Lost among the August doldrums was a demonstration by a group of inventors outside of the U.S. Patent and Trade Office (PTO) in Alexandria, Va.
In early August, several inventors and their kids gathered with signs, news cameras, and an ample amount of security — watching them, not protecting them — while they burned their U.S. patents. The inventors were demonstrating against the Patent Trial and Appeal Board (PTAB) an Administrative Tribunal that has run amok.
In the upcoming Oil States vs. Greene’s Energy Group, et al, the Supreme Court will decide the constitutionality of this tribunal. They will answer the question: Does this abusive tribunal, that effectively has no limits and no constraints, have the constitutional authority to take a patent away from an inventor?
PTAB, a relatively new Article 1 tribunal at USPTO, is the innovation economy’s worst nightmare. It has been ending patents at a rate so high that several prominent people have called it a “Patent Death Squad.” If that wasn’t bad enough, the USPTO recently acknowledged that the former director would stack the panels until the vote came out the way that she wanted.
Judge Taranto: And, anytime there has been a seeming other-outlier you’ve engaged the power to reconfigure the panel so as to get the result you want?
PTO: Yes, your Honor.
Judge Taranto: And, you don’t see a problem with that?
PTO: Your Honor, the Director is trying to ensure that her policy position is being enforced by the panels.
It is one thing to cover up a corrupt system, but quite another to freely brag about its true nature. It isn’t just in court though, the USPTO has patted itself on the back via Twitter about expanding the panel’s 100 judges to 270 judges.
The patent in question in the Oil States case is oil-fracking technology that reduces wellhead degradation due to the buildup of pressure during hydraulic fracking. But, the case may as well be about the government taking away someone’s house without a jury trial. Or, the way that I see it, taking away the glimmer is my young daughter’s eye that she can be the next greatest inventor.
You can invent, you can get a patent, you can build a company, but with the PTAB’s power-mongering, no inventor can be assured their patent means anything. And, that’s the issue the Supreme Court will solve when they rule the Article 1 Tribunal is unconstitutional.
The problem is that when a patent can’t be relied on as real property, an inventor is also less likely to invest in their ideas. When investors can’t rely on the USPTO to stand behind a patent that they have awarded an inventor, then investors are less likely to invest. And, if inventors are less likely to invent and investors are less likely to invest, the net effect is less innovation, fewer startups, and damage to the economy.
It is never a good time for less innovation, and it is never a good time for fewer startups. But, according to a recent New York Times article about a “Start-up Slump,” we are also at a low point in entrepreneurs starting new businesses. From the article:
The start-up slump has far-reaching implications. Small businesses in general are often cited as an exemplar of economic dynamism. But it is start-ups — and particularly the small subset of companies that grow quickly — that are key drivers of job creation and innovation, and have historically been a ladder into the middle class for less-educated workers and immigrants.
The article from the Times puts most of the blame on large corporations gaining more power. However, their conclusion largely ignores Intellectual Property. They can be forgiven for the oversight, because a lot of times patents are a part of the public story when we normally discuss start-ups.
Other countries, like China — which is now competing with the US to have stronger patent rights – understand the advantage that US has long enjoyed because of strong IP protections. In fact, China isn’t the only country, or even the leader. A recent report from the U.S. Chamber of Commerce marks the first time that, “the U.S. falls from 1st to 10th behind most European economies included in the Index as well as Singapore and Japan."
The rest of the world, even left-leaning Europe, is realizing the power of the United States conservative, business friendly legal environment. We welcome them joining the party, but there’s no reason for us to leave it.
In other words, Oil States vs. Greene’s Energy Group is a big fracking deal.
I am optimistic that the Supreme Court will rule that the PTAB is unconstitutional. Jobs are at stake, our innovation economy is at stake, and the glimmer in the eye of the next generation of inventors – and the investors that will enable that glimmer – are at stake. The Supreme Court was designed to check the powers of the rest of government if they get out of control. This Tribunal is begging for it.
Charles Sauer is president of the Market Institute.