Obama’s Anti-Patent Bias Led to the Destruction of His Legacy

By Neal Solomon
December 14, 2016

President Obama

President Barack Obama

Barack Obama came to office with the suspicion that patents caused higher prices and created market inefficiencies. He set a mission to disassemble the patent system, which culminated in the America Invents Act, a one-way legislation that deprived inventors of patent rights and naively transferred power to market incumbents. In its implementation in the U.S. Patent and Trademark Office (PTO), patents were attacked by market incumbents in a second-window patent examination with the effect of destroying a substantial number of patents.

However, Obama does not understand economics. The patent system is the bedrock for the U.S. economy, supplying critical tools for market entrants. Instead, Obama supplied power to the market incumbents, thereby fortifying their monopoly power, while depriving market entrants of critical tools. By strengthening incumbents and their industrial oligopolies, he harmed competition from market entrants, policies that generated the slowest growth in history.

Even Obama’s chairman of the Council of Economic Advisers, Jason Furman, understands the need to control the abusive market power of oligopolists. But apparently, neither Furman nor Obama implemented policies to help market entrants to compete with entrenched incumbents because of a naïve view of economics and complete misunderstanding of the critical value of the patent system.

The Obama administration has implemented patent policies inspired from left-of-center. Yet, because the far left arguments have questionable assumptions, mistaken facts and over-extended arguments, these policies have a long list of contradictions. Accepting these far left positions, particularly from the open source movement that attacks patents as blocking innovation, has provided the Obama administration with an ironic position of aligning with the far right political positions of market incumbents, critical of patent rights to protect incumbent monopoly power.

The Obama contradictions on patent policy include: (a) a desire to assist start-ups, but penalizing start-ups by attacking the only tool, viz., patents, available to compete against larger corporations; (b) helping China, which has a massive manufacturing sector, attack U.S. innovators; (c) starving U.S. start-ups and ventures of capital by weakening patent rights that investors require and by harming start-ups that create two-thirds of jobs, thereby constraining job creation; (d) demanding substantially increased litigation barriers to enforce patents, which hurt the weakest companies that need patent rights the most; (e) aligning with the far right to protect the monopoly power and profits of large corporations (in effect promoting trusts rather than enforcing antitrust laws that attack trusts); (f) claiming a need for innovation to spur growth while attacking the patent system’s essential tools for competition; (g) not realizing that litigation and access to the judicial system is the only way to even the playing field between market entrants and larger companies; (h) aligning with the open source movement, which attacks property rights, and advocates openness in government at the risk of harming legitimate government secrecy and security; (i) appointing patent critics to policy positions to delegitimize patent rights; (j) not realizing that weakening patents promotes inequality, which they attack; (k) encouraging large corporations to hold out from negotiating licenses for patented inventions and then complaining about the high costs of litigation; (l) claiming that patent holders hold up manufacturers even when the patent holders are not eligible for injunctions (and thus cannot hold out to enforce an exclusive right) and rewarding the infringer rather than the innovator; (m) drastically increasing costs in the Patent Office in the name of increasing efficiency but with the effect of providing a high regressive tax to inventors and then complaining that we don’t have enough innovation; (n) advocating an unrealistic emphasis on manufacturing but advocating a utopian vision that ignores the U.S.’s only competitive advantage of innovation; (o) crushing American small entities in the Patent and Trademark Office in order to favor East Asian institutions, suggesting that they don’t know who their friends are; and (p) advocating for an aristocratic patent system that requires vast capitalization for innovators when their rhetoric suggests the ideals of a democratization of patents. It would appear, then, that the Obama patent policy is hypocritical and self-contradictory, with more in common with the previous administration that it critiques. These convoluted political positions are largely responsible for the weak economic development and jobless recovery of the recession years.

The genesis of these inconsistencies can be found in the Obama administration’s philosophical belief in big government to solve problems. According to this view, the government R&D budget should be expanded. This view of a central government focus advocates that government funded R&D should be given away for free. There are, however, two main problems with this view. First, no matter how big the federal government R&D budget (and it is never enough, even at $140B+ per year), this investment is only a small part of overall U.S. technology spending. Even after corporations and venture capitalists invest capital, the need is over a trillion dollars a year. Angel investors and individuals are the biggest category of non-corporate technology spending and require strong patent rights to protect those investments. Second, the government funding goes mainly to universities, which require patent rights to commercialize their inventions. The main motivation of central government technology spending is the utopian notion of supplying free stuff for the people. But is this not a socialist vision and has not that ideology been discredited as being inefficient and unworkable? Because of the dramatic left turn of these Obama economic policies, the Democrats are now largely a marginalized minority party.

The terrible consequences of these contradictory policies that attacked patent rights and helped market incumbents are just now evident. Because he attacked the patent system, market entrants and small entities suffered their worst declines ever recorded. The disintegration of patent rights robbed incentives to innovate. Investment in innovation declined dramatically, not only for market entrants because of the uncertainty that accompanies weak patent rights but also for incumbents; since incumbents could free ride on market entrants, they lacked incentives to invest in innovation. With declining investment in innovation, productivity growth recorded its worst showing in generations, even as tech incumbents realized the greatest profits in history. As a consequence of weak productivity growth, the economy stagnated. China’s economy also grew dramatically even as the U.S. economy stagnated, creating a competitive challenge from our mismanaged policies. From economic stagnation, wage growth stagnated. From wage growth stagnation, populist movements emerged on the far right as well as the far left.

From the weak economy, generated in large part by Obama’s anti-patent policies, Republicans gained complete control of the federal government. From complete control of the federal government by the opposing party, every single one of Obama’s policy initiatives will be reversed.

Since Obama’s policy mistakes caused the economic malaise that ultimately deprived the Democrats of power, particularly since they derived from mistakes and contradictions adopted by the far left of the party, this catastrophe was preventable. The chief challenge now is whether the Democrats will ever learn from these disastrous mistakes.

 

The Author

Neal Solomon

Neal Solomon is CEO of Advanced System Technologies Inc. A prolific inventor of technologies involving semiconductors, communications, data management, imaging, robotics and healthcare, he holds degrees from Reed College and the University of Chicago.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 35 Comments comments.

  1. EG December 14, 2016 7:58 am

    Hey Neal,

    Your article is spot on. Lee as the current Director has been an unmitigated disaster for the U.S. patent system generally, and the USPTO specifically. I wish Kappos, Obama’s first Director, had remained on board.

  2. angry dude December 14, 2016 9:53 am

    To be completely fair, patent system destruction started under Bush with infamous Scotus Ebay decision
    Then it continued full force under Obama

    The result – complete loss of incentive to invent for small private entities – independent inventors and startups (unless they can rely on trade secrets to protect their inventions which is just not possible in many fields)

    We are back in Middle Ages

  3. Prizzi's Glory December 14, 2016 11:23 am

    I am not sure undermining patent system system is a specifically right or left political issue.

    We are seeing the results of misguided gutter Schumpeterism and corruption that appears to have begun with the creation of SAWS slightly before and possibly in response to the imminent start of the GATT patent regime in 1995. The misbehavior continued from the Clinton administration through the Bush ’43 administration into the Obama administration.

    I have identified by means of intrinsic evidence a plethora of examinations and PTAB decisions in which patent office employees including both examiners and also APJs lied on official government documents at the behest of senior USPTO officials (criminal 18 USC 1001 and 18 USC 371 violations).

    In addition, TC 3600 application churning looks like an effort to stall patent applications until they have no term and to prevent applicants from seeking relief via 35 USC 141 or 35 USC 145 while CBM Review institution logic seems to have resulted from a secret policy to game patent allowance. The results have been so outrageous that the CAFC has slapped the PTAB in Unwired Planet v. Google.

    I have little doubt that the Obama presidency was a total waste. Maybe rational minds in Congress will institute something something like the Kefauver Hearings to investigate criminality at the USPTO and to find out what is really happening at this agency.

    It is quite possible that the corruption extends out of the USPTO up the Department of Commerce chain of command and perhaps higher. Pritzker has in the past had association with serious criminality.

    Criminality at this level is hardly unprecedented in US history. Secretary of Interior Albert Fall went to prison for corruption in association with the Teapot Dome scandal.

  4. step back December 14, 2016 11:28 am

    It sort of feels like 1984 all over again.

    Big Brother has released us from the shackles of patent regulations so as to unleash our innovative spirits, energies and make the collective “we” great again.

    Why if we got to the moon once before surely we can launch a new Moonshot against them there cancers and cure ’em all once and for good. If a java sipping 2nd year engineering student in Silicon Valley started a mega success company once, surely he (or a coding ready she) can do it again and again until the technological singularity is reached. If we successfully plucked one BRCA banana off the DNA tree surely we can do it again and again until all law of nature disposition genes have been identified. Yes, “we” can. Yes we will. So let it be said. So let it be done. Make it so number two. 😉

    http://s1121.photobucket.com/user/Inspired_ink/media/torpedoes.jpg.html

  5. Curious December 14, 2016 3:41 pm

    I disagree that Obama is the source of all our woes. Let’s not forget that the abuses at 3600 preceded the Obama administration. Let’s not forget that Dudas was appointed by Bush. Let’s not forget that the AIA was passed by a Republican Congress. Let’s not forget that all of the anti-patent Supreme Court decisions were signed on by a conservative majority. Let’s not forget that Obama gave us Kappos who has been as good as a leader of the USPTO as we have had in a long time.

    Granted, Obama gave us M. Lee. However, I honestly don’t believe Obama really cares that much about patent policy — which is, IMHO, his biggest flaw. Instead, the lobbyists at Google have essentially be in charge of making patent policy at the current administration.

    One would hope that the current administration realizes that catering to a group of infringers is bad policy and bad for the country. The “efficient infringers” are just about protecting their profit margins, and in the United States, that isn’t considered a bad argument to make. However, it is short-sighted and doesn’t put the best interests of the country first.

    Weakening the US patent system can only serve the best interests of China and other countries who want to reproduce our products and services and be able to sell them here without worrying about intellectual property.

  6. Gene Quinn December 14, 2016 4:52 pm

    Curious…

    I hear you, but I’ll push back a bit. I don’t want to get into it too much right now but will say stay tuned for my column tomorrow (just finished). It is about the Obama Administration and some surreal revisionist history. For now I’d just point out that the forces seeking to weaken the U.S. patent system are very closely tied with our current President and his Administration. China is a better jurisdiction for innovators today, which is almost unbelievable. To have allowed that to happen suggest to me that Obama bears a great deal of responsibility.

    -Gene

  7. Edward Heller December 14, 2016 4:57 pm

    “The chief challenge now is whether the Democrats will ever learn from these disastrous mistakes.”

    No sign of it yet.

  8. Edward Heller December 14, 2016 5:00 pm

    On the other hand, when we have Gates comparing Trump to Kennedy, and Tech Gods kissing the ring, well at least some of the private sector Dems are at least willing to listen.

  9. jbavis December 14, 2016 7:21 pm

    > “Accepting these far left positions, particularly from the open source movement that attacks patents as blocking innovation”

    Folks, open source is not going anywhere. It’s growth continues and for good reasons.

    Nor is open source a failure. There are plenty of success stories – including startups able to get funding developing open source. Blinded followers of this site are in letting themselves believe that open source cannot succeed.

    Nor is open source inherently anti-patent. Both patents and open source lay open their teachings. They do it using very different languages intended for different end users (humans vs computers).

    However, the majority of open source *DO* believe patents are anti-innovation. They are wrong on that front. They do not like being encumbered by anyone on what they can and cannot do. Perhaps it is the patent community that has not made a strong enough case how&why patents do not block innovation but rather encourage it? Google has swayed the public to their side by allying with open source and furthering this anti-innovation notion.

  10. step back December 14, 2016 7:39 pm

    jbavis @9

    Fully agree.

    There is nothing in basic patent policy that prevents altruistic folk from donating their time, sweat and tear-stained golden code for free use by the general public.

    I commend these people and owe them much since I, like many others here use an awful lot of open source software for carrying out daily functions.

    Software technicians tend to be absolutists (because software itself is often an absolutist one or zero). So they assume that the practice of patent law is an absolutist enterprise. Either you infringe or you don’t infringe. And since there are millions of patents out there, one of your own thousands of lines of code MUST infringe. Hence patents are evil.

    Of course the practice of patent law is NOT an absolutist enterprise.
    Many of the millions of patents out there have expired for one reason or another.
    It is not pragmatically and economically possible to detect every infringement.
    Even if infringement is detected, if the accused does not have deep pockets, what’s the point in suing? One cannot extract blood from a cold stone. In short, the absolutist conclusions that the techies often reach are not reality.

  11. Curious December 14, 2016 7:44 pm

    For now I’d just point out that the forces seeking to weaken the U.S. patent system are very closely tied with our current President and his Administration.
    I don’t disagree that there have been anti-patent forces that have had undue influence on the Obama administration. However, I don’t think Obama is inherently anti-patent. If so, Kappos would have never led the USPTO and Phil Johnson would have never even been mentioned as a possible replacement for Kappos.

    Ultimately, my biggest problem with the article is that there is plenty of blame to go around — on both sides of the aisle — but only one side is getting picked on.

  12. jbavis December 14, 2016 8:21 pm

    Step Back @ 10:

    Your point is largely unrecognized in the open source community – namely that just because a patent exists does not mean you infringe. They typically read the Abstract and exclaim “how did this issue?!?” – followed by “patent system is beyond broken”.

  13. step back December 14, 2016 9:42 pm

    They typically read the Abstract and exclaim “how did this issue?!?

    And of course they always do it with aid of 20/20 hindsight. 🙂

  14. EG December 14, 2016 10:08 pm

    Hey Curious,

    “Let’s not forget that Dudas was appointed by Bush.”

    Hey Curious,

    I thoroughly agree and I’m not saying the Democrats always make poor choices for the Director of the USPTO. Director like Kappos who was Obama’s first Director the USPTO was great choice because he actually understands how the USPTO operates historically, something current Director Lee is completely clueless on. In my view (I’m also registered but cynical Republican), as well as many others, Rogan and especially Dudas were very poor Directors picked by President Bush’s Republican administration.

    There’s some suggestion that Q. Todd Dickinson, a former Director of the USPTO (chosen I believe by President Clinton) and former Executive Director of the AIPLA might also be a possible a pick for President-Elect Trump. That would be a very good choice.

  15. Joachim Martillo December 15, 2016 7:48 am

    In theory Open Source ideology is more anti-trade secret than anti-patent. A strong patent regime should, in fact, encourage Open Source as part of the bargain with the public: disclosure in exchange for limited time monopoly.

    It has been a long time since I spoke with Richard Stallman, but as I remember, in the early through middle 90s, he did not have a problem with patents.

  16. Anon2 December 15, 2016 8:09 am

    Obama at heart is an altruist and an egalitarian, very common to left leaning collectivists who only see capitalism as a distasteful means to an end – as such his vision is really about sacrifice and equality (as against justice). His so called Legacy, as seen through the eyes of his staunch supporters, is about how well he promotes these altruist and egalitarian causes.

    Make no mistake, the ends sought are not overall welfare, nor even the welfare of the poorest – the equality that egalitarianism aims at is not equality under the law or equality of opportunity, but equality of results regardless of justice, effort, reality. This means that if we must impoverish everyone, in order to “reduce the gap” between the wealthiest and the poorest, the result would be morally better (according to egalitarians) than a greater gap between the wealthiest and the poorest, EVEN IF everyone would have actually enjoyed a better standard of living.

    Patents are part of capitalism, the system which is not based on sacrifice or egalitarianism… his attacking it does not destroy Obama’s so called Legacy, it is an act in complete accord with it’s vision.

  17. Anon December 15, 2016 8:50 am

    Insightful and well stated, Anon2.

    I have long maintained that attacks on the patent system come from both the Left and from the Right (with different philosophies in play).

    You have identified and articulated a third philosophical angle of attack, distinguishing it from a Left (socialist/communist) point of attack.

  18. angry dude December 15, 2016 9:44 am

    jbavis @9

    I challenge those open source dudes to “accidentally infringe” my patent on a simple math algo (literally boils down to one formula)

    or any of those “pure math” patents out there like RSA patent..

    There are many “software” patents in areas like speech/audio coding, video compression, radio frequency communications, GPS etc etc which you just can’t accidentally infringe … being your proverbial open source contributor, heck, you can’t even read those patents for lack of specialized education

    The probability of accidentally infringing is about the same as monkey randomly typing on keyboard eventually producing “War and Piece”

  19. Anon2 December 15, 2016 9:54 am

    Anon@17

    Thank you but I disagree that I have articulated a “third” attack distinguished from the Left.

    More likely, the labels “Left” and “Right” do not themselves mean the same thing to those who use them. Do you see the Left as not “motivated” by altruism in their gaudy self-satisfied role as Robin Hood? Do you take the Left not to be influenced by egalitarian ideas?

  20. Night Writer December 15, 2016 11:06 am

    Obama is a bubble president who sits in the White House and does what he thinks is right based on the “intellectuals” and lobbyist. He has no grasp of the real world and very little real world education. This is the same attitude that resulted in NAFTA, Chinese free trade, no regulations on the banking industry, etc.

    That’s it. Not giant motive behind it. Just situational with a basically lazy decent person, but one that has no clue how to get real things done or what the real world is like.

    Sad that we elect people like this. Trump scares me in that he seems to equate “winning” with giving the current “winners” what they want. And that round table with Google didn’t look good for patents.

  21. Night Writer December 15, 2016 11:10 am

    And, by the way, the reason to hold Lemley accountable for his unethical conduct is that people like Obama do not destroy the patent system without the intellectuals approval. You guys just don’t get how powerful Lemley is and how much a role he plays in this. People like Obama listen to Lemley and take actions based on Lemley. If Google was alone without the “intellectuals”, then their lobbying money would go nowhere with Obama.

  22. Anon December 15, 2016 1:34 pm

    Anon2, you have a point with labels (they can be misused).

    However, the distinction I see is Left as a form of socialist/commune with a focus on the collective, versus egalitarian, with a focus on an “enlightened” class distinct from the “common.” In practice, the socialists/communists had that “separate and elite” group – even as they tried to deny it. In fact, the disparities between preaching and living what was preached was almost always a factor in the downfall of the systems.

    I see your view as different in kind, rather than merely different in degree.

  23. Edward Heller December 15, 2016 3:49 pm

    anon2@16: “Patents are part of capitalism, the system which is not based on sacrifice or egalitarianism… his attacking it does not destroy Obama’s so called Legacy, it is an act in complete accord with it’s vision.”

    If Obama truly were egalitarian he would not have tapped the VP IP of IBM to lead the PTO, or Lee of Google to later succeed him. Both backed the AIA which went a long way to effectively rigging the system in favor of established elite businesses. Egalitarianism would have favored the startup, the individual inventor, the university. Enhancing the power of the small fry to compete with the elites would have tended to level the playing field.

    (True, Republicans played their part in passing the AIA. But the Republican elites have always favored the elite companies despite some rhetoric to the contrary.)

    I have noted an odd thing about modern socialism. Keeping every person equal still allows for concentrations of power in the political elites and the big international corporations that each have undo influence and great power. The original point of socialism (Rousseau) was to provide (substantial) equality so that everyone would have the same political power, the same rights and the same access to justice. In a system where wealth and property coincided, reducing the power of property was the goal and it did worked to provide political and social equality. But the modern socialist seems oblivious of the power of the international elites, the big international companies.

  24. Inventor Woes December 21, 2016 11:25 pm

    I thought the AIA was pretty good. It made the US system line up with the rest of the world, thereby making patenting in multiple countries easier. It also introduced IPRs to weed out bad patents. Seems like a win-win to me.

  25. step back December 22, 2016 4:24 am

    In that case, there is a bridge in New York dat I am awtarized to sell you for a good prize. 😉

  26. Edward Heller December 22, 2016 12:02 pm

    Inventor Woes, do you agree or disagree that the purpose of the US patent system is to promote

    invention

    in the United States?

    If you agree with that, then does removing all advantages accruing to US made inventions advance that goal?

  27. Inventor Woes December 22, 2016 1:30 pm

    Edward Heller @26

    I thought that creating an incentive to disclose and giving a one year shield to those who disclose early was meant to promote invention, right? To that end it seems that the AIA is a good thing. It seems like more knowledge spreading earlier and easier, with incentives to do so (i.e. one year dibs) actually promotes the progress of science and the useful arts.

  28. Edward Heller December 22, 2016 3:33 pm

    Inventor Woes, think.

    If one discloses before one files, one kills his right to file abroad. The people who came up with this as a balm for the universities to gain their support must have been laughing uproariously in private.

    We gave up a grace period based on invention in the US. That grace period not only covered acts of the inventor, but all prior art of anyone in the world.

    What we gave up was the special advantage for inventing in the US. Now R&D managers have patent law reason to conduct research in the US. R&D moves to to where highly qualified, but low cost engineers exist, and that is not in the US.

    We shot ourselves in the foot, Inventor Woes. But we can recover by restoring the one year grace period for inventions made in the US.

  29. Inventor Woes December 22, 2016 11:09 pm

    Edward Heller @28

    “What we gave up was the special advantage for inventing in the US. Now R&D managers have patent law reason to conduct research in the US. R&D moves to to where highly qualified, but low cost engineers exist, and that is not in the US.”

    I’m not sure what you mean by that. R&D have a reason to conduct research in the US in the first sentence, but the opposite in the second sentence. Perhaps it was a typo, can you clarify?

  30. Night Writer December 23, 2016 2:56 pm

    @28 Just think Edward it will all be good if you just add a ROM. How do we know that you aren’t misrepresenting the facts or law when you talk about anything Edward? You do this for 101, so how can/should we trust anything you say?

  31. Edward Heller December 23, 2016 3:26 pm

    Inventor Woes, thanks for catching the typo.

    If invention in the US gets one a solid 1 year grace period not enjoyed by those outside the US, then there is a good reason to locate R&D in the US.

  32. Inventor Woes December 23, 2016 10:22 pm

    Edward Heller @31

    I think you could still keep R&D in the US. Just do the research here and keep hush about it and then file for an international patent. That will trigger the 1 year grace period for the US patent. I don’t see how that prevents research from going overseas.

  33. Edward Heller December 25, 2016 4:50 pm

    Inventor, but there is no advantage for conducting research in the US. That is the point.

    We long lived in a world where foreign prior art did not count unless published. We long live in a world that we could prove prior invention for up to a year even with respect to published prior art. There were good reasons to keep R&D in the US. Now there are none.

  34. Inventor Woes December 25, 2016 9:01 pm

    Edward Heller @33

    So what you’re saying is that the “edge up” that the US had is now gone? I guess now that everything is more or less equal, it’s actually a disadvantage? I get that. Makes sense. But it does beg the question: Do we want inequality to give the US an advantage or do we want equality for all at the expense of the US advantage? I guess that’s more of a philosophical question.

  35. Edward Heller December 26, 2016 4:22 pm

    Inventor, but answer is in the Constitution. The Patents Clause is there to promote invention in the US, not in, for example, England. In the beginning, only US citizens could receive patents.