Patent Law

Lunatic

By Gary Odom and Jordan Kuhn

David Simon, Chief Patent Counsel at Intel, in testimony today before the House about pending patent legislation, comes off as a raving sociopath. Let's begin with his corporate arrogance, a pandemic disease among his Coalition brethren. "As one of America's leading innovators, Intel recognizes the critical importance of a strong and effective patent system that protects actual inventions and thereby provides an essential incentive for inventors... Too often, the patent law... is being used to extract unjustified payments from true innovators..." And who might the "true innovators" be?

For Intel, "true innovators" are decidedly not synonymous with inventors, but with manufacturers. Simon harkens back to a fictional idyll.

The patent litigation rules that govern today's lawsuits were adopted in a very different era, when claims virtually always were asserted by one product manufacturer against the manufacturer of a competing product, alleging that the defendant's product infringed the plaintiffs patent and was diverting customers from the plaintiff to the defendant. The principal measure of damages sought was the profits lost by the plaintiff due to the diversion of sales to the defendant.

In the 1853 case of Seymour v. McCormick, over a reaping machine improvement patent by a sole inventor, the Supreme Court set the stage for the current damages statute, §284, finding:

The basic theory of damages is to make the patent owner whole for losses caused by the infringer's illicit activity. The patent owner is to be restored financially to the position he would have occupied but for the infringement.

Patents by sole inventors asserted against companies have been as much the norm throughout our history as inter-company patent wars. Reasonable royalty has always been the baseline recovery, not lost profits.

Enter Intel's villain: non-corporate inventors.

The last ten years have seen a fundamental change in the litigation environment for technology companies, with the overwhelming majority of royalty demands, whether pre-litigation or in court, now asserted by non-practicing entities ("NPEs")-businesses that do not manufacture or sell products and that do not conduct research and development.

Of course, to invent, one must do research and development (R&D). There are no unskilled inventors. There are no inventors that did no research or development. Just as novice painter cannot pick up a brush and paint a masterpiece, so an inventor must be steeped in his art to achieve any aspiration of innovation.

A reasonable extrapolation is that Simon views Intel employees as slaves, who would be mindless without corporate backing. The reality is that the employees bring to employment strong skills, and, yes, further develop their skills as employees. But corporations are not innovators. Their employees are. Individual and small group inventors. Their names are on each and every patent. Almost no patent has more than a half dozen inventors, and most only one or two inventors. There are the true innovators.

Simon's irrational whine continues.

Why have NPEs targeted technology patents?

The answer is simple: because the presence of hundreds, if not thousands, of components technology-related products and the tendency toward standardization that allows technology products to interact-as well as the widespread use of technology by companies throughout the economy-allows NPEs to assert claims against multiple defendants based on alleged infringement of the same patent

The mid-1800s reaping machine had hundreds of components. Many companies made reaping machines at the time. And many were sued for patent infringement.

Patents lawsuits against multiple companies is nothing new. The reason it may appear more prevalent is because international competition is more fierce now than ever before. And, now more than ever, innovation spreads like wildfire in a chinook.

Simon cites recent cases providing "vivid confirmation of the NPEs' strategy." Exhibit number one: Odom v. Attachmate et al, "a suit against 28 software companies." Yours truly. Let's look at the facts.

This inventor spent twenty years as a software designer and developer, and wrote well over a half-million lines of code as a journeyman. For corporations. Currently eight patents to my name, in a variety of technologies.

Four years after Odom invented active tool groups for toolbars, Microsoft tried to patent the same invention. To my knowledge, Microsoft introduced the technology into the commercial marketplace with Office 2007. Microsoft actively promoted the technology with a licensing program, with some assurance to licensees that Microsoft owned the technology. The advantage abundantly clear over the prior art, active tool groups has been widely adopted by numerous companies as a worthy innovation.

How would Simon recompense inventors such as Odom?

This litigation effectively imposes a tax on the creation and use of innovative technology products.

Microsoft told Odom that his patents represented a "tax." Microsoft "set forth terms" for Odom to give Microsoft a license to all his patents. In return, they were willing to give: nothing. Zip. Nada. There's the patent tax that these mega-corporations deem equitable, with profit margins up to 80%, and marginal costs next to nothing (as much sunk cost is in R&D). Not a cent to inventors. The "true innovators."

Simon attacks the nearly 40-year case law precedent of Georgia-Pacific v. United States Plywood, accusing it of failing to provide for reasonable royalty, particularly where a product is made of numerous components to which multiple patents may apply.

The flaws in the Georgia-Pacific test are especially pronounced when the plaintiffs target is a complex product made up of many different components...

Let's look at some of the Georgia-Pacific factors to see what's included.

8. The established profitability of the product made under the patent; its commercial success; and its current popularity.

9. The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results.

10. The nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention.

11. The extent to which the infringer has made use of the invention; and any evidence probative of the value of that use.

12. The portion of the profit or of the selling price that may be customary in the particular business or in comparable businesses to allow for the use of the invention or analogous inventions.

13. The portion of the realizable profit that should be credited to the invention as distinguished from nonpatented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer.

Corporations take moral weaklings, blazing with ambition of power (such an illusion, that), then engender and empower them to heights of arrogance and deceit. People like David Simon, lacking any apparent sense of honesty, empathy, or equity, acting as a scourge upon humanity, to rake in as much profit as possible, without regard to others or the environment, beyond what facile civility and the law require. And there are a hell of a lot of them running large corporations in this country.

Full post as published by The Patent Prospector on May 01, 2009 (boomark / email).