KEI Activists Try to Promote Anti-Patent Populism to Prod Politically-Motivated Patent Reforms Reminiscent of Prior Poor Policy Proposals

The following 1886 New York Times Op-Ed was disseminated by James Love of the George Soros-Funded Activist Organization, Knowledge Ecology International (KEI), in an Effort to Persuade US Policymakers & Congressional Representatives How the US Patent System is Broken and Needs to Be Replaced. Sadly, This Effort is Not Only Misguided But also Dangerous to Future U.S. Global Economic & Technological Competitiveness.


The article below is actually demonstrative of the historical ebbs and flows of U.S. patent policy during the late 19th and 20th centuries, as is reflected in additional information provided by the ITSSD following this article.


In the 19th Century, the New York Times on a number of occasions reported and editorialized on various proposals at radical reform of patent laws, including this automatic licensing [COMPULSORY LICENSING] proposal in 1886.


"PATENT LAW AMENDMENTS." The New York Times, February 11, 1886.


Representative Dunn, of Arkansas, introduced in the House on Monday a bill to prevent the establishment of monopolies under the patent laws of the United States. Section 4,884 of the Revised Statutes gives the inventor a complete monopoly of his invention. It provides that, in addition to a description of the invention, every patent shall contain "a grant to the patentee, his heirs or assigns, for the term of seventeen years, of the exclusive right to make, use and vend the invention or discovery throughout the United States and the Territories thereof." Mr. Dunn's bill amends this section by declaring that the grant to the inventor shall be, as now, for seventeen years, but instead of an exclusive and entire property in the invention, it shall cover "a royalty of 10 per centum of all gross sales of the right to make, use, and vend the same throughout the United States." Any person, it is further provided, shall have the right to make, use, and vend the patented article upon payment of the 10 per cent royalty to the patentee or his heirs or assigns.


The principle of Mr. Dunn's bill is sound and its purpose is commendable. It is obvious that some amendment of the bill would be necessary, for patented inventions vary so widely in respect to their cost of construction, the extent of the public demand for them, and the expense of putting them on the market, that a 10 per cent royalty would in many cases be a very insufficient return to the patentee for his expenditures of time, labor, money, and brains. The effect of such a law would be to discourage invention, and that would be a worse evil than the tendency to monopoly which the bill aims to check. The problem is too complicated to be solved in that simple way, but there is not the slightest doubt that a just and workable amendment to the patent laws can be drawn up which would prevent the use of the grants of the Patent Office as a foundation for greedy and oppressive monopolies.


It is high time that the interests of the people as against those of patentees received some consideration and protection. The spirit of the time is hostile to monopolies, and justly so. It is hard enough for the public to bear the exactions of corporate monopolies which have no other warrant than a charter granted under State laws and no protection save that accorded them by bribed legislators and lenient Judges. But that the great seal of the United States should be allowed to confer a license for unlimited extortion is a monstrous wrong. The doctrine that a corporation may demand "what the traffic will bear" is held to be outrageous and wicked. Yet letters patent of the United States at present grant to patentees an absolutely unrestricted right to apply this doctrine to the sale and use of their inventions. Surely there is somewhere a just limit to the profit which a patentee may be permitted to exact from the public under his grant from the Government, a limit which would yield him the due reward of his genius and insure him a full and generous return for his toil and outlay, and yet would protect the people to whom his devices were a necessity from that boundless avarice which experience has shown is often fostered in the favoring and secure shelter of a patent. Such a restriction would not discourage inventors, and it would have the salutary effect of making useful inventions more widely available.


There is one form of extortion under the patent laws, and it is the most common one which ought to be made impossible. The best example of this kind of legalized pillage is furnished by the Bell Telephone Company. That company, protected by a patent whose validity is strenuously disputed, exacts and annual rent of $14 from the local companies for telephone instruments which cost $3.42. That is the whole case in a nutshell of robbery by royalty. As a consequence of this 350 per cent profit and of its great revenues from the local companies, whose stock it holds to the face value of $22,000,000, the capital stock of the Bell Company, according to the statement of Boston newspapers, has been "watered" to seven times its original amount, and still the dividends are 17 per cent upon the enormously inflated capital. No such monopoly as that ought to exist by the sanction of the Government.


There should be most assuredly a well defined limit to extortion in the form of rent or royalty upon patented machines and devices. And the privilege of exacting royalties is one which should never be accorded save with reasonable safeguards. It ought not to be possible for a patentee to exact his own price with no alternative to the user. The latter should have the option of purchase outright in lieu of royalty or rent paid at stated periods; and the permissible royalty or rent would naturally become the basis of the purchase price. A patentee ought to be content to sell his machine or device at a fair price, and the user ought to have the right of absolute ownership in it if he chooses to remunerate the patentee in that way.


James Love, Knowledge Ecology International (KEI)


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It is no surprise that U.S. government treatment of patents, copyrights & trade secrets has long been influenced by concerns and fears about economic downturns.


“A Brief History of the Patent Law of the United States”


According to at least legal commentator,


“[D]ifferent attitudes...have prevailed at [] different times and...have had...effects on...the...development of [] patent law...In the last two decades of the nineteenth century there was a period of economic depression and increasing concern about the power of "big business" leading to the passage of the Sherman Antitrust Act in 1890. This climate was reflected in the patent field by an increasing tendency of the courts to hold patents invalid. By the late 1890's the depression had run its course and patents came back into favor with the reviving economy. In general the twentieth century has seen a dynamic interrelationship between the patent system and the application of antitrust laws. Although the first antitrust law, the Sherman Act, was enacted in 1890, the courts did not start to give it teeth until Theodore Roosevelt’s administration (1901-1909). It was not until the 1930's that the patent system started to come under attack, being viewed as assisting in the maintenance of monopolies that were seen as being at least a contributing factor to the economic misery of the thirties. This skepticism about the patent system survived World War II and blossomed again in the depressed economic conditions of the 1970's, a period of strong anti-trust enforcement...In the early 1980's, the thinking of the Chicago School of economists came to the fore and with the election of President Reagan enthusiasm for antitrust enforcement went out of fashion.” (Ladas & Perry, LLP – 2003)



Source: Rediscovering the Value of Intellectual Property Rights, Presented at The 20th Liberty Forum Of Instituto de Estudos Empresariais - iee “Property Rights and Development”, ‘IP in the 21st Century: Challenges & Concerns’, in Porto Alegre, Brazil
April 17, 2007, accessible at: http://www.itssd.org/ppt/IPinthe21stCentury.ppt .

Silly Apologist-Analyst Recommends That America Give Away its Future IP-Based Economy to the World

http://www.brookings.edu/opinions/2006/0825trade_klemens.aspx


U.S. Patent Imperialism Hurts American Interests


August 25, 2006 —


The Patent Reform Act of 2006 (S.3818), introduced to the Senate floor on August 8, will entirely fail to reform patents. The bill makes important modifications to rules on filing and review of paperwork, but the Senate has chosen to overlook many serious problems with patents that cost consumers billions of dollars and embarrass the U.S. internationally.


Much of this excess cost and embarrassment comes as a result of a double standard between imports and domestic goods. All patent disputes may be tried in U.S. District Courts, but disputes over imports may also be tried at the International Trade Commission (ITC), a branch of the Department of Commerce. The ITC uses a broader definition of patent infringement than the district courts, meaning that an import may be found to infringe on a patent that it would not infringe upon if it were produced in the U.S. Such a double standard affects U.S. taxpayers and consumers, who have fewer choices and more monopolies with which to contend.


[THIS COMMENTATOR IS OBVIOUSLY REFERRING TO SECTION 337 OF THE TARIFF ACT OF 1930, WHICH PERMITS THE U.S. INTERNATIONAL TRADE COMMISSION (ITC) TO INVESTIGATE COMPLAINTS BROUGHT BY PARTIES IN ORDER TO DETERMINE WHETHER ALLEGEDLY 'PIRATED' IMPORTED ARTICLES SHOULD BE BARRED FROM ENTERING THE U.S. UNDER SECTION 337 THE ITC POSSESSES THE AUTHORITY TO EXCLUDE IMPORTS BECAUSE OF 'UNFAIR ACTS', 'UNFAIR METHODS OF COMPETITION' OR 'ACTS OF INTELLECTUAL PROPERTY INFRINGEMENT' COMMITTED IN CONNECTION WITH IMPORTATION. AS CONCERNS THE PROCEDURAL LIGITATION METHODS REFERENCED, THE COMMENTATOR IS OBVIOUSLY REFERRING TO A 1989 GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT) PANEL DECISION WHICH FOUND THAT CERTAIN ASPECTS OF SECTION 337 HAD VIOLATED THE NATIONAL TREATMENT PROVISIONS OF THE GATT INTERNATIONAL TRADE LAW. THE URUGUAY ROUND OF TRADE NEGOTIATIONS PURSUANT TO WHICH THE WORLD TRADE ORGANIZATION WAS CREATED, ADDRESSED THESE VIOLATIONS. AS A RESULT, FOLLOWING U.S. ACCESSION TO THE WTO AGREEMENTS, CONGRESS IN 1995 ENACTED IMPLEMENTING LEGISLATION TO AMEND SECTION 337, CONSISTENT WITH THE NEW WTO REQUIREMENTS].


[THIS COMMENTATOR'S ARGUMENT APPEARS TO OBJECT TO SECTION 337 AS AMENDED, MUCH AS THE EUROPEAN UNION DID DURING 2000. SEE: UNITED STATES SECTION 337 OF THE TARIFF ACT OF 1930 AND AMENDMENTS THERETO Request for Consultations by the European Communities and their member States, WT/DS186/1 IP/D/21 18 (January 2000) AT: http://trade.ec.europa.eu/doclib/docs/2004/january/tradoc_114327.pdf ].


Over the past decade, there have been abundant examples of how patent law has been stretched too far to the detriment of U.S. consumers and manufacturers. The reader may recall the problems faced by the makers of the Blackberry, who faced a lengthy patent battle in domestic courts over software on its Canadian email servers. In hearing that case, the Court of Appeals for the Federal Circuit (CAFC) declared that if "control and beneficial use" of a device is in the U.S., then it is beholden to U.S. patent law. With this simple declaration, millions of web sites all around the world suddenly had liability exposure in U.S. courts.


In another example, Creative, Inc., claims that the iPod violates its patent on organizing songs by artist, album, and genre (U.S. patent #6,928,433). Since the iPod is made abroad, Creative sued Apple in domestic courts and petitioned the ITC to block their U.S. sale. On Wednesday, with the threat of an iPod ban looming, Apple paid Creative $100 million to withdraw its complaints.


And the dueling standards collide at a cost to the government, too. For example, Amgen, Inc., has a patent on Epogen, a drug that treats anemia in patients who are on dialysis for end-stage renal disease. Thanks to its patent, Amgen is the monopolist vendor of a life-saving drug—and it sets its price accordingly. Every year, Medicare pays over $1 billion for this drug alone.


[THIS COMMENTATOR TAKES THE IDEOLOGICAL POSITION THAT ALL INTELLECTUAL PROPERTY RIGHTS, ESPECIALLY PATENTS ON HEALTH CARE PRODUCTS AND DEVICES AND INFORMATION TECHNOLOGIES, CONSTITUTE ILLEGAL MONOPOLIES. THIS POSITION IS AKIN TO THAT ADVANCED BY SOME EMERGING ECONOMIES SUCH AS BRAZIL AND BY DEVELOPING COUNTRIES SUCH AS THAILAND.]


A Swiss pharmaceutical company, Roche, has a drug that would compete head-to-head with Epogen, and thus force down Epogen's price and possibly improve patient outcomes—except the drug is produced abroad. Roche's product is likely to be found to be a valid, non-infringing competitor to Amgen's patents and products in U.S. District Courts, but will have a harder time getting past the ITC's broader definition of patent infringement. As a result, Amgen may continue to bill Medicare at the full monopoly price.


Maintaining a separate definition of patentability for imports directly violates WTO treaties mandating non-discrimination. Other court-invented innovations in patent law also create a growing rift between the U.S. and the rest of the world that will be a liability for the U.S. in negotiations over trade and tariffs.


[THE U.S. CONGRESS AMENDED SECTION 337 TO COMPLY WITH THE WTO AGREEMENTS].


All of the rulings that have shaped patent law in the last few decades have come from the CAFC, a court founded in the early 1980s to resolve patent and trade disputes. It is heavily stocked with former prominent patent attorneys, so it no surprise that the CAFC has actively expanded the powers of patents well beyond pre-1980 limits.


[THIS COMMENTATOR TAKES ISSUE WITH THE FACT THAT A UNIQUE COURT (THE FEDERAL CIRCUIT COURT OF APPEALS WAS ESTABLISHED TO IMPROVE JUDICIAL EFFICIENCY AND ADJUDICATION OF PATENT DISPUTES) POSSESSING SPECIALIZED KNOWLEDGE IN INTELLECTUAL PROPERTY. OTHER IMPORTANT PIECES OF FEDERAL LEGISLATION AFFECTING PATENT RIGHTS WAS ENACTED TO IMPROVE, AND REMARKABLY IMPROVED, U.S. GLOBAL COMPETITIVENESS - NAMELY THE BAYH-DOLE ACT. ALSO THE HATCH-WAXMAN ACT WAS ENACTED DURING SUCH TIME. IT IMPROVED CONSUMER ACCESS TO GENERIC DRUGS].


Rather than striving to maximize innovation and economic benefits, the CAFC tends to rule via tortuously close readings of statute. Its ruling that established the separate ITC standard for patent infringement is based almost entirely upon a reading of the boilerplate phrase "for purposes of this title." Its statement regarding "control and beneficial use" is nowhere to be found in statute, but did build upon a prior CAFC divination—that the Congress of 1952 intended that software would one day be patentable.


Patent law has been expanded and forcefully exported by a single court, without oversight by Congress. Internationally, the courts' favoring of domestic producers over importers, and the CAFC's self-declaration that it has jurisdiction over any Internet-enabled computer in the world, has put U.S. trade negotiators in a weaker position and will hurt Americans in the long run. Domestically, it has created the usual problems associated with unfettered monopolies: prices rise, choices diminish, and consumers suffer.


Congress needs to take real action to explicitly establish a single standard for patent infringement regardless of the manufacturer's address, and to restore the scope of patents to where it was before the CAFC's unilateral expansions. The Patent Reform Act of 2006 is not enough.

EU Supports Flexible Compulsory Licenses for Healthcare, But None for Entertainment or Information Technologies; Is This a TRIPS Double Standard?

http://www.ip-watch.org/weblog/index.php?p=907


EU Threatens Taiwan With WTO Case Over Law On Compulsory Licences


31 January 2008


By David Cronin


Intellectual Property WatchBRUSSELS -


The European Union has demanded that Taiwan change its intellectual property law within two months following a probe into how the East Asian island overruled patents on recordable CDs (CD-Rs).


Philips, the Dutch electronics giant which holds patents for the core technologies used in CD-Rs, filed a complaint with the EU in early 2007 over the activities of a Taiwan-based company Gigastorage.


Since the 1990s, Philips had given licences to use technology for which it held patent rights to several companies in Taiwan. These firms went on to supply about 80 percent of the global market in CD-Rs by the early part of this decade.


While Gigastorage was one of the firms with which Philips had a licence agreement, this accord was scrapped in 2001. Gigastorage subsequently asked the Taiwanese national authorities to enable it to continue making the discs by issuing a compulsory licence. Its request was granted in 2004.


After investigating Philips’ complaint, the EU’s executive, the European Commission, warned on 30 January that it could start dispute proceedings against Taiwan in the World Trade Organization unless its patent law is swiftly amended.


http://ec.europa.eu/trade/issues/respectrules/tbr/pr300108_en.htm



The Commission has objected to a provision in the Taiwanese law allowing national authorities to grant a compulsory licence if a rights-holder has refused a voluntary one.


...According to the EU Commission the provision of the [Taiwanese] Patent Act dealing with compulsory licences was inconsistent with Article 28 of the TRIPs Agreement, because it allows the grant of the such licences where there is no more than a refusal to deal on the part of the patent owner. Further, the Commission services concluded that the interpretation of various procedural requirements relating to the grant of compulsory licences in the decisions of the authorities of Chinese Taipei were inconsistent with Article 31 of the TRIPs Agreement. The Commission services also found that Chinese Taipei had failed to respect the obligation to ensure that the compulsory licences were not used to produce for export, and that in fact they had been predominantly used to produce for export."


[THE EUROPEAN COMMISSION'S OBJECTION TO COMPULSORY LICENSES FOR WHAT ESSENTIALLY AMOUNTS TO A 'FAILURE TO WORK'/ REFUSAL TO DEAL' IS QUITE HUMOROUS GIVEN THAT EUROPE HAS TAKEN THIS POSITION WITH RESPECT TO U.S. PHARMACEUTICAL AND SOFTWARE PRODUCTS SOLD IN EUROPE, AND BRAZIL & THAILAND HAVE DONE THE SAME THING AS TAIWAN WITH RESPECT TO U.S. HIV/AIDS DRUG PATENTS].


...“The EU fully supports the use of compulsory licensing in specific circumstances, in particular to facilitate access to medicines,” said Peter Mandelson, the European commissioner for trade.


“However, we cannot accept the abuse of this system. I hope that the Taiwanese authorities will move quickly to bring their law and practice into line with WTO rules. I cannot rule out seeking WTO dispute settlement if they do not.”


The Commission said that it is challenging Taiwan’s patent law as part of its overall efforts to remove barriers to trade encountered by European firms doing business abroad. In a 2006 strategy paper titled Global Europe, the Commission argued that the protection of European patent rights outside the EU’s borders is essential to guarantee the competitiveness of European industry.


A report prepared by EU officials who examined the Philips’ complaint concludes that “circumstantial evidence” has been found to suggest the Taiwanese authorities are willing to use compulsory licensing as an industrial policy instrument, rather than as a limited exception to patent rights.


[THIS PRACTICE IS OTHERWISE REFERRED TO AS 'IP OPPORTUNISM']


It suggests that a compulsory licence was issued in this case to pressurise Philips into lowering the royalty rates it charged to all CD-R manufacturers in Taiwan. None of the other CD-R manufacturers in Taiwan opposed the advantages given to Gigastorage, it noted.


According to the Commission, the case sets a “terribly dangerous precedent of an industrial policy built on violation of the TRIPS agreement.”


A Taiwanese diplomat familiar with the case said that producers on the island had encountered a “dramatic change” because the international price of CD-Rs has fallen considerably in recent years. Although the Taiwanese authorities had asked Philips to reassess the royalty rates it was charging to reflect this situation, the Dutch firm declined to do so, the diplomat said.


[THIS SOUNDS AWFULLY SIMILAR TO THE BRAZILIAN GOVERNMENT'S ARGUMENT THAT BRAZIL HAS ENCOUNTERED A 'DRAMATIC CHANGE' BECAUSE THE INTERNATIONAL PRICE OF ITS NATIONAL 'UNIVERSAL ACCESS TO HEALTHCARE' PROGRAM HAVE INCREASED CONSIDERABLY IN RECENT YEARS.]


“It might seem odd that the Commission wants us to change the law within two months,” the diplomat continued. “Maybe it just wants to send out a signal not just to Taiwan but to others that it will vigorously safeguard Europe’s intellectual property concerns.”


Despite the Commission’s warning, a preliminary settlement was reached between Philips and Gigastorage in October 2007. The settlement followed a ruling in Philips’ favour, delivered by the US International Trade Commission earlier in the year. The Commission said its aim is a change to Taiwanese law.


http://www.usitc.gov/secretary/fed_reg_notices/337/337-TA-474.Notice.1170697224.pdf


The amount of compensation being paid as a result of the settlement has not been disclosed.


[THE PRIOR SITUATION DESCRIBING THE EUROPEAN UNION'S GROWING DISPUTE WITH TAIWAN OVER THE LATTER'S ISSUANCE OF A COMPULSORY LICENSE AGAINST EUROPEAN COMPANY (PHILIPS) INFORMATION / ENTERTAINMENT TECHNOLOGIES FOR THE PURPOSE OF SECURING A BETTER PRICE MUST BE READ IN LIGHT OF TAIWAN'S PREVIOUS ISSUANCE IN 2005 OF A COMPULSORY LICENSE FOR EUROPEAN COMPANY (ROCHE) MEDICINES:


'Taiwan’s Adventures With Tamiflu’


“In November 2005, Taiwan's government issued a license to allow local companies to manufacture generic versions of Tamiflu -- the only drug in the world considered effective in combatting the effects of bird flu. To date, Taiwan has recorded no cases of bird flu, but according to health authorities, it lies squarely in the path of migrating birds from China...At the time, Taiwan's health authorities stated very clearly that the purpose of the compulsory license was only to stockpile enough Tamiflu to protect against an outbreak of bird flu. But...Taiwan[] [subsequently]...amend[ed] [its] patent laws to allow the export of its generics to other nations.¨


...‘The new provision will relax regulations on drug exportation, so that upon the request of poorer countries, local drug companies may manufacture and export drugs to those countries without the consent of the patent holders...As such, these medicines would be available at a much cheaper price than their authorized versions...


This amendment seems custom-designed to allow companies which are making generic Tamiflu for Taiwan's DOH under compulsory license conditions to make extra money from their participation in the project. And it seems to contradict the DOH's earlier statement made when it was enacting compulsory licensing conditions in November 2005, when it said that any Taiwan-made generic Tamiflu was strictly for local use only and would not be exported to any other country’... [W]hatever gains Taiwan generates with developing nations, it will lose with the developed world...” (Andrew Leonard - Salon 2006)


¨The following compulsory licensing conditions were agreed upon between Taiwan’s DOH and the patent-holder, during negotiations:

§“Taiwan must use Tamiflu supplied by Roche before resorting to using any supply produced under the compulsory license”;

§“The compulsory license could be cancelled if TDOH obtained a voluntary license from Roche during the compulsory period”;

§“The products produced under the compulsory license would be limited to domestic prevention”;

§“Taiwan’s Dept. of Health would provide adequate remuneration to Roche” (Finnegan, Henderson, Farabow, Garrett & Dunner, LLP)