How the America Invents Act Harmed Inventors
By Paul Morinville
September 10, 2016
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“The America Invents Act (AIA) was the single worst disaster in the 226 year history of the U.S. patent system. The AIA did very real damage – enough to put many inventors out of business and discourage many others.”
 For inventors, those who create most of America’s new jobs, the America Invents Act (AIA) was the single worst disaster in the 226 year history of the U.S. patent system. The AIA did very real damage – enough to put many inventors out of business and discourage many others. Of course, it was a great new law for the large multinational corporations who pumped hundreds of millions of dollars into Washington D.C. in the form of political contributions and funding for a massive public relations campaign centered on a patent troll villain. This fictional patent troll was based on a couple of bad actors. Indeed, the New York Attorney General investigated MPHJ, who was accused of being a bad actor. In that investigation, the NY AG conducted a nationwide search for nefarious demand letters that would lead them to more patent trolls. After several months of investigation, the NY AG found six examples of nefarious demand letters in a multi-month nationwide search. That’s right – six – only six. Yet the patent troll remained the narrative driving the passage of the AIA and is still the narrative of the infringer lobby in their effort to pass the Innovation Act. That is because it is really just a smokescreen, a red herring based on slivers of truth and dressed out with unsubstantiated false allegations that is intended to mystify the true nature of patent reform. This smokescreen provided cover for lawmakers to pass the AIA and effectively transfer the property rights of small inventors to the large multinational corporations led by Google, the same multinationals who paid for it in Washington.
During the run up to passage of the AIA, the infringer lobby pushed “first to file” to the front of the debate and made it appear as the main issue of contention among inventors. However, first to file was a false flag. It was pushed out to obfuscate the most damaging part of the AIA. The real damage was hidden in the AIA’s creation of the Patent Trial and Appeals Board (PTAB) and three new procedures to invalidate issued patents – Inter Partes Review (IPR), Post Grant Review (PGR) and Covered Business Method Review (CBM). Pushing first to file to the forefront of the debate effectively hid PTAB procedures from honest and open debate.
Indeed, first to file was an issue that could be understood by most inventors. Many rightfully objected that it would force patenting before the invention was fully baked thus increasing costs and risk of theft. That objection and others are proving to be true as illustrated in this article about the Young Inventor’s Showcase in Houston. However, litigation experience was required to understand the damage of the PTABs and since less than 2.3% of patents are ever litigated, only a very small subset of inventors have ever been forced by infringers to defend their patent rights. Of those, an even smaller subset knew about the provisions in the AIA, could project the damage those provisions would cause, and were bold enough to say something. Ron Katznelson comes to mind, but there were a handful of others. Inventors were just not organized nor were they educated educated, and those who were did not have the right Washington connections. Inventors who did stand up were sidelined and disparaged by the infringer lobby. Effectively, inventors were silenced by Congress, with independent inventors not even given a seat at the table or called as witnesses at any hearing.
From the perspective of some independent inventor working in their garage or basement to create their next consumer product, phone app, electronic device or something else, why should they keep up with Washington politics anyway? After all, we have a Constitution. In addition, black letter law and over 200 years of precedent had well established that an issued patent is a presumed valid private property right, which could only be invalidated in an Article III court. We all learned about patents in grade school. For the entire history of America, patents had enabled inventors to get a return on their hard work because a patent could be leveraged for investment to commercialize the invention or to license it so others could. Why would any lawmaker want to change that?
 But, if you do not pay attention to politics, it eventually pays attention to you. The AIA turned the patent system on its head, and today inventors can scarcely do anything with their patents. I’ve been to dozens of inventor clubs in the last six months talking about patent reform. Inventors are walking away from the patent system en mass, which is exactly what the large multinational corporations that supported the demise of the American patent system wanted. These independent inventors can’t license their inventions, which means they can’t fund their companies to continue to research, develop and commercialize their inventions. This was the goal of the large multinational corporations. Each and every one of them obtained substantial benefit from the patent system, which is how they rose to where they are today. Even Google, the most vociferous of the anti-patent corporations filed two patent applications on their search algorithm before they even acquired the URL Google.com.
If inventors can’t make money by inventing, they stop… and that is what is happening all across America. Some inventor support companies have laid off as much as 70% of their staff. The canary is not only unconscious, it is burning in flames threatening to ignite the entire coalmine. Congress and regulators must take note. The market has collapsed for inventors. This is a serious national issue that will negatively affect a generation of job growth. Unfortunately the results are slow burning and hidden, but the long-term damage will become clear nonetheless.
Entrepreneurial inventors and the start-ups that rely on the innovation generate most of America’s new jobs and the collapse of the patent system is a major reason why America’s real job market (as opposed to the fiction delivered monthly by the Department of Labor) is stagnant and our economy is not growing. Those familiar with the innovation crisis in America, which has been caused by a demise of the U.S. patent system, easily understand why GDP is growing at an abysmal 1% to 2%. Given the ingenuity found in America it is embarrassing that we suffer in this lackluster economy.
Prior to the AIA, a patent was a highly valuable asset capable of attracting capital to startup new technology companies. The deck was rearranged by the AIA to radically favor infringers to the point that today, a patent is a liability. Both inventors and investors now associate a patent with high cost and high risk of even higher cost. It provides no barrier to entry because since eBay v. MercExchange it is no longer an exclusive right. Instead the public good must be proven, an impossible task in most cases. A single patent can scarcely be defended at all because most contingency attorneys and investors have left the patent business. Most patents cannot be sold unless they are part of a large portfolio often measured in hundreds or thousands. Even those few patents that can still be sold or defended are worth pennies on the dollar.
The AIA is a certified disaster, and PTAB procedures are the core reason why.
TO BE CONTINUED… How the PTAB Has Harmed Inventors.
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THE AUTHOR
Paul Morinville is Managing Director of US Inventor, Inc., which is an inventor organization working in Washington DC and around the US to advocate for strong patent protection for inventors and startups. Paul has been walking the halls of Congress knocking on doors and sitting down with hundreds of offices to explain the damage suffered by inventors due to patent reforms. Paul is an independent inventor with dozens of patents and pending patent applications in enterprise software. He is also CEO of OrgStructure, LLC, an early stage enterprise middleware provider in Northwest Indiana.
Tags: aia, AIA 5th Anniversary, america invents act, famous inventors, independent inventor, independent inventors, inventor, Leahy-Smith AIA, patent, patents
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Appearance of ... September 10, 2016 3:32 pmAlthough I am not thrilled with AIA, I think that most of the problem has been in the implementation. If PTAB actually allowed amended claims, and if there wasn’t all this silly (and mostly ultra vires) patent eligibility nonsense, the patent system would be in much better shape.
Is the problem really the laws, or rather how they have been administered?
angry dude September 10, 2016 4:01 pmUS Patent system was already dead for independent inventors after Ebay
PTAB or no PTAB – who cares if he’s buried in dirt or cremated? I don’t
Amen brothers
Paul Morinville September 10, 2016 9:01 pmAppearance of…, You ask: “Is the problem really the laws, or rather how they have been administered?”
That question goes to the heart of what a patent system is and who it is intended to benefit. If it is intended for a patent to be solely an instrument of litigation, the administration of the current laws is the problem. However, if the patent system is intended to promote the progress, make new technologies available to the public, create jobs and advance our economy, the laws themselves are the problem and no amount of corrective action will help.
While the most visible part of the patent system is litigation, litigation is the last stage of the patent system. The first stage is an inventor with a patented invention. Most inventors have only the patent to leverage to attract investment at the earliest stages of a startup. Pre-AIA and pre-eBay, a patent represented a presumed valid exclusive right. This did two things. First it gave early stage investors a degree of confidence that the invention would not be stolen thus reducing the risk that the technology will be infringed and therefore increasing the success rate of the startup. Second, if some huge company did steal it killing the startup, the investor could take control of the patent to return the investment. That would generally be done through litigation – the end phase of the patent system.
It is the early stage of the patent system that matters. If this early stage is successful, the end stage, litigation, need not happen. PTAB’s have killed the early stage by substantially raising the cost and risk of litigating patents to the point that it is now a liability for the investor to take control of a patent if the startup fails. As a result, investors are staying away from high risk, early stage technology startups, the companies that provide most of our new technologies and new jobs. And rightfully so. PTAB’s make a patent a perpetual target for litigation and there is nothing a patent holder can do to avoid that risk. PTAB’s can be launched by anyone, even people not at all related to the technology and not a party to any litigation, at almost any time. The cost to the patent holder is hundreds of thousands of dollars (sometimes millions) and many years of the patent’s life. If you happen to be in the minuscule percentage of survivors, another PTAB can be filed again…. And again.
I don’t think anyone who reads this blog wants litigation, but PTAB’s force litigation by killing the value of a patent asset as it relates to the earliest stages of starting up a company based on new patented technology. If you can’t startup a company, you are left to litigate the patent.
PTAB’s must be eliminated if we are to have our job creation engine back. There is no other way. Massaging it does not change the underlying fundamental drivers of why PTAB’s kill startups.
Benny September 11, 2016 5:25 amFirst-to-file…post grant review…isn’t that how the rest of the world worked before AIA?
You haven’t got around to using the metric system like everyone else, either.
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