Category: Patents

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Innovation Patents

New White Paper Explores the Importance of Property Rights to National Wealth and Security

a hand reaching for a shining, hanging keyA new white paper, Property Rights: The Key to National Wealth and National Security, was published today by Dr. James Edwards, the Executive Director of Conservatives for Property Rights. In the white paper, Dr. Edwards explores how stable and effective property rights in both tangible and intangible property are critical to human flourishing and progress, and he notes that a renewed commitment to strengthening property rights will help to restore U.S. industrial competitiveness as a top national economic priority.

The white paper was launched at a briefing today on Capitol Hill that featured a speech by Congressman Thomas Massie, who noted the prescience of the Founders in formulating the Constitution’s IP Clause. Dr. Edwards discussed the new white paper and then joined a panel discussion that included Kimberly Chotkowski, CEO of Licensing Executives Society, Preston Noell, President of Tradition Family Property, and Robert Taylor, Founder and Owner of RPT Legal Strategies.

The prologue from the white paper is copied below:

PROLOGUE

Intellectual property is the basis of national economic development, wealth, power, and security. As our Founding Fathers recognized, the ideas represented in a patent form the basis for the advancement of science, technology, and industry. These advances are brought to fruition in the manufacturing process, which in turn provides useful products, including defense articles, as well as jobs, incomes, economic growth, and social stability. Manufacturing based on patents also creates opportunities for further research into and development of even better ideas and products — a continuous feedback loop that encourages more technological and thus societal advances. The loss of manufacturing in particular reduces opportunities for technological progress and economic growth.

Patents have developed historically, and the American system, embodied in the Constitution, is based on centuries of legal and philosophical developments. Perhaps the most central idea to emerge is the grounding of patents in property rights: The owner of the patent, whether the inventor or someone to whom he has sold or licensed the patent, has an exclusive right in the technology or processes or ideas contained in the patent. That right is in essence the ability for a limited time to employ the judicial system to stop others from using the patented matter and to enforce monetary damages for violation of the patent.

The ability to commercialize patents in a manufacturing enterprise requires investors who are willing to put up significant sums of money in the expectation of getting a decent return on their money. If the discovery contained in a patent is not recognized as a property right and protected for a sufficient period to allow the inventor and the investors to recoup their initial expenditures plus a reasonable profit, there will be fewer inventors and no investors, and much less progress.

The technological, economic, and social success of the United States has been built largely on the foundation of patents as property rights. Patent law and case law have evolved over the last two and a quarter centuries, but the concept of a patent as an exclusive right of an inventor for a limited period has remained at the center. However, in recent years, legislation and judicial decisions have moved away from the concept of an issued patent as securing a property right.

This paper analyzes the necessary foundation of private property rights for achieving citizens’ thriving, economic prosperity through both individual flourishing and industrial competitiveness, and national security that preserves independence. It considers property rights’ cornerstone role in attaining industrial competitiveness through the lens of President Reagan’s commission on U.S. industrial competitiveness. This approach provides the benefit of hindsight and several decades of perspective, giving a clearer view of what went right and what went wrong. This framework also gives a longer view for assessing our present challenges.

After an introduction comparing the Reagan era to the present time, the first section examines industrial competitiveness: What is this concept and what are its purposes? The second section delves into invention and patents, developing a case study from a pillar of a property rights-based, competitive in­dustrial backbone. The third section pulls back the lens from the case study to apply the lessons from the previous section to other aspects of property rights, forms of property, and industrial competitiveness more broadly. The final section makes concrete recommendations for reestablishing private property rights in pursuit of reinvigorated U.S. industrial competitiveness for the 21st century.

To read the white paper, please click here.

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Copyright Patents

CPIP Fall Conference Papers Highlight How Intellectual Property Rights Promote Global Prosperity

2016 Fall Conference flyerBy Alex Summerton

The George Mason Law Review has just published the papers from our Fourth Annual Fall Conference, Intellectual Property & Global Prosperity, which was held at Antonin Scalia Law School, George Mason University, in Arlington, Virginia, on October 6-7, 2016. The conference highlighted the importance of IP rights in the global marketplace and discussed how countries that leverage the availability of such protections enjoy creative, technological, and economic benefits far surpassing those that place less value on IP.

The newly-published papers are outlined below:

Kristina M. L. Acri, née Lybecker, Economic Growth and Prosperity Stem from Effective Intellectual Property Rights, 24 Geo. Mason L. Rev. 865 (2017)

Professor Kristina Acri of Colorado College discusses the importance of IP in incentivizing innovation by enabling firms to recuperate development expenditures. She explains how the static loss resulting from the patent system is far offset by the dynamic gains resulting from both increased innovation and public disclosure of knowledge. Acri identifies how countries employing strong IP regimes realize greater benefits in pharmaceutical innovations in the form of more available treatments and earlier implementation than countries with weaker protections. Furthermore, she highlights how robust IP systems encourage both revolutionary and incremental technology developments, promote domestic technology industries, and foster new employment opportunities for domestic labor forces.Key to this analysis are the fundamental economic forces that drive patented innovation. Acri discusses the importance of patents to innovator companies that must bear substantial fixed costs in the form of research and development, while generic competitors need only compete on negligible marginal costs with the innovators. She further explores how countries employing strong patent protections attract innovation businesses, as well as develop investment industries and educated workforces to support such innovation. Finally, Acri analyzes the positive correlation between a country’s rank as an innovative hot spot and the relative strength of its IP protections.

Walter G. Park, Averting a “Tripsxit” From the Global Intellectual Property System, 24 Geo. Mason L. Rev. 883 (2017)

Professor Walter Park of American University examines the benefits that developing countries can realize by implementing stronger IP right systems in the context of the globalized marketplace. He considers the effect the TRIPS Agreement has had on the relationship between developed and developing countries as a function of the grant rates for technologies originating from various countries and the balance of technology imports and exports. Park seeks to explain why certain countries have developed into technological powerhouses in the last few decades, while others have remained behind and lagged in technological production.Park looks at various factors that could have influenced, and in turn have been influenced by, these divergent development paths, such as trade practices, legal and sociological structure, and the flexibility that TRIPS gives member states to set their own schedules. He concludes that countries seeking to move themselves into modern economies can benefit greatly by examining and adjusting their IP regimes to encourage both domestic and foreign innovations and investment in the local territory.

Stan Liebowitz, The Case for Copyright, 24 Geo. Mason L. Rev. 907 (2017)

Professor Stan Liebowitz of the University of Texas explores several rationales for copyright, commenting on both economic and moralistic perspectives and discussing how, as a common misconception, many people fail to recognize that the property rights imparted by copyright truly enable economic returns. He focuses heavily on the economic case for copyright, seeking to dispel the myth that copyright is an economic monopoly. Liebowitz notes that popular works enjoy unusually high monopoly-like rents because they are uncommon and disproportionately successful as compared to unpopular works, not because they benefit from any economic monopoly imparted by copyright.Liebowitz discusses the concept of market-determined values of works in contrast to alternative systems such as centralized markets and patronage systems, and he concludes that these alternative systems lack the ability to incentivize the production of either high quality or high quantities of works. Finally, he explores the moral justifications for the remuneration of authors of successful works and discusses several alternative, although morally absurd, repugnant, or questionable, systems for securing payments for authors. Liebowitz posits that copyright enables markets to efficiently set the price of works and facilitates the determination of what society does and does not want produced.

Brett Danaher & Michael D. Smith, Digital Piracy, Film Quality, and Social Welfare, 24 Geo. Mason L. Rev. 923 (2017)

Professors Brett Danaher of Chapman University and Michael Smith of Carnegie Mellon University assess the impact of piracy of copyrighted works on the production, in terms of both quantity and quality, of artistic works, particularly films. They discuss the trade-offs of copyright enforcement versus piracy for consumers and producers, and they outline the expected welfare transfers that occur for both users who would and would not otherwise purchase the consumed media in the absence of piracy. Danaher and Smith also delve into the hidden impact that piracy and the non-enforcement of copyright laws have on markets that traditionally have relied on copyright.Danaher and Smith analyze the origination of high-quality works and examine how the rise of online piracy has caused a depression in the production of award-winning films in countries where copyright is laxly enforced. They further identify the collateral negative effects of the lack of copyright enforcement, including the frustration of attempts to secure funding for riskier projects. Danaher and Smith explain how this potentially robs the world of artistically meritorious, but financially unsafe, projects, thereby decreasing overall social welfare.

Kevin Madigan & Adam Mossoff, Turning Gold Into Lead: How Patent Eligibility Doctrine is Undermining U.S. Leadership in Innovation, 24 Geo. Mason L. Rev. 939 (2017)

CPIP Legal Fellow Kevin Madigan and Professor Adam Mossoff of George Mason University focus on recent developments at the Supreme Court that have made patenting high-technology inventions, particularly in the computer and biotechnology disciplines, more difficult and the consequential danger this poses to the United States’ position as a global innovation leader. They begin by reviewing the late-20th century jurisprudence that placed the U.S. in a position to be a technological force in the new millennium, especially with respect to the patentability of biotech and computer technology. Madigan and Mossoff then review more recent Supreme Court precedents that have led to a recession from a pro-patentability position while providing very little guidance on what could be patentable.Madigan and Mossoff go on to assess how this change in jurisprudence has resulted in a retreat from America’s position as a patent powerhouse. They point to cases where applications were rejected as unpatentable subject matter in the U.S. while the corresponding technologies were found to be patentable in Europe and China. Madigan and Mossoff also discuss the general trend of rejecting applications and invalidating patents with scant actual justification for why those applications and patents were patent ineligible. They conclude that data available from the last few years shows that the U.S. may be receding as a technological center since its patent laws have become unreliable for inventors and investors seeking protection.

Jiarui Liu, The Predatory Effects of Copyright Piracy, 24 Geo. Mason L. Rev. 961 (2017)

Professor Jiarui Liu of the University of San Francisco analyzes strategic behavior in copyright enforcement, particularly in countries that have not yet developed robust copyright industries and that have lessened incentive to invest in effective copyright policy. He discusses the phenomenon in China, where large copyright entities sometimes prefer pirating of their works to enforcement when they cannot expect any return for their work. As Liu explains, expecting the ability to develop a market and later determine how to recover payments for pirated copies, this lax enforcement of copyright policy results in a suppression of domestic industries that would compete with large entities.Liu outlines the reality of copyright enforcement in China, a lackluster effort on the part of the Chinese government that has led to rampant piracy of a wide range of copyrighted works. He explains how the piracy of software products, such as Microsoft Office, has stunted the development of new and competing technologies, a result implicitly approved by the market-dominant copyright owners. Liu compares this behavior of strategic non-enforcement to predatory pricing practices traditionally viewed as part of antitrust law, since it places the product into consumer hands at an initial loss in order to establish market dominance that will later enable the firm to exert monopoly power once its product has become the dominant force. Finally, Liu discusses possible mechanisms of corrective actions, both private and public, to combat non-enforcement as strategic behavior.

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Innovate4Health Innovation Patents

Innovate4Health: Nanobiosym’s Gene-RADAR Brings Real-Time Results for Zika Testing

This post is one of a series in the #Innovate4Health policy research initiative.

Innovate4HealthBy Gabrielle Eriquez

Because there is currently no preventative vaccine for Zika, a mosquito-borne virus known to cause severe birth defects in pregnant women, the ability to obtain a fast and accurate diagnosis is critical. However, especially in the developing world where Zika’s presence is greatest, there are significant issues with current diagnostic tests: they are in extremely high demand, especially during the summer months, and, accordingly, are very costly.

Enter Nanobiosym’s Gene-RADAR: a tablet-sized device which can detect Zika RNA from human serum. Though it is currently only authorized for Zika testing pursuant to an FDA Emergency Use Authorization, this device has the potential to facilitate the availability of faster, cheaper Zika testing worldwide.

Due to the scale of the disease, getting tested for Zika is not as simple as a quick trip to a local clinic. Testing criteria prioritize pregnant women who have possibly been exposed to the virus. These criteria result in many others who are not pregnant, but still may have been exposed, being turned away from getting tested.

mosquitoThe problem is even greater in developing countries in Latin America. Poor areas lacking adequate sanitation and air conditioning are favorable breeding grounds for mosquitoes. The only advice that many of these countries give to women to combat Zika is to avoid pregnancy; however, these countries have the world’s highest proportion of unintended pregnancies.

The difficulties in preventing and combating Zika that impoverished people in Brazil face have been well documented. For those living in more affluent areas, Zika testing is available even for patients who are not pregnant. But at free public clinics in poorer neighborhoods (where it is easier to contract Zika), lines are out of the door. Symptomatic patients spend hours waiting, only to receive saline for dehydration and to still have to return if their symptoms persist.

The lack of available testing for many patients in developing countries is influenced by cost. Tests are typically hundreds of dollars. For those who can’t even afford window screens or insect repellant, affording a Zika test at this price is next to impossible.

Timing is the other likely factor contributing to this issue. Dr. Anita Goel, CEO and founder of Nanobiosym, noted that even in Florida, testing was back-logged due to medical centers having to ship patients’ samples to outside labs. Results could take up to five weeks to come back.

Outside the U.S., 4 billion people don’t even have access to this basic, albeit inefficient, centralized testing mechanism. “[In developing countries], clinical testing is offered by the occasional network of unregistered laboratories operating without regulatory oversight. Services might be of too poor quality to be of any worth in medical decision-making.” Timing is obviously crucial for pregnant women, but it is also important for any other potentially-infected person, since Zika can be transmitted sexually whether or not symptoms are present.

Gene-RADAR has the potential to remedy these issues by decentralizing and mobilizing testing, thus lowering cost and wait time. Gene-RADAR employs nanobiophysics to diagnose in real time diseases that contain DNA or RNA.

This foundational technology is not limited to Zika. The mobile device was an award nominee for Saving Lives at Birth’s 2015 Grand Challenge for Development for utilizing the platform to detect early HIV in infants in Rwanda. It was also presented in the same year as a diagnostic solution for other global pandemics such as Ebola.

Centralized lab platforms can run from several hundred thousand to one million dollars. Though Gene-RADAR’s cost is still being optimized, the goal is to make it affordable even to the poorest areas of the globe. In terms of wait time, Gene-RADAR should be able to return results in about an hour, eliminating the back-log problem that comes with centralized testing mechanisms.

Gene-RADAR is patented, and does not require running water, constant electricity, or highly-trained personnel to operate. The patented improvements over previous technologies both result in a smaller machine and improvements in the accuracy of testing.

The device’s footprint is much smaller than that of large, centralized testing machines. Gene-RADAR is tablet-sized and only 3.5 pounds, versus 50-plus-pound platforms that are certainly not mobile and likely do rely on constant electricity.

Gene-RADAR diagnosis is also more accurate than that of the other Zika tests currently available. Current testing methods that look for Zika-specific antibodies have a high proportion of false positives. Other tests, like Gene-RADAR, look for DNA or RNA. But these other tests also result in false positives by confusing a sequence with that of another Zika-like virus, such as Dengue. The advances in Gene-RADAR improve accuracy to solve these problems by detecting a virus’s precise RNA sequence.

From a public health perspective, testing as many people as possible in at-risk areas will help contain the virus. If people know quickly whether they’re infected, there is less of a chance of infecting others. Through multiple global initiatives, Nanobiosym’s next step is to increase production and distribution where the need is greatest.

According to Dr. Goel, patent protection via the Nanobiosym incubator has allowed this revolutionary technology to expand beyond the research labs. “Our incubator focuses on bringing together a holistic approach using physics, medicine, nanotechnology, and information technology to create new science or technology, then incubate it all into different products and spin-off companies that can transform how we solve some of the world’s greatest challenges.”

The innovative technology that is Gene-RADAR is a prime example of innovation working to promote groundbreaking solutions to real-world challenges. For Zika (and other diseases with genetic footprints), this means the potential for cheaper, faster, and more readily-available testing that would undoubtedly benefit global health.

#Innovate4Health is a joint research project by the Center for the Protection of Intellectual Property (CPIP) and the Information Technology & Innovation Foundation (ITIF). This project highlights how intellectual property-driven innovation can address global health challenges. If you have questions, comments, or a suggestion for a story we should highlight, we’d love to hear from you. Please contact Devlin Hartline at jhartli2@gmu.edu.

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Innovate4Health Innovation Patents

Innovate4Health: GRIT Leveraged Freedom Chair Brings Mobility to Developing World

This post is one of a series in the #Innovate4Health policy research initiative.

innovate4healthThe World Health Organization (WHO) estimates that over 65 million people in the developing world need an appropriate wheelchair. Over 75% of people in the developing world live in rural areas, where standard wheelchairs do not work, as they are hard to mobilize over rugged terrain and rough local roads that may not be paved. Further, most wheelchairs are difficult to maintain: they are comprised of many pieces that are easy to break and hard to repair, and they are expensive to replace.

The Leveraged Freedom Chair (LFC) is a wheelchair that solves this international humanitarian problem. It enables people with disabilities in developing countries to gain mobility and independence, and it gives them the ability to navigate their environment in life-changing ways and at a viable cost. The LFC is built out of steel and bicycle parts that are commonly available in rural areas of developing countries. The parts and tools for maintenance and repair are inexpensive and commonly found. This makes it easier to repair the wheelchair at local bicycle shops or wherever spare parts may be found.

The construction of the LFC is engineered to meet the diverse challenges that arise in developing countries. The LFC uses a unique lever drivetrain which makes it both faster than conventional wheelchairs and sturdier when traveling over rough terrain. It does not use gears and derailleurs, which can be expensive and easily broken; it instead uses levers connected to the drivetrain to control velocity and speed. By using readily available bicycle parts in the production of the LFC, costs are kept down and users can maintain and repair the chairs themselves.

The lever construction is one of the high points of inventiveness of the LFC. Instead of pushing on the wheels like a regular wheelchair, LFC riders push on two levers, which are designed to be biomechanically efficient. LFC riders can shift gears by moving their hands up and down the levers. For smoother roads, riders push on a low part of the levers and shift into “high gear,” which enables them to travel 80% faster than a regular wheelchair on tarmac. For rougher terrain, riders push on a high part of the levers and shift into “low gear,” which enables them to ride over obstacles with 50% more torque than a regular wheelchair. The levers can be removed and stored on the wheelchair, which allows the LFC to be used like a regular wheelchair indoors.

The LFC was conceived and developed in 2007–2008 by four graduate students in the mechanical engineering program at MIT who then founded a company in 2012 called Global Research Innovation and Technology, or GRIT, to develop and commercialize their invention. The LFC has been in development since 2008. First-generation prototypes of the LFC were constructed in Kenya and Vietnam with community partners who were also local wheelchair producers. In 2014, GRIT secured Patent No. 8,844,959 for the LFC, a “wheelchair with level drivetrain.”

The company now manufactures the LFC in India with a local partner and sells it in bulk for $250 per chair to non-governmental organizations (NGOs) and other development organizations. The aid agencies and NGOs that purchase the chair generally distribute the LFC to users free of charge. In 2015, the GRIT management team estimated that it had shipped almost 1,200 LFCs to 17 countries, including Guatemala, Haiti, Kenya, Uganda, Tanzania, India, the Philippines, and Vietnam.

The team at GRIT runs the company as a “social enterprise,” pursuing a social mission (like a nonprofit) but also retaining the ability to make money off their patented invention. As a for-profit social enterprise, GRIT can accept money from nonprofit foundations that is congruent with its mission, but it can also raise private equity like a regular startup.

GRIT has earned numerous awards and honors for the LFC, including winning a Patents for Humanity Award from the U.S. Patent and Trademark Office in 2015.

After spending several years developing the LFC, GRIT decided to build upon its patented technology and develop wheelchairs similar to the LFC but more suited to use in first-world countries. The GRIT Freedom Chairs are somewhat sleeker in design, and have certain features that appeal to first world riders, such as a lightweight frame, optional customization, and the ability to be folded and stored in the trunk of a car. The sale of these chairs is intended in part to defray the costs of distributing chairs at or below cost in developing world countries. GRIT Freedom Chairs afford users access to previously-inaccessible terrains, and offer versatility to a broad array of riders, including American veterans. They are directly marketed in the U.S. in order to keep costs down.

People with limited mobility in developing countries face many daunting obstacles, and the lack of appropriate wheelchairs can severely limit their mobility, opportunities, access, and independence. The GRIT Leveraged Freedom Chair is an elegantly simple, inexpensive, and ingenious device that confers freedom to wheelchair users in the developing world. Its underlying technology, secured by vital U.S. patents, is also the basis of the GRIT Freedom Chair, which likewise transforms the lives of users in the developed world. Both the LFC and the Freedom Chair rely on secure property rights that enable their parent company to develop and market life-changing products that users can afford to ride, repair, and maintain. The “all-terrain wheelchair” is truly an invention with worldwide relevance and reach.

#Innovate4Health is a joint research project by the Center for the Protection of Intellectual Property (CPIP) and the Information Technology & Innovation Foundation (ITIF). This project highlights how intellectual property-driven innovation can address global health challenges. If you have questions, comments, or a suggestion for a story we should highlight, we’d love to hear from you. Please contact Devlin Hartline at jhartli2@gmu.edu.

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Innovate4Health Innovation Patents

Innovate4Health: Treating Neonatal Jaundice in the Developing World with D-Rev’s Brilliance

This post is one of a series in the #Innovate4Health policy research initiative.

Innovate4HealthBy Nick Churchill

Severe neonatal jaundice kills over 100,000 newborn babies annually and causes severe brain damage to thousands more. In most cases, the condition can be treated by simply shining a blue light on a baby’s skin. However, each year more than 6 million infants worldwide do not receive adequate treatment. The problem is particularly severe in low-income countries, where many hospitals cannot afford the equipment to treat jaundice.

To address this global health problem, the innovators at D-Rev, a non-profit firm based in San Francisco, designed a high-performance, affordable device called Brilliance to treat severe neonatal jaundice. Brilliance has been praised by users as “effective and user-friendly,” and it was honored as the top innovation in the Health category of the 2016 Tech Awards. Since the introduction of the first Brilliance model in 2012, D-Rev estimates that the device has treated over 250,000 babies and has averted approximately 3,400 infant deaths and disabilities.

Neonatal jaundice occurs when a newborn has elevated levels of bilirubin in the blood. Approximately 18% of babies have severely high levels of bilirubin, which, left untreated, can lead to brain damage, cerebral palsy, hearing loss, and even death. Severe jaundice can be treated with a process called phototherapy, which involves placing the baby under special blue lights. When the light is absorbed by the infant’s skin, it helps break down bilirubin. Treated properly, severe jaundice usually does not cause lasting damage.

Phototherapy has long been recognized as a simple and effective treatment for severe neonatal jaundice; but at around $3,000, traditional phototherapy devices are prohibitively expensive for many hospitals in developing countries. Hospitals that can obtain a traditional unit are often unable to afford the maintenance and repair costs necessary to keep it running. The unreliable electrical systems in many developing countries can cause voltage spikes that damage device components. Commonly used fluorescent lamps require frequent replacement. As a result, phototherapy is unavailable to babies in many developing communities.

D-Rev is a product development company founded in 2007 to provide world-class, affordable healthcare technologies to people living on very low incomes. After learning that severe jaundice continues to cause brain damage in many parts of the world, D-Rev staff members visited hospitals in India and Nigeria to assess the availability of effective phototherapy and found that most of these hospitals did not have phototherapy devices that met standards for care. With the problem identified, D-Rev’s design team got to work.

D-Rev’s advanced devices, for which they are seeking a patent, uses LEDs that last 60x longer than fluorescent lamps, saving hospitals over $240 per year on replacement bulbs. Brilliance is designed to withstand a range of power fluctuations without affecting performance and operates without cooling fans or filters, so there are fewer parts to maintain. The device is height-adjustable and can be integrated with the wide variety of other critical neonatal medical equipment found in hospitals serving low-income communities.

Importantly, D-Rev’s devices are inexpensive to manufacture, which allows D-Rev to sell them for hundreds, instead of thousands, of dollars. The newest model incorporates the technology in their patent application, which ensures light intensity levels remain consistent across the treatment area at any angle of tilt. D-Rev also developed an integrated light meter to help healthcare providers ensure that infants receive appropriate doses of light, something many low income hospitals were previously unable to do. Thus, the innovations developed by D-Rev are improving the technology and reducing cost, making much needed treatments more accessible in the developing world.

After successfully designing an affordable and effective phototherapy device, D-Rev’s next challenge was to find a way to deliver Brilliance to the hospitals that needed it most. D-Rev’s CEO, Krista Donaldson, recognized that the firm would need help to establish a sales and distribution network, noting, “We knew we needed to license in this case.” To achieve its goals, D-Rev needed to find a partner willing to manufacture its products and distribute them to hospitals and clinics in the poorest communities in the world.

D-Rev licensed its technology to Phoenix Medical Systems, a neonatal equipment firm based in India, who agreed to manufacture and distribute Brilliance while capping its price. The licensing agreement was structured so that D-Rev would take a smaller royalty on sales to public and district hospitals, which tend to serve lower-income patients. In this way, D-Rev used its intellectual property rights to align the incentives of Phoenix’s sales team with D-Rev’s goal of reaching those patients who are most in need of affordable phototherapy.

Donaldson has explained why D-Rev’s protection of its intellectual property “is a prerequisite to having the broadest possible impact.” First, intellectual property rights allow D-Rev to ensure that the quality of its products remains consistent. As Donaldson notes, a medical device “cannot fail the user, particularly a user in a vulnerable population.” Second, inconsistency erodes consumer trust, which limits the impact of a product. Third, D-Rev recognizes that designing an effective product does not necessarily solve the targeted problem. By retaining control of its intellectual property, D-Rev can ensure consistent manufacturing of its products, sustainable delivery to users who need it, and continued maintenance and support. Finally, D-Rev protects its intellectual property because the market is “the most economically sustainable and scalable way” of reaching their intended customers.

D-Rev has demonstrated that the value of intellectual property goes beyond incentivizing life-saving innovation like Brilliance. Intellectual property rights empower innovators to increase their impact by partnering with market leaders like Phoenix. As Donaldson concluded: “To succeed, serious partners (for-profit or non-profit) must also make an investment, and none are willing to do that with the threat of knock-offs.”

#Innovate4Health is a joint research project by the Center for the Protection of Intellectual Property (CPIP) and the Information Technology & Innovation Foundation (ITIF). This project highlights how intellectual property-driven innovation can address global health challenges. If you have questions, comments, or a suggestion for a story we should highlight, we’d love to hear from you. Please contact Devlin Hartline at jhartli2@gmu.edu.

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Injunctions Innovation Legislation Patent Law Patents

The STRONGER Patents Act: Important Legislation to Protect Our Innovation Economy

U.S. Capitol buildingToday, Senators Chris Coons, Tom Cotton, Dick Durbin, and Mazie Hirono introduced the Support Technology & Research for Our Nation’s Growth and Economic Resilience (STRONGER) Patents Act of 2017. This important piece of legislation will protect our innovation economy by restoring stable and effective property rights for inventors.

First and foremost, the STRONGER Patents Act will bring some much-needed balance to the post-issuance review systems administered by the USPTO’s Patent Trial an Appeal Board (PTAB). Until now, the PTAB has been a “death squad”; an arm of the USPTO killing patents that the same USPTO had previously issued. There are even examples where the PTAB has invalidated a patent that had previously been upheld by the Federal Circuit Court of Appeals.

Data analyzing PTAB outcomes demonstrates just how dire the situation has become. Coordinated and repetitive challenges to patent validity have made it impossible for patent owners to ever feel confident in the value and enforceability of their property rights. Only 16% of patents reaching a final written decision at the PTAB have survived unscathed.

This is not surprising as the procedures have been stacked against patent owners from day one. We and others have noted how broadly construing claims, multiple filings against the same patent by the same challengers, and the inability to amend claims, among other abuses, severely disadvantage patent owners in PTAB proceedings. With the STRONGER Patents Act, these proceedings will move closer to a fair fight to truly examine patent validity. There are many aspects to this legislation that will improve the PTAB, such as:

  • Harmonizing claim construction with litigation, focusing on the “ordinary and customary meaning” instead of the broadest interpretation a bureaucrat can conceive. Sections 102(a) and 103(a).
  • Confirming the presumption of validity of an issued patent will apply to the PTAB just as it does in litigation. Sections 102(b) and 103(b).
  • Permitting only those who are “charged with infringement” of the patent to challenge that patent, thus preventing the abusive and extortionate practice of challenging a patent to extract a settlement or short a company’s stock. Sections 102(c) and 103(c).
  • Limiting abusive repetitive and serial challenges to a patent. Sections 102(d), (f) and 103(d), (f).
  • Authorizing interlocutory review of institution decisions when “mere institution presents a risk of immediate, irreparable injury” to the patent owner as well as in other important circumstances. Sections 102(e) and 103(e).
  • Prohibiting manipulation of the identification of the real-party-in-interest rules to evade estoppel or other procedural rules and providing for discovery to determine the real-party-in-interest. Sections 102(g) and 103(g).
  • Giving priority to Federal Court determinations on the validity of a patent. Sections 102(h) and 103(h).
  • Improving the procedure for amending a challenged patent, including a new expedited examination pathway. Sections 102(i) and 103(i).
  • Prohibiting the same administrative patent judges from both determining whether a challenge is likely to succeed and whether the patent is invalid. Section 104.
  • Aligning timing requirements for ex parte reexamination with inter partes review by prohibiting requests for reexamination more than one year after being sued for infringement. Section 105.

Second, the STRONGER Patents Act will make other necessary corrections to allow patents to promote innovation. For example, as Section 101 of the Act confirms, patents are property rights and deserve the same remedies applicable to other kinds of property. In eBay v. MercExchange, the Supreme Court ignored this fundamental premise by holding that patent owners do not have the presumptive right to keep others from using their property. Section 106 of the STRONGER Patents Act will undo the disastrous eBay decision and confirm the importance of patents as property.

Third, the STRONGER Patents Act will once and for all eliminate USPTO fee diversion. Many people do not realize that the USPTO is funded entirely through user fees and that no taxpayer money goes to the office.  Despite promises that the America Invents Act of 2011 would end fee diversion, the federal government continues to redirect USPTO funds to other government programs.  This misguided tax on innovation is long overdue to be shut down.

Each of the steps in the STRONGER Patents Act will help bring balance back to our patent system. In addition to the major changes described above, there are also smaller changes that will be important to ensuring a vibrant and efficient patent system. CPIP co-founder Adam Mossoff recently testified to Congress about the harms being done to innovation through weakened patent protection.  It is great news to now see Congress taking steps in the right direction.

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Antitrust Innovation Patents

Foreign Antitrust Regulators Are Threatening American Innovation

By David Lund & Matthew Barblan

U.S. Capitol buildingAmerican businesses are suffering as foreign governments improperly use their antitrust laws to discriminate against American companies. Recently, the United States Chamber of Commerce assembled an International Competition Policy Expert Group to examine this problem. The Group released a report describing particular harmful and inappropriate uses of antitrust law and providing recommendations for U.S. policymakers to address these harms.

Although the report addresses foreign antitrust law abuses broadly, there has been a recent upsurge in the misapplication of these laws in the context of intellectual property. The report itself identifies several unique ways that innovative industries have been harmed by this unfortunate trend, noting that “legitimate IP rights are often not respected for their role in incentivizing investment in innovation that can have an enormously positive long term impact on competition.”

This is a critically important issue, and it is becoming increasingly relevant in DC policy circles. For example, later this week the House Judiciary Committee will be holding a hearing on Recent Trends in International Antitrust Enforcement, including testimony from Deborah Garza (Co-Chair of the Chamber’s International Competition Policy Expert Group) and Scalia Law’s Koren Wong-Ervin (Director of the Global Antitrust Institute), among others.

Over the next couple of months, CPIP will be writing a series of essays highlighting issues discussed in the report that are of particular relevance to the intellectual property policy community.

Industrial Policy Masquerading as Antitrust Law

By securing to innovators exclusive property rights to the fruits of their productive labors, intellectual property law incentivizes innovation and forms the foundation of the myriad partnerships and transactions that enable creators and innovators to commercialize their inventions. In theory, antitrust law is supposed to support the IP system by providing a fair marketplace where innovative companies thrive according to their own merit. The main thesis of the Chamber’s report, however, is that several countries are misusing their antitrust laws to pursue domestic industrial policy goals that allow the government to pick particular winners and losers. The report notes:

[Competition law enforcement] may reflect an effort to improperly discriminate against a U.S. competitor to further “industrial policy” goals, such as by favoring domestic commercial interests or state-owned enterprises over foreign competitors. Report, Page 24.

When antitrust law is used for industrial policy goals or simple political favoritism, it undermines the basic premise of the IP system. Often the selected winners are cherry-picked nationals of the countries at issue. This harms the ability of innovative American companies to compete in these markets based on the actual economic value of their products and IP. As the report states:

Commercial success may turn on political cronyism, rather than on the ability of a firm to efficiently provide the goods and services consumers desire at a competitive price (the result the consumer welfare approach to antitrust law is designed to foster). Report, Pages 20-21.

The misuse of antitrust law is particularly damaging in IP-intensive industries. IP incentivizes research and investment based on the property rights it secures to creators. These property rights are only valuable—and thus only function as an incentive—when IP owners deploy them in the marketplace without undue interference. When countries use antitrust laws to devalue the IP rights of foreign companies in order to favor their own local businesses, it undermines the purpose and function of the IP system as a whole.

Inconsistent Notions of “Fairness”

The Chamber’s report discusses several improper uses of antitrust law that undermine IP owners’ ability to freely deploy their property rights in the marketplace. One key problem is the inconsistent application of vague “fairness” considerations. As the report states:

Where competition rules include inherently subjective concepts such as substantive “fairness” (as is the case in many jurisdictions), for example, the legal treatment of business conduct may differ profoundly on a case-by-case basis, often driven by ad hoc political considerations. Report, Page 20.

“Fairness” may be an important value for children to learn, but when it is vaguely applied to a complex body of law it can result in inconsistent and even contradictory outcomes. The report highlights one particular dichotomy to show just how problematic vague conceptions of fairness can be: pricing. Jurisdictions have used antitrust law to scrutinize prices as being “unfair” both for being too high and too low. But high prices often simply reflect higher consumer demand for a better product. Conversely, low prices often reflect more efficient business practices, precisely the kind of improvements antitrust law is supposedly designed to promote.

Importantly, businesses have no way of knowing ahead of time whether a country’s antitrust regulators will find “fairness” violations for their prices. This prevents companies from taking affirmative steps to comply with the law, thereby increasing volatility, increasing costs to set up and maintain a business, and undermining sound business planning and investment.

Because subjective considerations such as “fairness” can easily be applied arbitrarily, the real-world application of these laws often brings in more nefarious purposes. When there is no objective guide or lodestar to the legal system, cronyism runs rampant. It no longer matters who is the most efficient producer or who invented the technology. What matters is who is friends with the antitrust law enforcement agency. As a result, subjective doctrines of “fairness” perversely create an unfair playing field, making it easy for foreign governments to discriminate against American businesses, even when it ultimately works to the detriment of consumers in their country.

IP-intensive industries are particularly subject to being victimized in the name of “fairness.” The business benefits that come from property rights in innovation can include the ability to set prices that far exceed marginal costs. This makes sense from both an economic and a moral standpoint—innovative companies routinely make millions (if not billions) of dollars worth of up-front R&D investments before commercializing their inventions. And the fruits of their labor are justly secured to them as their property in the form of IP. But from a antitrust law enforcement perspective, pricing far above marginal costs makes IP owners particularly vulnerable to claims that their prices are “unfair.”

Even though it makes perfect sense for an IP license fee to be high when the IP enables important functionality in a product, antitrust law authorities are adept at minimizing the economic value of the IP while criticizing the price of the license as unfair. This is particularly true in industries where American companies are leaders in researching and developing foundational innovations that foreign companies want to integrate into their products. As a result, IP-intensive American companies are particularly vulnerable to abusive and inconsistent antitrust law scrutiny under supposed considerations of “fairness.”

A Worrisome Lack of Due Process and Regulatory Humility

In another troubling trend for American IP owners, foreign antitrust authorities are increasingly pursuing investigations that go beyond the scope of any reasonable antitrust concerns. Despite being baseless, these investigations have serious negative consequences for the targeted firms, particularly in the case of innovative firms trying to license their IP or get their products to market while their patents are still in force and while their technology is still cutting-edge. As the Chamber’s report notes:

Enforcement activities may reflect local case law that allows an agency to exercise its powers of investigation and its decision-making authority in an expansive and highly discretionary way. Where this occurs, competition authorities can tend to discount the costs and disruption that their enforcement activities impose on legitimate business conduct, give too little weight the costs of wrongfully condemning conduct that is procompetitive, and exaggerate the likelihood and consequences of wrongfully exonerating conduct that might have anticompetitive impact. Report, Page 22.

In parallel with overly expansive investigations, many jurisdictions do not offer the basic procedural due process safeguards necessary for businesses to defend themselves. Once again, this effectively allows authorities to pick winners and losers based on political cronyism or domestic industrial policy goals rather than actually promoting competition. The report states:

[L]eading U.S. companies have complained that in certain jurisdictions they are subject to investigations and enforcement actions in which they are not given adequate notice or time for responses to questions; are not informed of the particular acts or practices which are a subject of concern; are not allowed to obtain from enforcers information about the theory of anticompetitive harm…. Report, Page 29.

The report further notes that IP-intensive industries suffer additional harms from poorly conducted enforcement activities because of their novel, complex, and dynamic nature. Unfortunately, the regulatory pendulum is swinging in the wrong direction. The report notes that some countries are considering creating liability simply for failing to license patents, including for failing to license outside of the country in question. This will create a whole new burden on IP owners that does not exist for any other industry.

How Should the US Respond?

The report provides several potential solutions to the harms it identifies, some of which will be familiar to the IP community. These solutions include actions that can be taken by the United States alone as well as actions that utilize international organizations. We will discuss these in more detail in a future essay, but two general points are worth mentioning here.

First, the report notes that Section 301 of the Trade Act of 1974 has expansive language that could be more widely used to “respond to unjustifiable, unreasonable or discriminatory practices of foreign governments that burden or restrict U.S. commerce.” The “Special 301 Report,” which names countries that are failing to live up to their IP law commitments, is the most widely known use of this section, but as the report notes, the Trade Act provides for much more.

Second, the report notes the possibility that existing mechanisms in the WTO or OECD may provide internationally-recognized means to examine the substantive and procedural aspects of antitrust law that may be in conflict with international agreements. Such recognition would be valuable to promote harmonization of antitrust law not just across jurisdictions, but also with the underlying principles of antitrust law itself.

The report provides an important examination of the harms caused by improper use of antitrust law across the globe. Over the coming weeks, we will provide more commentary on how this is playing out in particular places, for particular industries, and what the United States should do to fix it.

Categories
Copyright Patents Trademarks

From Star Wars to La La Land: How Intellectual Property Fuels Films

The following post comes from Mandi Hart, a rising third-year law student at Antonin Scalia Law School, George Mason University, who worked as a video producer before going to law school.

cameraBy Mandi Hart

Movies are a first-love in America and around the world, and their production is made possible by the existence of intellectual property (IP) rights. Although most moviegoers may not recognize the vital role that IP plays in film, without it, screens would be dark. This post explains the critical role that copyright, trademark, and patents play in film production and financing.

Copyright is the Lifeblood of Movies

Copyright secures to creators certain exclusive rights in their original works of authorship, including rights of reproduction, distribution, public display, performance, and the creation of derivative works. These exclusive rights make it possible for creators and copyright owners to deploy their creative works as property rights in a free market.

Copyright’s exclusive right to distribute creative works is particularly important in the film industry. Distribution deals are essential to the filmmaking process, as many filmmakers finance the production of their movies by selling the exclusive right to distribute their film in a given territory. Distributors purchase these rights via a pre-sale, committing to pay a certain amount to the producer when the completed film is delivered in accordance with technical specifications. The pre-sale agreement serves as collateral for bank loans that provide actual cash for a film’s production. Once a film is completed and delivered, the payment from the distributor is then used to pay back the loan.

Without copyright, producers would have no distribution rights to sell in the first place, and without distribution deals, many producers wouldn’t be able to secure the funding necessary to make their movies.

Copyright also makes it possible for authors to option pre-existing works for adaptation into movies. An author or publisher can sell a film producer the right to create a derivative work from a novel, short story, play, or comic book. And films themselves might inspire derivative works—think of the breadth and popularity of Star Wars movies and shows today, 40 years after the original movie was released. Copyright not only protects the original creative works that often serve as the foundation for films, it also makes possible the many licensing deals that turn individual films into trilogies, series, or full-blown universes.

Copyright also fuels the music and sounds we hear in movies. From original scores and sound effects to the innumerable songs licensed for use in movies, copyright ensures that the people involved in the creation of movie sounds—whether artists, composers, or engineers—are incentivized and rewarded for their contributions.

By giving artists and creators a property right in the fruits of their artistic labor, copyright provides the foundation for the creation of movies as we know them today.

Trademark Helps Movies Get Made and Protects Their Brands 

Just as copyright protects several aspects of any given film, trademark helps establish and protect a movie’s brand while providing supplemental sources of financing. As studios move away from traditional film financing mechanisms due to economic recession, consolidation within the industry, and risk-aversion in credit markets, a growing number of producers are looking for new funding sources. Product placement has become an increasingly common source of financing, providing mutual benefit to producers and marketers.

Featuring recognizable brands in a film enables a producer to leverage the reputation and public perception of certain products to craft characters and settings. Indeed, a character may become identified with a particular brand or product—think James Bond driving an Aston Martin, ET eating Reeses Pieces, or Carrie Bradshaw wearing Manolo Blahnik. A product may even become a character itself, as with the Wilson volleyball in Castaway.

The inclusion of known brands lends authenticity to the world of the film and the characters inhabiting it. When Mia asks Sebastian to get the keys to her Prius from a valet in La La Land, and Sebastian sees nothing but Prius key fobs on the valet stand, more is communicated to the audience than just the type of car Mia drives. Viewers get a sense of the world in which Mia lives, her friends and associates, and her subculture and values.

And of course, Prius benefits from the connection with an acclaimed film that won multiple Academy awards. While product placement represents a creative choice, it is also a shrewd business move for producers in need of funds and marketers looking for more subtle promotional opportunities than the traditional hard-sell advertisement.

Additionally, trademark serves to protect merchandise and ancillary products created in connection with a film. Marketing trademark-protected clothing, toys, home appliances, bedding, wallpaper, and other film-related merchandise is another critical source of revenue for producers, particularly those hoping to build a film franchise. Just as copyright is central to film financing and content, trademarks make an increasingly vital contribution to production funding and the creation of on-screen worlds.

But Without Patented Technology, Films Wouldn’t Exist

In addition to copyright and trademark, patents also play an essential role in film. A patented invention—the kinetoscope—allowed individual, consecutive images imprinted onto film to be projected in order and at speeds capable of creating the illusion of movement. Thomas Edison, holder of the kinetoscope’s patent, began documenting the world around him and created the first microdocumentaries for exhibition to paying customers. Across the Atlantic, the Lumiere brothers also embraced the possibilities that early film technology offered, creating short fiction films, the most enduring of which, Trip to the Moon, is still watched to this day.

The original film technologies, to both capture and display moving images, gave birth to a new form of leisure and entertainment. In less than three decades an entire industry had been established to exploit the commercial value of film and to satisfy the growing public appetite for movies.

Sound recording and playback technology revolutionized the industry and were followed just a few years later by technicolor, the debut of which—in The Wizard of Oz—changed filmmaking forever. Patented technologies created, then upended, the film industry, and to this day provide the foundation upon which advancements in filmmaking and viewer experience are based.

Just as the development of VistaVision in the 1950s gave directors more onscreen real estate and enabled sweeping scenic compositions, the implementation of Dolby Surround Sound in the 1980s allowed composers and sound editors to weave rich sonic tapestries. Composers were able to create complex filmic symphonies, and sound editors could immerse the audience more deeply into the world of the film by literally enveloping them in the movie’s aural field.

The switch from analog to digital, and the integration of computer technology into filmmaking, allowed for special effects unlike anything seen before. Computer-generated images put an end to an era of hand-drawn animation and manual splicing, as entire worlds could be created and manipulated digitally. Today, the development of 3D and virtual reality technology are set to revolutionize the film industry, changing the way images are captured and exhibited. Add to the distribution mechanisms numerous exhibition platforms (laptop, tablet, cell phone, etc.), and it is obvious the central role that patented technology plays in film creation and consumption.

Conclusion

In any given film, copyright, trademark, and patent play crucial roles in crafting the story, securing financing, and translating script to screen. Copyright secures property rights in (and incentivizes the creation of) original films as well as adaptations of prior works, while trademark contributes to the development of setting and characters. As an industry founded on patented technology, filmmaking relies on the innovation made possible by a patent system that encourages and incentivizes inventors. Those who developed sound recording and transmission technology, technicolor, panoramic projection, and many other innovations at the heart of moviemaking could not—and would not—have done so without the assurance that they would own the fruits of their innovative labor.

Next time you settle into a plush reclining chair, as the lights dim and the trailers begin, think about all the intellectual property embedded in the story you watch play out on-screen, because without it, that story wouldn’t exist.