Semiconductor IP News and Trends Blog

Greed is Good and So Are Patents

Patent attorney Howard Zaretsky shares his views on the good, the bad and the ugly parts of innovation and the patent system.

By John Blyler, Editorial Director

The following is a portion the IEEE IMS Panel on the Good, the Bad and the Ugly of Patents. In this part, Howard Zaretsky, Patent Attorney for the Zaretsky Group, shares his viewpoints on the pros and cons on innovation and the US Patent systems. — JB

Let’s begin by testing your knowledge of patents with a trivia contest.

1. Patents are rendered by the US Patent office once every year. What day of the week is that? The answer is “Tuesday” although I don’t know why.
2. One US president that is a patent holder. What president is that? The answer is not Benjamin Franklin. He was smart but not a president. It was actually President Lincoln, who received a patent in 1849 for a method to lift boats over shoals and obstructions in a river.

Let me give you a little insight into the mind of a patent attorney. Consider a cup of water. Optimists will say the cup is half full. Pessimists will say it is half empty. But a patent attorney will say, “it’s an open cylindrical vessel with liquid H2O contained in and bisecting said open cylindrical vessel.” If you don’t understand what I just said, that’s fine. It is patent claim language. It is one of the most sophisticated and complex forms of legal writing around.

I want to convey the essence of and basis for the patent system. Remember the movie “Wall Street” with Michael Douglas playing Gordon Giko? He’s famous quote was: “The point, ladies and gentlemen, is that greed, for lack of a better word, is good.” Like capitalism, the patent system is ultimately based on fundamental human characteristics, namely, greed and selfishness.

And thank god that we have it. Those that think it is a bad trait are wrong. It is a very good trait. It is probably the reason why today we are surrounded by all this technology and not still stuck writing on slates and chisels.

The core value proposition behind patents betrays the most greedy and selfish tenets of capitalism – a monopoly granted by the government in exchange for 20 years of exclusion from competition. Let me step back to make sure we all know the definition of a patent. A patent holds a mystique for a lot of people including engineers. Patents is basically a social contract between society and the inventor. On the one hand, society will grant the inventor a monopoly in which he can stop others from making use of his invention for 20 years. In return, the inventor discloses what he did to the world. It is that exchange which is tied to Article 1 of the US Constitution, granting congress the ability to make laws to promote the science and useful arts. The language is from the 1700s, where “useful arts” is synonymous with “technology” in today’s terms. The founding fathers were very smart and clever to write that into the constitution. [Editor’s Note: “Intellectual Property Clause. Article I, Section 8, Clause 8, of the United States Constitution grants Congress the power “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.”]

What is the purpose of the patent system? Again, it is to provide a social benefit. Society and the government don’t want inventors to sit in their basements coming up with some great stuff and then keeping it a secret because they fear that somebody is going to steal from them. Patent law is designed to encourage inventors to disclose their technology to the world. The goal is to let others see it and improve on it – to innovate beyond it. The intent is that science and technology will progress a lot faster than if everybody kept things a secret.

But won’t people innovate anyway? Sure, it’s human nature. As long as there are humans, there will be inventions. But the patent system is designed to get it out and advertise it for the whole world. There will be someone who picks up a patent, reads it and say, you know, I can do better. That is the whole point of the patent system.

Since 1790, the US has greatly benefited from its patent system, resulting in the US becoming the most innovative country in the world. I think there are three reasons for this. First, America is based on democratic capitalism. You can’t beat that system. Again, it ties into the basic human characteristic of selfishness. Secondly is freedom. In America we enjoy freedom, which is not the case in a lot of other countries in the world. The third catalyst is that patents encourage inventors not to keep their inventions secret but to disclose them to the world.

What about innovation and the patent system? It’s a double edged sword. Patents, like other monopolies, create two countervailing forces. First, innovation in a particular technology area is fostered due to the government grant of a monopoly and ensuing profits. Conversely, innovation in a particular technology area is hindered due to limitations created by the monopolies of others, and the power for such monopolies to prevent competition and continued innovation. If a company locks up its technology in patents, what can I do? It is a barrier to entry for me. While that is true, there is nothing to stop you from innovating around their existing patents. That is really what the patent system encourages.

The real million dollar question is which force is stronger. I think both of them are tied to the idea of benefit to society.

Let me summarize my viewpoint on the good, bad and ugly parts of the patent system (see Table 1). First, are patents critical for startups? I believe that they typically are the most valuable startup asset. Patents portfolios represent the human capital of the invention and the associated experience. When you talk to VCs, one of the first things they ask is to see your patent portfolio. God help you if you don’t have one.

Is the patent system being abused by non-practicing entities (NPEs)? Definitely, but the way to fix that is through legislation. It may not look good or ethical, but it is perfectly legal.

Are trade secrets better than patents? Rarely. Today, nothing can stop you from reverse engineering a chip or other complex product. Once your secret is out, you lose the trade-secret status. [Editor’s note: Contrast this opinion with the ARM paper describing the benefit hiding a design within a low cost ASIC instead of patent protection: “Custom SoCs Compete with Discrete IC Boards”]

Should companies employ patent incentives? Definitely. I see the benefits in my practice of 25 years. I see the difference in companies that have a patent incentive program and those that don’t. Those that do I find have higher quality submissions. Such incentives empower all the employees to submit patents typically with cash returns.

Do patents only enable competitors to understand a company’s technology and then figure out enough to get around them? Sometimes. But again, there is nothing stopping you from out-innovating once it’s already out there. That is the whole point of the system.

Is the US PTO handling patent filing efficiently and cost-effectively? Yes. In my experience, I have seen dramatic improvements in turn around and in the quality of the examination. Previous administration have put a lot of money into fixing and improving the system. I’ve had patent filings returned within 6 months, which is lightning speed for a government institution.

Should software patents be allowed? Definitely. To me, software inventions are no different than mechanical and electrical inventions. Mechanical inventions are just collections of gears and levers. Electrical inventions are a combination of electrical components. Software is a collection of instructions ranged to give behavior to a computer. Why is that any less deserving of a patent? I don’t think it is. The problem is that courts and jury’s lately don’t really understand software. Some of these decisions, like Alice Corp. v. CLS Bank International, are really messing things up for all of us. (See, “Software Patenting in Crisis, Part III”)

Table 1: Summary by Howard Zaretsky on the good, bad and the ugly aspects of the US patent system at the IEEE IMS 2016