Trade Secrets

I'm not certain what to make of this study which asserts that 90+% of truly useful innovations are not patented. I have my doubts because in the chemical arts--and pharmaceutical inventions in particular--the converse is more likely the case. The paper takes a minute to load so here's the abstract:

Abstract

It is well known that not all innovations are patented, but the exact volume of innovative activities undertaken outside the coverage of patent protection and, relatedly, the actual propensity to patent an innovation in different contexts remain, to a major degree, a matter of speculation. This paper presents an exploratory study comparing systematically patented and unpatented innovations over the period 1977-2004 across industrial sectors. The main data source is the ‘R&D 100 Awards’ competition organized by the journal Research and Development. Since 1963, the magazine has been awarding this prize to the 100 most technologically significant new products available for sale or licensing in the year preceding the judgments. We match the products winners of the R&D 100 awards competition with USPTO patents and we examine the variation of patent propensity across different contexts (industries, geographical areas and organizations). Finally we compare our findings with previous assessments of patent propensity based on several sources of data.

Trade secrecy is the default setting for intellectual property law. It's what the system reverts to when things get ugly, costly and when openness is abused. Trade secrecy is not what Thomas Jefferson wanted for us.

Taxing Invention

The Leahy-Smith "America Invents Act" takes full effect next week. A little noticed provision of the act which passed through Congress two years ago and is already in effect is Public Law 112-29, sec. 14, 125 Stat. 284. This portion provides that:

(a) IN GENERAL.—For purposes of evaluating an invention under section 102 or 103 of title 35, United States Code, any strategy for reducing, avoiding, or deferring tax liability, whether known or unknown at the time of the invention or application for patent, shall be deemed insufficient to differentiate a claimed invention from the prior art.
(b) DEFINITION.—For purposes of this section, the term ‘‘tax liability’’ refers to any liability for a tax under any Federal, State, or local law, or the law of any foreign jurisdiction, including any statute, rule, regulation, or ordinance that levies, imposes, or assesses such tax liability.
(c) EXCLUSIONS.—This section does not apply to that part of an invention that—
(1) is a method, apparatus, technology, computer program product, or system, that is used solely for preparing a tax or information return or other tax filing, including one that records, transmits, transfers, or organizes data related to such filing; or
(2) is a method, apparatus, technology, computer program product, or system used solely for financial management, to the extent that it is severable from any tax strategy or does not limit the use of any tax strategy by any taxpayer or tax advisor.
(d) RULE OF CONSTRUCTION.—Nothing in this section shall be construed to imply that other business methods are patentable or that other business method patents are valid.
(e) EFFECTIVE DATE; APPLICABILITY.—This section shall take effect on the date of the enactment of this Act [Sept. 16, 2011] and shall apply to any patent application that is pending on, or filed on or after, that date, and to any patent that is issued on or after that date.]

So from a patent examiner's perspective, whose job it is to evaluate an invention for novelty and nonobviousness under 35 U.S.C. 102 and 35 U.S.C. 103, any tax strategy will be considered indistinguishable from all other publicly available information that is relevant to a patent’s claim of originality. Tax strategy now belongs on the short—but odd—list of other things unpatentable including laws of nature, scientific principles, human beings, Jerusalem artichokes, and perpetual motion machines.

The stated public policy is "to keep the ability to interpret the tax law and to implement such interpretation in the public domain, available to all taxpayers and their advisors."  Fair enough. A reasonable person might agree that we shouldn't encourage inventors to come up with ways to cheat on taxes, even if it's within the bounds of the law. But an unintended consequence may be to drive such undesired tax strategies underground and thus less available to the general public. People will always pay good money for novel ways to save on taxes.

The Jeffersonian bargain—the basis for our patent policy—was to reward inventors with a relatively brief window of exclusivity in exchange for full disclosure. Jefferson was utilitarian on this point and wanted to promote and disclose technological innovation rather than to protect inventors’ moral rights to their discoveries.

Who Invented That?

A sample question from the US Patent Bar Exam:

Roger Rocket is a designer of paper cups at Paper America. During his free time, he likes to attend baseball games at Yankee Stadium. One day, while seated in the stands, he caught a fly ball. He took the baseball home and played catch with his friends Andy Cannon, Orlando Torpedo, and Mariano Missile. Unfortunately for Rocket, Cannon has a problem with accuracy. Cannon threw the ball over Rocket’s head and straight through a neighbor’s front window. The shattered glass ripped the lining off of the baseball. Instantly, Rocket conceived a more durable baseball with an exterior similar to that of a golf ball. Rocket worked for months on his invention in Missile’s garage. His new baseball was comprised of a titanium core, and a plastic shell having circular dimples and V‐shaped laces. Torpedo realized and told Rocket that Y‐shaped laces would enable baseball players to throw the ball faster. Cannon, an engineer in a radar gun laboratory, tested the velocity of the baseball with both V and Y‐shaped laces. To Cannon’s surprise, the baseball traveled 10 M.P.H. faster with the Y‐shaped laces. Rocket wanted patent protection for a baseball having a titanium core, and a plastic shell having circular dimples and Y‐shaped laces, so he approached Yogi Practitioner for assistance. Rocket has no obligation, contractual or otherwise, to assign his inventions to Paper America. 

In accordance with proper Patent Office practice and procedure, who should execute the oath [i.e., who are the inventors]?

(A) Rocket
(B) Rocket and Torpedo
(C) Rocket and Cannon
(D) Rocket, Torpedo, and Cannon
(E) Rocket, Torpedo, Cannon, and Missile

SCOTUS is like the New Testament

The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun. ~Ecclesiastes 1:9 (KJV)

The Supreme Court echoed Ecclesiastes' "new thing under the sun" language in a case concerning the patentabilty of oil-eating bacteria, i.e., a species of living things engineered by humans. The decision recited:

The Committee Reports accompanying the 1952 [Patent] Act inform us that Congress intended statutory subject matter to "include anything under the sun that is made by man."
~Diamond v. Chakrabarty, 447 U.S., 303 (1980)

Compare "there is no new thing under the sun" with "anything under the sun that is made by man."  Novelty was inherent in the Supreme Court's phrase because they were construing 35 U.S.C. § 101, which provides:

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.*

SCOTUS affirmed that micro-organisms constituted a composition of matter within the meaning of the statute.

Can we reconcile SCOTUS with the Old Testament?  Yes, if we consider Ecclesiastes to refer to matter per se and not to compositions of matter. New chemical compounds, even living organisms, are just old atoms put together in new ways.

On the other hand, SCOTUS was also saying that there was such a thing as something new under the sun, so long as it was made by man.
______________________________
*Emphasis added. The language came from Jefferson, but he originally used the term "art" for "process."

Expired Terms

Sixty Grit raised an interesting point back here about substituting everyday chemical substances for commercial products.  This is a very DIY approach and reminds me of a thriving barter economy.

It also reminds me of a Jeffersonian Ideal.  In his view, patents were a sort compromise: monopoly rights granted for a fixed term in exchange for a full disclosure into public domain.  The latter is never emphasized, and yet the Patent Office essentially publishes an online "how-to" manual for many many useful inventions. They all come with expiration dates, the one date which is rarely emphasized.  Why do you suppose that is?