History Trail. Outcomes Why? GATT & WTO Columns Talks

Historians remember the 20th Century as "The American Century." During this time, America led the world in innovation. At the beginning of the century, the best technology was railroads and steamships. By the end, we had electric light, central heating, running water, automobiles, aircraft, computers, the Internet and so much more. But at the end, the world changed, the technology bubble burst, and since then, the focus has been on cost cutting, globalization. This page describes seldom discussed policy changes during the 1990s that helped drive these changes. It is posted here for historical interest. Before the "sub-prime crisis" there was the "dot.com" bust. This history may help explain the latter, and how the environment for innovation was forever changed.

Patent Wars Legislation
Note: Later changes in accounting rules (e.g. Sarbanes-Oxley and expensing stock options) caused further damage to Silicon Valley, Venture Capital, and Innovation. Subsequent to these rules, there have been few major venture capital investments and almost no Initial Public Offerings (IPOs). The focus of business strategy shifted to cost cutting, outsourcing, mergers, and acquisitions.
I use the term Patent Wars to describe one battleground in the broad systematic assault on U.S. infrastructure for Innovation in the 1990s. This was only the "Russian Front" of a much larger conflict, one that involved copyright law, telecom law, trade treaties, etc. The definitive book analyzing these important but little-known changes in U.S. law  and federal court rulings is Larry Lessig's The Future of Ideas.

The Future of IdeasTo me, the Patent Wars were significant for three reasons. First, the core issue was a basic Constitutional right (Article One, Section eight). Second, I got personally involved (pro bono), one of the leaders trying to defend America's then best-in-the-world patent system. The patent system was the last bastion of American intellectual property rights to fall, and, some say, the greatest, if perhaps the least understood, loss.

Commerce Secretary Ron Brown's genius was concealing radical economic and trade policy under a boring facade of arcane intellectual property law. His plan worked. Surprisingly few of the participants seemed to understand the issues deeply or to want any energy invested in discussing them.

Corporate CEOs' eyes glazed over at the mere mention of patents: they delegated such things to their lawyers. And few IP lawyers cared what the law said. They saw their job as processing filings and litigation, not setting policy. Why should lawyers care about pending legislation, especially when controversial and ambiguous law would get them more business? Also, why make enemies? Their large clients and Patent Commissioner Lehman were strong advocates for the new law. 

Patent lawyers prefer to push paper and collect fees, not get involved in economic policy disputes. Congress, having dissolved the Office of Technology Assessment in 1995, was generally clueless. It wasn't an issue they wanted to spend time on. The press didn't care either. It was busy with Monica, impeachment, and other scandals. America's Constitutional infrastructure for protecting "the new" wasn't defended. It wasn't even being watched. That wasn't anyone's job.

And so, the attack on the U.S. patent system was launched with a barrage of cunning, deeply deceiving sound bites, with the spokesman being Patent Commissioner Bruce Lehman himself. Lehman's sound bites were lies, but clever lies that contained partial truth. The honest answers were generally, "Yes, but...." followed by tedious discussions that few wanted to spend time on. Even the Nobel laureates failed to get Congress to hold an open debate.

The Patent Wars never saw the light of day. It was easier for citizens to see the sell-off of nuclear weapons designs or national parks as a threat, than the potential suppression of future ideas. The public seems to think that Americans are intrinsically innovative, and that the law doesn't matter. Protecting new things to benefit society was crucial to our nation's founders, but we've forgotten that heritage. However, as strange and unnoticed as this war was, the conflict and the consequences were real. Important issues, high-wage jobs, and vast sums of money were at stake.  back to top

The Aggressors consisted of three basic groups, all of which were well-financed:

Foreign interests, especially China and Japan, who wanted cheap access to U.S. Technology.  They wanted to weaken the U.S. patent system. Most of the lobbyists in Washington work for foreign interests. These lobbyists and "donations" were used to influence Congress and the Administration.

The "One Worlders," initially the radical leftists, who sought to move the world from nation states to a new order where society is run by global organizations like the UN and WTO. Their early battle cry was "HARMonization of patent law." Later, the WTO world-view developed a seductive appeal to both liberals (who see a power shift to "benevolent social bureaucracies without borders") and conservatives (who see it as offering "open markets" and "free trade").  An excellent book about this new world order is William Greider's One World, Ready or Not.

The large multinationals, mostly backed by the political right, who wanted to shift market advantage from small upstart firms to the large incumbent corporations. Ironically, this powerful group was cleverly manipulated by crafty politicians. Our society has many cautionary tales about how, in exchange for short term gratification, greedy people have been known to gladly accept long term damnation. See, for example, the sections of Barbara Olson's book, Hell to Pay, where she describes radical but effective methods for manipulating wealthy businessmen. back to top

The Defenders consisted of four groups, mostly volunteers without significant funds:

Nasdeq CrashesThe defenders lost, of course, overwhelmed just before the new millennium started.  The governing law for the Patent Office (PTO) was totally rewritten  in November 1999, though it did not take full effect until after the 2000 election. Consequences.

The bill, misnamed as "The Inventor's Protection Act," passed without any debate and before copies of the legislation were even publicly available. See below for events from the last days of the fight. Few in the U.S. are happy with the results. back to top

Note: I am sometimes asked if I infer "cause and effect" from the fact that the major part of the tech wreck started just as the new laws were going into effect and their flaws were becoming known, concurrent with the 2000 election and even before the winning candidate was known. I've never said that, but I have said that the bad technology laws passed in the 1990s were "time bombs" set to go off during the next administration.

That's pretty much the same concern that the Nobel laureates raised: the risk of lasting economic harm. I'm more inclined to attribute the market collapse to "unintended consequences" than conspiracy. I do confess that I expected a market fall and took some action -- not enough! -- to protect my personal portfolio. It's like the man put on his tombstone, "I expected this, but not so soon." In this case, both the breadth and depth of the crash were much greater than I'd expected.

The so-called Patent "reform" legislation passed into law in 1999. It was embedded in the 2,000-page budget bill that was voted on late on a Friday night as the Senate was adjourning for the holidays in November. See status to learn the sequence of events that led to this.

The house version HR 1907 slipped through WITHOUT DEBATE under "suspension of the rules" (a procedure normally used for such things as naming bridges or building maintenance). It was passed before Members of Congress could even read the legislation that they were voting on! In similar fashion S. 1948 was included in HR 3194, the budget bill. This passed by roll call vote without discussion as the last item of business before adjournment for the 1999 Christmas holidays. Section 4001 of this 2,000 page bill is a version of the old HR 1907.

As Stanford's Constitutional Law Professor Larry Lessig has noted in his several excellent books on the subject, the body of law designed to protect "the new" has been shifted by the law to protect "the old," to serve vested interests and their lobbyists. The Patent and Trademark Office (PTO) has effectively been converted into a major source of revenue. The PTO is now, in effect, a tax collector for knowledge-based businesses.

The resulting situation is, in my opinion, patently absurd.

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When U.S. Patent Law was totally rewritten in 1999, I retired from the Patent Wars as an active, pro bono, participant and turned my files over to Professor Lessig. I leave a few highlights from that period posted on these pages. I will close with one last thought to ponder:

"We have spent two or more decades intentionally de-industrializing our economy.  Why?"

Pamela Geller, former Publisher, The New York Observer

rainball Trudel's famous "Great Patent Sell-Out" Upside column. (Once prestigious, Upside did not survive the tech wreck.)

rainball Analog Article [For a compressed pdf  file click here]. This award winning article discusses the events and issues surrounding the total rewrite of our patent system. Learn what happened, how, and why.   

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