Sunday, May 10, 2009

The "modest proposal" for inventor ownership: too late in the day?

Ron Watson at EDN in a piece titled, A modest proposal to save the Intellectual Property system from patent securitization, suggests:

No one seems any longer interested in the original idea: that the patent system should protect the inventor—not his or her employer—and by protecting the inventor encourage publication of the work, thereby accelerating the pace of innovation.
So at this point permit me to offer a suggestion that should infuriate just about everyone in this wonderful, multifaceted debate. I believe that everyone in this discussion would be better served by a single, simple change in the law. We should prohibit assignment, sale, or any other transfer of patent ownership, save on the inventor's decease, to a named heir.

Watson points to the bad situation of most employee - inventors in corporate America:

First, consider the now-distorted relationship between inventors and their employers. Today, granting patents to the people who actually did the inventing is a rude fiction. Unless the inventor happens to be self-employed, and can show that none of the work on the patent was done under the employ of or contract to a company, ownership of the patent will automatically be assigned, by prior agreement, to the employer. Only the most powerful figures in the industry can refuse such assignment agreements when they are hired. This appropriation is poisonous in a number of ways, and to everyone involved.

For one, since it is impossible for the inventor to benefit by more than bragging rights, savvy engineers find ploys to work around the system. They avoid documenting key parts of their work if they think they might be onto something. If an idea starts to pan out, the engineers resign, find funding, and launch a new company from which they file the patents—in effect converting a potential license-revenue stream into high-risk venture equity. That's an unwise bet most of the time, but it is a better deal than simply being stripped of the patents in exchange for a listing on a nice bronze plaque in the lobby. In the end, it is often a lose-lose for everyone. The company in which the employee began the work gets nothing but a minor competitor, the inventor gets nothing but two years of 16-hour days at reduced salary, and the industry gets no benefit from the invention. And that's if everyone is lucky and avoids litigation.

IPBiz notes this system would be a field day for litigation lawyers. Former employers would be suing "resigned" employees all over the place for breach of contract.

But Watson wants licensing FROM the employee - inventor TO the company:

But suppose patents were not transferable. Inventors, instead of assigning patents to their employers, would license them, under terms negotiated on a case-by-case basis. Something useful only to the company the employee might just hand over. An innovation that is the basis for a valuable product might get licensed for a royalty based on apportionment—what share of the product's success is due to the invention--one of the criteria used today to settle infringement cases.

Watson did not get into "who" would pay for patent application filing / prosecution. The employee? Years go by between application and grant. Fewer than 50% of filed applications are granted these days.

There is a bigger problem with Watson's plan. For a large part, time has passed it by. IBM is numero uno in getting US patents. Mr. Watson should check where IBM's workforce "is" these days, and what the trend is. If Ron Watson is unsure about this, he should talk to Rick Clark:

A NBC Nightly News story on 3 April 09 discussed how an IBM Fishkill employee [Frederic (Rick) Clark] was offered the opportunity to keep his job, in India at the prevailing salary in India [20 to 25% of US].

On the layoffs themselves, from the Times Herald-Record online:

IBM fired some 5,000 U.S. workers Thursday [26 March 09] — including employees at IBM Sterling Forest in Tuxedo and IBM Poughkeepsie.

One by one, thousands of IBM workers entered managers' offices with a sense of dread to learn if they'd get the ax.

At Sterling Forest, which had been spared from a wave of firings earlier this year, an employee described the mood as grim and the building whisper quiet.

Big Blue is shifting work to India, where labor and production costs are significantly lower.

Way back in 1474, when Venice passed its patent law, the concern was that some Venetians were scared that other Venetians might steal their ideas, and that this fear would inhibit dissemination of ideas. If there was a belief that the same ideas could be obtained elsewhere, at lower cost, a different calculus would have evolved.

See also

IAM on IBM's Kappos, not touching the political or patent pulse?

IBM to withdraw second patent application on outsourcing

LBE tried to comment at EDN, but comment not accepted.

The video of the Simon / Perlman "debate", which motivated Watson's comment is available at

Perlman's statements should be viewed by everyone. He comments on papers he received from Mallun Yen of Cisco supporting apportionment of damages, which papers amounted to 2007 papers of Lemley/Shapiro and Thomas. Perlman indeed uses
the term "fucking liar."

Simon refers to Lemley as one of the most respected "patent practitioners in the country", neglecting the fact that
Lemley is not a registered patent attorney and thus not a patent practitioner at all.

[In passing, the proposal should be to a named beneficiary or heir.]

***UPDATE. One IPBiz reader commented:

A) it would seem different companies "make use" of the patent office, for business purposes different from the original intent of patenting:

IBM gathers patents mostly to "build moats" around its own products, but not necessarily to bring to market its new patented ideas.

My company does IR&D for the government, some of which is "more than 50 years in the future". We are encouraged by the gov. to file patents, to show "intellectual effort" "state of the art"...but the patents will be long expired before any product hits the market. So it is all for "show and tell". Something similar goes on in National Labs: "show and tell", but the National Labs are not in the "business" of bringing products to market. Indeed, their patents can have the effect of building a moat, impeding others from using such technology. (Personally, I don't think National Labs should be patenting, because there is a clear lack of intent to bring to market.)

B) If patents were assigned to the inventor, and not the employer.....
1) many companies could play hard ball "assign us the patent for $1, or you are laid off" (or continuing your work in India). I can imagine this occurring for the "moat builders", but also many other companies.
2) It would not effect the "show and tell" operations of national labs...they can still advertise the patent productivity of their workers.
3) In very mobile (movable industries, where people move from company to company), I could imagine "assign us the patent for $1, or you will not be hired".


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