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 .

Bush Administration Sees Wisdom of Preserving US Global Competitiveness in Life Sciences; IT Coalition Patent Reform Position Deemed Spurious

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/05/BUOGURRUS.DTL


Bush staff, tech titans split over patent bill


Tom Abate, Chronicle Staff Writer


Tuesday, February 5, 2008


The Bush administration said Monday that it opposes a key provision of a patent reform bill that has passed the House of Representatives and is awaiting a floor vote in the Senate, taking sides in an intellectual war over how best to promote innovation.


The position puts the administration at odds with big technology firms like Intel, IBM, Apple, Google, Cisco and Hewlett-Packard that have banded together to push the bill, and squarely on the side of the biotech and venture capital industries, which say the proposed change would significantly weaken patents.


A patent is a government-issued monopoly that gives inventors the legal right to control the use of their discoveries for up to 20 years.


[A PATENT IS RECOGNIZED AS A PROPERTY RIGHT OF TEMPORARY DURATION UNDER U.S. CONSTITUTIONAL AND CIVIL LAW]


In a six-page letter written on behalf of the U.S. Patent and Trademark Office, the administration told senators that it disagrees with a provision that would change the way damages are calculated in cases when patent infringement is proven. That change "could promote infringement,"the administration warned, saying it would oppose the legislation unless the bill is changed to "protect the inventor."


"What the administration is saying on damages is our position as well," said Kelly Slone with the National Venture Capital Association, which has sent senators a letter signed by Kleiner Perkins Caufield and Byers, New Enterprise Associates and others.


Mark Isakowitz, a lobbyist with the tech-sponsored Coalition for Patent Fairness, downplayed the significance of Monday's letter, saying the administration made much the same argument before the House passed its patent bill by a 220-175 vote in autumn.


"We strongly and respectfully disagree with their view," said Isakowitz, adding that he still expects the bill to come up for a floor vote in the Senate around the end of February. "Between now and then we have to try and reach a broader consensus on damages," he said.


Patents are authorized in Article I of the Constitution, which gives Congress the power "To promote the Progress of Science." But the Constitution does not say exactly how, which has meant a never-ending series of arguments, said Kenneth Dobyns, a retired patent attorney who wrote a history of the system called "The Patent Office Pony."


"There's never been a time when it wasn't like this," Dobyns said.


At the heart of the current dispute is the fact that patents, which have been on a sort of pendulum swing throughout U.S. history, from worth very little to worth very much, are somewhere at the high end of their historical value.


The reasons have little to do with Congress, which has not really changed patent law since 1952, but rather with a reorganization of the federal court system in the 1980s. That change created what amounts to a special court of appeals for patent cases that has, generally speaking, ended up strengthening patent law, according to Bronwyn Hall, a UC Berkeley economist who has studied the situation.


Perhaps the high point of patent strength, at least to members of Congress, came in recent years when the Canadian company Research In Motion paid $612.5 million in March to settle a patent dispute that had very nearly lead to a court-ordered injunction stopping sales of the BlackBerry device, which is popular on Capitol Hill.


The size of the settlement and the drama leading up to it lent credence to tech industry complaints about patents.


"We have a system which is out of whack, out of balance," said Tim Sheehy, a Capitol Hill lobbyist for IBM Corp., which backs the current language on damages that the White House opposes.


Biotech industry leaders feel particularly threatened by proposed changes because their whole industry has grown up in the past 25 years when, largely thanks to court actions, patents have become more and more valuable.


"If it comes down to a choice between a tilt toward the iPod or a tilt toward cancer cures, I think that's a no-brainer," said James Greenwood, president of Biotechnology Industry Organization.


What remains to be seen is whether the disagreement over damages can be ironed out, or whether the bill will stall.


"A forced choice is a false choice. The current proposal forces a choice of promoting one innovation over another," said Patent Office Director Jon Dudas, who held out hope of an agreement being reached.


E-mail Tom Abate at tabate@sfchronicle.com.
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/02/05/BUOGURRUS.DTL