Archive for the ‘Patent Reform’ Category

Threat to the American Patent System and Inventors’ Rights

Tuesday, October 10th, 2017

On August 11, 2017, a group of inventors went to the United States Patent Office to make a statement and give testimony against new patent laws that promote the theft of our intellectual property instead of protecting it. Afterward, the inventors demonstrated in front of the Patent Office, and several burned their patents.  Michael Caputo, Managing Director of Zeppelin Communications, stated, “Patents have become worthless.”  The C-Span video of the protest can be viewed here.

Why is the American patent system and inventors’ rights being threatened?  In September 2011, Congress passed and the president signed the Leahy-Smith America Invents Act (AIA) that changed the U.S. patent system to the party “first to file” instead of the “first to invent to bring the U.S. in line with other countries who adopted first to file patent systems years ago, supposedly to simplify the patent process for companies that file applications in multiple countries. Its central provisions went into effect on September 16, 2012 and on March 16, 2013.

At the time, supporters said it would improve patent quality by creating a new process for reviewing patents after they have been issued and allow third parties to provide information on other parties’ applications.

Opponents argued that there was no reason to change the U.S. system, and inventors and small businesses complained that switching to a “first to file” system would give large companies an advantage and hurt individual inventors.

To find out what has happened to the American Patent System and Inventors’ Rights since 2011, I requested information from Randy Landreneau, Founder Independent Inventors of America, Paul Morinville, Founder US Inventor, and Adrian Pelkus, President of San Diego Inventors Forum.

Randy Landreneau: “America has been the most innovative country on earth from the start. A key reason for this is the revolutionary patent system created by our Founders that provided intellectual property rights to any man or woman, rich or poor. The rest of the world had systems that were for the aristocracy and those favored by the powerful…America maintained a superior system in protecting the intellectual property rights of inventors until …the passage of The America Invents Act in 2011…While it is hard to quantify the effect of changing to First-to-File, this change does place a disadvantage on the independent inventor relative to the large corporation. But another change has had very measurable negative effects.

The America Invents Act created new and easier ways to invalidate an existing patent. Prior to this, to invalidate a patent required going to a judicial court with its various protections offered to the holder of a property right. The America Invents Act created procedures for an administrative court, the PTAB (Patent Trial and Appeals Board), that does not have the same protections. Approximately 70% of the patents that companies try to invalidate using the PTAB get invalidated.

There are efforts underway to get the PTAB procedures ruled unconstitutional or at least reigned in and similar to the procedures of a Judicial court. Certainly, the PTAB procedures are doing great harm to American innovation.”

A more recent bill was even worse – The Innovation Act (H.R. 9), which passed the House in December of 2013. But, the Senate version (PATENT Act, S.1137) was fought effectively and did not pass the Senate.  However, these bills were reintroduced in subsequent sessions of Congress until the summer of 2016, when it became clear these bills were not moving forward.

Hundreds of millions of dollars have been spent pushing a false narrative that nefarious entities called “patent trolls” are using frivolous litigation to make companies pay them unfairly. More often, in actuality, an inventor has a patent that is being infringed by large corporation that he cannot afford to fight in court. So, he sells his patent to a company that does have the wherewithal to fight in court (a non-practicing entity or NPE), and the infringer loses because he is guilty.

One element of the Innovation Act was ‘Loser Pays.’ If an inventor sues a corporation for patent infringement and does not win, he could be liable for the infringer’s legal costs. This could be more than $5,000,000. This liability would also be a personal liability to an investor with an interest in the patent (piercing the corporate veil and placing personal assets at risk).

There are still efforts underway by multinational corporations to get a similar bill passed in the future. Currently, there is the threat that something similar to the Innovation Act will come back.

But, the more current threat is how the courts have been moving toward not considering a patent as the property right that it has been for 200 years. A three-judge panel actually ruled that a patent is a public right. If the courts start to widely regard patents as not being property rights, as some feel they are already doing, this will greatly harm American innovation. If a court does not respect the rights of an inventor, court procedures end up being applied in ways that work against him. Recently, there have been numerous cases where judges ruled that a patent was too abstract, and the inventor was not given the normal due process of providing witnesses, testimony, or otherwise fighting to retain his intellectual property.

There is an effort underway to get the U. S. Supreme Court to take up this issue and rule in the favor of patents being property rights. If this effort succeeds, we will have, at least temporarily, stopped the erosion of inventor rights that are so important to this great nation. I and others are involved in fighting to maintain the rights of inventors, and to expand them where they have been reduced in recent years.”

Paul Morinville wrote his opinion in a paper titled, “We’ve Been Googled,” when H.R. 9 looked like it would pass in which he stated that “H.R.9 creates a Patent System without Inventors. Over the last decade, Google and others have spent hundreds of millions of dollars to lobby Congress and produce an ingenious ‘patent troll’ narrative, which distorts the reality of invention in America. In this decade long war on inventors, H.R.9 is the Google lobby’s latest accomplishment. Not surprisingly, H.R.9 is not directed to fixing the fictional problem of ‘patent trolls.’ Instead, H.R.9 mounts its considerable damage on the patent system in general, specifically harming inventors and small patent-based businesses.”

Morinville explained, “If this bill becomes law, inventors will not be able to enforce their patent rights against moneyed corporations like Google. However, moneyed corporations like Google will still be able to enforce their patents against small businesses with even more devastating consequences to those small businesses. Patent litigation is about risk and cost versus reward. If risk or cost is too high in relation to reward, a patent cannot be enforced.”

Adrian Pelkus: “I’m an inventor named on 14 issued patents and have made my life as a serial entrepreneur doing new product development for over 30 years. Along the way I have created many startups and raised millions of dollars on the back of IP. I have coached inventors and startups every Thursday since 1985 and have run one of the larger inventor clubs in the U. S. since 2005, the San Diego Inventors Forum (www.sdinventors.org.)

He said, “What is most absurd about the America Invents Act to American inventors is the fact that with PTABs we can lose our ISSUED PATENTS… A company challenging a patent wins 90% of the time. The cost to defend is so expensive that inventors give up and are unable to afford achieving their dreams.”

Now, issued patents guaranteed as a Property Right in the constitution are being challenged. A business that infringes would just pay a royalty to the inventor if found guilty hence ‘efficient infringement.’ The biggest incentives to create new ideas and businesses are weakened because the guarantee that an issued patent will protect your IP interests and investments is gone. Patents can now become liabilities. The proposed bills to penalize an inventor with loser pays and threatens to make their investors pay was beyond absurd; it would be economic and intellectual suicide. The end of our rights and hopes as inventors is in plain sight.”

Adrian became connected to Randy Landreneau and Paul Morinville when they reached out to other inventor groups, and he was invited to join the fly-in to Washington, D.C. to fight H.R.9 in April 2015. After that fly-in to Washington, D.C. he became focused on fighting against bills that would destroy our patent system and joined the board of US Inventor in August 2016. He was already on the board of the United Inventors Association and had been working to unite the inventor clubs and groups nationwide.

In January, 2017, the Policy Panel of US Inventors authored a USI Policy Section 101 paper and in February, it was determined that they had to “get as many inventors as possible calling Congress and writing about the threat of a new bill.” 

Adrian said, “I sent out my first call to action to all the clubs and sent a second one the next week and every week since. I discussed the plan to unite the groups and clubs with Stephen Key of Invent Right and Louis Foreman of Edison Nation, who asked how they could help. With their help, we have united 24 inventor groups nationwide to fight the threat to our American patent system and protect inventors’ rights.

I established a bimonthly phone conference with the heads of the biggest organizations in the inventor community, inventor clubs, and individual inventors in an effort to create a coalition that would support a petition that reflects our concerns about and suggestions to change the America Invents Act. This coalition is a historic cooperation that will unite the inventor community and bring a voice to Washington, D.C. they need to hear!

We now have a petition that we believe will help make America great again by making it a great place for American Inventors again. This petition represents concerned citizens, inventors, entrepreneurs, and businesses from coast to coast. I’m proud to contribute my efforts to help America by restoring its patent system. 

I agree with Landreneau, Morinville, and Pelkus that the America Invents Act is gradually destroying the American Patent System. If a bill similar to H. R. 9 passes Congress, it would the final nail in its coffin.

Why is this important? Because most new technologies, especially break-through or disruptive technologies, come from individual inventors who either start a company or license their technology to companies that are more able to take them to the market.

As a mentor for San Diego’s CONNECT Springboard accelerator program and fellow director on the board of the San Diego Inventors Forum with Adrian Pelkus, I work with inventors designing new products or break-through technologies. Local inventors have the opportunity to compete in the San Diego Inventors Forum annual invention contest for best new consumer product or best new technology. All contestants must have applied for at least a Provisional patent before they can participate. The future success of their product or technology is contingent upon their having a patent they can protect from infringement. Their ability to raise the financial investment they need to bring their product to the marketplace depends upon their being able to protect their patent. No investor will take the risk of investing in a product or technology that cannot be protected.

Please join the American inventors coalition formed by Adrian Pelkus, Randy Landreneau, Paul Morinville, and others to save American inventors by signing the petition at http://www.usinventor.org/petition.

 

How the Trade Secrets Act will Benefit Manufacturers

Tuesday, August 16th, 2016

Many times, Congress passes important bills that are go unreported by the mainstream media. Such was the case with the Defend Trade Secrets Act of 2016 (DTSA – S. 1890), passed by the Senate and House of Representatives with near unanimous support in April and signed by President Obama on May 11, 2016. This beneficial bill was authored by U.S. Senators Chris Coons (D-DE) and Orrin Hatch (R-UT) and cosponsored by nearly two-thirds of the Senate.

The bill was supported by a broad industry coalition that included manufacturers and organizations, such as the Alliance of Automobile Manufacturers, the Association of Global Automakers, Inc., Biotechnology Industry Organization, The Boeing Company, Caterpillar Inc., Corning Incorporated, Eli Lilly and Company, General Electric, Honda, IBM, Intel, The Intellectual Property Owners Association  Johnson & Johnson, Medtronic, National Alliance for Jobs and Innovation , National Association of Manufacturers, The Procter & Gamble Company, Siemens Corporation, Software & Information Industry Association (SIIA), U.S. Chamber of Commerce, and United Technologies Corporation (click here for full list). This industry coalition sent a letter dated December 2, 2015 to Senators Hatch, Coons and Flake, saying in part:

“Trade secrets are an essential form of intellectual property. Trade secrets include information as broad-ranging as manufacturing processes, product development, industrial techniques, formulas, and customer lists. The protection of this form of intellectual property is critical to driving the innovation and creativity at the heart of the American economy. Companies in America, however, are increasingly the targets of sophisticated efforts to steal proprietary information, harming our global competitiveness.

Existing state trade secret laws are inadequate to address the interstate and international nature of trade secret theft today. Federal law protects trade secrets through the Economic Espionage Act of 1996 (“EEA”), which provides criminal sanctions for trade secret misappropriation. While the EEA is a critical tool for law enforcement to protect the clear theft of our intellectual property, U.S. trade secret owners also need access to a federal civil remedy and the full spectrum of legal options available to owners of other forms of intellectual property, such as patents, trademarks, and copyrights.

The Defend Trade Secrets Act will create a federal remedy that will provide a consistent, harmonized legal framework and help avoid the commercial injury and loss of employment that can occur when trade secrets are stolen. We are proud to support it.”

The intent of the DTSA is:

“IN GENERAL.—Section 1836 of title 18, United States Code, is amended by striking subsection (b) and inserting the following:

‘‘(b) PRIVATE CIVIL ACTIONS.—

‘‘(1) IN GENERAL.—An owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.”

‘‘(c) JURISDICTION.—The district courts of the United States shall have original jurisdiction of civil actions brought under this section.

However, the DTSA does not preempt state law. Therefore, the owner of a trade secret could potentially file a federal claim and a state law claim at the same time.

In a May 11, 2016 guest post on www.manufacturinglawblog.com by Ian Clarke-Fisher of Labor & Employment and Jim Nault of Robinson + Cole’s Intellectual Property Litigation Practice Team, they wrote, “…the DTSA provides the following important provisions, among others:

Federal Civil Action:  The DTSA creates a federal civil cause of action, giving original jurisdiction to United States District Courts. This will allow companies to decide whether to bring claims in federal or state courts, and may have the net effect of moving most trade secret litigation to federal courts…Importantly, similar to federal employment laws, the DTSA does not supersede state trade secret laws.”

“Seizure of Property:  The DTSA includes a provision that permits the Court to issue an order, upon ex parte application in ‘extraordinary circumstances,’ seizing property to protect against to improper dissemination of trade secrets…the DTSA permits such an order only if the moving party has not publicized the requested seizure…”.

“Damages and Attorney’s Fees:  In addition to the seizure of property and injunctive relief, the DTSA permits for the recovery of damages for actual losses and unjust enrichment, and allows for exemplary (double) damages trade secrets that are ‘willfully or maliciously misappropriated’… The DTSA also provides for the recovery of reasonable attorney’s fees in limited instances…”

In a blog article prior to the bill’s passage (April 8, 2016), Nuala Droney and James Nault, members of Robinson + Cole’s Intellectual Property Litigation Practice Team commented: “The law provides for the award of damages for trade secret theft as well as injunctive relief. It even includes a provision allowing a court to grant ex parte expedited relief to trade secret owners under extraordinary circumstances to preserve evidence or prevent dissemination of the trade secret…”

They explained that “Trade secrets are a form of intellectual property that are of increasing importance to many manufacturers for a variety of reasons. A trade secret can be any information that is (i) valuable to a company, (ii) not generally known, and (iii) not readily ascertainable through lawful means, as long as the trade secret holder has taken reasonable precautions to protect it. A classic example of a trade secret is the formula for Coca-Cola. A more recent example is DuPont’s innovative Kevlar product, which was the subject of a large scale trade secret theft in 2006. Trade secret theft is a huge problem; a recent Pricewaterhouse-Coopers study showed that trade secret theft costs American businesses $480 billion a year.”

Dennis Crouch, Law Professor at the University of Missouri School of Law and Co-director of the Center for Intellectual Property and Entrepreneurship, provides this commentary on his blog:

The Defend Trade Secrets Act (DTSA) includes a new provision added to the Economic Espionage Act (EEA) that, depending upon how it is interpreted, may govern how district courts handle trade secret information in all cases. The new section will be codified as 18 U.S.C. 1835(b) and reads:

(b) Rights Of Trade Secret Owners—The court may not authorize or direct the disclosure of any information the owner asserts to be a trade secret unless the court allows the owner the opportunity to file a submission under seal that describes the interest of the owner in keeping the information confidential. . . .

Courts already liberally allow parties to file documents under seal – so that doesn’t provide the entire impact of the provision. Rather, the provision’s importance is that it extends beyond briefs being filed by parties and instead reaches disclosures at trial and court opinions. Thus, the statute presumably prevents a court from disclosing a trade-secret in its opinion without first providing the trade-secret owner with the opportunity to brief the issue of disclosure. In addition, it provides non-parties with a right to request (under seal) non-disclosure of their trade secret rights.”

However, the website of the Essex Richards law firm of Charlotte, NC has a warning that “businesses should know that the DTSA contains certain requirements that affect their employment and similar agreements with provisions protecting against disclosure or misappropriation of the company’s trade secrets or confidential information.” Here are a few provisions of the DTSA that they highlight as important for employers to understand:

  • “The DTSA provides immunity from trade secret misappropriation claims to whistleblowers who disclose their employer’s trade secrets or confidential information to government officials for the purpose of reporting or investigating a violation of the law.
  • The DTSA requires all employers to notify employees of the DTSA’s whistleblower protection provisions in any contract or agreement with an employee that governs the use of a trade secret or other confidential information. Otherwise, an employer will be deprived of exemplary damages and attorney’s fees under the DTSA. This notice requirement is satisfied if the agreement cross references a separate written policy that addresses reporting suspected violations of the law. Importantly, the DTSA broadly defines “employee” to include any individual “performing work as a contractor or consultant for an employer.” Therefore, independent contractors and consultants, in addition to “W-2 employees,” are covered under this definition. The notice requirement applies to agreements that are entered into or modified after May 11, 2016.
  • The DTSA provides a variety of remedies. If the court finds liability, it may: (1) issue an injunction so long as the order does not prevent an individual from entering an employment relationship and does not conflict with applicable state law prohibiting restraints on lawful employment; (2) order that a party take certain affirmative action to protect the trade secret; (3) award actual damages and damages for unjust enrichment; (4) condition future use of the trade secret on payment of a reasonable royalty, and (5) in a case of willful misappropriation, award exemplary damages not more than twice the original damages amount.  In addition, if the court determines that a party willfully and maliciously misappropriated a trade secret, or if it finds that a misappropriation claim or a motion to terminate an injunction has been brought in bad faith, it may award reasonable attorney’s fees to the prevailing party.
  • In the event a defending party is damaged due to a wrongful seizure, it may sue for and recover “relief as may be appropriate,” such as damages for lost profits, damages for loss of goodwill, reasonable attorney’s fees and punitive damages if the seizure was sought in bad faith.”

As a director on the board of the San Diego Inventors Forum, I am particularly interested in the fact that the DTSA is the first federal legislation that allows private citizens, without first having to obtain patent, trademark, or copyright registration, to sue in federal court to protect their trade secrets. This will be a great help for inventors and existing businesses that do not have “patentable” Intellectual Property and have to rely on trade secrets to protect their “secret” formulas or processes to produce their products.

Entrepreneurial Spirit Molds Success of Plastic Technologies Inc.

Tuesday, September 22nd, 2015

During my tour of manufacturing plants in the Toledo, Ohio region last month, I decided to write an article about Plastic Technologies, Inc because of the interesting story about Dr. Tom Brady who founded the company in 1985. When I interviewed Dr. Brady last week, he told me that when he worked for Owens-Illinois, Inc. from 1971-1984, he had become the VP and Director of Technology and had led the development of the first PET (polyester) plastic soft drink container and had directed the technical activities for all of O-I’s plastic product lines.

When I asked him what led him to start PTI, he said, “In late 1985, I happened upon a unique opportunity to start the company. Several of the major Coca-Cola bottlers were seeking to expand their already successful PET bottle manufacturing operations and to develop new and innovative PET plastic soft drink packaging products. The four largest Coca-Cola regional bottling cooperatives agreed to jointly sponsor and fund product development and engineering projects, and they approached me to manage those project development efforts. Not having an interest in just changing jobs, I made a counter offer to those Coca-Cola cooperatives to establish a separate independent company for the purpose of managing their projects. When they agreed, I left O-I to start Plastic Technologies, Inc. and signed long term contracts with all four Coca-Cola cooperatives.”

Dr. Brady also said, “Because of my industry experience, I was quickly able to identify additional customers that were non-competitive to Coca-Cola and I hired a small, but highly experienced professional staff, to do the technical development for the Coca-Cola Cooperatives and for other customers. Because of our professionalism and experience, we were quickly able to establish a reputation in the industry as a high quality PET R&D and technical support company. As our technical staff expanded and our revenue grew at compound annual rates of 35%, we moved to a larger facility in 1989 and set up both analytical testing and process development laboratories, with the capability of prototyping and testing PET containers and preforms. We founded Phoenix Technologies International LLC in 1991 in nearby Bowling Green, Ohio and have since then expanded the plant three times to produce recycled PET using proprietary technology.

Because PET had become the material of choice for new packaging during the 80’s and 90’s, we were able to quickly expand our customer base and to become involved in developing many different products and businesses, including health care packaging, plastic recycling, specialty compound development, and even leisure products. Our experiences outside the PET packaging field provided a basis for us to hire additional technical professionals to staff our laboratories and establish a reputation in the plastics industry as a substantial technical development company.

Since those early days, we have developed relationships with most major manufacturers, resin suppliers, machinery builders, brand owners, and converters. Today, we even supply preforms for blow molding to customers needing specific quantities or unusual designs. We have also learned how to work effectively with competitive customers andwe have become recognized for our excellence in protecting customer intellectual property and confidentiality. Today, our customers are involved in every step of the PET value chain from raw material supply through end of life recyclability.”

I asked if they were affected by the Recession of 2008-2009 and if so, what did they do to survive it? Dr. Brady said, “The recession did have a big effect on PTI’s business, but the recession, per se, was not the most significant issue. Rather, the recession just added to the challenge of changes that were already happening in the world at large. As is true for almost every business today, one of the challenges for PTI today is to redefine its business going forward. Dr. Brady said that what PTI has done successfully for 30 years is no longer as different and special as it once was. The challenge for PTI, and for every business today, is to find the “gaps” in the markets of the future that can be filled by employing the experience and knowledge that has been developed over many years.

Mr. Brady did say that “we had to do some things differently during the recession. We had to get more professional about sales because there are many more companies selling the same technologies and services now. The biggest impediment to our continued growth is that there are more competitors, so that staying ahead of the competition is a bigger challenge.” When he started the company, he was working with the top levels of management at his major customers. Now, he says that business is being done at a different level. More business is handled today by professional purchasing agents, so you have to be more price competitive than in the past. They also went through formal training in Lean, which has been beneficial to their manufacturing businesses, because, he says, “You have to be more efficient to be competitive in every aspect of your business today.” However, the Lean initiative didn’t affect PTI’s testing lab. Rather, becoming ISO certified has had more of an impact on that lab.”

Since I had seen a whole wall of patents PTI had been granted on display at their headquarters, I asked if the change in patent law under the America Invents Act of 2011 affected his company. He replied, “We have to take the steps to be “first to file” instead of being able to rely on being “first to invent.” We have to file more provisional patents than we ever had to in the past, which adds another big burden and costs that we didn’t have previously. Our number of patent applications has shrunk now that we can’t depend on being first to invent. Anything that adds bureaucratic activity becomes a burden on business.”

After my visit, I had emailed Dr. Brady information on the proposed patent legislation (H.R. 9 and S.1137) and asked if these bills would have an effect on his company.” He responded, “You don’t have time to fight everything that comes up. You try to work around it. In fact, we find that patents are less valuable than they used to be. It is more important to be first to the market and to be innovative. Our growth hasn’t been about becoming a bigger and bigger company. We started Phoenix Technologies and our other companies so that those teams could be more entrepreneurial themselves. Our growth model has been to expand by creating our own “Intrapreneurs,” by offering those intrapreneurs ownership and by growing as a family of companies. Our PTI family of companies now includes two manufacturing companies, two technical development and engineering service companies and three joint venture companies that license technology or sell specialty services to the packaging industry (Preform Technologies LLC, Phoenix Technologies International LLC, PTI Europe SARL, PETWall LLC, Minus 9 Plastics LLC and The Packaging Conference). Today, many PTI employees are owners and are in a position where they can truly feel it’s their company. Any employee can be considered by the management team for an opportunity to buy an equity stake, and 40% of PTI employees are owners today. We have more than 200 employees worldwide and many of the products you buy every day are sold in plastic containers designed by one of our companies.”

During my visit, I was astonished to learn that there are only 11 states that have bottle deposit programs to encourage recycling ? California, Connecticut, Delaware, Hawaii, Iowa, Maine, Massachusetts, Michigan, New York, Oregon, and Vermont. In these states, about 80% of bottles are recycled, while in non bottle-deposit states only about 20% of bottles are recycled. I asked why more states didn’t have bottle deposit programs, and Dr. Brady responded that many major companies oppose the programs because they say it would add to their costs. Dr. Brady explained, “You have to have an infrastructure in place to get enough material to make recycling profitable. However, he emphasized that everybody, even those who think deposit systems cost more money, would win if there was more recycled material, because the costs for virgin material would go down. He also pointed out that a lot of the recycled material goes offshore to China and other Asian countries because it is cheaper to ship the material in the empty containers that are going back to Asia than it is to ship the material to Ohio. We are a big enough company that we can buy recycled material from other sources in Mexico, Canada, South America, and even Iceland, and, we also benefit because we put it back into the highest value end-use products ? food and beverage containers. Dr. Brady pointed out that when China and India get to our standard of living, there isn’t going to be enough of all raw materials to go around. That means that reusing all materials will eventually become necessary and that recycling will become a significant industry, rather than to remain a “nice thing to do.”

During our interview, I learned that Dr. Brady had taken a leave of absence from the company in 2009 to become the Interim Dean of Education at the University of Toledo. He said, “At first, I was judged by the faculty and staff at the college to be a poor choice as the interim dean. However, I actually had the advantage of being completely dependent upon the expertise and experience of the faculty and staff at the college. I made a personal commitment to get to know each and every person in the college and to understand the personal and professional backgrounds of everyone. As a result, we were able to work together to craft a mission and strategy for the future and to create a climate of success going forward.”

Therefore, I wasn’t surprised to learn that Dr. Brady’s grandfather founded the University of Toledo’s college of secondary education. His mother, an aunt, his two sisters and both grandmothers all taught school. He doesn’t just “talk the talk”; he “walks the talk.” When he was interviewed by Plastic News prior to being inducted into the Society of Plastics Industry Hall of Fame in, 2012, he said, “My goal is to help anywhere I can to make education better. If we don’t educate our kids in this country, we’re lost. Our only competitive advantage is being able to be entrepreneurs. The rest of the world can catch up in everything else, so we better figure it out. And, there are not going to be enough unskilled jobs in the future, so you better educate people so they can go out and create their own jobs.”

Dr. Brady emphasized the importance of education and training in the whole economic development equation by saying, “In a sense, I think I could reduce the entire economic development issue to just this one issue. That is, if we spent every one of our economic development dollars on building a world class K-16 education and training system, I truly believe that economic development would happen naturally as a by-product of that initiative.” He reiterated a point that he had made to the mayor of Toledo a few years earlier:

  • Higher per-capita income is a by-product of higher-paying jobs
  • Higher-paying jobs are a by-product of knowledge-based commerce
  • Knowledge-based commerce is a by-product of education and talent
  • Talent and education are by-products of a superior K-16 school system, substantive trade and skill development institutions, and a superior teaching and research university.

I completely concur and made similar points in my book, Can American Manufacturing be Saved? Why we should and how we can, as well as the several blog articles I have written about workforce development and attracting the next generation of manufacturing workers. Manufacturing jobs are the foundation of our economy and the middle class. We must strengthen our manufacturing industry to create more jobs if we want our children and grandchildren to have an opportunity to live the “American Dream.”

Patented Technology is Key to RoadLoK’s Success

Tuesday, July 14th, 2015

There is no lack of ingenuity and innovation in the U. S. today. Each year, thousands of new products are invented, and but most are never produced. Knowing how to use technology to create a product doesn’t mean you know how to manufacture it and get it to market. Obtaining a patent is a key factor in achieving success, but you also need to recognize the limitation of your knowledge and expertise and utilize experts in fields you need, such as product design/engineering, patent/licensing, material/process selection for prototyping and production manufacturing, and marketing.

I recently had the opportunity to interview Adam Xavier, founder and CEO of New Hampton Technologies dba RoadLoK Security, who is an example of an inventor and entrepreneur who successfully got his product patented and into the marketplace.

His company distributes products worldwide under the brand name RoadLoK. The company specializes in the design and production of model-specific vehicle locking systems for motorcycles, scooters and off-road power sports vehicles. The RoadLoK is the only locking system that safely and effectively prevents rollaway theft. The system is designed to be permanently mounted on a motorcycle, thereby eliminating the need for storing the lock while riding. The system’s permanent mounting eliminates all momentum, making it virtually impossible to damage calipers and fenders. This is accomplished while also protecting the rider, should the rider forget to unlock the system before attempting to ride off.

I asked how he got the idea for his product, and Adam said, “My twin brother Eric and I were sitting in the outside seating area of a bar the summer after we graduated from college and saw a man forget to take off his lock and tip over his motorcycle. We started talking about a better idea for a lock and drew a sketch on a napkin. The next day, we searched to see if there was a lock similar to our idea, but didn’t find one. We took our sketch to a CAD designer to turn our idea into a design that could be manufactured. A friend from college, Matt Tomosivitch, who had become a machinist, made our first prototype. Matt is now the chief engineer of our company.

Continuing, Adam said, “We made a video of our lock that showed how it worked. We wrote a comprehensive 60-page business plan. We filed for a provisional patent in July 2005. Then, we sent our video to local investor network group in New York and were kicked down to the group in our area, Orange County. The director contacted us, and we gave our pitch in December 2005. We got our first investment check from the Orange County Capital Development Group on February 16, 2006. This investment was enough to get us to our first trade show in March, the International Motorcycle Show in Atlanta, GA.

Adam said that they set up their first office in Middleton, NY and later moved to Newburgh, NY. They spent two years of R&D to finalize the design and raised another $3 million over three years to get into full production. They used 3D printing to make new prototypes as they improved the design. They received a lot of mentoring and hands-on help from their angel investors.

Their first utility patent was granted on December 23, 2008 after their third attempt at an “office action” at the patent office. They got their second patent in 2010.

When they started the company, Adam said that they wanted to keep everything made in the U. S. They used www.thomasnet.com to find all of their vendors. They have seven major vendors for all of the different parts of their product, and they are located in Illinois, North Carolina, New York, and Texas. Their mission is to produce a high quality product, so all of their vendors are ISO 9001-2008 certified to meet the exacting requirements of their customers.

They later moved to California because they needed to have face-to-face communication with their two biggest customers, one located in Murrieta and one in Corona, CA. California also has the biggest population of motorcycle riders.

The executive offices are now located in Santa Monica, CA, but their product is manufactured in Salisbury, North Carolina and assembled to order at their plant in Torrance, CA. Since the RoadLoK is produced to order, production is not automated and does not utilize any robots. They are looking at doing more vertical integration of parts manufacturing. Their screw-machining vendor in Chicago makes two parts, and the patented design of their locking pin has 5 components made by three different vendors.

They started to implement lean principles in 2009 and changed one component from a square rod to an extrusion, which reduced material waste by 62%. They have been working towards reducing other material waste and time since then.

Their original plan was to focus on after-market sales of the product for the first two years and then license the product to motorcycle manufacturers on a non-exclusive basis similar to how the airbag is licensed to car manufacturers. Now in its 9th year of operations, RoadLoK’s largest customers are KTM Sportmotorcycle and Ducati with others to be announced within the next year.

When asked how his company has been impacted by competition from offshore in Asia, Adam said, “We don’t have any direct competitors offshore, just cheaper substitute locking mechanisms. We are selling in Australia, Japan, and China and recently selected a company to partner with to produce parts in China to sell to the Chinese market. We have started the process to file a patent in China. We need to have manufacturing plant in China to sell to the Chinese market because of the high import duties. Brazil is another county we are looking at to set up a manufacturing plant because of the high import duties. There would be a win/win benefit of jobs to the community and provide a much-needed product for the people.”

I naturally asked how the recession affected his company when they were only a little over two years old when it started in late 2008. Adam said that they were spending about 85% of their time setting up a distributor network and program to sell to dealers utilizing direct sales persons. But, motorcycles are purchased with discretionary income, which dried up during the recession as people lost their jobs. So, their direct sales to motorcycle riders through distributors/dealers dropped drastically. To survive and grow, Adam said, “We had to reduce our direct sales staff and reduce our travel costs. We changed our sales model to online retail sales and direct sales to motorcycle manufacturers. This model has helped us grow and succeed. We have also started R&D on the next generation of vehicle immobilizers to other two or more wheeled vehicles that do not have a transmission.”

Adam had read my article on “Which Patent Reform Bill Doesn’t Destroy the American Patent System?” and said, “Our having a patent pending was key to getting investors and having a patented product has been the key ingredient to our success as a company. Investors want the protection of a patent, but they wouldn’t take the risk of being made personally liable. There is no way that we could have gotten investors if our investors had been personally liable for defending our patent in a patent infringement lawsuit.” Note: Adam was referring to the “Loser Pay’s provision of H. R. 9 and S.1137.

If we want to have more successful companies manufacturing products in America, then we need to protect our American Patent System and stop H.R. 9 and S. 1137 from being passed. Instead, we need to pass the Strong Patents Act of 2015, S. 632, which will “Enact balanced reforms to reduce abuse while sustaining American leadership in innovation.”

 

Fight to Stop Fatal Patent Bills Heats up

Tuesday, July 7th, 2015

Thanks to support from inventors and inventor groups all over the country, Randy Landreneau and Paul Morinville of US Inventor and Independent Inventors of America are continuing their fight to stop the bad patent bills: The House’s Innovation Act, H. R. 9, introduced by Rep. Bob Goodlatte (R-VA) on 2/05/2015, with the “Manager’s Amendment” version passed by the House Judiciary Committee on 6/11/2015, and the Senate’s PATENT Act, S.1137, introduced by Senator Grassley (R-IA) 4/29/2015, with the “Manager’s Amendment” version passed by the Senate Judiciary Committee on 6/04/2015.

In the latest email update from Mr. Landreneau, he reports that he held 65 meetings with House Congressional staff in the last two weeks of June to educate them on why H.R. 9 would crush American innovation. He attached his latest paper, The Innovation Act is Fatal to the American Innovation Ecosystem and Mr. Morinville’s latest paper, We’ve Been Googled.

In his paper, Morinville states, “H.R.9 creates a Patent System without Inventors. Over the last decade, Google and others have spent hundreds of millions of dollars to lobby Congress and produce an ingenious ‘patent troll’ narrative, which distorts the reality of invention in America. In this decade long war on inventors, H.R.9 is the Google lobby’s latest accomplishment. Not surprisingly, H.R.9 is not directed to fixing the fictional problem of ‘patent trolls.’ Instead, H.R.9 mounts its considerable damage on the patent system in general, specifically harming inventors and small patent-based businesses.”

Morinville explains, “If this bill becomes law, inventors will not be able to enforce their patent rights against moneyed corporations like Google. However, moneyed corporations like Google will still be able to enforce their patents against small businesses with even more devastating consequences to those small businesses. Patent litigation is about risk and cost versus reward. If risk or cost is too high in relation to reward, a patent cannot be enforced.”

In is paper, Landreneau states, “With presumptive Loser-Pays, regardless of the merit of any case, the party that does not prevail will automatically owe the other side its legal costs, which could exceed $1,000,000. To avoid this, the non-prevailing party will be forced to re-litigate the case to prove each point objectively reasonable.” He further explains that in addition to making every case more expensive, there will be an additional, even more damaging effect on independent inventors.

The independent inventor will almost always require a contingency attorney to stop the theft of his or her property. Under presumptive Loser-Pays, his attorney will have to be willing to go the extra mile, after losing, for no pay. This will cause many independent inventors to not be able to find representation and have any access to justice.”

Why is this important? Because most new technologies, especially break-through or disruptive technologies come from individual inventors who either start a company or license their technology to companies that are more able to take them to the market.

As a director on the board of the San Diego Inventors Forum, I see new consumer products and break-through technology introduced at our monthly meetings, and the best compete of these compete in our annual inventors’ contest for best new consumer product and best new technology. Our next inventors’ contest will be held on August 15th. All contestants must have applied for a patent before they can participate. The future success of their product or technology is contingent upon their having a patent they can protect from infringement. Their ability to raise the financial investment they need to bring their product to the marketplace depends upon their being able to protect their patent. No investor will take the risk of investing in a product or technology that cannot be protected.

I will not repeat a discussion of what is wrong with H. R. 9 and S.1137 that I discussed in a previous article, “Which Patent Reform Bill Doesn’t Destroy the American Patent System?” but suffice it to say that these bills would essentially destroy the American Patent System. The Loser-Pays clause would make it virtually impossible for independent inventors and small businesses to protect a patent and get investors. Only large corporations would be able to absorb the costs of patent infringement litigation. The economic benefits of patents granted in different metropolitan areas of the U. S. could come to a screeching halt if either of these two bad patent bills is passed. Either bill would squash the American innovation that is so essential to our national prosperity and the prosperity of many metropolitan areas.

In a February 2013 Brookings Institution report, “Patenting Prosperity: Invention and Economic Performance in the United States and its Metropolitan Areas,” an analysis of national and metropolitan area invention from 1980 to 2012, revealed:

  • “The rate of patenting in the United States has been increasing in recent decades and stands at historically high levels.
  • Most U.S. patents—63 percent—are developed by people living in just 20 metro areas, which are home to 34 percent of the U.S. population…the metro areas with the highest number per capita are San Jose; Burlington, VT; Rochester, MN; Corvallis, OR; and Boulder, CO.
  • Inventions, embodied in patents, are a major driver of long-term regional economic performance, especially if the patents are of higher quality.
  • Research universities, a scientifically educated workforce, and collaboration play an important role in driving metropolitan innovation.
  • Patents funded by the U.S. government tend to be of especially high quality, and federal small business R&D funding is associated with significantly higher metropolitan productivity growth.”

Of interest to those of us in California is the fact that when comparing the average granted patents per year and the patents per million residents from 2007-2011, California ranks very high. The report states “… a few large metros notably changed their share of U.S patents. At the top, San Jose moved up from ninth to first, and San Francisco moved from seventh to fourth, moving ahead of Chicago, Philadelphia, Detroit, and Boston. Seattle and San Diego moved up 15 and nine places, respectively, to become seventh and eighth. Meanwhile, Austin and Raleigh moved up 41 and 55 places, respectively, to become 11th and 20th. Cleveland fell 10 slots from 13th to 23rd, while Philadelphia fell from fourth to 13th.”

In his paper, “The Innovation Act, H.R.9 is Fatal to the American Innovation Ecosystem, Randy Landreneau explains why H. R. 9 would be harmful, saying, ” A key reason that America has out-innovated the rest of the world for 200 years is the way the unique American Patent System has not only encouraged individuals to innovate, it has also facilitated the flow of capital into the resulting innovations. A key ingredient in this successful recipe has been the ability to stop the theft of the intellectual property represented by a patent, which results in a valuable patent asset that can be used to attract venture capital and build a successful enterprise… An early-stage investor in a start-up that fails often ends up with little more than the patent. If he then has limited patent rights and significantly greater risk in defending the patent, as is being proposed, then the patent asset loses significant investment value. In a scenario that is already high in risk, the changes proposed by The Innovation Act will severely reduce investment, and the incentive for American innovation will be lost. What is being proposed destroys the innovation ecosystem that has enabled America to be the world leader in innovation.”

 

It is expected that the House will vote on H.R.9 the week of July 13th, so it is critical that we add our voices to its opposition now. The Senate’s S. 1137 will be on the Senate floor soon as well. More attention seems to be paid if you call the Washington, D. C. office of your Congressional representatives and senators than their local office. If you don’t know the names of your representative or senators, search online or call the main switchboard number 202-225-3121 and ask for your representative or senators. Tell your representative to oppose H. R. 9 and tell your senators to vote “no” on S.1137. Ask your senators to support the Strong Patents Act of 2015, S. 632. Don’t let them destroy the goose that lays the golden egg ? the American Patent System that fosters American innovation, which provides jobs and prosperity to our country.

 

Which Patent Reform Bill Doesn’t Destroy the American Patent System?

Tuesday, May 19th, 2015

In 2011, the Leahy–Smith America Invents Act (AIA) changed our patent system from a “first to invent” to a “first to file.” It also created easier ways to invalidate patents, called Post Grant Opposition procedures (PGOs). These PGOs are now invalidating 76% of the patents at which they are directed. Now, there are three patent reform bills in consideration by the House and Senate that are all purporting to fix some of the problems generated by AIA Act. They are:

The PATENT Act, S.1137, sponsored by Senator Grassley (R-IA), was sent to the Judiciary Committee on April 29, 2015 and would “amend title 35, United States Code, and the Leahy-Smith America Invents Act to make improvements and technical corrections…”

The Innovation Act, H. R. 9, sponsored by Rep. Bob Goodlatte (R-VA) was sent to the House Judiciary Committee on February 5, 2015 and would also “amend title 35, United States Code, and the Leahy-Smith America Invents Act to make improvements and technical corrections…”

The Strong Patents Act of 2015, S. 632, sponsored by Senators Chris Coons (D-DL), Dick Durbin (D-IL) and Mazie Hirono (D-HI) to “Enact balanced reforms to reduce abuse while sustaining American leadership in innovation.”

The first two bills are the result of the expenditure of hundreds of millions of dollars to lobby Congress by large corporations such as Google, Microsoft, Oracle, etc. over the last 8 years to produce a “patent troll” narrative and then fix the fictional problem of “patent trolls” with these bills.

Many consider the worst provision of both bills the “Loser-Pays with Joinder clause,” which means that 1) a patent holder who tries to defend a patent and does not prevail is potentially liable for the infringer’s legal costs (easily $1,000,000+), and 2) interested parties are joined in the liability. This means that the inventor could be liable for millions of dollars if he is unsuccessful in defending his patent against infringement, and an investor could be personally liable as well. With the odds of losing so high, Loser-Pays makes it impossible for almost all inventors to enforce their patent rights against patent pirates or ever get outside investment.

Under The Innovation Act (H.R. 9), a university could be liable for millions of dollars if patents created and licensed through university research were unsuccessful in defending against infringement. The university could be held liable for the legal costs of the infringer if the patent holder did not prevail in the patent infringement case because of the Loser Pays with Joinder clause.

The PATENT Act (S. 1137) exempts universities and pharmaceutical companies from the Loser Pay with Joinder clause, but makes it worse for small inventors. There is now a requirement that a patent holder certify that he has the funds for the Loser Pays liability before he can sue for infringement (easily $1,000,000 plus). This will eliminate the ability of virtually every independent inventor to defend a patent. And, if an investor provides the funds, he will be personally liable for the Loser Pays (piercing the corporate veil and throwing away hundreds of years of corporate law).

Randy Landreneau, founder of Independent Inventors of America, states the following regarding the exemptions: “It is shameful that we have a political system where groups with political influence get favored while the rest of us suffer. Universities and drug companies will still have patent protection, but the independent inventor, the individual the American Patent System was created for, will be destroyed. This is an all-out attack on a most basic and important part of America. This is arguably the worst and most damaging legislation in American history.”

Both of these bills would do considerable damage to the patent system, specifically harming inventors and small patent-based businesses. If either of these bills becomes law, inventors and small businesses will not be able to enforce their patent rights against large corporations with deep pockets while corporations like Google, for example, would still be able to enforce their patents against small businesses with devastating consequences to those small businesses.

Paul Morinville, Founder of US Inventor stated, “For the last two years, inventors have lost the large majority of patent cases. Post grant opposition procedures (PGO) created in the America Invents Act (AIA) invalidate patents at rates above 75%. Article III courts invalidate patents at similar rates under the indefinable “abstract idea” category of subject matter ineligibility. Today, inventors are losing more cases than at any time in the 224-year history of the U.S. patent system.”

He added. “Patent litigation is about risk and cost versus reward. If risk or cost is too high in relation to reward, an inventor or a small business cannot enforce a patent. This bill creates enormous risk and cost, and consequently it creates a patent system without inventors. An infringement suit can cost millions of dollars for each side. Prior to the American Invents Act (AIA), it was possible to protect small inventions from patent infringement. But, with the huge increase in inventor losses due to the AIA and the indefinable “abstract idea,” only inventions with exceptionally large damages can be enforced. It’s simple math, damages must exceed the cost of the case plus the cost of risk. Thus, the high damages bar would make the vast majority of patents unenforceable by inventors.”

In an opinion article in The Hill, Robert Schmidt, co-chair of the Small Business Technology Council, wrote, H.R. 9, purported to solve a patent troll problem, is instead the next step in crushing competition from new small firms, creating “Big Tech Patent Ogres” that can ignore smaller players and their patents. This new bill makes it almost impossible for small technology startups to enforce their patents… H.R. 9 will retard innovation and cost America jobs and wealth. H.R. 9 is contrary to the Founding Fathers’ Constitutional intent, contrary to the policies of 220 years of patent law, and contrary to stated intention of the President and Congress to stimulate innovation.”

In contrast, The Strong Patents Act, S.632 would be good for all inventors ? individual, small businesses, universities, and large corporations. It would “would effectively crack down on the abusive practices of so-called patent trolls without weakening the U.S. patent system” according to the Association of Public Land Grant Universities.

The Biotechnology Industry Organization (BIO) “supports the STRONG Patents Act of 2015 and will continue to advocate for passage of legislation to curbing abusive patent practices, while not undermining the ability of patent owners to defend their inventions and businesses against infringement.”

Landreneau states, “The Strong Patent Act would rein in the Post Grant Opposition procedures so that they are more like federal court procedures used in invalidating property rights, rather than administrative procedures designed so that 76% of patents they are directed at are invalidated.”

Another advantage of this bill is that it “Eliminates fee diversion through the establishment of a new USPTO revolving fund in the U.S. Treasury.” It also “Empowers the Federal Trade Commission to crack down on abusive patent-related demand letters.”

Senator Coons’ website makes the following convincing argument for the importance of preserving a strong patent system:

  • “IP-intensive industries comprise one-third of U.S. GDP ($5.5 trillion), generate 27 million jobs, and pay employees over 30% more than other industries.
  • 75% of venture capital investors consider the value of patents when making funding decisions in small businesses (97% in the biotech industry).
  • Patents inspire innovation in fields that require long-term investment in R&D: from life-saving therapies to new generations of wireless technologies.
  • Patents allow us to benefit from the genius of small inventors. With a strong patent right, individuals create inventions that disrupt dominant companies. 
  • U.S. leadership in innovation is due in no small part to an unrivaled patent system. Strong patents today provide for game-changing inventions tomorrow.”

There is no question in my mind that the Strong Patents Act is the only bill that truly protects American innovation. As a director of the newly incorporated San Diego Inventors Forum, I join our board President, Adrian Pelkus, in urging everyone to contact their Senators and Congressional representatives to urge them to oppose the House’s Innovation Act (H.R.9) and Senate’s PATENT Act (S.1137) and vote “yes” on the Strong Patents Act of 2015 (S. 632).

Pelkus said, “We could lose everything if either of the two bad bills were passed by Congress. It could usher in the end of innovation as we know it and make it impossible for individual inventors to raise the money they need from investors to get their new products into the marketplace.”

Now is the time to fight with us to keep innovation alive and well in America and not allow large corporations to squash individual inventors.