Interview with Keith Grzelak

Keith Grzelak is the Chair of the Institute of Electrical and Electronics Engineers, USA Intellectual Property Policy Committee.

I’d like to discuss with you the current legislation of the Patent Reform Act as it now resides in the Senate. Where is IEEE on this? How do you feel about it? What do you think its chances of passing? And then we can talk about individual components of the bill as well.

One of the concerns that IEEE-U.S.A has had about the entire process in the House and the Senate is that it has been a closed process, driven by a small coalition of large entities that are for this change. And we think that patent reform is so important that it should be an open process.

GRZELAK: There’s a key case before the Patent Account Court right now. Our committee did not file a brief, although a couple of our committee members have. We deliberate over issues involving deluxe property, and particularly involving patents, for the courts or when the Patent Office makes rules, or when some legislation. What we try to do is take our individual hats off. I’m speaking on behalf of IEEE. I am formerly an engineer; I work at two fortune 500 companies, but I’m practicing patent attorney in private practice. I’m typical of most practicing patent attorneys in that the primary practice has clients pushing for this bill. And I also represent people that are against this bill.

What we look for, as a community, is what is going to be important for our members. Irrespective of whether they work at a large multi-national company that maybe originated in the U.S., or whether or not they are recently unemployed and they are off with a couple of their friends and some venture capital trying to start a new business. And what we’re in cognizant of is that in this process of deliberating over the patent system I have the solution that needs to be fixed, we don’t believe that there’s been enough attention paid to the successes of the patent system, over the last 50 to 100 years, have given to this country.

One of the concerns that IEEE-U.S.A has had about the entire process in the House and the Senate is that it has been a closed process, driven by a small coalition of large entities that are for this change. And we think that patent reform is so important that it should be an open process. And we’ve tried to participate where possible. And, but against the shorthand, what it’s saying is if patent reform is delivered by one lobbying group, and only people who — only corporate entities that have directors of government relations on board their corporation have a say, so many other people that use the patent system, be it a company that has 500 employees. They don’t have directors of government relations yet. Some of those companies might be the next large company.

It’s in a growth phase right now. So we’re very concerned that all of our members, irrespective of where they work, continue to benefit and be motivated by the patent system. If you look at the purpose of the patent system under Article 1, Section 8 of the Constitution, the founders understood that there should be laws that promote the progress of useful arts. We’re very concerned that the patent law suits everybody. And it should suit the large corporate entities who are lobbying for this reform.

Ultimately, people were voting on things that they have not studied or carefully analyzed. And the IEEE-U.S.A believes that there are problems with the patent system. They are overburdened. They claim that they cannot fix it by hiring. But ultimately, the process of deciding whether something should be patented, whether they are good patents or bad patents, is a people process. It requires highly skilled individuals, who we believe are third party impartial. And there are some changes that they want to make now that place the burden on applicants.

And we’re concerned that that will make it nearly impossible for many of the current users of the patent system to continue to use it. And we’re concerned that some of these changes will strike an imbalance, in that companies that hold large portfolios of patents can pool their patents together to get strength, that individual patents will become worthless. And we need to understand and study what are the ramifications of that because start-up companies don’t have 10,000 patents in their portfolio. They have individual patents, and much like the drug companies, they have to rely on individual patents to carve out a niche where they can survive and not be gobbled up or squashed. And so the process needs to be carefully scrutinized or we might strike an imbalance that will end our ability to generate new companies. And when we’re in an economic situation that has many people asking questions, one of the strengths in this country has been our ability for under-employed engineers or for break-off people to generate new companies with great ideas, and survive and grow them into the next generation of large companies.

Tell me how you see the proposed change from a first-to-invent to first-to-file.
GRZELAK: First to file, we have not taken a strong position on that. We recognize that there are groups of our members who are very concerned about first-to-file. But we have members who are indifferent to it. So we haven’t taken a strong position on first-to-file. I can tell you I recognize the concerns of people that don’t want to go to a first-to-file system because, again, it’s the question of balance, knowing the consequences. If we change from first-to-invent, what is the purpose for harmonization? That was one of the reasons given. We should harmonize with the rest of the world and be like them.

Well, here’s the question I want to ask, and you — adjacent to that question is why are we being asked to provide an applicant quality submissions that some people say will cost 50,000 an application, on top of the cost of preparing and filing the application, when no one else in the world provides an applicant quality submission. So it’s funny how the reform proponents say this is harmonization in one breath, and then they do something completely contrary. In most parts of the world you do not have to disclose your known prior art. Certainly, you don’t have to go out and perform a task comparable to the applicant quality submissions that they’ve attempted to put in. And there are no rulings in their legislation. So we’re very concerned about that because they seem to be picking and choosing their reasons. In one pen stroke it’s patent trolls. In another pen stroke it’s poor patents. In another pen stroke, it’s harmonization. And we need to sit down and understand what is meant by Article 1, Section 8. What will truly promote the progress of useful arts? A small lobbying group shouldn’t be deciding that. And it’s very difficult for senators to get up to speed on those issues. There are knowledgeable people out there, and university folks, venture capitalists, people that represent start-up companies should have had a cooperative say in this. Quite honestly, if you look through the Congressional testimony, at one point, I think it was Steve Perlman, in a statement — he’s an IEEE-U.S.A member — he went through all the legislation and the only thing he could see was that eBay had testified on behalf of small inventors. And he goes, “They’re not small inventors. They’re not a small start-up.” It seems to me that there has not been an open process to consider people’s concerns. And IEEE has concerns– someone should make a proposal to truly fix the patent system. There are areas where patent attorneys will tell you they’ve been told by the patent examiners “our supervisors are telling us in the software area not to allow any more patents.” Also, in the business method area.

They’re telling patent attorneys to go talk to their Congressmen. One of our committee members was told that by a patent examiner. And that’s not how the patent system should work. Either somebody has a patentable idea for a software invention or they don’t. It shouldn’t be because we’re overburdened and the political wind has shifted. And I can tell you where the damage would occur. We can have an honest meeting about whether or not software should be patentable, whether business methods should have been patentable, about whether the patent office was equipped to properly examine those cases. I don’t think they were. I’m not sure it was their fault, but the changes inside the patent office have migrated from software business application to other areas purely because they’re backlogged.

One of the analogies that had struck myself and our community is [to copyright law], and there is no question when compared. Copyright law enforcement is going up drastically. It extends the life of the copyright. They’re going around filing suits against grandmothers whose grandchildren have used their computers to download music. And basically, Keith Richards’ great-great grandson can live a life of luxury and privilege based upon his copyright. And yet, the PhD in biochemistry, who invents a catchall cure to cancer, may not be able to protect it all to patent. We need to be comparing these two things. At the end of the day, people want to buy a computer from Wal-Mart for $500.00. And whether or not somebody makes the hard drive operate 20% faster, if there’s 3,000 patents on it, the company that makes the computer really does have a challenging issue in trying to figure out how can we own up to all the patents? And what is the real contribution of these innovations because there are so many.

Where are you on third party submissions and the post grant review changes?
GRZELAK: We’re for increasing the likelihood that a patent is strong and valid and properly granted. The problem is it should be done somehow very efficiently, without putting too much of a cloud over the patent because ultimately, if one of our members does a start-up company — or even works at a company with 500 employees — if that small company is in the market segment where they compete against a monster multi-national, there’s an imbalance of power. Doubt can be raised about the patent forever. There’s always been an ability to attack a patent into litigation and do a re-examination. So those processes have already been out there, and the concern is that this changes the balance between next generation companies, which are presently small, and current large generation companies.
When you ask one group to define patent reform, of course they’re going to put it in their favor. And I don’t believe that you can characterize this reform as being brought by a broad coalition. When you start looking at the names and the numbers that have signed on to this reform, they’re a relatively small, carefully honed lobbying group. And you can look at where the lobbying money went and which law firms are lobbying it on the Hill.

But didn’t a lot of the current legislation come from the FTC Commission report and the National Academy of Sciences report? Is that now where a lot of the basis for the current legislation comes from?
GRZELAK: Does it comport with it, or is it a goal? I can’t comment completely. It’s been quite a while since I reviewed those reports.

Right.
GRZELAK: I can tell you as a chair of our committee I have met with Susan Davies in the last year and a half. I have met with Patrick Lahey’s staff council. I have met with Ryan Triplet, which is Spector’s staff council. I’ve met with quite a few Senators and Congressmen and their staff. And we’ve said repeatedly we would be willing to participate. And we are not in the process and I think there are other organizations that are not participating in this. I think it’s a very tight-knit group. I think they’re just counting Senator’s votes and trying to see what they can do to bring the numbers where they need them. I mean ultimately, you have to really say yes, there are issues. If the head of the patent office says we cannot climb our way out of this problem, one and only personal view, is you take away their authority to do what they do, and we should provide another venue. If they say it’s broken and they can’t hire their way out, that tells me they can’t fix it. So by arbitrarily saying let’s change the system, making the patents weak and useless and unenforceable, the pool patents will still be valuable. That creates a great imbalance. And if that’s what design they decide they want, fine, but let’s be honest about it and have an open deliberation. And so, as an honest engineer, I want to pick any company. To be quite honest, I’ve represented a lot of these companies. I think Acme Company has 20,000 patents. And they fire half their engineers and move their work to China. I think it’s a great thing that their underemployed engineer can call up the patent attorney that used to do the corporate work with Acme Company and says, “Look. I’ve got a great idea on this in 10RA. I’ve got three of my friends. We’re underemployed. Get some venture capitalist at our home, and we want to get a funding route.”

That has been a great thing that the patent system has supported. If individual patents become weak and useless, they’re going to have a hard time getting funding. You might have to prosecute this patent for four years and spend 20 or 30 thousand arguing with the patent law office. You only have, at best, a 50% chance of getting anything allowed. You could even just narrow the blank. And on top of that, next year, you might also have to submit the complicated quality submission that could cost an additional 10 to $50,000.00

So you see the imbalance. Now, Acme Company still gets their 20,000 patents. And they don’t care whether they’re valid or not. In fact, they’re willing to have some guys in China write the patents for them. And ultimately, anybody who’s gone through due diligence or litigation would say that’s not the way to do it. The patents will probably be founded down. But they have so many and so much market power they don’t really care. They use the patents differently. Somehow, we need to find reform that recognizes Acme’s Company’s problems and concerns, but does not take the patent system away from the next generation of innovators who are going to grow the next Acme Company. And that’s really IEEE’s concern in a nutshell.

So there are beautiful things about the patent system, and if you were to listen, everybody in these deliberations would say it’s all broken. And, you know, people forget –and maybe Intel’s a bad analogy — but three guys ultimately left their jobs at Fairchild Semiconductor. They got a processor and they protected the processor; they enforced it in court. And now we know the company.

And so we are for patent reform, but also portioning and damages. Who is to determine what the value of innovation is? And if there is uncertainty about the strength of a patent after it issues, that goes in the favor of Acme Company, and not the start-up company. And secondly, if there’s scrutiny, and an attack that can be made to the patents downstream, other than through litigation, it further imbalances the system and there are unintended consequences because the little start-up companies can’t keep fighting. And, let’s say you got off new processor architecture. Acme Company can keep going after you and challenging your patents to the point where you use up all your resources. And that’s not how the patent system used to work. We’re concerned that there are unintended consequences that haven’t been thought through. But fixing the problem is going to take everybody’s knowledgeable input, and a lot of deliberation.

Okay. Thank you very much.