Patent Law, Law 472

Introduction to Technology Law

Dr. Sinan Utku

Bilkent University Law School
 IP Law

 Technological Property
 Copyrights
 Especially computer programs, user interfaces, APIs etc.
 Patents
 (The bulk of this course)
 Trade Secrets
 Other
 E.g., design rights, design patents, trademarks, unfair
competition etc.
 What is a Patent?

 A right to exclude others from practicing your

invention for a limited period of time

 But not necessarily the right to practice your own

invention!
 What is a Patent?

 Example:

 A’s invention:
Chair

 B’s invention:
Chair with arms
 What is a Patent?
Claims

 A’s invention – a chair

 An article of manufacture for sitting comprising:

a seat panel,

a back rest panel attached to the seat panel at a substantially

right angle, and

at least three vertical members attached to a bottom surface

of the seat panel at substantially right angles.
.
 What is a Patent?
Claims
 B’s invention – a chair with arms

 An article of manufacture for sitting comprising:

a seat panel,

a back rest panel attached to the seat panel at a substantially right

angle,

at least three vertical members attached to a bottom surface of the seat

panel at substantially right angles, and

two arm-rest members wherein each arm-rest member is attached to a

top surface of the seat panel and is substantially horizontal.
 Many (most?) patents are little
value
 Factors:
 Is the invention implemented in commercial products?
 Is the patent being enforced?
 Is the patent of high quality?
 Timing of the invention
 Requirements for Patentability
 Subject matter
 In U.S., “utility”
 Novelty
 Inventive step
 In U.S., “nonobviousness”
 Sufficiency
 In U.S., “enablement” and “written description”
 No added matter
 Industrial applicability

15
 Cost of National Applications

Average estimate of national application costs

(preparation and up to grant, in euros)

EPO 24,100
U.S. 10, 250
Japan 5,460

"Study on the cost of patenting in Europe"

prepared on behalf of the EPO by
Roland Berger Market Research (2005)

16
 Policy Questions

 Do patents encourage innovation or have no impact?

 Do patents harm innovation?

 Patent Pathologies?
 NTP Inc. v. Research in Motion
 Research in Motion (“RIM”)
 Maker of popular Blackberry wireless e-mail device
 First introduced 1999

 NTP:
 Patent holding company
 No products; only owns patents
 Earliest wireless e-mail patent filed 5/1991, granted 7/1995

 NTP asserted a group of patents directed to wireless e-mail

technology (e.g., U.S. 5,436,960)
 Blackberry Litigation
- ARPANET and e-mail
Early 70’s

- First commercial digital cellular networks

1990-91

- First patent application

Filed May 1991 (granted July 1995)

- Mosaic web browser

1992

- First Blackberry device

1999
 Blackberry Litigation
January 2000
 NTP “invites” RIM to license its patents

November 2001
 NTP files suit in federal district court in Virginia

November 2002
 District court decision of infringement
 $53 million in damages awarded to NTP
 Injunction against RIM, but stayed pending appeal
 Blackberry Litigation
August 2005
 Court of Appeals (essentially) affirms (appeal heard June
2004)

October 2005
 Supreme Court denies RIM request to stay the case

March 2006
 Facing injunction, RIM agrees $613 million settlement

Afterwards, PTO decisions invalidated these patents

(some of these are still on appeal) !
 Patent Pathologies?
 Blackberry and similar litigations have resulted in new
entities
 Patent Troll or Non-Practicing Entity
 Business model:
 Raise capital; buy patents from, e.g., bankrupt companies
 No manufacturing or other commercial activity
 Sue companies based on patents with threats of injunction
 But keep in mind:
 Universities
 Individual inventors (e.g., Thomas Edison)
 Property right; incentive to inventors
 Patent Pathologies?
 AIDS patent controversy
 Large R&D based drug companies versus developing
countries with AIDS epidemic

 Brazil versus Abbott regarding pricing for anti-AIDS Kaletra

drug

 Brazil threatened to compulsorily license patent (allowed

under TRIPS under certain circumstances); Abbott lowered
price

 Abuse of IP right, or exploitative behavior by multinational

company?
 Patent Pathologies?
 Ampyra and using patent law to manipulate stock prices

 If you know how the price of stock of a company will move, you can
make money

 E.g., say stock of company A is trading at $10/share today

 Enter into contract today to sell 100 shares in one month from
now
 The agreement will likely provide you will be paid $1000 today

 Per contract, you will have to deliver 100 shares in a month from now

 Assume stock price drops to $5/share before the month is up

 You can buy 100 shares on the market at that time for $500, and deliver to buyer

 You make $500 profit

 Patent Pathologies?
 Ampyra and using patent law to manipulate stock prices

 New IPR patent challenge process in US implemented in 2013

 Early on, IPR process resulted in large majority of patent claims being
canceled

 So filing an IPR on a commercially important patent at that time would

result in fall of stock price of company owning patent

 Investor Kyle Bass, through his organization “Coalition for Affordable

Drugs” files IPR patent challenges against commercially important
patents of a number of pharma companies
 Patent Pathologies?

Ampyra
(MS, Parkinsons, spinal
cord injuries)

sales: $400 million/yr

from http://patentvue.com/wp-content/uploads/2015/10/Acorda_Chart_EnvisionIP.png
 Why is There a Property Right?
 Tragedy of the Commons
 Professor G. Hardin, 162 Science 1243-1248 (1968)
 For example,
 10 sheep herders sharing a common parcel of land
 Land supports maximum of 100 sheep before it is temporarily
or permanently damaged (so it supports fewer sheep)
 A self –interested, rational herder will have the incentive to
graze more than 10 sheep
 Benefit of one extra sheep completely realized by that herder;
detriment caused shared by all
 Why is There a Property Right?
 Solution?
 Privatize land so that each sheep herder owns one-tenth of
the land
 Self-interested, rational herder will not exceed more than 10
sheep on his/her own land
 Benefit and detriment of one extra sheep realized entirely by the
herder

 Society as a whole benefits from consumption of maximum

possible number of sheep
 Why is There a Property Right?

 Alternative Solution?
 Strong central body enforces 10 sheep per herder limit on the
common parcel
 Need a trustworthy central body
 That body must be capable of effectively managing all
decision making in society
 But no need for a property right
 Why is There a Property Right?
 In common law traditions (England, USA), Locke’s labor
theory (~1689)
 According to Locke, God gave the world to all people; then
why should anyone own anything?

 One owns himself and herself – this is a natural right; one

therefore owns his/her labor

 By mixing one’s labor with the land, that person also owns
the land
Why is There a Property Right?
 Therefore, property is a natural right
 Corollary: property right should not be subject to
democracy
 Other natural right: right to life. Also should not be
subject to democracy

 Hence, an individual’s property right should be

protected against incursions by the Government
 Property right is built into the Bill of Rights (U.S.
Constitution)
 But what about inheritance or the scarcity of land?
Intellectual Property (Patents) as
Property
 The rationale of the tragedy of the Commons does not
apply directly to intellectual property
 Patents, unlike real property, can be exploited over and
over again without any depletion
 For patents, ineffective, or inefficient use by one should not
impact use by another

 But, Locke’s labor theory may apply

Intellectual Property (Patents) as
Property
 What else might influence innovation?
 What are the incentives?
 For entrepreneurs

 For inventors

 Under what kind of systems do entrepreneurs/inventors

thrive?
Intellectual Property (Patents) as
Property

 North Korea v. South Korea

 Nogales, Mx. v. Nogales USA
 extractive/inclusive institutions
 political institutions

 economic institutions

 rule of law
Intellectual Property (Patents) as
Property
 Professor Diamond’s book is about why some cultures
advanced faster than others
 Provides an explanation of difference in technological
advancement between pre-Columbus American cultures
and Eurasian cultures

 Does so based on geographical factors

 For example, consider propagation of innovation in
domestication of agricultural species
Intellectual Property (Patents) as
Property
 The model for propagation of innovation as described in
this book worked for thousands of years – why shouldn’t
it work now?
 In pre-industrial societies, copying of innovation by others
had no impact on benefit realized by innovator

 In post-industrial societies, the benefit of innovation is

impacted by copying
 Usually the sale of goods based on the innovation is the most
important benefit
Intellectual Property (Patents) as
Property
 Keeping innovation secret may be one solution
 The law of trade secrets

 Coca Cola’s secret formula (developed in the late 19th

century)

 But, if innovation triggers other innovation, it is not in

society’s interest for all innovation to be kept secret
Intellectual Property (Patents) as
Property
 Patent as a social contract:
 In return for a full and enabling disclosure of the
invention to the public,
 State provides the inventor with a limited
monopoly to exploit the inventions
 As a result,
(1) Useful knowledge in the public domain increases

(2) Inventors are given an incentive to innovate and disclose

Intellectual Property (Patents) as
Property
 But can too many property rights (e.g., patents) have
reverse effect of harming innovation?
 The Tragedy of the Anti-Commons (Professor M. Heller,
1998)

 Patent thickets and royalty stacking

 A cell phone may incorporate hundreds of patents

 Patents on biomedical research tools may hinder new research

and development?
Intellectual Property (Patents) as
Property
 Potential solutions to proliferation of patent rights
 Raise the standards for patentability
 E.g., patent to wireless email device in light of wireless
technology of 90s and email technology invented in 70s

 Raise patent quality

 Longer and more expensive examination of applications
 Detract from property-right aspects
 Weaken the ability to obtain injunctions
Intellectual Property (Patents) as
Property
 But is there really a problem?
 Consider also:
 Correlation between strong-patent jurisdictions and
technological development

 Development of Silicon Valley in 80s occurred during a regime

of strong patent rights

 Utility of the ability of start-up companies to finance

themselves based on patents or patent applications
END