We often hear today that there’s an unprecedented “patent litigation explosion” that’s killing innovation. Last week, the New York Times plied this claim without abandon in its hit piece on high-tech patents.  It’s become so commonplace that this phrase garners over 1.3 million hits on Google. It’s especially common fare in discussions about the “smart phone war.”  It was raised repeatedly by my fellow panelists, for instance, at a congressional briefing a few days ago (you can listen to the audio of the event here).

Of course, a blog posting is not a law review article and so I can’t get into all of the weeds here, but a blog is ideal for a few quick reactions to this tread-worn trope in the public policy debates about patents.

First, it’s simply untrue. Award-winning economist, Zorina Khan, reports in her book, The Democratization of Invention, that patent litigation rates from 1790 to 1860 fluctuated a lot, but averaged 1.65%. Today’s patent litigation rates are around 1.5%.  As Yoda would say: patent litigation explosion this is not, hmm, no.  In fact, for three decades in Khan’s study patent litigation rates were higher than today’s litigation rate. From 1840-1849, for instance, patent litigation rates were 3.6% — more than twice the patent litigation rate today.

This was during a time, as reported by patent law professor Michael Risch, when patents were handwritten, and even worse, patents were extremely vague, incoherent and sometimes outright unintelligible.  And, as Professor Risch and others have so ably reported, patent law was very much unsettled at this time as well given the many new ways that the American patent system departed from English patent law. 

And it wasn’t just that the law was new and that patents were vague, as early scientific and technological discoveries were just as difficult to comprehend as the new scientific and technological discoveries are today. Long before Judge Richard Posner was complaining of the lack of technical competence at the PTO or Judge Learned Hand was complaining about his own ignorance of biochemistry in assessing the validity of early pharma patents, Supreme Court Justice Joseph Story was explaining in 1841 that

Patents and copyrights approach nearer than any other class of cases belonging to forensic discussions, to what may be called the metaphysics of law, where the distinctions are, or at least may be very subtle and refined, and sometimes, almost evanescent.

Frankly, with all of the rampant uncertainty in early patent law and in early developments in science and technology — early nineteenth-century scientists, for instance, were still vigorously debating whether the atomic theory of matter was valid — it’s surprising that the patent litigations rates weren’t astronomically higher than just 1.65%, or with many similar problems today that our patent litigations rates are only 1.5%.

The historical patent litigation rates are significant because they also include the same “patent wars” that we are experiencing with the “smart phone war.” The very first patent war began in 1851, and was called at the time in the popular press the “Sewing Machine War.”  The Sewing Machine War had all of the allegedly new problems about which there is much breathless commentary on the “smart phone war” today: lawsuits in multiple venues, expensive litigation, numerous overlapping patents, non-practicing (patent-licensing) entities obtaining injunctions against manufacturers, “defensive patenting,” inventors’ sales of patents to firms, etc., etc. There was even widespread popular outcry over the Sewing Machine War, as it was fought as much in the newspapers as it was in the courts. As the classic saying goes: What’s old is new again.

Importantly, the Sewing Machine War was ultimately resolved by patent-owners innovatively creating the very first patent pool in American history, called the Sewing Machine Combination, which functioned successfully until its last patent expired in the 1870s. The Sewing Machine Combination unleashed a tremendous amount of commercial, technological and even social innovation — including new innovative manufacturing techniques, innovative commercial practices, and even helping change social prejudices about women’s ability to use machines.  As a result, the sewing machine was fundamental to the success of the Industrial Revolution in the U.S., as I have detailed extensively in my historical research.

But even after the Sewing Machine War was brought to an end in 1856 by the Sewing Machine Combination, so-called “patent wars” continued to occur with every pioneering leap forward in technological innovation — the incandescent light bulb, telephone, electrical systems, automobile, airplane, and radio were all subjects of patent wars. Today’s patent lawyers remember very well the “diaper wars” and the “stent wars” of the 1980s, resulting in hundreds of millions of dollars in patent damages awards. If cutting-edge innovation in disposable diapers (a multi-billion-dollar industry, as any parent knows) is the subject of intense patenting and extensive litigation, then frankly we should be unsurprised that this occurs again with 21st-century cutting-edge innovation in smart phones, tablet computers and other digital devices.

Unfortunately, the complaints today about today’s patent litigation crisis arise more from unchecked intuitions about what feels like a bad situation, from unrealistic assumptions about how much certainty we can achieve in the patent system, and from emotionally-compelling anecdotes about innovators running into trouble with patents — like the ones that dominated the New York Times hit piece on high-tech patents a week ago.

As I said in a previous blog posting, it’s time to bring objectivity and a historical-based perspective to public policy discussions about patent litigation, the smart phone wars, and the role of property rights in innovation.

Filed under: intellectual property, litigation, patent, technology, war

I’m moderating the digital equivalent of a “fireside chat” with Richard Epstein at 3pm this afternoon.  The great thing about teleforums is that, unlike podcasts, listeners can ask questions of the speaker.  So, call in and let’s have fun!   Here’s the information…

Read the full piece here. 

Some of the most significant transactions singled out recently for intensive federal review involve the communications industry. Unfortunately, communications providers face serious and potentially fatal problems of supply. Radio spectrum — the chief input and most severe constraint on the ability of carriers to support more users and more data — is essentially unavailable at any price. That’s because the Federal Communications Commission has run out of usable, unassigned spectrum to license. As consumers pull orders of magnitude more data to their smartphones, tablets, and notebook computers, carriers are becoming desperate. Network operators, already experiencing what the FCC warned in 2010 as an imminent “spectrum crunch,” have little choice but to acquire spectrum assets from other mobile operators, whose licenses can be put to immediate use once the agency approves the transfer. They have been doing so as quickly as possible, attempting or completing over a dozen major transactions since 2007. But as the urgency of spectrum-related transactions has increased, the FCC has come to play an increasingly problematic — and largely unstructured — role in the government’s review of transactions in the communications industry. This brief essay discusses the key problems with the FCC’s current approach to transactions involving spectrum license transfers.

UPDATE: You can listen to an MP3 of the panel briefing at

http://www.netcaucus.org/audio/2012/20121016mobilepatents.mp3

Today, I’m participating in a Hill briefing on the smart phone wars hosted by the Advisor Committee for the Congressional Internet Caucus.  Here’s the information:

Date: Tuesday, October 16, 2012
Time: 12:00 pm – 1:30 pm. Program begins promptly at 12:00 pm, check-in starts at 11:30 am. (Box lunch will be served)
Location: Rayburn House Office Building – Room 2226
RSVP: [email protected] or via phone to 202-638-4370. Note: Registration is complimentary.

Panelists

• Marvin Ammori – Principal, Ammori Group and Steering Committee, Engine Advocacy [Bio]
• Jorge Contreras – Associate Professor of Law – Washington College of Law, American University [Bio]
• Eric Hinkes – Legal Policy Fellow, Congressional Internet Caucus Advisory Committee [Bio] (Moderator)
• Adam Mossoff – Professor of Law – George Mason University School of Law [Bio]
• Rob Pegoraro – USA Today/Discovery News [Bio]

Additional Panelists Will Be Announced

You have seen the headlines: Patent litigation continues to roil the exploding smartphone and tablet marketplace with consumers literally caught in the crossfire. Recent high profile smartphone court cases have consumers and policymakers deeply troubled that courts will strangle the incredible pace of mobile innovation and competition. Recent litigation between leading smartphone manufacturers has also caught the attention of Congressional members. The number of smartphone patent lawsuits in multiple countries and jurisdictions around the globe is dizzying and could threaten to keep the best new mobile phones off the market. How will the public be affected by these lawsuits as new mobile devices continue to rollout? Will a competitor force your favorite mobile device off the market?

A diverse set of panelists will tackle important questions including: 1) Can mobile device companies simply innovate around these intellectual property disputes?; 2) Are these constant lawsuits just the natural byproduct of rapid innovation?; 3) Must Congress step in with legislation? The panel will also debate the impact of the recently passed America Invents Act on the smartphone litigation inferno and share their thoughts on what patent issues lie on the horizon in the competitive mobile device space.

Filed under: truth on the market

The recent New York Times article on the high-tech industry argues that software patents and the current “smart phone war” are a disaster for innovation, and it backs this with quotes and cites from a horde of academics and judges, like Judge Richard Posner, that software patents are causing “chaos.”

Read the full piece here.

Some of the most significant transactions singled out recently for intensive federal review involve the communications industry. These include the merger of Comcast and NBCUniversal, the failed merger of AT&T and T-Mobile USA, a multi-billion purchase of spectrum by Verizon from a consortium of cable companies and, just recently, the announced acquisition by T-Mobile USA of rival MetroPCS and Softbank’s offer for Sprint.

Read the full piece here.

The New York Times set hearts aflutter in the IP world yesterday with its hit piece on patents in the high-tech industry– I’m shocked, shocked to find the New York Times publishing biased articles on hot topics in politics and law — but Bloomberg also published an important article yesterday on the smart phone war, software patents and other topics raised by today’s so-called patent litigation crisis: Apple Phone Patent War Like Sewing Machine Minus Violence.

Read the full piece here. 

This coming Friday (Oct. 12), the Center for Business Law and Regulation at Case Western Law School will host what promises to be a terrific symposium on executive compensation.  Presenters include TOTM alumnus Todd Henderson (Chicago Law), Jill Fisch (Penn Law), Jesse Fried (Harvard Law), David Walker (Boston U Law), David Larcker (Stanford Business), Stephen L. Brown (TIAA-CREF), Paul Hodgson (GMI Ratings), William Mulligan (Primus Venture Partners).

Here’s a description of the symposium:

Executive compensation has become the most contentious issue in corporate governance. Many claim that poorly designed executive compensation helped cause the recent financial collapse, but critics disagree widely about what was wrong with those designs. Management and investors are wrestling over their roles in structuring executive compensation through say-on-pay and over the role of proxy advisory services. The symposium brings together prominent practicing attorneys, institutional investors, proxy advisors, and academics to discuss the current issues and where we are, or should be, headed.

If you’re in Cleveland and able to make it to the symposium (for which 4.5 hours of CLE is available), do it.  Otherwise, check out the webcast.

Filed under: announcements, executive compensation

https://www.youtube.com/watch?v=2KdLW4T5iCY