Dubai: Financial Free-Trade Zone on the Persion Gulf

Date:  Mon, 2005-06-06

The Patent Bubble

Date:  Wed, 2005-06-01

The Monopoly Factory (Excerpts)

Date:  Wed, 2005-06-01

Respond to this Article June 2005 The Monopoly Factory Want to fix the economy? Start by fixing the Patent Office. By Zachary Roth [Excerpts] … “Some might even use the word ‘crisis'” The 1991 decision to make the PTO pay for itself, however, has created a series of perverse incentives that encourage the office to approve undeserving applications, and has made it easier for applicants to game the system. Because each new application now brings in a $380 fee, the agency has an incentive to approve those patents sending a signal to the market to apply for more. Additionally, patent-holders pay annual maintenance fees for the first 12 years of a patent’s life, meaning that each approved patent brings in a total of over $3,000 to the office. So every patent issued means a bigger budget for the patent office, and helps to guarantee that Congress will continue to look kindly on the office . “It’s like telling the Treasury Department, go call the Bureau of Engraving and Printing and tell them that they’re gonna get paid by how many twenties they print,” says David Martin, who runs M-CAM, an intellectual-property consulting firm based in Charlottesville, Va., and has testified frequently before Congress about the patent system. Dan Ravicher, of the Public Patent Foundation, a non-profit legal organization, agrees. “At the agency level, if you want to increase the number of people applying for a patent you don’t want a reputation for being tough on applications,” he says. You want a reputation for being a rubberstamp. And that’s pretty much what the patent office is now.” The agency denies that management encourages examiners to approve applications. But one examiner told The Washington Monthly that he had been told by a manager, “We’re not the rejection office … if you can’t figure out what’s going on, don’t reject it.” Another examiner agrees: “That’s where the push is coming [towards allowing more applications], because allowances bring maintenance fees.” The patent office, operating under these institutional incentives to push more patents out the door, has set up a system that encourages individual examiners to green-light more of the applications that cross their desks. The first of these individual incentives stems from the fact that the examiners are overworked. Even with increased number of examiners, and their relocation to a more comfortable environment, the patent office hasn’t been able to come close to keeping pace with the mushrooming number of patent applications. In 1983, the office received 87 applications per examiner. That figure has since risen steadily, and in recent years has generally been over 100. That increase would be manageable for the office were it not for the fact that, over the same period, applications have become vastly longer and more technically complex, as software and information technology have come to account for an ever-larger proportion. “Whereas in the old days it was extremely rare that you got a case of 100 pages, it’s now pretty common. Cases have just gotten bigger,” says Ron Stern, a veteran examiner and the head of the patent examiner’s union. As then-commissioner James Rogan noted in testimony before a House subcommittee in 2002, “The increasing volume and complexity of our workload poses serious issues for the patent office. Some might even use the word ‘crisis.'” While the weight of the workload gives examiners a passive incentive to rubber-stamp patents, the office’s worker evaluation system gives them an active one. The size of an examiner’s bonus is determined in part by the number of “counts” he amasses. Examiners gain one or more counts each time they open and close a new case. But when examiners reject patent requests, applicants typically adjust the claim and file a “continuation,” denying the examiner a count. So, an examiner concerned about his bonus has a strong incentive to approve the application. “There’s a gaming of the system,” says Harold Wegner, a former examiner who now works as a patent attorney with the law firm Foley and Lardner. “You can get a stack of applications and just allow patents and get your [counts] that way.” … A second set of eyes The result is a system that has approved ever-higher percentages of applications. According to a 2002 study of patent office data by attorneys Cecil Quillen, and Ogden Webster, and Richard Eichmann of Cornerstone Research, the success rate for patent applications rose from 69 percent in 1984 to 86 percent in 2000. In other words, the patent office now grants applications to more than eight out of 10 applicants. The patent office argues that it is simply carrying out the will of Congress. Brigid Quinn, an agency spokeswoman, says that examiners are required by law to grant applications, unless they can find evidence to reject them. “So the office is doing exactly what the law requires that they do,” she says. But in fact, as David Martin, an intellectual property consultant, points out, the law as written only says that an applicant “may obtain” a patent if sufficient evidence can’t be found to reject it. It doesn’t require that the office grant a patent. When the patent office created its Manual of Patent Examining Procedure (MPEP), an internal document used to establish uniform standards of examination, it wrote, “shall obtain,” rather than “may obtain.” That change has allowed the office to act in its own self-interest by treating applicants as favorably as possible, while simultaneously claiming that its hands are tied by the law. “That subtle substitution of ‘shall’ for ‘may’ is one of the key reasons why we have the problems we have right now,’ says Martin. The patent office denies that the quality of its patents has declined. And, in fact, there are no comprehensive measures of patent quality. But an internal agency experiment gives an instructive glimpse. In 2001, the office created a new set of rules for reviewing “business method” patents-a relatively new category of patentable material, covering non-technical innovations, such as Amazon.com’s “one-click” ordering system (the patent protects the idea, not the technology necessary to carry it out). The complexities of these patents were causing problems for many examiners, so the office instituted a “second-set-of-eyes” system, which simply required an additional examiner to review each application. Under the new system, the allowance rate for business method patents was quickly halved. That suggests patents in other complex fields, such as bio-technology, given without a “second set of eyes,” may have similarly higher error rates. The countless faulty patents that are pumped out through this process can be extremely damaging to the American economy. They force consumers to pay more than they otherwise should. They make the patent office an easy mark for those who would manipulate the system-and indeed have given rise to a whole new category of scammers: “patent trolls.” Some economists think that all the extra patents in corporate portfolios have artificially enhanced the value of those stocks, creating what they call a “patent bubble,” with potentially devastating results for many investors. Worst of all for the economy and for society as a whole, a faulty patent system can create substantial obstacles to basic, critical scientific and technical innovation. …

David Martin to Address Conference on Intellectual Property Rights Protection for financial Services in New York

Date:  Wed, 2005-05-11

M·CAM Research Tax Credit Study Discussed in Congressional Quarterly

Date:  Mon, 2005-04-04

CQ Weekly — In Focus Jill Barshay, CQ Staff April 4, 2005 The fourth-largest subsidy in the corporate tax code, a credit for research and development expenses, is designed to reward companies for boosting their research spending. Drugmakers, software developers and other high-tech interests in Washington say the credit keeps R&D at home and keeps U.S. companies on the cutting edge of the global economy. Spurring innovation: It’s as American as apple pie. But this $6 billion a year transfer from taxpayers to corporations does not always deliver what it promises. It often pays for mundane – even redundant – work. Companies regularly claim the credit for rediscovering patents they already own, expired patents that are in the public domain and activities for which the label “research” is dubious at best. Defense contractors, in particular, sometimes claim it for research that was financed by Uncle Sam and not out of their own pockets. No one can point to an academic or government study that proves the credit has actually stimulated extra research. To the contrary, accounting firms frequently help companies look back through their books to find prior-year expenses that qualify for the credit under the vague rules issued by the IRS. And there are serious concerns about how accountants numerically calculate the payout for clients. “This story unfortunately has epic qualitites about it,” said David Martin, a patent consultant who has become a self-styled R&D whistleblower. “We think we’re funding innovation, but we’re not.” Nevertheless, Republicans and Democrats in Congress are eager to preserve the tax break, and President Bush has called for making it permanent at a 10-year cost of $76 billion. The combination of special interests that back the credit is a potent one: pharmaceutical companies, software makers, defense contractors and automakers. Together, they donated $39 million to candidates for federal office in the last election cycle. In a 14-page study supporting renewal of the credit in 2004, the industry coalition that lobbies for it on Capitol Hill focused its arguments on how many companies benefit and the states where they are based. Not one word was devoted to their innovations. Because the credit is expensive, Congress keeps it on a short leash, renewing it every year or two to keep a check on deficit estimates. The tax break currently expires at the end of 2005, and a bill to extend it is one of the few tax measures almost certain to be enacted this year. Top Senate tax writers want to make the credit even more generous than it already is. The credit operates by giving companies 20 cents in cash for each research dollar spent above a threshold. That is in addition to the deduction businesses already take for all research expenses. The idea behind the credit is to encourage companies to take the risks inherent in research and development of products and ideas that may or may not someday yield profits. But among those who most benefit from the credit are federal government contractors, whose work is funded by taxpayers. “There are some instances where the entirety of the company is government research and they’re claiming the credit,” said Martin, the whistleblower. His company, M-CAM, studied publicly traded firms that disclose use of the credit in their financial filings. Of those, 20 percent reported that government contracts and grants were a major source of research funding. When asked, several large government contractors said they took the credit on U.S. government-financed work. One that does is Electronic Data Systems Corp., the Texas-based information technology company founded by Ross Perot. EDS, along with Microsoft Corp., spearheads the industry coalition that lobbies for the credit on Capitol Hill. Also claiming the credit for government-backed research are Alliant Techsystems Inc., a Minnesota missile and munitions maker, and Computer Sciences Corp., a prominent California supplier of software to businesses and governments. “We factor in our ability to claim the credit on those research activities when we bid for the contract,” said David Hernandez, vice president for taxes at EDS. In the mid-1990s, the IRS argued that companies were double-dipping on government-financed work and tried to stop them from claiming the credit. But U.S. courts sided with the companies under the rationale that in cases where they were required to produce the research for a fixed price, the credit was a valid claim. The tax court ruled that under fixed-price contracting, companies were liable for cost overruns and at risk for having to return the contract money if they did not produce the research in the end. Since that ruling, the number of fixed-price government research contracts has grown. According to Eagle Eye Inc., a Virginia-based publisher, the federal government signed more than $4 billion in such contracts in fiscal 2003. If the credit was claimed on all of those contracts, the companies involved might have pocketed an extra $800 million from taxpayers. Looking Backward Meanwhile, in San Antonio, Texas, Shai Wood, a tax manager at the accounting firm of Padgett, Stratemann & Co. specializes in helping financially struggling companies find research expenses they didn’t know existed. Wood digs through the three more recent years of financial statements, easily finds research expenses and refiles amended tax returns for clients. “There’s the misperception that you have to have a research lab. But you can just be making product improvements,” Wood said. “Once we go in and explain, they go, ‘oh yeah, we do that.'” Wood said she helped a bank claim the credit for upgrading its customer Web site. She also worked with a company that makes furniture for jails and dormitories, the kind that is anchored to the floor to withstand jumping and bouncing. When the company changed some of its designs from steel to aluminum, Wood helped them claim the R&D credit. “I might spend 10 percent of my time doing retroactive claims,” said Wood, adding that she thinks the number of companies claiming the credit retroactively is on the rise. That’s a far cry from the original vision of the credit, which was included in the 1981 tax cut bill, enacted during President Ronald Reagan’s first year in office, as a way to induce high-tech companies to launch innovative research projects. “There are a lot of problems” with the credit, said former IRS Commissioner Donald C. Alexander, now a lobbyist at teh law firm Akin Gump. “It’s very hard to say where research ends and where practical applications begin.” Companies and accountants are not necessarily to blame for the confusion. The credit has been a part of the tax code for more than two decades, but the Treasury Department didn’t issue final regulations defining research until 2004. Even tax lawyers say it still isn’t clear which activities qualify and which don’t. “It is difficult to come up with a test of what is phony research and what is true,” said Alexander. “I don’t have any magic solution.” Another problem is how companies crunch the numbers to calculate the credit. The basic formula allows companies to reduce their tax bill by 20 percent of what they spend on research in excess of their average research budget from the 1980s. But companies and their accountants work to recalculate that base number to increase the amount of credit they can take today. “Is this whole R&D credit an accountant-driven exercise?” asked a Senate GOP tax aide after meeting with the IRS in late March. “We are taking this very seriously.” Former Treasury Secretary Paul H. O’Neill, a one-time chief executive officer at Alcoa Inc., shares that view. In his book, “The Price of Loyalty,” Ron Suskind quotes O’Neill as saying, “Go talk to people who make practical business decisions about how much tax credits influence the level of R&D that they invest in. You find somebody who says, ‘I do more R&D because I get a tax credit for it,’ you’ll find a fool.” Recycled Research Martin said his interest in the research credit was piqued after a potential client asked him to assist with a patent problem on a $40 million federal contract. The company hoped to claim the credit on a Homeland Security contract to research technology to protect drinking water systems against terrorist attacks. A database search revealed that the patent had expired and was in the public domain. “The rule should be [that] you’re doing this for the first time and others don’t already have it,” said Martin. In fact, the Treasury rules don’t require companies claiming the credit to do work that hasn’t already been patented or published. Treasury considered it too burdensome to ask companies to review scholarly journals to make sure their research wasn’t already available, according to a senior Treasury official. And the IRS didn’t want its auditors, who typically don’t have scientific expertise, to evaluate research. “The rules say, if you undertake experimentation, you can take the credit. The rules don’t say you have to do something really cool,” said Chris Ohmes, a former Treasury official who oversaw use of the R&D credit. In the past, scant media attention has focused on the opaque process of periodically renewing the R&D credit. Committee aides readied extensions behind closed doors and slipped them into unrelated legislation near the end of each session. (The credit was last renewed as part of a middle-class tax cut bill in September 2004). Until Senate Finance Chairman Charles E. Grassley, R-Iowa, called a hearing last month, none had been held in years and debates were rarely heard on the merits of the policy. Grassley is eager to extend the research credit again. The only change he is mulling so far would be to ask companies to get a prior blessing from the IRS before claiming the credit – a notion sure to provoke consternation on K Street – and one Grassley is unlikely to press too hard if it means letting the credit lapse. Source: CQ Weekly The definitive source for news about Congress. © 2005 Congressional Quarterly Inc. All Rights Reserved

Dr. Martin to speak at Duke’s “Collective Action and Proprietary Rights” Conference

Date:  Sun, 2005-04-03

Dr. David E. Martin March 4-5, 2005 Dear Dr. Martin, We are writing to invite you to Duke University on March 4-5, 2005 for a two-day conference entitled “Collective Action and Proprietary Rights: Promoting Innovation and Access in Health.” The symposium will focus on cases where proprietary rights on research inputs are posing, or may imminently pose, obstacles to biopharmaceutical R&D. Many of these cases involve diseases that have limited market potential, either because the affected population is poor or because it is small. Hence the need to reduce costs related to licensing, as well as other R&D costs, is particularly acute. These concerns may especially affect genomic innovation, where the ability to “invent around” building blocks of knowledge may be limited. Various groups that are interested in reducing R&D costs have put forward proposals that rely on collective action. Such proposals include: collective efforts by universities and other nonprofit actors to negotiate humanitarian licenses; patent tools/”technology trusts” that rely on liability rules; and “open source” projects directed to neglected diseases. These proposals are complementary. Humanitarian licensing could reduce licensing and transaction costs for prospective projects; patent pools could address existing proprietary thickets; and open source projects that rely on collective efforts by volunteers to reduce R&D costs could also make use of humanitarian licensing and patent pools. This conference will bring together leading thinkers on these proposals, as well as those who are working on parallel efforts in other technology sectors, to exchange ideas with key stakeholders and partnership groups that aim to fund work on neglected diseases. The conference will feature both plenary presentations and “breakout groups” that focus on particular upstream and downstream disease areas. We are extending this non-transferable invitation to you in the hope that you will contribute in specific ways to the conference discussions. At the conference, we will also invite feedback on a new report, commissioned by the World Health Organization’s Commission on Intellectual Property Rights, Innovation, and Public Health and authored by the conference organizers, on the intersection of public-sector technology transfer practices and developing country access to health products. In the next couple of weeks, we would appreciate an e-mail (ghta@duke.edu) confirming whether or not you will be able to participate. We also hope to speak by telephone about your specific contribution to the conference discussions. The conference is jointly sponsored by the Duke Program on Global Health and Technology Access at the Terry Sanford Institute of Public Policy; Duke Law School’s Center for the Study of the Public Domain; and Duke’s newly established Center for the Study of Public Genomics. We have limited funding to support conference participation and can offer economy-class, round-trip airfare (arranged through Duke), plus modest ground transportation costs to and from the airport. On-site accommodations and food will be provided as part of the conference. We hope that you will be able to join us for these exciting discussions. Sincerely, Arti K. Rai, Professor of Law Anthony So, MD, MPA Director, Program on Global Health and Technology Access

Iranian President Khatami addresses UNESCO Conference on Bioethics

Date:  Sat, 2005-03-26

To read the full speech, click HERE

Senator Chuck Grassley (R-Iowa) Comments of IRS Role in Tax Oversight

Date:  Wed, 2005-03-16

Senate Tax Writers Examine Research Credit

Date:  Wed, 2005-03-16

M·CAM CEO Testifies to Senate Finance Committee on Research Tax Credit

Date:  Wed, 2005-03-16

US Research Tax Credit To Face A Critical Review

Date:  Fri, 2005-03-11

Rob Wells March 11, 2005 excerpted from DOW JONES NEWSWIRES A large federal tax subsidy for corporate research – the research and experimentation tax credit – will face some intensified criticism next week before a Senate committee. New research of 200 public companies which received the credit over a period of five years suggests 20% of the firms might be “double-dipping,” or receiving the credit while also obtaining government-funded research directly or through contractors. Public filings of the companies show about 20% disclosed a situation “where one would want to clarify whether the companies are using it and double-dipping it or not,” said researcher Dr. David Martin. And interviews with chief executives, chief financial officers and research directors found companies generally didn’t factor in the credit before embarking on research, said Martin, president and chief executive of Virginia-based M-CAM Inc. Martin has provided research to the Senate Finance Committee as part of its effort to halt abusive donations of corporate patents to non-profits. The study also examined the stock performance of the companies receiving the credit. About half of the companies outperformed the S&P 500, while the other half didn’t, according to Martin. “That would suggest the credit is not having its intended effect,” he said. Martin is to release additional findings about the research credit at a March 16 Senate Finance Committee hearing. “The committee intends to have a serious review of the credit and how it is operating and if the IRS is able to administer it properly,” a Senate Finance Committee Republican aide said.

M·CAM CEO Discusses Innovative Capacity of India with Civil Society

Date:  Tue, 2005-02-01

David Pratt Addresses Annual Meeting of PIPRA

Date:  Wed, 2005-01-19

January 19-20, 2005 David Pratt provided two lectures on the importance of IP quality management in public interest initiatives. M·CAM has been a technology underwriter of PIPRA partnering its support to the financial support from the Rockefeller and McKnight Foundations. PIPRA Purpose Statement

M·CAM Comments on China IPR Policy Expressed by U.S. Commerce Secretary Evans

Date:  Sat, 2005-01-15

M·CAM Patent Quality Analysis Highlighted in The Economist

Date:  Tue, 2005-01-11

M·CAM CEO Named to AASTIIK Board Solidifying India – EU Partnership

Date:  Wed, 2005-01-05

January 5, 2005 Today, the Academy for Augmenting Sustainable Technological Inventions, Innovations and Traditional Knowledge (AASTIIK) was inaugurated in a ceremony chaired by Dr. R.A. Mashelkar, Director General of India’s Council for Scientific and Industrial Research. Project coordinator, Prof. Anil K Dupta, together with EU partners Prof. David Smith (Wales, UK); Prof. Martin O’Connor (France); and, Prof. Larry Stapleton (Ireland) announced the strategic plan for this EU funded project which will serve as a global catalyst for IPR definition and protection serving numerous emerging market economies as they refine their roles in the global economy. AASTIIK Activity Chart

Indian President, the Hon. A P J Abdul Kalam, highlights accomplishments of M·CAM partners CSIR and NIF

Date:  Wed, 2005-01-05

Lipitor Patent to Be Reexamined at PUBPATs Request

Date:  Wed, 2004-12-08

Patent Office Agrees There is a “Substantial Question” Regarding Blockbuster Cholesterol-Lowering Drug Patent’s Validity NEW YORK — The United States Patent and Trademark Office has issued an Order granting the Public Patent Foundation’s Request for Reexamination of Pfizer’s patent on Lipitor, touted by the pharmaceutical giant as being “the best-selling treatment for lowering cholesterol and the best-selling pharmaceutical product of any kind in the world.” In its Order, the Patent Office found that PUBPAT’s request raised “a substantial new question of patentability” regarding all 44 claims of the patent. During the past year, Pfizer filed numerous infringement lawsuits asserting the patent against websites offering generic or lower priced versions of Lipitor. Meanwhile, a one-month supply of Lipitor in New York costs from $105 to $132 and filings with the Securities and Exchange Commission show that Pfizer made $2.4B from the sale of Lipitor in just the second quarter of 2004 alone. When it requested the reexamination in September, PUBPAT argued that “millions of Americans are not getting the cholesterol lowering treatment they need and deserve [because] the price for Lipitor is too high.” PUBPAT’s request pointed out that the challenged patent is relevant to the price of Lipitor in that “Pfizer is able to charge such a high price for Lipitor because the ‘156 patent stands as an impediment to the marketing of a generic atorvastatin pharmaceutical product (atorvastatin is the generic name of the compound marketed by Pfizer under the Lipitor brand name).” Pfizer has the opportunity to make an opening statement to the Patent Office, to which PUBPAT has the right to make a response. After opening statements, if any, the Patent Office will proceed to determine whether the patent is indeed invalid in light of the new questions raised by PUBPAT’s request. Third party requests for reexamination, like the one filed by PUBPAT, are successful in having the subject patent either narrowed or completely revoked roughly 70% of the time. “We are obviously very pleased with the Patent Office’s decision to grant our request to reexamine Pfizer’s Lipitor patent that they are attempting to use to prevent Americans from getting generic atorvastatin,” said Dan Ravicher, PUBPAT’s Executive Director and Founder. “This is the first step towards ending the significant financial and public health harms being caused to the public by this patent that should have never been issued.” More information about PUBPAT’s Request for Reexamination, including a copy of the Patent Office’s Order Granting the Request, can be found at http://www.pubpat.org/Protecting.htm . M·CAM Orange Book™

M·CAM CTO Presents IP Collateral Fundamentals at Taiwan’s Intellectual Property Valuation & Financing Forum

Date:  Mon, 2004-12-06

The cost of ideas

Date:  Sat, 2004-11-13

It is becoming ever more apparent that the patent system isn’t working excepted from: The Economist: November 13, 2004 pg. 71 … In America, several controversial business-method patent awards, notably Amazon’s one-click payment process, have fuelled the perception that the Patent and Trademark Office (PTO) is under strain. A study by M·CAM, an intellectual-property consultancy, found that over 30% of patents make duplicate claims, raising questions about their validity. America’s PTO dismisses the criticism as anecdotal. “We’re seeing lots of new industries being born, that is why there are a lot more patent applications,” say Mary Critharis of the PTO. The number of patent applications to the PTO is growing at around 6% a year. The wait for a decision is on average 27 months – and much longer for complex applications in advanced sciences. Last year, the PTO received around 350,000 applications and currently has a backlog of over half a million to review. It is a global concern: foreigners account for around half of all patents granted. Similar growth is occurring elsewhere, including in countries that previously showed little interest in intellectual property. Applications to China’s patent office increased fivefold from 1991 to 2001. As countries such as China, South Korea and India spend more on research and development, they are filing more patents. …