Patent Reform Act of 2007 (PRA), eBay v. MercExchange, KSR, Leapfrog : Vested Interests & Territoriality : Justice Harlan I Wins Again for Modern Law

The Problem of Vested Interests for any Reform Activity

One of main problems encountered in attempting to instigate reform of any kind is the problem of vested interests, which can be described academically or historically as the sum of advantages, real or perceived, that mark the status quo in a given area, and which advantages are enjoyed by some person or group in that area. It goes without saying that the status quo of the patent system is also marked by such vested interests. Indeed, these are fighting tooth and nail to hang on to the advantages that they now enjoy after 20 years of unhindered proliferation.

Consequently, pursuant to the aforesaid, it is important to recognize in this context that most argumentation about reform of any kind is not conducted with a view toward objective improvement of any given status quo, but is rather a battle between opposing camps – those who stand to lose something – and – those who stand to gain something – by any reform. Neutrality is especially not be expected from those who themselves presently work in the system to be reformed, as they are not about to bite the hand that feeds them.

One result is that those insiders who know any particular system best, often say nothing, because they have no interest to rock the boat in which they are comfortably sitting. Similarly, if they do say something, their argumentation will openly or subliminally support the “insider” position that they are trying to protect. Since insiders who wash dirty linens publicly are generally ostracized by any group, very little legitimate criticism about a system thus ever comes from within that system and one should expect very little help from them.

For example, the USPTO will always support measures that give them more personnel and make them bigger and more powerful than they already are, quite apart from any objective gains or losses suffered thereby by the patent system or legal system as a whole. Similarly, the USPTO will oppose measures which curtail their powers and personnel, regardless of the objective value of such measures.

In the same vein, patent judges, patent attorneys and patent academics will tend to favor “patent solutions” which elevate their own position within the legal system and make them more important and more successful in the patent system as reformed. Any reforms which limit or minimize their roles will be rejected, based on allegedly “objective” grounds, of course.

Territoriality – The Territorial Imperative

Similarly, not only established ways of doing things but also expressed opinions will be defended as a type of territory – as a vested interest, a territorial imperative, true to the motto that “new ideas do not prevail on their merits, rather, they prevail when their “old guard” opponents die out or fall into the minority. There is a lot of truth to that territorial wisdom: see e.g. Michael D. Coe’s Breaking the Maya Code for a spectacular and also sad example of the territorial imperative in academia.

Territoriality is a primary force and even the concept of legal jurisdiction is based upon the territoriality principle. Only two American Presidents worked as land surveyors prior to be being elected – Washington and Lincoln – and they are often ranked as the two greatest Presidents that America has ever had. They understood land, and they understood territory.

See Kal Raustiala, The Evolution of Territoriality in U.S. Law, for the proposition that US territoriality is becoming increasingly uncoupled from sovereignty and geography.

Vested Interests and Territorial Claims Burden Patent Law Reform

Vested interests and territorial claims are the main impediments to patent reform in the United States. These vested interests have been instrumental in hindering Congressional patent legislation, discussed below.

The Sluggishness of Patent Reform and the Voices of Neutral Outsiders

True reform in any field, especially in patent law, thus depends primarily on the voice of more-or-less neutral outsiders who have sufficient knowledge about a particular system under scrutiny, but who are not dependent upon that system and who suffer no losses and/or who gain no advantages from a reform of that system.

Indeed, one reason that the patent law system had come into such disarray in the last 20 years is precisely because not enough outside voices had come to bear on the vested interests and territorial claims within that system. Now that these outside voices are becoming louder and more numerous, the patent system has no option but to change in the direction demanded, like it or not. As every smart investor knows, no one is bigger than “the market”, i.e. the entire public, viz. republic, is stronger than the special interests.

We are one of those neutral voices in the larger public “market” with no personal stake in the outcome of patent reform. Rather, we are suggesting changes in patent law that we think to be absolutely necessary for the good of the legal system and the country as a whole. That there will be winners and losers in such a patent reform is clear, but this is not our main concern, as we see a need to curb the current powers of the vested interests for the good of the common weal. Anyone arguing for or against a PARTICULAR group of territorial claims therefore has little standing with us since our concern is the WHOLE big picture. We view other voices in this debate from the standpoint of their allegiances, vested interests and territorial claims. Do their arguments seek the best for everyone, or just a chosen few?

The Patent Reform Act of 2007 (PRA)

Via the University of Chicago Law School Faculty Blog we are directed to Richard Epstein’s column at the Financial Times (FT.com) website which views the Patent Reform Act of 2007 (PRA) as A dangerous one-two punch, arguing that changes to rules on patent-based injunctions and patent infringement damages would dampen patent innovation.

As far as injunctions are concerned, Epstein points to the standard voiced by the US Supreme Court holding in eBay v. MercExchange. That rule, as Epstein writes, is:

[A] four-factor public interest test [which asks] whether the patent holder suffered an irreparable injury, whether damages were an adequate remedy, what was the relative balance of hardships between the parties, and how best to serve the public interest.

According to Epstein, the US Supreme Court wrongly bypassed “the long-standing rule of equity from the Court’s 1908 Continental Paper Bag decision, which treated the issuance of an injunction as a matter of course whenever a patentee practices an invention“.[link added by LawPundit]

That decision, found in a badly reasoned opinion by Justice McKenna (who studied law at the Benicia Collegiate Institute, closed in 1867), was rightly dissented to by Justice John Marshall Harlan (the 1st Supreme Court Justice to have earned a modern law degree and the lone dissenter to the segregationist case of Plessy v. Ferguson – a case which ranks with Continental Paper Bag as an unfortunate historical anachronism of American jurisprudence):

“Mr. Justice Harlan thinks that the original bill should have been dismissed. He thinks the facts are such that the court should have declined, upon grounds of public policy, to give any relief to the plaintiff by injunction, and he dissents from the opinion and judgment.” [emphasis added by LawPundit]

In supporting Justice McKenna and in not supporting Justice Harlan, Epstein is as wrong as those who supported Justice Henry Billings Brown (who never earned a law degree) in Plessy v. Ferguson and who similarly ignored the wise corresponding dissent of that same Justice Harlan.

Epstein writes about the PRA and the new damage rule:

The key damage provision states “The court shall conduct an analysis to ensure that a reasonable royalty . . . is applied only to that economic value properly attributable to the patent’s specific contribution over the prior art.” Thereafter the PRA also instructs courts to exclude from the damage calculations any economic value properly attributable to other patented or nonpatented improvements.

Epstein claims that these rules combined will “dampen patent innovation on the heels of Ebay“.

That is simply an allegation without proof, for which there is no evidence of any kind. Nothing indicates that patent innovation ever has been dampened or will be dampened in any manner by sensible rules on injunctive relief and damages.

What we as observers of the world of patent trolls have seen up to now is that the threat of broad injunctive relief leads to the kind of ridiculous court-based virtual extortion witnessed in the NTP v. Research in Motion case (the Blackberry case) and that the possibility of outlandish damage awards leads the kind of egregious court-based virtual extortion witnessed in the Eolas vs. Microsoft case. In those two cases, none of the patent-holders contributed anything to the economic development of the highly profitable products that were created by thousands of other people and the amount of money demanded as damages in those two cases bore no reasonable relationship to the inventor’s alleged contribution to those products.

The Eolas and Blackberry cases are prime evidence of patent law run wild – a development which has not escaped the notice of the US Supreme Court, whose decision especially in KSR v. Teleflex clearly and thankfully points to the inexorable swing of the patent law pendulum in the opposite direction. The subsequent Federal Circuit decision in Leapfrog confirms that assessment.

The danger that Epstein sees, especially to the pharmaceutical industry, is a straw man:

It is no wonder that the pharmaceutical companies dread the PRA, because of its potential to slash their returns while increasing their costs.

We worked in that industry for numerous years and it is one of the most profitable businesses on this planet due to the monopoly powers granted by patents. Just take a look at the Fortune 500 Global 500 and then look at the pharmaceutical industry specifically – and then compare profits with revenues. The Fortune Global 500 lists as the most profitable the company that has the most dollar profits, regardless of revenue. But a better way to judge profits is by comparing profts as a percentage of revenues. For that list, the pharmaceutical industry wins hands down. Just take a look at the year 2007 profits as a percentage of revenues in the pharmaceutical industry’s top echelons:

Top Ten Profits as a % of revenues are as follows
Fortune 500 Global 500 in 2007 – The Pharmaceutical Industry

Pfizer 36.9% of revenues
GlaxoSmithKline 23.2% of revenues
AstraZeneca 22.8% of revenues
Johnson & Johnson 20.7% of revenues
Wyeth 20.6% of revenues
Merck 19.6% of revenues
Novartis 19.4% of revenues
Roche Group 18.1% of revenues
Eli Lilly 17.0% of revenues
Sanofi-Aventis 13.6% of revenues

By comparison, even the multinational oil companies, known for taking the public for every cartel penny they can, are mere amateurs in filling their coffers. The rationale for patent-supported high drug prices in the pharmaceutical business is to recoup research costs and to finance new research, but in fact, those patent-created monopolies lead to phenomenal profits far beyond research recoupment.

It is not just for the period that patents are granted that monopoly profits are made, but far beyond those patents, as patent monopolies create strong market positions which serve as powerful barriers to entry to competitors down the road – long after patents have expired. In fact, many generic pharmaceutical companies – who sell the patent-expired products – are owned by patent-based companies, as the cow is milked long beyond patent protection.

Fiona M. Scott Morton writes at the Journal of Economics and Management Strategy in Horizontal Integration Between Brand and Generic Firms in the Pharmaceutical Industry that about 70% (SEVENTY percent) of all generic pharmaceutical companies are owned by branded companies.

We have nothing against the pharmaceutical industry, by the way, as antibiotics have saved our own life several times, but using the incomparably profitable pharmaceutical industry as the prime example for not invoking badly needed patent reform is – when one views the above profit figures – er, what shall we say, amusing.

In our opinion, limiting injunctive relief and bringing damages down to rational levels in patent infringement cases will not harm the powerful pharmaceutical industry significantly, and we have seen no presentation of evidence that this has ever occurred or will ever occur.

Legitimate, socially useful patents, correctly granted by the USPTO for non-obvious inventions, and demanding reasonable royalties, have nothing to fear from patent reform. Patent reform is aimed at the parasitical patent trolls and at all those who seek to profit unreasonably from any invention, where that invention is – 99% of the time – just a tiny part of the entire economic framework of the modern world and which should thus not be unduly rewarded and not be given broad injunctive powers of extortion fully at odds with modern economic realities.

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History and Law : Solon and Democracy : Hereditary Aristocracy vs. a Meritocracy of Wealth

N.S. Gill at the Ancient History pages of About.com posts in Democracy Then and Now – Rise of Democracy – Solon’s Constitution on Solon’s contributions to democracy and law.

A revolutionary step toward the modern world was the fact that, as Gill observes:

Solon replaced the hereditary aristocracy with one based on wealth.

The meshing of law, politics and economics by Solon was a major change in the “political way of doing business” and had a major impact on the development of Western civilization.

See Solon’s Reforms and the Rise of Democracy in Athens

What Does "Good Coaching" Mean in College Football : The Example of Nebraska vs. Colorado and the Talent for Making Necessary Adjustments

The Colorado Buffaloes football team has a bright future under head coach Dan Hawkins and his coaching staff because they apparently understand what coaching is all about. This is exemplified by the content of the following posting at Buffs.tv which hits the nail fully on the head. It’s title is We don’t live in Lincoln:

Let’s give credit to the CU Buffaloes. In a cold game, they made the adjustments they needed to and won an offensive battle. It was a strange game because it literally took on four personalities. In the first, Nebraska attempted to run the ball. As predicted they went no where. Then the Cornhuskers adjusted to a near exclusive passing game in the second. They racked up 3 touchdowns in the second and looked ot have the Buffs on the ropes. Colorado was running nickel and dime coverages exclusively, and the Husker receivers were just sitting open in the seams. And after freshman Jimmy Smith gives up Nebraska’s fifth touchdown, I figured the Buffs were done for the day. Nebraska had adjusted and we hadn’t

At halftime apparently Ron Collins sat his defense and asked them what needed to change. They suggested going back to their base defense and Ron Collins honored that request. And that there may have been the turning point of the game. Jimmy Smith sparked the third quarter with an interception returned for a touch down. Made me think that Brown and Smith on the corners next year may be more formidable than I had originally thought. Next pass is another interception. The buffs put that one in the house too. Follow that with a blocked punt by Alonzo Barrett recovered by Jordan Dizon and that was the straw that broke Nebraska. Colorado reeled off five straight touchdowns to put this one out of reach of the Huskers.” [emphasis added by LawPundit]

One reason that the Callahan-coached Huskers went 0-17 in games after trailing at the end of the first half – and why they also lost many games in which they were leading at the outset – was that the Callahan staff had their “game plan” and was apparently unable to adjust their coaching of a game to adapt effectively to changes that the other team made, especially at the half. What this means is that NU coaches thus obviously overestimated their own abilities of planning and underestimated the abilities of opposing coaches. That is a loser’s flawed approach to coaching.

In the game against Colorado, the Huskers led 35-24 at halftime and should have won the game with sensible play and correct adjustments in the second half. However, as the posting from Buffs.tv above indicates, this was not done. Running the ball one quarter and passing the next is not an “adjustment”, it is simply one kind of game plan. Optimally, adjustments mean “real-time” adaptation to whatever the other team is doing before any real damage is done and not after the damage has been done.

A really gifted coaching staff for the Huskers would have known that Hawkins is a very good coach and could be expected to make serious adjustments to his nickel and dime defense at halftime rather than continue to be beaten by the NU passing offense. The NU coaching staff at halftime should have pondered, discussed, answered and instructed as to what the Colorado adjustments could be and how Nebraska would counteract such adjustments when they faced them, i.e. if Hawkins went to Defense A, the answer of the offense would be B, if Hawkins went to Defense C, the answer of the offense would be D, etc. But of course, none of this was done, so that two interceptions on two succeeding series of downs were totally unnecessarily inflicted upon an offense unprepared by its coaching staff for the defense they were facing.

A similar NU coaching lapse against Texas in the final quarter gave the Longhorns a win in a game that the Huskers should also never have lost, but when Texas went into the “zone read” offense in the 4th quarter, Nebraska did not immediately react and change its defense to minimize the threat that the zone read offense posed to them, so that a very fast Jamaal Charles ran off one big gainer after the other, leading to an easily avoidable Husker loss.

“Fixed system” coaches are simply not well prepared for modern football and will be beaten by coaches who are able to play any offense or any defense required to get the upper hand over their opponent – and this can change situation to situation, play to play, quarter to quarter, half to half, game to game, and season to season.

Law : Ubiquity of Personal Information : Discrimination

The ubiquity of it all.

The University of Chicago Law School Faculty Blog has a November 26, 2007 posting on
Strahilevitz on “Law in an Era of Ubiquitous Personal Information”.

Strahlevitz hypothesizes that anti-discrimination will be reduced by the ubiquity of personal information enabled by modern technology.

We remain sceptical.

Happy Thanksgiving from LawPundit ! How about the Question of the Origin of the Word Turkey for the Turkey Bird

Happy Thanksgiving!

If you have ever thought that the Turkey bird takes its name from the country Turkey, you would be wrong.

Believe it or not, there is no accepted etymology for the word for the bird “Turkey”, a word which has been analyzed lexically at great depth by Alain Theriault in his 1996 posting at the Linguist List.

There is also a comprehensive lexical list at the Wiktionary. The closest words to English “turkey” are German Trut-hahn, Latvian ti-tars, Hebrew tar-negol hodu“rooster Indian”, Igbo (southern Nigera) toro toro, Irish turcai, Italian tacchino, Ladin (Switzerland) tachin, Lower Sorbian turk, Sorbian truta, Romanian cúrca, Telugu (Dravidian language of India) Tarkee Kodi (compare those two words with the Hebrew). Many other languages of the world have a word for the bird turkey starting with a word like hind- or ind- or something similar to it meaning “bird of India”.

If the Turkey originated in Europe, the Latvian terms tark-sket or tark-skis might give the essential clue since these words mean to “chatter, clapper, patter, rattle”, i.e. “to gobble”.

But as explained by Michael Qunion at World Wide Words, the turkey originally came from Mexico of the New World and was brought to the Old World by the Spaniards, in part via India and the East Indies, which is how the bird got called the “Indian” bird.

The Maya term for the turkey cock was ah tzo based on current evidence so that an original *tzor– form is not inconceivable. Since Tzorkin viz. Tzolkin means “cosmic matrix” (whence “calendar”) and Chorti, the name of the Maya people, means “river of stars”, the name of the Turkey bird may have come originally from the contact of the first European explorers with the tribal populations of Mexico prior to the colonial era, i.e. rather than a “bird of India”, which the explorers thought they had discovered, it was actually a “bird of the Maya” Chorti, whence also names of the Turkey that reference Peru.

Patents and The Prior Art Blog : The Doctrine of Sovereign Immunity : Legal Modernism and History : King Henry II and the Constitutions of Clarendon

We ran by chance today across The Prior Art, a new blog started this month by Joe Mullin, who describes himself as:

a reporter for the San Francisco and Los Angeles Daily Journals, covering intellectual property law.

We noted with particular interest his posting Sovereign Immunity at Street Level, citing to Peter Lattman at the Wall Street Journal Law Blog and his posting titled Critics Take Aim at California’s Patent Shield.

State universities such as the University of California claim to be beneficiaries of the doctrine of sovereign immunity, according to which THEY can sue private citizens for patent or copyright infringement of patents or copyrights owned by such universities, but not vice versa, since such universities are allegedly immune from such suits through the sovereign immunity doctrine.

The sovereign immunity doctrine is of course a legal fiction, as documented by the exceptions to that doctrine:

Suits brought by the United States… Suits brought by another state… Suits in which the Supreme Court is reviewing the decision of a state court… Suits filed against state officials under the “stripping doctrine”… Suits brought against a political subdivision of a state… Suits as to which Congress has abrogated the states’ Eleventh Amendment immunity….”

Essentially, the sovereign immunity doctrine is a modern legal “double standard” of the kind which people in power historically try to apply to ruling institutions (and thus to themselves and their vested interests), regardless of whether those institutions be of government or of religion.

The classic example here is the struggle over the double standard of the Church in England at the time of King Henry II and Archbishop Thomas Becket. Ecclesiastical servants (about one of every six of the population in those days) benefitted from the “sovereign immunity” of the Church and were not tried for crimes in secular courts, but rather in ecclesiastical courts, where leniency or exculpation was practically guaranteed.

It was this battle between Henry II and Thomas Becket – which Becket rightfully and thankfully lost – that was a landmark in the development of legal modernism in England and which laid the basis for modern English law and the Rule of Law in modern Western Civilization. As written at BritainExpress.com:

Legal Reforms – Henry introduced several major reforms. Prior to 1166 trial by ordeal was a common way of determining guilt or innocence in criminal cases. Under this system, an accused person might have to pick up a red hot bar of iron, or pluck a stone out of a boiling cauldron. If their hand had begun to heal after three days they were considered to have God on their side, affirming their innocence. One has to wonder how many “not guilty” verdicts were rendered by this system! Henry replaced this rather painful system with a jury of 12 men. He also introduced the first personal property tax. At the same time he forced Wales to at least nominally acknowledge the sovereignty of the English crown.

The Constitutions of Clarendon in the year 1164 were thus at their core not a “personal” battle between Henry II and Thomas Becket, but rather a battle between the enlightened forces of the future against the dark religious and establishment forces of the past. As written at BritainExpress.com:

The Constitutions were composed of 16 articles, which laid out the extent of papal influence in the realm and the degree to which church members were subservient to the crown and English legal custom. The majority of the Constitution was simply a restatement of English custom and practice, but severe controversy erupted over two clauses which made “criminous clerks” (i.e. clerics accused of a crime) answerable to the legal authority of crown courts rather than ecclesiastical courts, and prevented appeals to the church in Rome without royal permission.

The church leaders in England, including Archbishop of Canterbury Thomas a Becket, reluctantly agreed to the provisions. When Pope Alexander condemned the agreement, Becket reversed his field and also condemned the Constitutions. This led to bitter conflict between Becket and Henry, conflict which finally ended in Becket’s murder in 1170. After the murder Henry revoked the two controversial clauses, but the rest of the Constitutions remained in effect and were integrated into the common law of England.

This task of destroying ancient vestiges of power in England was thus not finished, however, until the rule of King Henry VIII:

In 1220, Becket’s remains were relocated … to … the recently completed Trinity Chapel where it stood until it was destroyed in 1538…. This was done on orders from King Henry VIII as vengeance for his ancestor, Henry II. The king also destroyed Becket’s bones and ordered that all mention of his name be obliterated.

England at that time finally shook off this ancient loadstone and was then in a position to start to become one of the world’s leading powers, unencumbered by “sovereign immunities”.

The idea that any State is somehow “above the law” or “‘immune from the Rule of Law” in any manner is a rustic notion propagated in our day by dark age nostalgia and historically uninformed judges and Supreme Court Justices, some of whom seem to have lost sight of what the trend of modern law is and what the justifications for the Rule of Law are all about.

As a matter of constitutional law, we agree fully with Stanford Professor Mark Lemley, quoted in Peter Lattman’s posting:

The underlying problem is that the Supreme Court is applying an antiquated doctrine — the 11th Amendment — to circumstances in which it was never intended to apply … The Framers never contemplated states suing people for patent infringement.

Whenever a State claims rights that the citizens do not have, you have the beginnings of tyranny. When the top judges in the land affirm such claims to be the law of the land, the legal system has a significant problem. Indeed, to the degree that States themselves claim not to be bound by the laws of the land, so also shall their subjects follow suit.

Zoho features Zoho Writer as an Online Word Processor and Other Useful Ajax-based Programs

We recently ran across a rather intriguing site, Zoho, which is currently in Beta and features a large number of Ajax based progams, including Zoho Writer, an excellent online word processor for creating both private as well as public documents. Zoho is MSOffice and Open Office compatible. We took one of our own larger hobby publications and gave it a try, resulting in a document that we published on Zoho as a public document titled Horus Falcon Cult as Astronomy. Published documents are also automatically given an RSS Feed. The original document formatting had to be tweaked a bit, but the result was most certainly acceptable.

In addition to Zoho Writer, Zoho features the following Zoho programs:

Zoho Sheet (spreadsheets online)
Zoho Show (online presentations)
Zoho Meeting (web conferencing)
Zoho Notebook (online note taker)
Zoho DB & Reports (online database & reporting)
Zoho Planner (online organizer)
Zoho Projects (project management software)
Zoho CRM (on-demand CRM solution)
Zoho Creator (for database applications)
Zoho Wiki (with many features)
Zoho Chat (for group decisionmaking)
Zoho Mail (collaboration groupware)
Zoho Business (online business solutions)
Zoho Polls (online polls)
Zoho Viewer (view and share documents online)
Zoho Challenge (to evaluate candidates)
Site 24×7 (website monitoring service)
Zoho Start (dashboard for Office files)
Zoho Plugin for Microsoft Office
Zoho QuickRead for IE and Firefox
Zoho API (to create applications)
Zoho Widgets (for the desktop)
Zoho CRM Plugin (for MS Outlook).