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Response to Andy Grove

by Alexander Poltorak - Mr. Grove was recently quoted in the article by Jonathan Thaw and Susan Decker, “Grove Says Patent System May Have Same Flaws as Derivatives” (Bloomberg.com, May 4 2009). With all due respect to Mr. Grove, he simply doesn’t understand the meaning of, and the underlying motivation for, patents.

Patents are a quid pro quo for invention disclosure, not for practicing the invention. There is absolutely no requirement or “onus” on the inventor to build a product in return for the issuance of the patent. Nor should there be such a requirement.

Society has an interest in promoting the disclosure and exchange of ideas to stimulate the “progress of arts and sciences,” to borrow from the Constitution’s language. We don’t want people to reinvent the wheel; that is why we – the public – have a fundamental interest in providing an incentive to inventors to disclose their ideas to the public. A patent is just such an incentive.

That is why a patent, in the legal sense, is viewed as a contract or a bargain between an inventor and the State, whereby the State grants the inventor a patent, i.e. a public franchise, in exchange for disclosing his or her invention to the public. Whether or not the inventor chooses to practice his or her invention is entirely beside the point.

Society has no interest in providing inventors with incentive to go into the business of building and/or selling patented product. Inventors who are good at inventing may not be good at manufacturing or selling. They may not be good at running a business of any kind. They are good at inventing and this is what they should be doing.

Specialization is a hallmark of any developed society. We don’t grow bread that we eat, nor do we make clothes that we wear. Why should we require inventors to build their inventions? We don’t require composers to sing their songs, nor do we require playwrights to perform in their plays. To think so is absurd. Patents have positively nothing to do with making products. A patent is a limited right to exclude others from practicing the patented invention, which the inventor is granted in exchange for public disclosure of the invention, not for making anything.

Derivatives are indeed financial instruments whose value is linked to another security. However, the value of a patent is not linked to the value of the patented product (although this fatal mistake is made by many accountants and valuation consultants). A patent is the right to exclude others. It has nothing to do with what the patent owner or the inventor does or does not do. Therefore, a patent is not a derivative of the invention, as Mr. Grove would have us believe.

The term “non-practicing entities” is used by people who simply don’t understand (or intentionally misinterpret for their benefit) patent law. As a quid-pro-quo for invention disclosure, a patent has equal value to the society and to the inventor irrespective of whether the inventor practices the invention or is a “non-practicing” entity.

It is no wonder that Intel would invent a derogatory term like “patent troll” to malign inventors. They already enjoy a de facto market monopoly in their industry and have no need for patents, which are but a nuisance to them. Is this why Intel and Microsoft are spending untold amounts of money on Washington lobbyists who are pushing the Congress to reform (read “deform”) our patent system?

However, nothing baffles me more than Mr. Grove’s statement that, “The separation between patents and products… makes it more difficult for the U.S. to compete with countries such as China”! Perhaps there is a virtual reality somewhere in cyberspace or in a parallel universe where this statement makes sense, but not in the world where you and I live. We cannot compete with the cheap cost of labor in China. We can only compete based on innovation, on American ingenuity!

Strong patents (precisely the kind that Mr. Grove doesn’t like) can go a long way in saving American manufacturers from cheap Chinese knockoffs flooding our markets, driving domestic industry out of business and our workers out of jobs.

China?

I think the idea is that countries like China ignore patents (and brands) in general, just like they ignore copyright.

Also, patents can be a big problem as far as software patents are concerned - these have blocked the progress of web application development many times in the past.

Patents should stay with production and hardware. With software I'd want a move to strong open standards rather than patents.

andy grove mindset

I would say Mr. Andy Grove suffers from the same kind of flaws that brought about the global financial crises of 1929 and the current one - the "Standard Oil" monopoly greedy mindset having no tolerance to any independent competition, i.e., their goal is to kill directly their competition, not outperform it.