(More) Deconstruction of False Patent Narratives

Patent Puffery: Bloomberg View contributors and editors, complicit or clueless

by: Patrick Anderson | July 10, 2017


Associate Professor in the Entrepreneurial Management Unit at Harvard Business School, Scott Duke Kominers (pictured left) fundamentally misunderstands the United States Patent system and we, myself and my Dominion Harbor colleagues, request he stop this until he “learns a thing or two” about “a thing or two” patent-wise. The anti-patent rhetoric remains high and we intent to vigorously contest those that are: a) clueless (noted herein), or, b) of malice – about patents a bedrock of the US economy.

Dominion Harbor generates great value for individual patent holder and the F500/G2000 alike – providing much needed expertise and operational execution in patent monetization. We are a form of specialized middleman that not many endeavor and we are not “troll”-like; we provide a valuable service to an illiquid, obfuscated, legalistic, and down-right difficult market space. We are quite proud of the nearly $1.0 Billion in patent monetization work our team has completed.

As an economist (and ethnomusicology minor), Scott, why don’t you study our industry, I mean really study it. Let’s put the invisible hand to work for us versus the backhand you just leveled. At least clap to a different beat.

Associate Professor Kominers’ article and his comments while entirely out of his depth and armed with only rhetoric and long-discredited evidence are downright harmful and we’re calling him out and have done so on our weekly Podcast, IP…Frequently too. The article’s opening statement is but a preview of the erroneousness to come:

“There are lots of patents floating around that don’t represent bona fide inventions.”

This opening statement makes clear his intentions—to distort facts and present an ideological agenda, rather than engage in serious debate—but otherwise serves no purpose. This concept is never revisited in his article, nor does he ever clarify his understanding of “lots of patents” and “bona fide inventions.” Truth be told, as the US Patent system approaches the 10 million mark in a numbering scheme that started (re-started, technically) at #1 in 1836, even a small percentage of patents representing non “bona fide inventions” would add up to a big number. Thus, Kominers starts off saying precisely nothing while immediately biasing an unfamiliar audience to distrust the patent system.

Kominers next point is to claim that the overworked USPTO lacks a mechanism to conclusively reject “low-quality applications.” Of course, real practitioners know the falsity of this claim. The 10-year average allowance rate, according to the USPTO’s own statistics, varies by technology, but in several cases drops below 20%! How would this be possible without a way to “conclusively reject” applications, none the least of which are “low quality”? Overall allowance rates have consistently held in a range between 50-70% over that time period.

Even worse, Kominers completely ignores two key facts that inform the current problems associated with overwhelmed patent examiners. First, those same big tech companies who complain about assertions from patent-acquiring companies are directly responsible for creating the secondary patent market we have today. These companies flood USPTO with thousands of commodity patents, increasing delays and imposing costs onto small companies, many of which fail to survive long enough to see their patents issue.

Second, the STRONGER Act contains provisions to deal specifically with application backlog and overwhelmed examiner issues through its funding provisions. In theory, there should never be a significant backlog or shortage of examiners, since the fees collected by the USPTO are related to the costs of providing services (i.e. searching and examination). If you want to continue trying to get a patent issued after 2-3 rejections, guess what? You have to pay for that! If applications increase, so does revenue, enabling the USPTO to hire more staff. Without STRONGER, however, Congress will continue to raid user fees, hamstringing the patent office.

Still not convinced Kominers sees only one side of the picture? His discussion continues with IPRs, stating”

“IPRs are expensive – they cost tens of thousands of dollars to file, and that’s not counting legal fees – so nobody undertakes them lightly. You file only if you have a clear reason, and if you expect to succeed.”

However, he’s already lamented the existence of “low-quality patents” covering “’arguably similar’ ideas” that “don’t represent bona fide inventions,” but instead are the bi-product of “clever and persistent lawyers.” Like IPRs, obtaining patents in the first instance requires a substantial expense. The average total cost to obtain a patent from an application is over $60,000 according to a survey conducted by AIPLA.  Thus, it goes without saying that “nobody undertakes them lightly.”

Kominers also ignores the substantial expense a patent owner incurs to defend and IPR. This is where his opening premise comes in to play. If his audience buys in to this notion of worthless, non “bona fide” patents “floating around,” then there’s no reason to consider the patent owner side of an IPR. Under this view, the patent owner is merely spending money to protect his or her ill-gotten gains, right? If we switched right now to a registration system, rather than the current examination system, I would 100% agree that IPRs are completely fair and justified. However, as it stands, patent owners already spend tens of thousands of dollars to do the exact same thing the IPR purports to do—test the patent’s validity against the prior art.

To support his misguided view, Kominers goes on to claim that assertions of low-quality patents impose “billions” in costs. He trots out the same, tired Bessen and Meurer study of 2014 no less, but has also been repeatedly debunked. Professors David Schwartz and Jay Kesan noted significant flaws in the methodology and focus of the Bessen & Meurer study. Meanwhile, Ron Katznelson’s research into Bessen & Meurer notes many of these same shortcomings, along with the latter’s ignorance of gains realized from the patent system that suggest an overall net benefit. In my own writing, I’ve pointed out these, and other, flaws too many times to count.

Finally, Kominers bookends his false narrative with another straight-up lie erroneous statement, claiming that the STRONGER act would roll back the 2006 eBay v Mercexchange decision, making it easier to obtain “preliminary injunctions that force quick settlements.” Of course, those of us whose heads are still above water know that eBay dealt with permanent injunctions. So, to, does the STRONGER act as its injunction provision is premised specifically on “a finding by a court of infringement of a patent not proven invalid or unenforceable.”  If Kominers’ objections are really to “low quality patents” then there he has literally no reason to oppose this measure, since it only benefits owners of patents already demonstrated to be valid, enforceable, and infringed.

Thus, Kominers lacks actual knowledge, education, familiarity, and understanding of the critical and complex issues surrounding our patent system. Moreover, he demonstrates a clear inability to analyze these issues critically, instead attempting to sell his readers on a false narrative predicated on thinly-veiled rhetoric and bad data.

Frankly, he should be ashamed to call himself an academic, and if I sound cranky about this, I am. Truthfully, I did not want to write this article. I want to write about the very real problems affecting patent owners and the very real systemic issues that I believe are at the root of them.

However, I find myself, instead, constantly correcting, combating, these false narratives that are so easily propagated by a media that is, at best, being played by the incumbent tech companies or, at worst, corrupt and complicit for their own perceived gains.

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