Science embraced: patent policy merits a brief mention

By Peter Kerr 07/03/2012

Another guest blog by IP mentor, Doug Calhoun

The McGuinness Institute is to be congratulated on its exhaustive analysis of science in New Zealand, ‘Report 9: Science Embraced: Government-funded Science Under the Microscope’:

The report will no doubt generate considerable debate.

In focusing just on the very brief patent policy aspects of the report I feel a bit presumptuous – like Spike Milligan when he wrote ‘Hitler: My part in his downfall.’ But it is the patent bit about which I would like to continue the debate.

In my first guest post: I pointed out the inconsistencies between the MED and the MSI approaches to patent and innovation policies. The McGuinness Report concludes (on pages 94 and 95) that these inconsistencies are symptomatic of a wider problem:

‘There is a lack of clarity surrounding the respective roles of MSI and the Ministry of Economic Development (MED) regarding economic development. MED clearly has a role in fostering economic development and prosperity for all New Zealanders, and many of its portfolios are aligned to the six areas of investment determined by MSI: high-value manufacturing and services sector (HVMSS); biological industries; energy and minerals; hazards and infrastructure; environment, and health and society. It is not clear how the two ministries coordinate their strategies in these areas given that the difficulty in distinguishing the stated aims of these two ministries has been noted in the science-policy community.’

The report discusses the role of intellectual property on pages 72 and 73. The teaching that it extracts from the Uniservices Report: is that although there is some evidence that patents act as an incentive to innovation and thereby increase productivity, it did not find evidence that IP on its own is a driver of productivity.

What the McGuiness Report did not really get to is that the primary role of patents is to incentivise investment in the commercialisation of inventions.

A comprehensive study of the importance of patents to US entrepreneurs was the Berkley Patent Survey that is discussed by its authors: here, here and here.

While they urge readers not to leap to too many conclusions, one common theme that comes through is that patents are seen as being more important to the investors in entrepreneurial ventures than to the entrepreneurs themselves.

There is some evidence of this in New Zealand. At the Grow Wellington launch of its Innovating for Health Challenge on 5 March, Robert Feldman, a venture capitalist with Pacific Channel: outlined his company’s expectations of entrepreneurs who are seeking funding. His two highest priorities were the quality of the management and the quality of the IP, with particular emphasis on patents. Dr Feldman then drilled into what he meant by high quality patents. They must be:

1. Focused on the product that they are intended to protect,
2. They must be free of prior art, and
3. The entrepreneur must have freedom to operate.
4. The enterprise should have a track record in New Zealand (Underlining the point I was making in my first post that NZ patents do matter!)

(‘Freedom to operate’ means that you have done a comprehensive search for other patents in markets you intend to enter and have determined there are no patents you are likely to infringe. And, if there are such patents, you have arranged to licence them or made some other accommodation.)

With some technologies, freedom to operate may involve having to navigate your way through a dense patent thicket. How this is being done on a global basis through private collaborative arrangements is described in chapter 3 of the WIPO publication here.

The McGuinness Report (probably without realizing it) did consider one approach to solving the problem:

‘Creating better forms of co-creation based on collaborative practices between institutions, and new initiatives that allow inventions to be put into the public domain more quickly, seem part of the solution. For example, New Zealand could consider becoming a leader in Common Patents [I think that should read a Patent Commons], patents that register the creator and are fully transparent, but allow free use with acknowledgement (along the lines of the approach used by the Creative Commons, but through specific ‘New Zealand Invention Commons’). There are obviously a number of different ways to explore this landscape, but it is clear that such a system, which puts vast numbers of inventions into an open marketplace where entrepreneurs have access to them, can help economic growth, health and well-being. The challenge is therefore to create a system where new knowledge and technological advances are created and then traded in an open marketplace, which recognises the creator but also enables the entrepreneur to bring benefits to society.’

The reference to ‘patents that register the creator and are fully transparent’ is a bit of a mystery. All New Zealand patents do ‘register the creator’ by the requirement to name the inventor(s). And before a patent will be granted it must describe how to put the invention into practice — in terms that would be understood by someone able to put it into practice — so they are ‘transparent’.

Firms who invest in R & D and seek to protect that investment through patents are hardly going to be motivated to give up their exclusivity by donating their patents to a Patents Common when the only reward is an acknowledgement of authorship.

The ‘public domain’ is a part of an ‘accessible domain’ (there is a chapter in the book ‘Driving Innovation’ by Michael Gollin on this). The accessible domain includes a vast Patent Commons of published patents in other countries that are not enforceable in New Zealand and New Zealand patents that are no longer in force because a renewal fee has not been paid. And the accessible domain includes patents that others are prepared to license out a right to exploit. Freedom to operate can be thought of as finding a place in the accessible domain.

The WIPO Report at pages 118 and 119 explores why the open source software business model seemingly exists without patents. Studies it refers to show that:

‘both producers and users of open source products often blend participation in open source and proprietary software. In the case of producers, it is common for firms to develop both proprietary and open source programs. Firms may also participate in open source software projects strategically to upset dominant players.’

It then asks:

‘whether similar practices are transferable to other industries. Indeed, models of the open source type have been applied to other innovative activity. However, their uptake appears less spectacular than for software. One explanation may be that the success of open source software is closely linked to the special circumstances of software development: projects can be broken into small, manageable and independent modules; input by geographically dispersed developers can be easily shared; upfront capital costs are limited; and new products do not face lengthy regulatory approval processes. Nonetheless, additional opportunities for open source types of collaboration may well arise in the future as technology and the nature of innovation evolve.’

The business models that the WIPO Report describes in chapter 3, such as patent pools and markets for the sale and purchase of patents or patent licences, are being used by those seeking to monetise their IP instead of the open source software model.

Both the Uniservices and the McGuinness Report say that a lot more research needs to be done (they would say that wouldn’t they). And that research should begin where the WIPO report leaves off.

The McGuiness Report also mentions the importance of Talent (with a capital ‘T’). At the Grow Wellington launch Elf Eldridge promoted nurturing that talent with a dose of real world interaction through a programme to be run by Chiasma:

The Uniservices Report survey noted the shortage of understanding of the management of IP. The call for nurturing science talent should extend to nurturing IP talent in talented scientists.

~ Doug Calhoun
IP Mentor
Serial Stirrer

0 Responses to “Science embraced: patent policy merits a brief mention”

  • It should come as no surprise that there is a degree of confusion about the roles of MSI and MED. All countries have this kind of problem. There are lots of ways you can cut the bureaucracy cake. In Norway, they have a Ministry of Science, Education and Religious Affairs!
    In NZ various Ministries have a role in economic development; those two plus Labour, Treasury, Revenue, MAF, Environment etc etc. The key to success is how well they engage with each other and the leadership which comes from how the Ministers’ portfolios are distributed. You could imagine a huge single Department of State, but that would merely shift the problem down a level.
    It is interesting though, that MSI now say they are focussing on small co’s and startups while MED will primarily look after 500 ‘high potential’ firms. which will presumably be more established.

    Regarding patents, it does seem that things are highly industry-dependent, as WIPO says.
    We get into trouble when policy (and legislation) is made on a one-size-fits-all basis.
    This is a particular problem in NZ because we have a dominant primary sector with a high degree of collectivism, but at the same time we want to develop HVM, where individuality rules and the drivers are different. Policy-makers are clearly struggling with this, and I don’t think the McGuiness Report has helped much.

  • Good to get the guest blogs! Any chance that we could hear from people on the other side of the debate, though, particularly around software/code and patents? Balance and all that, and Doug’s now had a coupla chances to air his views 🙂

  • Hi Aimee,

    I’d like to see this too. (I have to admit I’m also finding myself being uncharacteristically quiet on a topic I have views on, albeit partly as my time is a bit limited.)

    Regards the ‘open-source movement’ views, I believe Fabiana knows some of the open-source software crowd; perhaps she could convince one of them to do a guest post on her blog?

  • Grant

    The paper by Mulligan and Lee referred to in the Ars Technica link you provided identifies a problem with software patents – they are a victim of their own popularity. The authors state (at page 22):

    “Notice that the factors that make software patents work poorly are characteristics of the software industry, not the patent system. This suggests that it is probably not possible to make the patent system work well for software. The basic problem is that there is a massive number of firms producing potentially-infringing software, they are producing many inventions, and there’s no systematic way to organize them all.”

    The basic premise of the paper is captured in the words, “there’s no systematic way to organise them all.” But that premise ignores history and underestimates the ability of developers to configure search engines to do the job. When I started out (as a freshly minted chemistry MSc) as a patent agent trainee in 1968 the tools I had to work with were a classification index book and indexed drawers of cards. Searching involved reading one card at a time. When gene sequencing began and 1,000 page + paper patent specifications were filed with long lists of sequence IDs (as they are called in patent speak) any comparison could only be done by reading page after page. But both those problems were eventually solved by computer based searching. They may already be beavering away at the problem already, but if not, Google could muster its resources to build a patent clearance algorithm that could at least narrow down troublesome patents to a manageable number that a patent attorney could advise upon. And there even exists a successful company that crowd sources bounty hunters to find “unfindable patents” or other “prior art” – at a fraction of the costs of patent attorneys:

    (Newton’s third law of motion – for every action there is an equal and opposite reaction – applies to software patents as well.)

    On page 18 of the paper is the heading, “Disorganized Patents have Led to A Litigation Explosion”. But that is equating a correlation with causation. The major patent litigation battles going on at the moment are not caused by too many software patents, they are driven by those seeking to dominate the personal electronic devices market. See:

    Mulligan and Lee propose three ways to overcome the problem of too many software patents:

    A. Subject Matter Restriction

    They suggest a ban on software and business methods. But they do not set out how you implement such a change without either taking away legally granted existing rights (by making it retrospective) or having to wait 20 years for it to become fully effective (after the last of existing patents expire.)

    B. Independent Invention

    What they mean by this is if a software developer produced software independently from a patent owner they would be exempt from patent liability. So long as the independent developer did release their software before the patent was applied for, they would have such a “prior user right” under the amendments made to the US Patent Act last year.

    C. Limiting Injunctions and Multiplied Damages for Patent Infringement

    You really need to be a patent trainspotter to want to know about this one. But the most recent US Supreme Court decision on injunctions (a court order to stop the infringing activity) has made injunctions much harder to get.

    Mulligan and Lee have not considered other alternatives such as patent pooling, which is used by both major players:

    and by open source software company collectives:

    So, in summary, Mulligan and Lee have identified a genuine problem with software patents (they are not alone in this) but their suggested solutions overlook history and some recent changes to US law and underestimate the ability of the software industry to itself develop an effective searching tool to solve the indexing problem.

    And as for the ban on patenting computer programs in New Zealand, the authors (on page 4) say:

    “In an island nation of, say, 100,000 people, the patent system’s discovery costs wouldn’t be a cause for concern. There might be a couple of patents granted each week, and it would be reasonable to simply expect every firm to read every patent. In contrast, the U.S. Patent & Trademark Office issues several thousand patents per week. Clearly, it’s not possible to expect every American firm to read and understand every issued patent.”

    The figures for this island nation are 4.5 million people and 4,000 to 5,000 patents issued per year. But where is the evidence that software patents indexing is a problem in New Zealand?



  • Here is a Herald article from about 4/5 years ago. It is not about patent but innovation. But it leads to the question of , can it be patent?

    Former HOD of Auckland University Computer Science, Prof. John Hosking stated the following in that Herald article.

    John Hosking…
    … one problem is that senior technology staff in New Zealand businesses tend not to have post-graduate or often even degree qualifications. As a result, the companies they work for, while often successful at selling a single idea, can struggle when it comes to continuing to grow through innovation.

    Although they [the technology managers] are bright and innovative, they haven’t been exposed to research methods as you would through doing a masters or PhD, he says.

    We’d like to open their eyes to what research can do to make companies grow quicker. Obviously we’d be interested in helping them do that research – we’re quite open about that – but the name of the game is to raise a research culture within their companies, and allow them to grow quicker, be more innovative and avoid this one-product wonder trap that they get into.

    The question that follow is, who are the kind of software companies that need University-based (original) researches that Prof. Hosking is talking about? What Prof. Hosking is offering the industry is that they can do the R&D on behalf of companies that want to use their expertise. It is a natural consequence of that R&D that the company that funded it want to protect it. I seriously doubt that any sane software company that seeks help from University researchers do not want patent protection at all.

    This is the kind of real research I have been arguing about on the other thread that should be protected. Invention/s that come out from such R&D is not to be equated with pub-invention. I still can’t believe that the open source movement can’t see this difference. Microsoft, IBM, Google, Oracle, etc,.. have an army of PhDs to do original researches. Prof. Hosking is offering our local software industry the same R&D capability as those big companies. If those companies patent their software inventions (R&D based), then why Prof. Hosking and his team can’t patent their invention on behalf of say, Navman who happened to fund that specific R&D? And why would Navman not want to patent it? The paid for it, therefore it should be protected via patent. Patent #566291 brought up by Jonathan on a previous thread, is not the same thing as original R&D that Prof. Hosking is offering our local software industry. Patent #566291 should have never been granted in the first place.

    But here is a fact. I seriously doubt that any of the open source based companies ever need some R&Ds from University at all, since what they do is just business as usual, nothing new or innovative.

  • Just a general observation for the discussion: my understanding* (and to state what I think is the obvious) is that patents are not protection in and of themselves but are a deposition of materials (text, illustrations, references, etc.) that can later be used in efforts to defend,** should the owner choose to. A point here is that for the patent to have protective value, the owner of the patent has to be able to do the ‘policing’ themselves – to identify breaches, bring cases against those they consider in breach, etc., at their own time and expense. (I think Dave made related remarks on this general issue a little while back.) I have strong memories of a well-respected businessman standing up in an earlier bioSouth*** meeting saying that in his personal experience and advice patents had limited ‘defence’ value unless you could also do the ‘police work’ to defend them. (My now fuzzy recollection is that he was standing up as he was concerned at IP lawyers (over)selling patents without sufficient mention of this practical element.)

    * I assume the situation hasn’t changed since I learnt the elementary basics quite a few years ago now!
    ** or as ‘items’ to sell, ‘advertising’ via preliminary patents, etc; i.e. there’s other uses to patents that just ‘defence’.
    *** No longer running.

  • I realized that the link I posted above which mentioned John Hosking’s comments is just the Herald website home. The article is here (by Simon Hendery).

  • Grant,

    I have never seen a patent described as a deposition of materials before. But you are correct that a patent gives you the right to exclude anyone from “making, selling, using or exercising” your invention without your permission. And it is a personal property right that is up to you to enforce.

    One patent owned by one proprietor does not have much economic punch. That is why companies try to accumulate them. And in innovative complex technologies many products incorporate features that are separately patented. A smart phone’s touch screen feature, and its microchips and its apps may all be covered by separate patents with separate owners. The owners can choose to cooperate or they can choose to sue each other. Most times they do the sensible thing and cooperate. The cooperative is called a patent pool. The arrangements are often very complex – and, most commonly, industry standard setters require companies with patents that cover the standard to put them into the pool.

    In the case of a university or a research institute that is not itself going to put an invention into practice, the way to monetise the patent property right is either to sell it outright or license the invention to a company that will itself commercialise the invention. In the case of a “spin off” company, the university or institute may acquire shares in the company in return for ownership of the patent rights. If the company succeeds the university or institute gets a return from either dividends or sell its shares. If the company fails the patents may revert to the university.

    One of the things that the Uniservices Report:

    identified in its survey on the patent system was how poorly the management of IP was understood. Before embarking on the patent route both the advisors and the advised should have a clear understanding of what they are getting and (probably more importantly) what they are not getting. It is a responsibility of an IP advisor to ensure that the client is well aware of what they are getting into and of the client to listen to the bad news as well as the good.

    There is a lot more to the picture than meets the eye.

  • There is a lot more to the picture than meets the eye.

    Is this an advertorial for your services (generally a bit of a no-no on most blogs) or trying to teach me to suck eggs?! 😉

    More seriously, your additions are familiar and I agree there is more to it. My brief comment was just adding one point that I didn’t think had been said, that defending a patent is not ‘automatic’ – it’s at the expense of the owner’s time & money. It’s a simple point I know but I think it needs to be included in patent discussions for those new to them – as I imagine you must experience in talking to some new clients. (FWIW, I don’t think nitpicking my choice of phrases is helpful – the intention was obvious.)

  • @ Grant;
    The debate was going quite nicely till you sought to malign Doug’s intentions. Your sly wink does not excuse your arrogant slight.

    So you know Doug’s situation do you? I think not. I know Doug well from his professional past and in his current retirement; his clients these days are more likely to be golfing buddies than professional relationships, so he has no need of service-promotion. Doug is simply passionate about the role that IP generally (and patents specifically) ought to play in developing the wealth he thinks our nation deserves, and is eager to promote debate that might lead to developments that enhance that environment. That was exactly where this string was going until you pushed your boat out on a sea of ignorance. Irrespective of your tut-tutting assertions, Doug has no need for advertorials for (his) services so you owe him an apology.

    Beyond that, I wish you would learn to play the ball not the player when you disagree, and when you MUST play the player to do that with assured knowledge not supposition.

    I suggest you delete your facetious insinuations, whereupon I shall remove this post too.

  • MainlyMe,

    “More seriously, your additions are familiar and I agree there is more to it.” […]

    I’m unlikely to be agreeing with him and opposing in the very same comment 😉

    You’re best you not to assume winks as being “sly” or having some other negative connotation. My wink was to make it clear I was joking – as the paragraph immediately afterwards underlines: “More seriously”, etc. I hope you don’t mind me saying this, but you’re rushing to his defence too soon.

  • Back@Grant;
    You said “Is this an advertorial for your services (generally a bit of a no-no on most blogs)… ;-)”
    “My wink was to make it clear I was joking…”

    That’s your view of what constitutes a JOKE? It doesn’t even raise itself to sarcasm, the lowest form of wit! Dear, dear me .. don’t contemplate doing stand-up comedy, unless you do it to collect the egg and tomato projectiles as a food source.

    No, irrespective of your own view, the impact of adding a SLY wink to that statement is to provide you with a back door to a challenge, and your latest response does nothing but proove that as your intent. I note this as a common habit in your SciBlog exchanges when interacting with a contrary view.


  • MainlyMe,

    Could you please step back and slow down? – you’re making a mess where there isn’t one and being argumentative isn’t helpful.

    I’ve already explained myself, it was sincere and I’m trying hard to be polite despite your accusations and tone. (Understandably, I don’t appreciate your ‘framing’ my reply or making accusations.)

    I haven’t “retracted with a contrary view” – the only things I’ve said in this thread are to agree with Aimee that it’d be good to see alternative views, to gently raise a general point that patents cost time and money to support/defend (not ‘a view’, just something I thought was missing in the discussion for those new to patents) and to link to article on the off-hand chance it might be of interest to others. None of these are ‘opposing’ anyone or being “contrary”.