Against Monopoly

defending the right to innovate

IP Law

Monopoly corrupts. Absolute monopoly corrupts absolutely.

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Expired Patent Lawsuits

Via Courthouse News:

People are increasingly filing lawsuits over expired patents. An engineer's claim against Sigma-Aldrich, a chemical company, is the twelfth such claim filed this year in courts covered by Courthouse News. Lawsuits over labels marked with expired patents are not a new cause of action, but the sudden surge in such claims is new.

Harold Josephs sued Sigma-Aldrich in Detroit Federal Court on Tuesday, citing seven chemical products he claims the company falsely labels as patented, though the patents have expired.

Josephs, a professional engineer, says he sued in the public interest "to enforce the policy underlying the false marking statute, 35 U.S.C. §292."

Read more coverage on this topic from Courthouse News here.

Read the actual complaint itself in PDF format here.

(And hats off to Harold Josephs!)

Libertarian Patent Lawyer Defends Patent Law

No, not me. Michael F. Martin, a patent attorney with Drinker Biddle. The March 2010 issue of Liberty (which also features a letters exchange regarding my December 2009 Liberty article, Intellectual Property and Libertarianism) features the following guest reflection by Mr. Martin:
Sane and sound "The hallmark of sanity is to remain firmly tethered to reality," said the federal judge to the parties of a patent infringement litigation between a large Canadian computer company and a small, patent holding company (a.k.a. "patent troll") after a jury had found the computer company liable for infringement. The computer company in question? Research In Motion, makers of the Blackberry. The case finally settled for $612.5 million.

That was March 2006. In May 2006 there followed the Supreme Court's announcement of its decision in the case of eBay v. MercExchange. In eBay, the Supreme Court overturned the Federal Circuit rule that permanent injunctions should issue against patent infringers "absent exceptional circumstances." Many large companies in the software industry, which tend to be defendants, have hoped that eBay would put an end to "patent trolls" and their own patent infringement liability. Indeed, since eBay only a handful of injunctions have issued to patent owners who do not practice their invention. "But," wrote the Supreme Court in eBay, "traditional equitable principles do not permit such broad classifications." And thus, just over three years later, on Dec. 22, 2009, the Federal Circuit upheld an injunction and award of $290 million in damages for patent infringement this time to a small Canadian startup, i4i Inc. The defendant was Microsoft Corporation, maker of Microsoft Word, which had incorporated into its software an XML editor patented by the startup.

The difference between the cases? Unlike the "patent trolls" in the earlier cases against RIM and eBay, one of the inventors behind the i4i patents, Michael Vulpe, was also an entrepreneur, who had started a business to commercialize the patented concepts.

Although Vulpe's apparent victory should be an occasion for rejoicing by libertarians (most of them, anyway) and other believers in strong property rights, one wonders what reality is faced by inventors without the desire or skill to become entrepreneurs.

Some might say the law has, at least for the moment, achieved a delicate balance between the exclusivity needed to encourage investment in new technology and the access needed to spread that new technology around. Others might say that a better way to determine what "reality" is most "sane" is to rely on private negotiations based on the principle of strong property rights. The eBay decision discouraged negotiation; the recent decision may lead to more negotiation and less litigation. Michael F. Martin

Martin writes as if oblivious of the fact that libertarians are increasingly opposed to IP rights (see my Have You Changed Your Mind About Intellectual Property?; Against Intellectual Property; and other material here); as when he writes, "Vulpe's apparent victory should be an occasion for rejoicing by libertarians (most of them, anyway) and other believers in strong property rights..." Vas...? We should rejoice that i4i was able to use the state-granted patent monopoly to impose millions of dollars of cost on Microsoft? Why? This presupposes that IP rights are legitimate "property rights." (Not to excuplate Microsoft from charges of hypocrisy: see my post Microsoft Wants Galactic Patent. The recent case mentioned by Martin is i4i v. Microsoft.)

Let me go through Martin's post in a bit more detail. First, his post implies that patent trolls are problematic (a patent troll was behind the $612.5 million Blackberry settlement), while actual inventors who have "commercialized" their own patent are good guys (Vulpe, the i4i inventor in the Microsoft case) and are justified in using their state monopoly grants to (legally) extort money from others. But patent trolls are not the problem at all (see my posts Patent Trolls and Empirical Thinking; Facebook Threatened by a Non-Patent Troll). The patent system does not require the patent owner to practice the patented invention or even to make an actual working model (see my "Reducing the Cost of IP Law", where I recommend imposing working and reduction-to-practice requirements on patentees, which would reduce patent trolling; I don't see Martin recommending this). Martin implies it's good--and libertarian, supposedly--that "the recent decision may lead to more negotiation and less litigation". What is libertarian about this? If the legal system grants clear, strong rights to a patentee to allow him to (legally) extort money from his victims, of course that may lead to "more negotiation" and "less litigation." Why is this good? If the legal system makes it crystal clear that the victim will lose in court, thus reducing the need for wasted time in litigation, this is not good, if the victim's losing is unjust.

In fact, this is exactly what happened in the Blackberry (RIM) case that Martin holds out as an example of injustice. In that case (see my post Woops, sorry, Blackberry!; also The Age of Technocide: RIM Pays Out Again Over Patents), RIM coughed up $612.5 million because of the possibility an injunction issuing--even though the patents in question were being re-examined at the US Patent Office. But even though it appeared likely they might be declared invalid a few months later, the courts were then operating under pre-eBay caselaw which made an injunction easy to get. In other words, the court in the RIM case was about to issue and order shutting down the Blackberry itself, even though the underlying patents' validity was in question and being re-examined at the PTO. This would have ruined RIM. So it caved, paying a huge ransom to save the company. If there had not been a threat of injunction, RIM would certainly have just fought the case--instead of paying almost a billion dollars!--and maybe the patents would have been declared invalid, and they would have walked away $612.5 million richer. That's why eBay was a good decision--for libertarians, at least, since it made injunctions less automatic, harder to get (see Woops, sorry, Blackberry!; I also discuss the eBay case in Radical Patent Reform Is Not on the Way). And that's why in Reducing the Cost of IP Law I recommended the abolition of patent injunctions. Martin acts as if he opposes the Blackberry settlement, blaming it on patent trolls (but without advocating a working or reduction to practice requirement, which would limit trolling), while favoring the granting of injunctions which was the real cause of the outrageous injustice done to RIM. (For a discussion of the pro-patent approach of patent attorneys, see "The Silent Bar" section of Reducing the Cost of IP Law.)

I see here a libertarian patent lawyer who is taking it for granted that patents are legitimate property rights--presumably because he believes the law should grant a monopoly license to provide "the exclusivity needed to encourage investment in new technology." Patents are not legitimate property rights. They are mercantalist, monopolistic abominations. Libertarians, including libertarian patent attorneys, should oppose the patent system.

[Mises; SK]

Kinsella Free Talk Live Interview on Reducing IP Costs

I was interviewed yesterday by Mark Edge, as part of his "Edgington Post Interview Series," for his Free Talk Live radio show, about my Mises Daily article, "Reducing the Cost of IP Law." The interview is lasts about 35 minutes, and starts at 2:02:36 in the Jan. 20, 2010 show (MP3). Edge conducted an excellent interview--very informed and interesting. And, like many others, he's come around to the anti-IP position.

[Mises; SK]

Against Intellectual Property in Italian

Against Intellectual Property has been translated into Italian by Mr. Robert Newson: Contro La Proprietą Intellettuale (.doc file). Translations into Spanish, Polish, Portugese and Georgian have been made as well.

[Mises; SK]

Kinsella IP Interview on The Peter Mac Show

I was invited to be a guest on The Peter Mac Show last night and ended up staying on for both hours. It was a pretty in-depth interview. The host asked impressively intelligent questions for someone who had just started coming around to the anti-IP position (after reading my Intellectual Property and Libertarianism just the day before (!)). The MP3 files are here: hour 1 ; hour 2.

Supreme Court Patent Case Analysis [Bilski]

The SCOTUSblog has its analysis regarding the crucial Bilski patent case that was hear before the Supreme Court today.

Read it here.

The good news: The impression seems to be that the Court is not prepared to let IP maximalists have their wish and be able to patent anything and everything under the sun.

The bad news: The Court still may decide rule on the case in a narrow fashion - refusing to inject the much needed broader reform that is so desperately needed.

PDF Transcript of the oral argument here.

Nokia's infringement suit against Apple illustrates need to scrap US patent system

From a post on Jurist:

Nokia's infringement suit against Apple illustrates need to scrap US patent system

Stephan Kinsella [General Counsel for Applied Optoelectronics and Editor of Libertarian Papers]: "A recent lawsuit filed by Nokia against Apple alleges that the iPhone infringes 10 of Nokia's patents. Nokia is probably "seeking between $200 and $400 million in damages from Apple," which JURIST characterizes as "a relatively low amount to seek from a company that expects revenues...of over $11 billion this year." It doesn't seem trivial to me, given that $400 million is a good chunk - say, 5 to 10% or so - of Apple's profits. And Nokia's is not the only lawsuit Apple faces. Half a billion here, half a billion there, and pretty soon you're talking real money. For other examples, see here.

This case is a good example of the waste caused by the patent system. The common justification for IP is that it increases innovation and overal societal wealth (see my article "There's No Such Thing as a Free Patent"). But study after study concludes otherwise (see my article "The Case Against IP: A Concise Guide," and my post "Yet Another Study Finds Patents Do Not Encourage Innovation"). Is this surprising? After all, the patent system undeniably imposes enormous costs on society - companies spend millions of dollars on patent attorneys' fees and salaries, patent filing fees, licensing fees, litigation fees, and so on. Is the value of the extra innovation that patent law stimulates greater than all these costs? Nobody knows for sure, but the various studies almost universally conclude no. Some studies even conclude that the patent system decreases overall innovation, meaning that that we are paying a huge cost just to have innovation impeded. Thus, as noted by Mike Masnick, "if you build anything even remotely innovative these days, you're going to get sued for patent infringement, probably multiple times. It's become a massive tax on innovation, rather than a lever for innovation."

Many patent lawyers and IP advocates begrudgingly admit that the system is broken, or at least needs significant improvement. As a senior partner in the patent department of a major national law firm wrote me:

Stephan, Your letter responding to Joe Hosteny's comments on Patent Trolls nicely states what I came to realize several years ago, namely, it is unclear that the US Patent System, as currently implemented, necessarily benefits society as a whole. Certainly, it has benefited [Hosteny] and his [partners] and several of their prominent clients, and has put Marshall, Texas on the map; but you really have to wonder if the "tax" placed on industry by the System (and its use of juries or lay judges to make the call on often highly complex technical issues that the parties' technical experts cannot agree on) is really worth it. Of course, anyone can point to a few start-up companies that, arguably, owe their successes to their patent portfolios; but over the last 35 years, I have observed what would appear to be an ever increasing number of meritless patents, issued by an understaffed and talent-challenged PTO examining group, being used to extract tribute from whole industries. I have had this discussion with a number of clients, including Asian clients, who have been forced to accept our Patent System and the "taxes" it imposes on them as the cost of doing business in the USA.
But I disagree that the patent system is broken, or malfunctioning at all. It benefits certain people and companies, as all taxes and regulations do. The beneficiaries of this government program defend it with various forms of propaganda. For example, they say that is a major cause of innovation and wealth - indeed, that it is necessary for innovation. But as noted above, there is no proof that patent systems generate net wealth. Another tactic is to call patent a property right - in particular an "intellectual property right." But calling it a property right does not make it so. In fact, as I have argued extensively - from the perspective of someone who is both as a practicing patent attorney familiar with the system and a libertarian who is a strong advocate of private property rights - patent rights are not genuine property rights. Patents are artificial privileges granted by the state that actually undermine private property rights. A patent is a government grant that gives the patent holder the right to tell others how they can use their own property, by vetoing certain uses. They can use this veto right to extort ransom payments, politely called licensing royalties today.

IP advocates often say that infringers "steal" ideas from the originators, to bolster their characterization of ideas and patterns as property. In fact, in the dispute at hand, as reported here, "Nokia said Apple has refused to pay for use of intellectual property developed by Nokia that lets handsets connect to third-generation, or 3G, wireless networks, as well as to wireless local area networks. 'Apple is attempting to get a free ride on the back of Nokia's innovation,' Ilkka Rahnasto, Nokia vice-president for legal and intellectual property, said in the statement." In other words, Nokia is trying to make it look like Apple copied Nokia's patented inventions, so that it looks more like a thief. But in a patent infringement lawsuit, the patentee does not need to prove copying. In fact, the infringer could have independently invented the technology, totally unaware of the patentee's invention, and still be liable. While Nokia here implies Apple is getting a "free ride" by using IP "developed by Nokia," you can bet that they will happily accept a win in court over Apple even if Apple is shown to have independently invented the technology.

And what is wrong with copying, anyway? This is how society and technolgy advances: by emulation, by learning. The free market thrives on competition and cooperation, and also on emulation and imitation. Every stage of technology is built on the body of knowledge developed over the centuries. Emulation and the acquisition of knowledge play a key role - are essential to - society and economy. Nokia's own technology was not developed in vacuo. There is nothing wrong with imitation. It is part of the market. It is essential to progress. It is no more theft than learning is. In fact, IP can be a barrier to learning, and even lead to censorship.

So, no, the patent system should not be reformed. It should be abolished, for the sake of freedom, private property rights and prosperity.

For further elaboration of the ideas expressed in this post, see my monograph Against Intellectual Property, my article "The Case Against IP: A Concise Guide," and other material on my website."

Update: see Intel Will Pay $1.25 Billion to Settle Disputes With Rival, reporting: "Ending the computer industry's most bitter legal war, the chip maker Intel agreed on Thursday to pay a rival, Advanced Micro Devices, $1.25 billion to settle antitrust and patent disputes."

$1.25 billion in wealth transferred, and untold hundreds of millions spent on litigation, patent acquisition, losses due to strategic adjustments in response to antitrust and patent law ... Yet another example of how the central state's artificial legislative patent and antitrust schemes do nothing but destroy and waste wealth. Well, not only that--they also enrich certain classes who parasitically benefit from the system, e.g. patent lawyers, litigators, and large companies.

Technocratic Patent Nonsense: Ex Parte Rodriquez

The recent Board of Patent Appeals and Interferences (BPAI) decision, Ex parte Rodriguez (discussed here), is a good example of the completely arbitrary, artificial nature of patent law. This is what counts as the meat and bones of natural "justice" in the IP world. This opinion discusses the relationship between the Patent Act's Sec. 112, 6th and 1st paragraphs, and clarifies why and under what conditions a functional claim limitation that is not a means-plus-function recitation may be invalid under Sec. 112, 1st para. for lack of enablement. Blah blah blah.

How anyone can think this is possibly compatible with libertarian principle is beyond me. No offense, Randians.

[SK cross-post]

Obama Administration Worse on IP Than Bush

As noted in this alert by the law firm Fulbright & Jaworski, the U.S. Patent and Trademark Office (PTO) has announced that it is rescinding controversial rules promulgated in 2007 that have been ensnarled in litigation since then. The rules sought to limit the number of patent claims per patent application, and the number of continuing applications that could be filed. As I noted in Radical Patent Reform Is Not on the Way, these changes are not radical, as the patent privileges lobby paints them. But the very fact that they were so vociferously opposed by the organized patent bar, such as the AIPLA, indicates that these changes would probably have been in the right direction. Basically, anything the AIPLA is against, the libertarian should be for.

Following the rule that each President is worse than the last and eventually makes you nostalgic for his predecessor, here we have a case where the Obama administration is fighting one of the few halting, tentative efforts of the Bush administration to actually improve matters. As a PTO press release stated, the current PTO Director "has signed a new Final Rule rescinding highly controversial regulations, proposed by the previous administration, that patent applicants felt unduly restricted their capacity to protect intellectual property." As Fulbright's alert notes, "The exact scope of the PTO's procedural rulemaking authority, a highly contested issue in this dispute, remains unresolved. The rescission of these rules may prove to be a tactical decision in a quest for greater PTO rulemaking authority. Despite the PTO's emphasis that these rules were proposed by the previous administration, the current administration, via Secretary of Commerce Gary Locke, is actively lobbying for substantive rulemaking authority at the PTO."

[LRC post; SK post]

Sad Patent Attorney Comments

Patent attorney and pro-patent shill Dale Halling writes: "According to US Patent and Trademark (USPTO) Power Point presentation the allowance rate has again fallen to 41% by mid year 2009. This continues the sad trend of falling allowance rates that started in 2002."

Why is it a "sad trend"? What if there are "too many" "poor quality" patents being issued, and fewer junk patents are being allowed?

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French firm has patents on using computers to choose medical treatment 1

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