Monday, March 16, 2015

Rep. Dana Rohrabacher Warns Against the Loss of IP Rights with Misguided Patent Reform

Many IP experts are growing concerned about the weakening of the IP system in the United States. Some are so concerned that they are wondering what steps can be taken to save it from the steady erosion of IP rights that has been occurring, often in the name of solving the "fake" problem of so-called "patent trolls."

One man who wants to prevent further harm to our IP system is Rep. Dana Rohrabacher (R) from California’s 48th District, who is a member of the House Science and Technology Committee. He recently wrote an op-ed article for the Washington Times called "Patent ‘reform’ is killing the right to invent: How a congressional misstep could imperil creativity" (March 1, 2015). I agree with much of what he says.

He warns that Congress's zeal to stop "patent trolls" will actually result in them simply doing the bidding of powerful companies who are annoyed by little guys able to defend themselves with patents. In effect, Congress is being manipulated into apparently "reforming" the US patent system but in reality they will be weakening it for small inventors and making it more friendly to the big empires that see patents as unpleasant sources of cost and annoyance. Here is some of what Rohrabacher has to say:
With the best intentions, and naively going along with the corporate world’s hugely financed publicity machine, Congress is about to stomp on America’s most creative citizens, its inventors.
The target is not the much-hyped “patent trolls.” They are a minuscule matter. What’s at stake is average Americans’ constitutional right to own what they’ve created. We’re really up against corporate lawyers acting like ogres, devouring the little guy’s innovative accomplishments.
Many of my colleagues, without understanding the legislation’s impact, will soon vote on “HR 9,” a misnamed “patent reform,” also dubbed “pro-innovation,” that is anything but. In reality, it deforms our patent system beyond recognition.
This legislation — pushed by my Republican colleague, House Judiciary Committee Chairman Bob Goodlatte, and deep-pocketed multinational corporations — appears on its way, again through the House, to the Senate, thence to an eager President Obama for signing.
When that happens, America’s exceptional system of invention will be shoveled into the depths of mediocrity, there to seep into the murk in which less scrupulous global competitors spend their resources.
In the last session, a bipartisan band of my Republican friends (some of whom made their pre-political marks as patent-holding inventors); members of the Black Caucus; and a heroic Ohio congresswoman, Democrat Marcy Kaptur, failed to dissuade our House colleagues that the bill was not the litigation-curbing effort as advertised.
The bill went to the Senate where, fortunately, it stalled. It’s back, this time resurfacing in the House with just one hearing. A whole class of small inventors, among the many who will be injured, is being kissed off as scarcely deserving a voice. All in a day’s work for the corporate influencers who shaped HR 9 from start to finish.
Just because a measure holds itself up as “tort reform” should not mean it escapes the scrutiny of free-market Republicans. It should instead call for a skeptical second look, and then more throughout its progress. Guaranteed: Such close-eyed analyses of this bill will encourage deep suspicion.
Fair-minded members will find themselves aghast at how this leaves defenseless our individual inventors, small and midsized companies, researchers, even universities who depend financially on their patent portfolios. It is a coup in the making by the biggest and best protected operators....
Legislative reform efforts invariably build on a narrative of great injustice. This one moves wildly beyond the need to fix real abuses, wherein at considerable cost companies must defend their legitimately acquired patents against unscrupulous claimants.
But the term “patent troll,” directed against such bad actors, has been transmogrified by corporate marketers to include legitimate small inventors — many of them minorities, which is why my Black Caucus friends sized up the issue astutely — who are outgunned and outspent when they try to protect their intellectual property.
Almost all infringement cases are brought by people who own a patent legitimately. If not, such cases should be decided in court. There is nothing wrong with bringing such matters to court — a cornerstone, not of crony capitalism, but of the free market itself.
Our economy and culture depend on the disruptive nature of innovation. Our Constitution deliberately made all people equal, giving no advantage to those of social status, wealth or position. The founders, even before they added the Bill of Rights, secured the right to hold patents in the Article I of the Constitution itself, the only right mentioned prior to the amendments.
We all know our country’s history of innovation. Large companies reject new ideas. It is the innovator who challenges the status quo, not the corporation.
Under the proposed bill, the pretrial discovery process — just one part of many dubious sections — tilts heavily against the small inventor, who of course must share his or her secrets with an opposing corporation’s well-armed legal team. In another era, I might have considered this an innocent, unintended consequence of ill-considered drafting. Not now.
I implore my colleagues in both the House and Senate to stop this monster aborning.

Sunday, March 15, 2015

Open Innovation and Intellectual Property Trends in China

China is undergoing a revolution in the realm of IP and innovation. In just 3 decades, China has gone from no IP law to leading the world in patents filed and litigation to enforce patents. The level of innovation in China may well be the next big surprise for many in the West.
“Open innovation” is often used to describe collaboration with outside partners to accelerate innovation. Dialog about open innovation frequently assumes that it is recent and Western, but successful open innovation is not unique to the West. Innovation via cooperation between unlikely partners has been a characteristic of China for centuries. Relevant terms are guanxi (often translated as “relationships”) and yuanfen (fate that brings partners together). In China, guanxi and yuanfen have allowed proximity and chance to bring business partners together when there was a basis of trust, resulting in innovative alliances. The fusion of skillsets in China’s manufacturing economy often stems from collaborative innovation, though the results are often decried as merely the machinery of copying.
Accelerated innovation in China, including advanced systems for responding to market feedback, is the subject of a report from the MIT Sloan Management Review, where Peter Williamson and Eden Yin survey China’s innovation in rapid manufacturing and parallel engineering. A key element is obtaining feedback and innovation concepts from outside partners or customers. The cited example of Mindray Medical International, China’s largest medical equipment maker, shows how R&D fueled by rapid response to outside feedback enables advanced new products to launch four times as fast as foreign competitors. This is not old-school copying, but the impressive fruit of aggressive open innovation.
Many more examples could be cited, such as Lenovo’s rapid acquisition of foreign patents to fuel entry into new areas, or Wuxi Pharma Tech (NYSE: WX) and their collaboration with Germany’s Targos Molecular Pathology to support WuXi's bioanalytical work for pharmaceutical customers.
The global IP community was surprised in 2014 to learn that a Chinese paper company had secured 8 billion RMB in funding (over US$1 billion) backed by its intellectual property. The story was reported in a Chinese paper-industry publication in March 2014, and a few days later we had the privilege of reporting this story to the Western world on the Innovation Fatigue blog, which was in turn quickly picked up by Intellectual Asset Management (IAM) magazine. IAM’s blog noted that this deal is one of the biggest IP-backed loans in history.
The company, Tralin Paper (Quanlin in Chinese, or Tranlin in recent US stories), has a modest portfolio with around 100 Chinese patents, several internationally-filed patents and a few trademarks. Their technical strength is in creating paper with natural characteristics from waste paper and straw. Even if guanxi rather than IP was behind the financing, the fact that IP was used as publicized basis for the deal underscores the increasing importance of IP in China and the diverse ways in which Chinese IP can generate value. For Tralin, even if the IP were window dressing, its role even as a prop at a minimum provided PR value and strengthened Tralin’s position as thought leader in its niche. The most reasonable assumption is that IP also provided direct financial benefits, not just window dressing.
In the US, where Chinese innovation and IP is often deprecated, the impact of this deal is being felt strongly as Tralin/Tranlin is investing $2 billion in Virginia and creating 2,000 jobs with the technology they are bringing to US shores. News stories so far have missed the connection between US jobs and Tranlin’s ability to get capital based on Chinese IP, but we hope that Americans might recognize that innovation and IP from China is at least partly responsible for this welcome job growth.
Tralin/Tranlin’s story is part of a landscape in China where entrepreneurs and creative leaders are discovering the many positive uses of IP, including its ability to secure capital and build partnerships. But many Western companies wishing to build partnerships with their technology fear China and the risk of misappropriated IP. This lack of trust is being addressed gradually as China strengthens its IP laws and IP enforcement systems. Lawsuits, no matter how fair, are a last resort. Successful joint innovation requires trust directly between parties, and both sides need more successful examples for inspiration. Fortunately, a powerful role model of the technical, cultural, and political bridge-building that can occur in a healthy relationship rooted in carefully-maintained trust can be seen in a remarkable experiment in technology transfer and international cooperation: the Utah-Qinghai EcoPartnership, a unique collaborative effort that is using IP from the United States to solve major environmental problems in China.
To read more about the Utah-Qinghai EcoPartnership, with some interesting photos showing the fruits of this unique collaboration based on respect for IP rights and mutual trust, see the article I published with two co-authors (Edgar Gomez, and Alan Smurthwaite) in the Diplomatic Courier, "Open Innovation and IP Trends in China: Insights from the Utah-Qinghai EcoPartnership."