Date: Mon, 2005-11-14
Date: Wed, 2005-11-02
M·CAM’s CEO and Fellow of the Batten Institute, David Martin and the University of Virginia’s Darden Graduate School of Business Administration’s Dean, Robert Bruner, have announced the publication of the first educational case studies emanating from the Batten Institute’s Intellectual Property in Business and Fincance fellowship program. Collaborating with faculty members Paul Simko and Mary Margaret Frank, these cases represent the critcal educational resources for business school curriculum. For more information on these cases, please refer to the following resources:
Date: Fri, 2005-10-28
Date: Thu, 2005-10-20
Dr. David E. Martin October 20, 2005 M·CAM Discusses Role of Innovation Risk Management in Federal Contracting and SBIR Phase III Programs with Partner, CIT. Innovative Partnerships 2005
Date: Mon, 2005-10-17
Janet Novack Excerpted from Forbes – October 17, 2005 pg.56 For years the Internal Revenue Service tried to crack down on folks donating clunker cars to charity and taking inflated deductions. Now it’s doing the same to companies that took billions of dollars in charitable deductions for donating what could be clunker patents. The IRS has already disallowed $1 billion in patent deductions and is auditing another 50 companies that claimed $4.7 billion worth of contributions. The first public battle involves Procter & Gamble. In October 1999 P&G donated 40 patents involving injection moldings to the Milwaukee School of Engineering and claimed an $86.5 million charitable deduction. It predicted that revenues from their commercialization “could exceed $1 billion annually.” In fact, they were never commercialized. Advances in computerized machining have “pretty much passed” the technology by, says Vito Gervasi, who directs the Milwaukee school’s research in the area. Such appraisals, however, typically calculated the patents’ “market value” on the sales a hypothetical company with plants and distribution in place might reap–not their value to a not-for-profit, says David Martin, chief executive of patent valuation firm M·CAM, an IRS consultant. The valuations also ignored the fact that if there had been corporate buyers ready to pay so much for patents, they would have been sold, not donated. Martin says some companies took deductions for patents they retained an interest in (a clear no-no), for disputed patents and even for inventions they hadn’t won patents for. This kind of nonsense won’t be happening for long. Clunker Patents
Date: Fri, 2005-09-30
Date: Thu, 2005-09-29
Dr. David E. Martin September 29, 2005 Dr. David Martin addressed an audience of faculty, students, and national innovation leaders at a forum at the Indian Institute for Management – Ahmedabad. During his speech he called for the launch of India’s new “Salt March” on the 75th anniversary of Gandhi’s historical initiative to reclaim the economic and social rights of India. Drawing parallels between colonialism and the current WTO and TRIPS imbalances, Martin noted that India needs to find ways to redefine legacy patent systems so that all participants are protected rather than subjugated.
Date: Mon, 2005-09-26
Dr. David E. Martin September 26, 2005 M·CAM Executive Management team, together with representatives of the M·CAM Board of Directors were invited to be present for the opening of the DIFX today. M·CAM is working with various entities in Dubai to support the Knowledge Economy initiatives and economic infrastructure priorities set forth by HH General Sheikh Mohammed Bin Rashid Al Maktoum, the Crown Prince of Dubai and UAE Defense Minister in his vision to build Dubai into a global knowledge economy hub. BusinessWeek online
Date: Thu, 2005-09-22
Date: Fri, 2005-08-26
Date: Sun, 2005-07-10
Date: Wed, 2005-06-22
PUBPAT Press Release June 22, 2005 In the reexamination proceeding initiated late last year by the Public Patent Foundation (“PUBPAT”), the United States Patent and Trademark Office has rejected all of the claims of Pfizer Inc.’s (NYSE: PFE) 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.” Relying on evidence provided by PUBPAT when the reexamination was requested, the Patent Office rejected all 44 claims in the pharmaceutical giant’s patent. Pfizer has the opportunity to respond to the Patent Office’s rejection, but third party requests for reexamination, like the one filed by PUBPAT, result in having the subject patent either modified or completely revoked roughly 70% of the time. Although the rejected patent is one of five patents listed by Pfizer with the U.S. Food and Drug Administration (FDA) for atorvastatin, the generic name for the drug compound distributed under the Lipitor brand, it is the only one asserted by Pfizer in roughly two dozen patent infringement lawsuits filed last year against web sites selling generic atorvastatin to Americans. Two of the other listed patents are under review by a Delaware court and the remaining two have never been asserted by Pfizer against any competitor to Lipitor. “The Patent Office has agreed with our conclusion that it should have never granted Pfizer the Lipitor patent,” said Dan Ravicher, PUBPAT’s Executive Director. “Revoking Pfizer’s patent is a critical step towards providing American consumers with access to atorvastatin at a fair price, which will not only provide substantial economic benefit, but will also improve public health, as even Pfizer admits that many Americans in need of the drug are not getting it.” More information about the reexamination of Pfizer’s Lipitor patent, including a copy of the Patent Office’s Office Action rejecting all of its claims, can be found at http://www.pubpat.org/Protecting.htm. Contact: Jill Ratkevic, Bite Communications: (415) 365-0482; Jill.Ratkevic@bitepr.com. About PUBPAT: The Public Patent Foundation (“PUBPAT”) is a not-for-profit legal services organization working to protect the public from the harms caused by the patent system, particularly the harms caused by wrongly issued patents and unsound patent policy. PUBPAT provides the general public and those specific persons or businesses otherwise deprived of access to the system governing patents, with representation, advocacy, and education. To be kept informed of PUBPAT News, subscribe to the PUBPAT News List by sending an email with “subscribe” in the subject line to news-request@pubpat.org.
Date: Thu, 2005-06-16
Date: Mon, 2005-06-06
Date: Mon, 2005-06-06
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. …
Date: Wed, 2005-05-11
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