Tag: Bhamati Viswanathan

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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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Infringement Patent Theory

Explaining Efficient Infringement

By Adam Mossoff & Bhamati Viswanathan

files labeled as "patents"In a recent New York Times op-ed, “The Patent Troll Smokescreen,” Joe Nocera used in print for the first time the term, “efficient infringement.” This pithy phrase quickly gained currency if only because it captures a well-known phenomenon that has been impossible to describe in even a single sentence. Unfortunately, some commentators are confused about the validity of this term. This is understandable, because no one has yet described exactly what it means, especially in comparison to the similar commercial practice of “efficient breach” in contract law.

In a nutshell, efficient infringement occurs when a company deliberately chooses to infringe a patent given that it is cheaper than to license the patent. The reason it is cheaper is what makes it hard to explain briefly: a slew of legal changes to the patent system by Congress, courts, and regulatory agencies in the past ten years have substantially increased the costs and uncertainties in enforcing patents against infringers.

Accused infringers now can very easily invalidate patents, either in court or at the “patent death squad” known as the Patent Trial and Appeal Board. If a patent owner runs this gauntlet after several years of costly litigation and obtains a judgment in its favor, courts are increasingly refusing to award injunctions for anyone other than manufacturing companies. What is left for the patent owner is only damages, but changes in the legal rules for awarding damages have made damage awards very minimal compared to the actual economic harms suffered by a patent owner (a 2015 PricewaterhouseCoopers study found that median damage awards in 2014 were at their second lowest level in the past 20 years).

The result of all of this is that a company economically gains from deliberately infringing patents. It pays less in either legal fees or in court-ordered damages than it would have paid in a license negotiated with a patent owner. This is efficient infringement.

As a term in the legal policy debates, efficient infringement draws some inspiration from the well-known economic model of “efficient breach” in contract law. But the two seem very different, at least superficially.  Thus, efficient infringement needs further explanation by way of a more explicit comparison to efficient breach theory.

The model of efficient breach posits an overall net gain in social welfare from a willful breach of contract. It supposes a scenario in which one contracting party has an opportunity to obtain a higher payment for its goods or services, producing a profit that exceeds any damages from a breach of contract that would be paid to the other contracting party. Thus, the contracting party breaches: it receives the higher payment, it pays the other contracting party its “expectancy interest” (lost profits), and it pockets its net profits. Everyone wins and society is better off, at least according to this highly stylized and abstract economic model.

In practice, though, one rarely finds cases in which this opportunistic breach of contract works. The losses suffered by a victim of a breach of contract easily exceed mere profits, and courts account for this by awarding reliance and restitution damages, as well as punitive damages for deliberate misconduct like opportunistic breach of contract. Other legal claims, such as tortious interference with a contract and equitable claims for rescission and restitution, provide additional sources of relief for victims of willful breaches of contracts. In fact, one reason contracting parties negotiate liquidated damages provisions in their agreements is to limit liability for these widely recognized costs that go beyond mere expectancy interests.

These additional damages reflect the total costs created by strategic, opportunistic breaches of contract. These include institutional and systemic harms in eroding reasonable reliance on contractual commitments, lost investments made on the basis of contractual commitments, lost opportunities to pursue other commercial transactions, reputational harms, and so on. A victim of an opportunistic contract breach, for example, can seek the equitable remedy of rescinding the contract and seek restitution to disgorge the willful bad actor of his wrongful gains at the expense of the victim.

This is why one usually finds successful efficient breach only in hypothetical examples in economic textbooks or in law review articles, and not in actual court cases. As one of the scholars who first coined this term in 1977 recently observed, “efficient breach is both a null set as well as an oxymoron.” Or, as Professor Gregory Klass similarly notes, efficient breach is a “dead letter,” although he still believes it “remains a great teaching tool.”

Recognizing this difference between theory and practice is key in understanding the parallels between efficient breach and efficient infringement.  In theory, efficient breach considers only the lost profits in a one-off case of contract breach, and it thus sounds like a gain in social welfare because everyone benefits. But, in practice, contracting parties and courts recognize the total individual and systemic costs caused by willful violations of legal rights, whether a contract right or a property right. The same is true for efficient infringement, in both theory and practice.

Theoretically, efficient infringement posits a breach of a legal right that enhances both private and social welfare. The company benefits privately because it pays less via a patent infringement lawsuit in either legal fees (invalidating the patent) or in a compulsory license (court-awarded damages). Society is better off, too, because the company engaging in efficient infringement has more resources to put to productive endeavors, as opposed to paying for use of an invalid patent (a monopoly) or in making a larger wealth transfer payment on the basis of a negotiated license.

In the real world, though, efficient infringement creates more costs than merely the lost licensing profits for the patent owner, or the lost patent itself. The more fundamental problem with efficient infringement is that it undermines the proper functioning of the patent system. It frustrates the promise of the reward to the innovator for one’s inventive labors. Once inventors know that the deck of (legal) cards is stacked against them and that they will suffer efficient infringement, they will create less patentable innovation. Without legal security in stable and effective property rights, venture capitalists will not invest in inventors or startups and the innovation economy will suffer.

The important point is that these negative dynamic efficiency effects from efficient infringement are systemic in nature. This is similar to the concern about systemic costs represented by such causes of action for willful breach of contract as restitution and disgorgement of wrongful gains. As a matter of real-world practice, the costs created by efficient infringement are similar to the broader private and systemic costs created by opportunistic breaches of contract—both threaten the viability of legal institutions and the policies that drive them, such as incentivizing investments and promoting commercial transactions.

Categories
Copyright

New CPIP Policy Brief: Open-Access Mandates and the Seductively False Promise of “Free”

the word "copyright" typed on a typewriterCPIP has published a new policy brief entitled Open-Access Mandates and the Seductively False Promise of “Free.” The brief, written by CPIP Legal Fellow Bhamati Viswanathan and CPIP Director of Academic Programs & Senior Scholar Adam Mossoff, exposes the lack of evidence or justification for the proliferating legal mandates by federal agencies that coerce authors and publishers to make their scholarly articles available for free to the world.

The Introduction to the policy brief is copied below:

Introduction

Federal agencies are increasingly mandating or proposing free public access for copyrighted works that report on federally-funded research. These “open-access mandates” compel scholars and researchers to make their articles or other writings freely available to billions of people around the world. Furthermore, many of the mandates also allow the public to modify these copyrighted works without the authors’ consent. Countless authors and publishers must comply with this legal mandate of “free.” Federal agencies—such as the Department of Education, the National Institutes of Health, and the Department of Energy—disburse billions annually in research grants. As a result, open-access mandates encompass millions of published articles, test-related materials (including those relating to standardized tests and testing services), and even computer software source code.

Open-access mandates have the potential to significantly harm the publishing industry. In 2015, the American publishing sector generated $27.78 billion in net revenue, representing 2.71 billion published works in electronic and print formats. This includes over 500,000 works in higher education, as well as learning materials for primary and secondary education. Works of scholarship, such as scientific research, also account for a significant share of revenue-generating materials. Unfortunately, open-access mandates are a direct threat to the business model that enables the multi-billion dollar market in scholarly and educational publishing to thrive.

Open-access mandates require publishers to place their works in government-operated repositories that are openly accessible and free of charge to users. But publishers typically invest hundreds of millions of dollars in building and supporting their own innovative and sophisticated systems for delivering copyrighted works to the public. Open-access mandates frustrate these efforts, effectively undermining publishers’ proven business models. Further, they force publishers to compete with government-run systems that need not be efficient, advanced, or profitable. By inserting the government as a competitor to private actors in the publishing sector, open-access mandates undermine publishers’ incentives to invest in both copyrighted works and effective systems for disseminating those works.

Open-access mandates also strike at the heart of copyright law by depriving publishers of their right to own and commercialize their copyrighted works as they see fit. U.S. copyright law secures to copyright owners fundamental property rights in their works; these rights cannot be eviscerated by administrative fiat. By forcing publishers to forfeit their rights to commercialize their copyrighted works, open-access mandates in works that report on federally-funded research are incompatible with fundamental principles of copyright law.

The publishing industry is built upon a business model that is proven, realistic, and robust. Moreover, the industry is constantly investing in innovation and improvement of its products and services. Proponents of open-access mandates seek to replace this model with an untested set of systemic changes. Yet they have not offered any evidence that the open-access model is viable and sustainable. Barring such evidence, open-access mandates should not be adopted.

Open-access mandates should be rejected as a prime example of regulatory overreach. In this paper, we address four reasons why this is the case:

  • Open-access mandates undercut publishers’ ability to invest in producing and distributing copyrighted works.
  • Open-access mandates contradict basic principles of copyright law.
  • Open-access mandates are the classic example of a solution in search of a problem: there is no evidence of a systemic market failure in scholarly publishing requiring a massive regulatory intervention.
  • Open-access mandates are based on untenable economic models.

We begin, however, by noting that while open-access mandates raise serious legal, policy, and economic concerns, the open-access model itself is unobjectionable when done on a voluntary basis.

To read the policy brief, please click here.