down the drain.

A patent is useful only to the extent that it can stop someone from copying the invention. If the patent is narrowly defined when enforcement is sought against an infringer, the patent has less scope. Most of the damage has been done by changing the legal rules that define infringement.

It is difficult to crunch into a page 200 years of patent law, but here’s a go at it. For literal patent infringement, each element in a claim must literally be found in the knock-off product, but it is too easy to get around that by some trivial change.

In the mid-19th century, the Supreme Court realized that the words in a patent would not fully capture a technical device such as the plow invented by John Deere, a farmer. The words in a patent claim have to be stretched to fit the function of the device and its elements, to cover a knock-off that performs substantially the same function in the same way. Thus the equitable Doctrine of Equivalents was born, making a screw equivalent to a bolt and making a patent claim reach beyond the claim’s literal reading. This protection is necessary because all patents live an inevitably short life of 17 years or so. Then everybody may legally copy the invention.

On the other hand, competitors must be able to determine whether an alternative to the invention falls within a patent claim. Under this rubric, the Supreme Court last year cut down the Doctrine of Equivalents to a sliver in Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 122 S. Ct. 1831 152 L. Ed. 2d 944, (2002). For any patent claim narrowed in the patent process, in amendments designed to meet objections by the patent office – and initial broad claims to an invention are almost always honed in interaction with the examiner – infringement may only be literal; anything slightly smaller, bigger, lighter, denser, etc. than what is described is not covered by the patent.

Only three narrow exceptions are left by Festo. For example, if technology changes in a way that was unforeseeable by the person writing the patent, so that he could not have written a claim on it, a patent claim may cover new technology doing the same thing. These minimal exceptions just cover up the destruction of the doctrine. As Judge Newman wrote in her dissent to the Federal Circuit, opinion below, 234 F. 3d 558 (2000): “The result is to negate infringement by equivalents…, thereby providing a blueprint for ready imitation of patented products.”

The only trick to maintain the old days is to file one very narrow claim at patent filing time. Then wait over a year for the patent office search. Then craft some broader claims and fax a draft of them to the examiner. Then call the examiner and verbally craft the rest of your 20 to 50 claims, making sure the examiner will allow them before you officially mail them in. Then receive a second office action with all your claims allowed. Never “narrow your patent,” and you are back to the good old days. But here are some problems. First, my time and costs will go up at least 25%. Next, you’ll wait an extra six months for your patent. Finally, the patent office will grind to a halt if everybody uses up examiner interview time like this. Maybe that will make the justices happy – more taxes and more government employees for the patent office!

The Supreme Court has made the patent process fit only for the rich and patient large-firm inventors. You little guys are going to start losing lawsuits and licensing opportunities. Soon most small inventors will get the picture: Why bother to patent anything? Why bother to be an entrepreneur and add wealth and jobs to America’s middle class? Why bother to invest in small start-ups when their patents will be easy to knock off?


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