What have non-technically trained lawyers contributed to IP law?
The issue was what non-technically trained lawyers have contributed to intellectual property law. Some of my posts on a
different blog:
***
I have to ask: what have we learned about technology law from some non-technically-oriented lawyers? This seems to be your predicate for "blending is a good thing" and better patents and business models.
As to the goal of promoting innovation, I think the bigger point is that "disclosure of invention" (the goal of the patent system) is not the same thing as promoting innovation. Whether the 90%+ of the patents that are not commercialized promote innovation can be questioned, but it is does seem clear that disclosure occurred. The numerous patents that cite to, and distinguish from, earlier patents is some evidence.
I am interested in "there’s a lot of non-Stanford-[or Stanford] generated writing out there that sticks to Bell for lack of foresight." Bell Labs fully understood the transistor as amplifier (AT&T finished a phone relay system based on the transistor about the same time the transistor-based hearing aid was commercialized) and Bell Labs fully understood the transistor as switch (the first airplane-based computer was built by Bell Labs under government contract in the 1950's). AT&T was not in the consumer-electronics business, but certainly licensed to those who were. What lack of foresight?
Of knowledge of business models by lawyers, big companies are going with mass production of patent applications, throwing up the "wall of patents" horror story. I doubt if the patent scribe in Bangalore or Mumbai has been briefed on business plans.
***
1. I would be interested in some specific examples of what have we learned about technology law from some non-technically-oriented lawyers? Citations to articles, perhaps.
2. The constitutional mandate is to promote the progress. People were motivated to disclose in patents long before scientific publication in journals was a big deal. The disclosure of patents sets baselines of where technology is/was at a given time. Again, 90% of issued patents aren’t commercialized, and, in and of themselves aren’t innovations in the business school sense of the word. That does not mean that such patents didn’t promote progress. US patent law has never had a requirement of economic advance over the prior art. It has required utility and novelty.
3. Just because research by Google tends to produce conflicting results does not mean there really are conflicts. AT&T fully understood the need for a more reliable amplifier (than tubes), deliberately set out to create a solid state amplifier, and immediately implemented it. AT&T was a regulated monopoly that was not in the consumer electronics business. As a monopoly, AT&T did not want antitrust issues arising from market areas in which they had no business; hence, the 25K license fee. If you look at their initial demos in 1948 (and their earlier briefing of the Army), you will readily see that they understood the potential impact.
4. I don’t think the “wall of patents” strategy is necessarily defensive. It forces licensing, as IBM has illustrated.
Curiously, some of the worst “offenders” in the “write the patent quickly and cheaply” school that I have seen are from smaller companies, exactly those who one might think need the good patent. However, claim construction being what it is (ca. 50% reversal rate), no one is ever quite sure about the scope of claims. Further, it’s not even clear what is prior art (in Eolas, the district court applied 102(g) abandonment principles to what was 102(a)/102(b) art). With this level of uncertainty, there seem to be many who take the money and run before sloppy work is uncovered.
Patent lawyers don’t “avoid” business people. Patent lawyers get the invention disclosure of the technical person. If they are lucky, they talk to the technical person. Business people are not in the loop. Business people, for whatever reason, don’t typically seek out patent lawyers. In Exxon v. US over Fischer-Tropsch catalysts there was monumental litigation, but when the smoke cleared, damages were only a few thousand dollars. Similarly, there are lots of patents on oil shale conversion, with basically zero likelihood that they would ever be economically worthwhile. On the flipside, certain businesses have invested in BlackLight’s hydrino technology. Jaffe and Lerner sure didn’t seek out patent lawyers in accepting the 85% patent grant rate argument.
If business people were really involved in patent decisions, one hopes that more than 10% of issued patents would generate some money.
***
To focus on one point [“Bell’s failure to recognize the potential of the transistor in the non-telephone based consumer technology market, which led to Bell’s demanding a foolishly low license fee from Morita.” I’m in no position to judge the truth; it looks to me, however, like both accounts are plausible. From what I’ve read, histories of technology are rarely straightforward; much depends on the point of view, on underlying assumptions about the nature of science and technology, and about the relative importance of the science itself, social and economic conditions, and personalities.]
one notes
1. Bell Labs had a flat fee for licensing the transistor patents. It was $25,000. It was the same for Morita (Sony) as it was for Texas Instruments. It did not depend on field of use.
2. The transistor patents were royalty free for the field of use of hearing aids. Even Stanford professors acknowledge that the inventors of the transistor foresaw the hearing aid application. The argument that because Bell Labs charged a ridiculously low royalty (free) indicates they did not see the use is wrong for hearing aids, and wrong for the other applications.
3. Because both accounts are "plausible" does not mean both are right. To some (including Stanford professors), both possibilities in selecting the door in the "Let's Make a Deal" problem are equally plausible, but they are not.
4. While historians may take different points of view on technology (a recent book elevates the contribution of Glenn Curtiss over the Wright Brothers), the scope of understanding of the inventors of the transistor is something that can be objectively assessed. We have earlier discussed the disclosure function of the patent document. Here, one notes that the Bardeen/Brattain and Shockley patents mention the amplifier function of the transistor, but never mention the words "hearing aid." If it were true that the only application they foresaw was hearing aids, that is a very odd situation.
**I never did get an answer as to which papers, from some non-technically-oriented lawyers, taught us about technology law. However, note that "non-technically-oriented lawyers" morphed into economic research:
To be honest, I really think that we don’t disagree much on the merits, but we simply talk in very different vocabularies. We do disagree on some history (scientific publishing largely preceded the patent system) and some historiography (I’m more skeptical of our ability “objectively” to assess what was known at some point in time), but I don’t regard either point as fundamental. I’ll have to sign off with the following:
Seeing the relevance of economic research to IP requires only a cursory examination of the Current Index to Legal Periodicals over the last decade, or, if you prefer, a search for research on network effects and institutional economics on JSTOR. Bell did charge a $25,000 flat license, to Sony and others; I didn’t suggest otherwise. And “Google results” shouldn’t be taken disparagingly, even though I don’t have time to give cites and sources; I was looking at e-copies of journal articles — from the technical literature, not the legal literature. Patent lawyers, at least most of the patent lawyers that I talk to, are indeed frustrated by not having sufficient access to the inventors, but they have little interest in talking to the business people. But finger-pointing is not the point; the point is that if both disciplines spent more time talking to and learning from one another, both clients and the patent system would be better off.
The host blogger closed the thread at this point.
Of the side issue of scientific publication, US Patent No. 1 was issued in 1790. In 1790,
Friedrich Gren founded the Journal der Physik, today known as the Annalen der Physik. The Journal of the American Chemical Society, perhaps the most cited journal, was founded in 1879.
In the time period of the first US patent, the most important scientific work of American Benjamin Thompson (Count Rumford) took place in Munich, and centered on the nature of heat, which he demonstrated in An Experimental Enquiry Concerning the Source of the Heat which is Excited by Friction (1798) to be not a liquid form of matter but a form of mechanical energy. The theory advanced in the publication was largely ignored.
There is another lesson from US Patent No. 1. From the work of Professor Henry M. Paynter:
Samuel Hopkins received US Patent No. 1 on July 31, 1790, for an improvement "in the making Pot ash and Pearl ash by a new Apparatus and Process." The patent was signed by President George Washington, Attorney General Edmund Randolph, and Secretary of State Thomas Jefferson.
Hopkins's key advance lay in burning the raw ashes in a furnace before they were dissolved in water. This second burning resulted in much greater carbonate formation, apparently because the free carbon in raw ashes (which partly accounts for the black color) was more completely oxidized and because of exposure to concentrated carbon dioxide gas from the fire. Hopkins also ncreased yields by mixing the insoluble residue from one batch with the raw ashes of the next, instead of simply discarding it. For a five-year license for a furnace using his process, Hopkins required a down payment of $50, or a half-ton of potash, and another $150, or a ton and a half of potash, over the next five years, payable to his agents in various cities. The exemplary disclosure, marketing plan, and license agreements, co authored by Shotwell as Hopkins' attorney-in-fact, set worthy precedents for all subsequent inventors.
In U.S. Patent No. 1, issued in 1790, the lawyer wrote the marketing plan. On a blog, in 2005, we have the statement: patent lawyers "have little interest in talking to the business people." Something is really wrong here.
**Of interest to discussion on contributions of non-technically trained lawyers-->
Mark Lemley, in attempting to gather evidence to rebut the concept expressed in "George Priest went so far in 1986 as to say that economists could tell lawyers virtually nothing about the appropriate scope of intellectual property rights," cited to the second Quillen/Webster paper, presumably as an example of what economists could tell lawyers [he also cited to the Jaffe/Trajtenberg work on patent citations; see footnote 137 of 83 Tex. L. Rev. 1031 (2005)] Criticisms of this second Quillen/Webster paper demonstrating bad legal analysis and bad math were ignored by Lemley [for the criticism, see 86 JPTOS 568 (2004) and 4 Chi.-Kent J. Intell. Prop. 104 (2004); criticisms of patent citation analysis are myriad.]
from Intellectual Property Today, September 2005.
In the beginning of Lemley's article in 83 Tex. L. Rev. 1031, we see that Professor Madison reviewed Lemley's article:
Thanks to Amitai Aviram, Tom Bell, Yochai Benkler, Anupam Chander, Vince Chiappetta, Julie Cohen, Dick Craswell, Tino Cuellar, Brett Frischmann, Michael Goldhaber, Rose
Hagan, Brad Handler, Alan Isaac, Mark Kelman, Glynn Lunney, Mike Madison, Mike Meurer, David McGowan, Alan Morrison, Craig Nard, Kevin Outterson, Mitch Polinsky, Arti Rai, Eric Rasmusen, Tony Reese, Pam Samuelson, Erich Schanze, Richard
Stallman, Stewart Sterk, Jeff Strnad, Eugene Volokh, Spencer Waller, and
participants at a workshop at Stanford Law School for comments and discussions that have fundamentally changed (and hopefully improved) this Article.
Footnote 137:
George L. Priest, What Economists Can Tell Lawyers About
Intellectual Property: Comment on Cheung, 8 Res. L. & Econ. 19, 21 (1986). Priest's concern - the lack of empirical study of intellectual property - rings false today. In the last twenty years, there has been an outpouring of empirical economic
work on intellectual property, and the patent system in particular. See, e.g., John R. Allison & Mark A. Lemley, The Growing Complexity of the United States Patent System, 82 B.U. L. Rev. 77 (2002); John R. Allison & Mark A. Lemley, Who's Patenting What? An Empirical Exploration of Patent Prosecution, 53 Vand. L. Rev. 2099 (2000); Barton, supra note 133; Bronwyn Hall & Rosemarie Ham Ziedonis, The Patent Paradox Revisited: Determinants of Patenting in the U.S. Semiconductor Industry, 1979-1995, 32 RAND J. Econ. 101 (2001); Adam B. Jaffe & Manuel Trajtenberg, International Knowledge Flows: Evidence from Patent Citations, 8 Econ. Innov. New Tech. 105 (1999); Daniel K. N. Johnson & Vittorio Santaniello, Biotechnology Inventions: What Can We Learn From Patents?, in Agriculture and Intellectual Property Rights 169 (V. Santaniello et al. eds., 2001); Samuel Kortum & Josh Lerner, Stronger Protection or Technological Revolution: What is Behind the Recent Surge in Patenting?, 28 Res. Pol'y 1 (1999); Lemley, Patent Term, supra note 38; Richard C. Levin et al., Appropriating the Returns from Industrial Research and Development, in 1987 Brookings Papers on Econ. Activity 783 (1987); Edwin Mansfield, Patents and Innovation: An Empirical
Study, 32 Mgmt. Sci. 173 (1986); Cecil D. Quillen, Jr. et al., Continuing Patent Applications and Performance of the U.S. Patent and Trademark Office - Extended, 12 Fed. Cir. B.J. 35 (2002); see also Wesley M. Cohen et al., Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not) 3-4 (Nat'l Bureau of Econ. Research, Working Paper No. 7552, 2000), available at http://www.nber.org/papers/w7552.pdf.
**
Of the "equally plausible" arguments, recall the antitrust issues faced by AT&T in the late 1940's and early 1950's:
In the mid-1950s, Anti-trust law played a substantial role in IP
policy governing the information technology industry by forcing extensive cross licensing of privately owned patents in the computer industry. As reported by the FTC, the 1950's was an era when anti-trust law trumped IP. n61 As an example, AT&T and the Bell System functioned as a "legally sanctioned, [government] regulated monopoly. n62 Through its monopoly, AT&T dominated three
major areas of telephone service: local service, long distance service, as well as equipment. n63 AT&T's success was partly attributed to a patent monopoly over this equipment. n64 In the mid-1940's, the Justice Department began a review of AT&T's business practices which resulted in a 1949 anti-trust suit against AT&T
and Western Electric, whereby the defendants were charged with
monopolizing the manufacture and sale of telephones and equipment in violation of the Sherman Act. n65 A seven-year struggle to separate the Bell System's manufacturing functionality from its operating and research functions ensued. n66
In 1956, the second case of U.S. v. Western Electric Co. & AT&T was settled with a consent decree. n67 Its terms provided that: (1) [*491] the Bell System confine its business activities to common-carrier communications service, and (2) Western Electric limit its manufacture of equipment to the type used by Bell operating companies. n68 Most crucially, the consent decree also required that
AT&T license all of its current and future patents to all interested
parties. n69 Simply stated, AT&T and Western Electric had to license their patents without restriction to those third party applicants that in turn licensed their patents non-exclusively to AT&T in the broad field of use where the Bell System was active: common carrier telephone service. n70 The patents at stake
included the patent claiming the transistor, which was invented at Bell Labs. n71
By giving AT&T a right to require cross-licenses, the court's consent decree essentially mandated non-exclusive cross-licensing across the entire telecommunications equipment industry. This result affected not only AT&T but also radically shifted the strategic effect of patent protection for the entire electronics industry. This placed licensees in a competitive bind because a
company whose R&D was being blocked by an AT&T patent had no choice but to license out its own IP portfolio into AT&T's field of use.
from Ted Sabety, NANOTECHNOLOGY INNOVATION AND THE PATENT THICKET: WHICH IP POLICIES PROMOTE GROWTH?, 15 Alb. L.J. Sci. & Tech. 477 (2005)
The equally plausible theories are no longer equally plausible when one considers the antitrust pressures faced by AT&T. At all relevant times, Bell Labs recognized the significance of the transistor. The "transistor only for hearing aid" suggestion is simply wrong. This saga is an example of where an economics guy "got it wrong," ironically by not considering an economics issue (antitrust) and its impact on intellectual property.
different blog:
***
I have to ask: what have we learned about technology law from some non-technically-oriented lawyers? This seems to be your predicate for "blending is a good thing" and better patents and business models.
As to the goal of promoting innovation, I think the bigger point is that "disclosure of invention" (the goal of the patent system) is not the same thing as promoting innovation. Whether the 90%+ of the patents that are not commercialized promote innovation can be questioned, but it is does seem clear that disclosure occurred. The numerous patents that cite to, and distinguish from, earlier patents is some evidence.
I am interested in "there’s a lot of non-Stanford-[or Stanford] generated writing out there that sticks to Bell for lack of foresight." Bell Labs fully understood the transistor as amplifier (AT&T finished a phone relay system based on the transistor about the same time the transistor-based hearing aid was commercialized) and Bell Labs fully understood the transistor as switch (the first airplane-based computer was built by Bell Labs under government contract in the 1950's). AT&T was not in the consumer-electronics business, but certainly licensed to those who were. What lack of foresight?
Of knowledge of business models by lawyers, big companies are going with mass production of patent applications, throwing up the "wall of patents" horror story. I doubt if the patent scribe in Bangalore or Mumbai has been briefed on business plans.
***
1. I would be interested in some specific examples of what have we learned about technology law from some non-technically-oriented lawyers? Citations to articles, perhaps.
2. The constitutional mandate is to promote the progress. People were motivated to disclose in patents long before scientific publication in journals was a big deal. The disclosure of patents sets baselines of where technology is/was at a given time. Again, 90% of issued patents aren’t commercialized, and, in and of themselves aren’t innovations in the business school sense of the word. That does not mean that such patents didn’t promote progress. US patent law has never had a requirement of economic advance over the prior art. It has required utility and novelty.
3. Just because research by Google tends to produce conflicting results does not mean there really are conflicts. AT&T fully understood the need for a more reliable amplifier (than tubes), deliberately set out to create a solid state amplifier, and immediately implemented it. AT&T was a regulated monopoly that was not in the consumer electronics business. As a monopoly, AT&T did not want antitrust issues arising from market areas in which they had no business; hence, the 25K license fee. If you look at their initial demos in 1948 (and their earlier briefing of the Army), you will readily see that they understood the potential impact.
4. I don’t think the “wall of patents” strategy is necessarily defensive. It forces licensing, as IBM has illustrated.
Curiously, some of the worst “offenders” in the “write the patent quickly and cheaply” school that I have seen are from smaller companies, exactly those who one might think need the good patent. However, claim construction being what it is (ca. 50% reversal rate), no one is ever quite sure about the scope of claims. Further, it’s not even clear what is prior art (in Eolas, the district court applied 102(g) abandonment principles to what was 102(a)/102(b) art). With this level of uncertainty, there seem to be many who take the money and run before sloppy work is uncovered.
Patent lawyers don’t “avoid” business people. Patent lawyers get the invention disclosure of the technical person. If they are lucky, they talk to the technical person. Business people are not in the loop. Business people, for whatever reason, don’t typically seek out patent lawyers. In Exxon v. US over Fischer-Tropsch catalysts there was monumental litigation, but when the smoke cleared, damages were only a few thousand dollars. Similarly, there are lots of patents on oil shale conversion, with basically zero likelihood that they would ever be economically worthwhile. On the flipside, certain businesses have invested in BlackLight’s hydrino technology. Jaffe and Lerner sure didn’t seek out patent lawyers in accepting the 85% patent grant rate argument.
If business people were really involved in patent decisions, one hopes that more than 10% of issued patents would generate some money.
***
To focus on one point [“Bell’s failure to recognize the potential of the transistor in the non-telephone based consumer technology market, which led to Bell’s demanding a foolishly low license fee from Morita.” I’m in no position to judge the truth; it looks to me, however, like both accounts are plausible. From what I’ve read, histories of technology are rarely straightforward; much depends on the point of view, on underlying assumptions about the nature of science and technology, and about the relative importance of the science itself, social and economic conditions, and personalities.]
one notes
1. Bell Labs had a flat fee for licensing the transistor patents. It was $25,000. It was the same for Morita (Sony) as it was for Texas Instruments. It did not depend on field of use.
2. The transistor patents were royalty free for the field of use of hearing aids. Even Stanford professors acknowledge that the inventors of the transistor foresaw the hearing aid application. The argument that because Bell Labs charged a ridiculously low royalty (free) indicates they did not see the use is wrong for hearing aids, and wrong for the other applications.
3. Because both accounts are "plausible" does not mean both are right. To some (including Stanford professors), both possibilities in selecting the door in the "Let's Make a Deal" problem are equally plausible, but they are not.
4. While historians may take different points of view on technology (a recent book elevates the contribution of Glenn Curtiss over the Wright Brothers), the scope of understanding of the inventors of the transistor is something that can be objectively assessed. We have earlier discussed the disclosure function of the patent document. Here, one notes that the Bardeen/Brattain and Shockley patents mention the amplifier function of the transistor, but never mention the words "hearing aid." If it were true that the only application they foresaw was hearing aids, that is a very odd situation.
**I never did get an answer as to which papers, from some non-technically-oriented lawyers, taught us about technology law. However, note that "non-technically-oriented lawyers" morphed into economic research:
To be honest, I really think that we don’t disagree much on the merits, but we simply talk in very different vocabularies. We do disagree on some history (scientific publishing largely preceded the patent system) and some historiography (I’m more skeptical of our ability “objectively” to assess what was known at some point in time), but I don’t regard either point as fundamental. I’ll have to sign off with the following:
Seeing the relevance of economic research to IP requires only a cursory examination of the Current Index to Legal Periodicals over the last decade, or, if you prefer, a search for research on network effects and institutional economics on JSTOR. Bell did charge a $25,000 flat license, to Sony and others; I didn’t suggest otherwise. And “Google results” shouldn’t be taken disparagingly, even though I don’t have time to give cites and sources; I was looking at e-copies of journal articles — from the technical literature, not the legal literature. Patent lawyers, at least most of the patent lawyers that I talk to, are indeed frustrated by not having sufficient access to the inventors, but they have little interest in talking to the business people. But finger-pointing is not the point; the point is that if both disciplines spent more time talking to and learning from one another, both clients and the patent system would be better off.
The host blogger closed the thread at this point.
Of the side issue of scientific publication, US Patent No. 1 was issued in 1790. In 1790,
Friedrich Gren founded the Journal der Physik, today known as the Annalen der Physik. The Journal of the American Chemical Society, perhaps the most cited journal, was founded in 1879.
In the time period of the first US patent, the most important scientific work of American Benjamin Thompson (Count Rumford) took place in Munich, and centered on the nature of heat, which he demonstrated in An Experimental Enquiry Concerning the Source of the Heat which is Excited by Friction (1798) to be not a liquid form of matter but a form of mechanical energy. The theory advanced in the publication was largely ignored.
There is another lesson from US Patent No. 1. From the work of Professor Henry M. Paynter:
Samuel Hopkins received US Patent No. 1 on July 31, 1790, for an improvement "in the making Pot ash and Pearl ash by a new Apparatus and Process." The patent was signed by President George Washington, Attorney General Edmund Randolph, and Secretary of State Thomas Jefferson.
Hopkins's key advance lay in burning the raw ashes in a furnace before they were dissolved in water. This second burning resulted in much greater carbonate formation, apparently because the free carbon in raw ashes (which partly accounts for the black color) was more completely oxidized and because of exposure to concentrated carbon dioxide gas from the fire. Hopkins also ncreased yields by mixing the insoluble residue from one batch with the raw ashes of the next, instead of simply discarding it. For a five-year license for a furnace using his process, Hopkins required a down payment of $50, or a half-ton of potash, and another $150, or a ton and a half of potash, over the next five years, payable to his agents in various cities. The exemplary disclosure, marketing plan, and license agreements, co authored by Shotwell as Hopkins' attorney-in-fact, set worthy precedents for all subsequent inventors.
In U.S. Patent No. 1, issued in 1790, the lawyer wrote the marketing plan. On a blog, in 2005, we have the statement: patent lawyers "have little interest in talking to the business people." Something is really wrong here.
**Of interest to discussion on contributions of non-technically trained lawyers-->
Mark Lemley, in attempting to gather evidence to rebut the concept expressed in "George Priest went so far in 1986 as to say that economists could tell lawyers virtually nothing about the appropriate scope of intellectual property rights," cited to the second Quillen/Webster paper, presumably as an example of what economists could tell lawyers [he also cited to the Jaffe/Trajtenberg work on patent citations; see footnote 137 of 83 Tex. L. Rev. 1031 (2005)] Criticisms of this second Quillen/Webster paper demonstrating bad legal analysis and bad math were ignored by Lemley [for the criticism, see 86 JPTOS 568 (2004) and 4 Chi.-Kent J. Intell. Prop. 104 (2004); criticisms of patent citation analysis are myriad.]
from Intellectual Property Today, September 2005.
In the beginning of Lemley's article in 83 Tex. L. Rev. 1031, we see that Professor Madison reviewed Lemley's article:
Thanks to Amitai Aviram, Tom Bell, Yochai Benkler, Anupam Chander, Vince Chiappetta, Julie Cohen, Dick Craswell, Tino Cuellar, Brett Frischmann, Michael Goldhaber, Rose
Hagan, Brad Handler, Alan Isaac, Mark Kelman, Glynn Lunney, Mike Madison, Mike Meurer, David McGowan, Alan Morrison, Craig Nard, Kevin Outterson, Mitch Polinsky, Arti Rai, Eric Rasmusen, Tony Reese, Pam Samuelson, Erich Schanze, Richard
Stallman, Stewart Sterk, Jeff Strnad, Eugene Volokh, Spencer Waller, and
participants at a workshop at Stanford Law School for comments and discussions that have fundamentally changed (and hopefully improved) this Article.
Footnote 137:
George L. Priest, What Economists Can Tell Lawyers About
Intellectual Property: Comment on Cheung, 8 Res. L. & Econ. 19, 21 (1986). Priest's concern - the lack of empirical study of intellectual property - rings false today. In the last twenty years, there has been an outpouring of empirical economic
work on intellectual property, and the patent system in particular. See, e.g., John R. Allison & Mark A. Lemley, The Growing Complexity of the United States Patent System, 82 B.U. L. Rev. 77 (2002); John R. Allison & Mark A. Lemley, Who's Patenting What? An Empirical Exploration of Patent Prosecution, 53 Vand. L. Rev. 2099 (2000); Barton, supra note 133; Bronwyn Hall & Rosemarie Ham Ziedonis, The Patent Paradox Revisited: Determinants of Patenting in the U.S. Semiconductor Industry, 1979-1995, 32 RAND J. Econ. 101 (2001); Adam B. Jaffe & Manuel Trajtenberg, International Knowledge Flows: Evidence from Patent Citations, 8 Econ. Innov. New Tech. 105 (1999); Daniel K. N. Johnson & Vittorio Santaniello, Biotechnology Inventions: What Can We Learn From Patents?, in Agriculture and Intellectual Property Rights 169 (V. Santaniello et al. eds., 2001); Samuel Kortum & Josh Lerner, Stronger Protection or Technological Revolution: What is Behind the Recent Surge in Patenting?, 28 Res. Pol'y 1 (1999); Lemley, Patent Term, supra note 38; Richard C. Levin et al., Appropriating the Returns from Industrial Research and Development, in 1987 Brookings Papers on Econ. Activity 783 (1987); Edwin Mansfield, Patents and Innovation: An Empirical
Study, 32 Mgmt. Sci. 173 (1986); Cecil D. Quillen, Jr. et al., Continuing Patent Applications and Performance of the U.S. Patent and Trademark Office - Extended, 12 Fed. Cir. B.J. 35 (2002); see also Wesley M. Cohen et al., Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not) 3-4 (Nat'l Bureau of Econ. Research, Working Paper No. 7552, 2000), available at http://www.nber.org/papers/w7552.pdf.
**
Of the "equally plausible" arguments, recall the antitrust issues faced by AT&T in the late 1940's and early 1950's:
In the mid-1950s, Anti-trust law played a substantial role in IP
policy governing the information technology industry by forcing extensive cross licensing of privately owned patents in the computer industry. As reported by the FTC, the 1950's was an era when anti-trust law trumped IP. n61 As an example, AT&T and the Bell System functioned as a "legally sanctioned, [government] regulated monopoly. n62 Through its monopoly, AT&T dominated three
major areas of telephone service: local service, long distance service, as well as equipment. n63 AT&T's success was partly attributed to a patent monopoly over this equipment. n64 In the mid-1940's, the Justice Department began a review of AT&T's business practices which resulted in a 1949 anti-trust suit against AT&T
and Western Electric, whereby the defendants were charged with
monopolizing the manufacture and sale of telephones and equipment in violation of the Sherman Act. n65 A seven-year struggle to separate the Bell System's manufacturing functionality from its operating and research functions ensued. n66
In 1956, the second case of U.S. v. Western Electric Co. & AT&T was settled with a consent decree. n67 Its terms provided that: (1) [*491] the Bell System confine its business activities to common-carrier communications service, and (2) Western Electric limit its manufacture of equipment to the type used by Bell operating companies. n68 Most crucially, the consent decree also required that
AT&T license all of its current and future patents to all interested
parties. n69 Simply stated, AT&T and Western Electric had to license their patents without restriction to those third party applicants that in turn licensed their patents non-exclusively to AT&T in the broad field of use where the Bell System was active: common carrier telephone service. n70 The patents at stake
included the patent claiming the transistor, which was invented at Bell Labs. n71
By giving AT&T a right to require cross-licenses, the court's consent decree essentially mandated non-exclusive cross-licensing across the entire telecommunications equipment industry. This result affected not only AT&T but also radically shifted the strategic effect of patent protection for the entire electronics industry. This placed licensees in a competitive bind because a
company whose R&D was being blocked by an AT&T patent had no choice but to license out its own IP portfolio into AT&T's field of use.
from Ted Sabety, NANOTECHNOLOGY INNOVATION AND THE PATENT THICKET: WHICH IP POLICIES PROMOTE GROWTH?, 15 Alb. L.J. Sci. & Tech. 477 (2005)
The equally plausible theories are no longer equally plausible when one considers the antitrust pressures faced by AT&T. At all relevant times, Bell Labs recognized the significance of the transistor. The "transistor only for hearing aid" suggestion is simply wrong. This saga is an example of where an economics guy "got it wrong," ironically by not considering an economics issue (antitrust) and its impact on intellectual property.
posted by Lawrence B. Ebert at 5:14 AM
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