Evidence That Patents Do Not Holdup Innovation

(p. A17) The trade war has highlighted the competitive advantage of reliable patent rights in driving innovation, prompting a bipartisan effort in Congress to strengthen patents.

. . .

Yet the FTC doesn’t seem to have received the message. It continues to push regulatory policies and undertake enforcement actions based on the story that bad actors licensing their patents somehow are stopping companies from making new innovative products and are harming consumers with higher prices. This idea that “patent holdup” raises prices and stifles innovation is based entirely on an academic theory first proposed in the Texas Law Review in 2007 by professors Mark Lemley and Carl Shapiro.

In contrast to the theory, extensive empirical research since 2007 has failed to find any of the predicted harms of stifled innovation or higher prices, and has in fact found the opposite. “An Empirical Examination of Patent Holdup,” published in 2015, found that industries like smartphone design with patents on foundational technologies have the fastest quality-adjusted price reductions in consumer products. A 2016 George Mason Law Review study also found consistent reductions in consumer prices, increased research-and-development spending, and incredibly fast technological innovation driven by patent licensing of key technologies in the smartphone industry.

For the full commentary, see:

Adam Mossoff. “The FTC Joins Huawei on a Misguided Troll Hunt; The commission’s lawsuit against Qualcomm threatens to undermine American innovation.” The Wall Street Journal (Saturday, Jan. 27, 2019): A17.

(Note: ellipsis added.)

(Note: the online version of the commentary has the same date and title as the print version.)

The 2016 George Mason Law Review study, mentioned above, is:

Mallinson, Keith. “Don’t Fix What Isn’t Broken: The Extraordinary Record of Innovation and Success in the Cellular Industry under Existing Licensing Practices.” George Mason Law Review 23, no. 4 (Summer 2016): 967-1006.

The 2015 paper mentioned above, is:

Galetovic, Alexander, Stephen Haber, and Ross Levine. “An Empirical Examination of Patent Holdup.” Journal of Competition Law and Economics 11, no. 3 (Sept. 2015): 549-78.

A related 2017 paper, is:

Galetovic, Alexander, and Stephen Haber. “The Fallacies of Patent-Holdup Theory.” Journal of Competition Law and Economics 13, no. 1 (March 2017): 1-44.

Patenting a Better Vacuum Tube as Semiconductors Emerge

After his disappointing improved-vacuum-tube invention (see below), Kates did not give up. He went on to make important contributions in coordinating traffic lights to ease traffic flows.

(p. A9) When he demonstrated a computer tic-tac-toe game called Bertie the Brain in 1950, Josef Kates thought he was on the verge of making a fortune. The game, introduced at the Canadian National Exhibition, featured streamlined vacuum tubes invented by the Austrian-born Dr. Kates, who came to Canada in the 1940s as a refugee from Nazism. He hoped the tubes would revolutionize computing.

His timing was off. The rise of semiconductors was about to render vacuum tubes obsolete as computer components. “I got the patent, but the patent was useless,” he said in an oral history. “Okay, so on goes the world.”

For the full obituary, see:

James R. Hagerty. “Refugee Crunched Data to Unsnarl Traffic Jams.” The Wall Street Journal (Saturday, July 28, 2018): A9.

(Note: the online version of the obituary has the date July 27, 2018, and has the title “Josef Kates Found Ways to Unsnarl Traffic and Solve Business Problems With Computers.”)

Huawei “Spent All Their Resources Stealing Technology”

(p. B1) On a summer evening in 2004, as the Supercomm tech conference in Chicago wound down, a middle-aged Chinese visitor began wending his way through the nearly abandoned booths, popping open million-dollar networking equipment to photograph the circuit boards inside, according to people who were there.

A security guard stopped him and confiscated memory sticks with the photos, a notebook with diagrams and data belonging to AT&T Corp. , and a list of six companies including Fujitsu Network Communications Inc. and Nortel Networks Corp.

The man identified himself to conference staff as Zhu Yibin, an engineer. The word on his lanyard read “Weihua”—an accidental scramble, he said, of his employer’s name: Huawei Technologies Co.

. . .

(p. B6) A review of 10 cases in U.S. federal courts, and dozens of interviews with U.S. officials, former employees, competitors, and collaborators suggest Huawei had a corporate culture that blurred the boundary between competitive achievement and ethically dubious methods of pursuing it. Continue reading “Huawei “Spent All Their Resources Stealing Technology””

Patent Troll Is Bankrupt After Victims Fight Back

(p. B5) Shipping & Transit LLC sued more than 100 mostly small companies in 2016, making it the largest filer of patent lawsuits that year. But when the Florida company recently declared bankruptcy, it valued its U.S. patents at just $1.
Its demise followed three cases where companies fought back and were awarded legal fees after Shipping & Transit decided not to pursue the patent claims against them. Judges in the cases awarded a total of more than $245,000 in attorneys’ fees and costs to businesses in 2017.
Shipping & Transit doesn’t sell tracking systems or anything else. Instead, it claims to own patents “for providing status messages for cargo, shipments and people,” according to court filings. The company typically demanded licensing fees of $25,000 to $45,000 from companies it said were infringing on its patents. Most agree to pay small amounts to avoid costly litigation.
. . .
In one ruling, a U.S. district judge in Santa Ana, Calif., called Shipping & Transit’s patent claims “objectively unreasonable” in light of a 2014 Supreme Court decision that held that certain kinds of abstract ideas weren’t patentable.
. . .
Patent assertions by companies that don’t make products and are primarily focused on making money off of patents have declined since the Supreme Court decision, but still “remain extremely high,” said Shawn Ambwani, chief operating officer of Unified Patents, which specializes in challenging these types of assertions.
In another of the cases from 2017, a federal magistrate judge in West Palm Beach, Fla., said Shipping & Transit’s actions suggest that the company’s “strategy is predatory and aimed at reaping financial advantage from defendants who are unwilling or unable to engage in the expense of patent litigation.”.

For the full commentary, see:
Ruth Simon. “Company That Filed Patent Suits Derails.” The Wall Street Journal (Monday, Dec. 17, 2018): B5.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Dec. 16, 2018, and has the title “Pushback Derails Company That Thrived on Patent Lawsuits.”)

Only Presidents with Their Names on Patents Are Lincoln and Trump

(p. A15) Fostering patentable innovation should appeal to President Trump. He is the only U.S. president other than Abraham Lincoln to have his name on a U.S. patent header. Though he wasn’t the inventor, Trump Taj Mahal Associates’ 1996 patent for a “Proportional payout method for progressive linked gaming machines” makes Mr. Trump, at least indirectly, the second presidential patenter.
But unlike Lincoln’s invention, a method of lifting boats over shoals that was cited only 10 times as prior art by subsequent inventors, the Trump Taj Mahal patent has accrued an incredible 1,066 citations. These citations are a key metric for judging economic significance and downstream impact. For someone who loves ratings, Mr. Trump must surely be pleased that his patent topped the charts.

For the full commentary, see:
Mike Kalutkiewicz and Richard L. Ehman. “A Government Agency That Produces Real Innovation; What does Trump have in common with the National Institutes of Health? Patents.” The Wall Street Journal (Friday, June 23, 2017): A15.
(Note: the online version of the commentary has the date June 22, 2017.)

Ridiculed Nathan Myhrvold Perseveres on Asteroids and Is Vindicated

Nathan Myhrvold has also been ridiculed on his entrepreneurial patent clearinghouse (called Intellectual Ventures), and on his geoengineering solution to global warming.

(p. D1) Thousands of asteroids are passing through Earth’s neighborhood all the time. Although the odds of a direct hit on the planet any time soon are slim, even a small asteroid the size of a house could explode with as much energy as an atomic bomb.

So scientists at NASA are charged with scanning the skies for such dangerous space rocks. If one were on a collision course with our planet, information about how big it is and what it’s made of would be essential for deflecting it, or calculating the destruction if it hits.
For the last couple of years, Nathan P. Myhrvold, a former chief technologist at Microsoft with a physics doctorate from Princeton, has roiled the small, congenial community of asteroid scientists by saying they know less than they think about these near-Earth objects. He argues that a trove of data from NASA they rely on is flawed and unreliable.
. . .
(p. D4) Dr. Myhrvold’s findings pose a challenge to a proposed NASA asteroid-finding mission called Neocam, short for Near-Earth Object Camera, which would likely cost hundreds of millions of dollars. A congressional committee that controls NASA’s purse strings just included $10 million more in a budget bill for the development of Neocam.
. . .
When Dr. Myhrvold made his initial claims, the Neowise scientists made fun of a few errors like an equation that mixed up radius and diameter.
“It is too bad Myhrvold doesn’t have Google’s bug-finding bounty policy,” Dr. Wright told Scientific American. “If he did, I’d be rich.”
Dr. Mainzer also said at the time, “We believe at this point it’s best to allow the process of peer review — the foundation of the scientific process — to move forward.”
. . .
Earlier this year, Icarus published Dr. Myhrvold’s first paper on how reflected sunlight affects measurements of asteroids at the shorter infrared wavelengths measured by WISE. It has now accepted and posted a second paper last month containing Dr. Myhrvold’s criticisms of the NASA asteroid data.
. . .
When the scientists reported their findings, they did not include the estimates produced by their models, which would have given a sense of how good the model is. Instead they included the earlier measurements.
Other astronomers agreed that the Neowise scientists were not clear about what numbers they were reporting.
“They did some kind of dumb things,” said Alan W. Harris, a retired NASA asteroid expert who was one of the reviewers of Dr. Myhrvold’s second paper.
Dr. Myhrvold has accused the Neowise scientists of going into a NASA archive of planetary results, changing some of the copied numbers and deleting others without giving notice.
“They went back and rewrote history,” he said. “What it shows is even this far in, they’re still lying. They haven’t come clean.”
Dr. Harris said he did not see nefarious behavior by the Neowise scientists, but agreed, “That’s still weird.”
. . .
Dr. Myhrvold said NASA and Congress should put planning for the proposed Neocam spacecraft on hold, because it could suffer from the same shortfalls as Neowise. “Why does it get to avoid further scrutiny and just get money directly from Congress?” he asked.

For the full story, see:
Kenneth Chang. “A Collision Over Asteroids.” The New York Times (Tuesday, June 19, 2018): D1 & D4.
(Note: ellipses added.)
(Note: the online version of the story has the date June 14, 2018, and has the title “Asteroids and Adversaries: Challenging What NASA Knows About Space Rocks.”)

China’s “Double Whammy for Prospective Entrepreneurs”

(p. B12) China’s past attempts to stoke indigenous innovation have a checkered history. A flood of cheap capital and high, state-set solar power rates in the mid-2000s secured China’s place as the world’s number one solar cell manufacturer. But it also led to enormous overcapacity, which sank prices and pushed debt burdens higher, making investment in real R&D more difficult. For investors, China’s solar champions have been a losing proposition–American depositary receipts of top firms such as JinkoSolar are worth less than half of their peak in 2010. Robotics, a key element of Beijing’s “Made in China 2025” plan to dominate high-tech manufacturing, is exhibiting similar tendencies.
The state-centric nature of China’s financial system–and its weak intellectual property protection–represents a double whammy for prospective entrepreneurs. Small private-sector firms often only have access to capital through expensive shadow banking channels, and face the risk that some better connected, state-backed firm will make off with their designs–with very little recourse.

For the full story, see:
Nour Malas and Paul Overberg. “‘Chinese Innovation Won’t Come Easily Without U.S. Tech.” The Wall Street Journal (Tuesday, March 23, 2018): B12.
(Note: the online version of the story has the date March 22, 2018, and has the title “Can China’s Red Capital Really Innovate?”)