>> Eric Horvath: Ready to start now? It's fun to have Andrew Torrance here today. I met Andrew, we
were both sitting on a panel together back in, I think it was March. And after the panel we had lunch
together, and we had a few conversations about the kinds of things he was doing and interested in. I
thought that folks here would find it interesting, but in particular our patent team. We're having a lunch
with some of our patent folks at noon today. The talk, the open talk, is frosting on the cake. So giving
that talk this morning here, Andrew is a professor of law at the University of Kansas, a visiting scholar at
the MIT Sloan School of Management, and a fellow at the Gruter Institute. His interests include patent
law, computer simulations of the law, empirical legal studies, biolaw, drug regulation, and biodiversity.
Andrew has been Visiting Professor of Conservation Biology at Harvard in the past. He's also been a
Visiting Professor of Law at the University of Washington across the lake, and Kansas University faculty
president. He received his Ph.D. in biology, of all topics, from Harvard University in 1997 and then went
on to Harvard Law School in 2000. So today I asked him to talk about a set of topics that I thought
would be most interesting to both legal folks and researchers, and in our lunch following this, more of a
closed lunch, he'll meet with our legal team. So Andrew?
>> Andrew Torrance: Thanks very much, Eric. I really appreciate the invitation to come and speak. I've
never been to Microsoft, not just to this building, but I've never been to the campus in general, so it's a
pleasure and an honor. I think for me, it'll be fun. Hopefully some of you will stay awake till the end,
but what Eric and I decided is that instead of delving incredibly deeply into one thing, I would present
you with a few topics that to me are very interesting, and I think they're extremely timely. So what I'll
talk about is the Myriad decision, the decision that just invalidated unmodified DNA sequences as
patentable subject matter. And I've been working on this for about eight years, and to me, the path
towards Myriad was a straight line, and thank goodness, at least for my research, that the Myriad
decision came out the way that it did. Not thank goodness for biotech, but it allowed my research to
sort of have a punctuation mark at the end. So I'll talk a little bit about that. Then I'm going to talk
about patent games. A colleague, Bill Tomlinson, and I, we have developed a simulation of the patent
system called the Patents Game. And we've played it with groups of human subjects under different
conditions and come up with what I think are some surprising results. They may not reflect reality, but
they've helped us delve into some other questions. But I'm going to talk about design patents and
specifically design patents on computer-generated imagery, such as, for example, the icons on your
Windows Phone or your iPhone if you're heretical, and one set of very interesting doctrinal questions
that make one wonder whether these things are indeed design-patentable. And we know that the
courts are dealing with these cases. The Samsung/Apple case was a big, big deal and resulted in a
damages verdict for more than a billion dollars on design patents, so I'll talk a little bit about that.
There's sort of a hidden nugget behind the design patent on computer-generated imagery issue that I
want to share with you. And then I'm going to end with a depressing litany of Supreme Court decisions
over the last decade that have, I think, weakened patent rights. Now, depressing to some, elating to
others. I'm not going to take a position, but altogether, I think this presentation is sort of a questioning
of some of the orthodoxies of the received wisdom of patents. So I'm going to start with what I call
nothing under the sun that is made of man. This is a riff off of a decision way, way back in the '80s, '81,
Diamond v. Chakrabarty, where the operational phrase that the court used was that anything under the
sun that is made by man is patentable. I think it's actually not true. I think the involvement of human
beings leads to the opposite result when it conflicts with the patent system and the Supreme Court. So
basically I'm going to talk a little bit about ownership of living things. Then I'm going to talk about
patents that cover things like physiology, stem cells, organisms, thought, and genes. I'm going to offer a
couple of potential explanations, one of which I favor more than the others, and I'm going to conclude
that ownership of biological inventions, physical, patented, or information, is quite challenging and in
light of Myriad more so even than that. So you probably have heard of Henrietta Lacks. There's a bestselling book, still a best-selling book, that talks about a very unfortunate African-American lady whose
cells were taken from her body for surgical purposes and translated into a cell line, the HeLa cell line,
that I think is about two blue whale's worth of cells now in laboratories around the world. She and her
family were not compensated, and the book is really wonderful in talking about issues of civil rights,
medical research, etc. There's another guy named John Moore, and John Moore also had cells removed
from his body. John Moore sued the doctor that took cells out. The doctor had patented the cells.
Turns out that they were useful for a variety of purposes, and he ended up essentially losing as being an
inventor on the cells simply because they came from his body, but the court did say, you know, you have
some ownership right in your own cells. Really, doctors ought to tell you before they take your stuff and
make it property. So patents. Why do we have them? Well, they're in the Constitution. They've been
in the Constitution from the get-go, and they're there to promote the progress of science and useful arts
by giving people a limited monopoly over certain types of subject matter. The traditional claim is you
need patents because without them you're not going to get as much of the kinds of useful things that
society desires: things like medicines, cars, computer operating systems, etc. Patents are valuable, at
least in some fields. The evidence is strongest for biotech. And there's a scholar named Sheila Jasanoff
who wrote a book called Designs on Nature, which talks a lot of about how the biotech industry became
closely entwined with the idea of patents being valuable, in part because biotech for many, many, many
years up till the current day has not yet made a profit as an industry, but what they do do is they're
exceptionally good at producing a certain type of product which is called a patent. So they're really
good at producing patents. They're secondarily good at producing drugs, but mostly they produce
patents. One day, they may produce both. One day, the drugs might outweigh the patents, but at the
moment, biotech really relies on patents, and a lot of the drugs are aspirational. There's a bunch of
hurdles to getting patents, many of which you may be aware of. It has to be new in a couple of ways,
both trivial and sort of significantly new. It has to be useful to a certain extent, although this is a fairly
low hurdle. It has to be disclosed well. Things called written description, enablement, best mode, and
definiteness. It has to be described in such a definite way that the public would understand what they
can and can't do. Sort of having a fence around your property. The fence has to be visible. If it's not
visible, then it's unclear whether people are trespassing or not. And eligible subject matter is really
what the line of cases leading to Myriad talks about. There is generally a very, very liberal standard in
what you can patent around the world. Most patent law is now informed strongly by the World Trade
Organization's TRIPS side agreement. The TRIPS side agreement, it says generally speaking you should
offer patent eligibility in every field except for certain things, and countries may make exceptions. For
example, if it violates morality. It may also make exceptions if they're animals other than
microorganisms. In the U.S. a seminal case back in '80, Diamond v. Chakrabarty, said that the laws of
nature, physical phenomena, and abstract ideas cannot be patentable. It's a principle that holds today,
but anything under the sun that is made by man can be. And specifically in this case there was an oildigesting bacteria which had been genetically modified, so organisms and genes, according to this
decision, appear to be patentable. Since Chakrabarty, all sorts of biotech inventions have been
patented. Products of human physiology that are sometimes called in vivo conversion products,
inventions using human thought, like methods of diagnosing sickness, embryonic stem cells, organisms
and genes. So I'm just going to quickly go through these categories and try and convey to you that what
started out looking patentable ended up not being terribly patentable, and I think the common element
is that they had to do with the human body or human structures or human functions. So in vivo
conversion involves chemicals that start out in one form and when you put them in the body, they
change form. And you can patent what's outside the body, the prodrug. You can also patent what's
inside the body, the drug. Sometimes the drugs are literally produced by being in the gut and by being
subjected to enzymatic conversion. So there's lots and lots of in vivo conversion patents, and there
hasn't really been very much of an issue in the patent office about issuing them. There's been a lot of
litigations involving in vivo conversion products. These are essentially all of them right here, 11. What's
interesting is that despite the fact that the courts will often say at the beginning of their decisions, of
course, products of in vivo conversion are patentable because anything under the sun made by man is
patentable. In this case, it's not patentable, or in this case, it's invalid, or in this case, it's not
enforceable, or in this case, the evidence just isn't there. Essentially, it's impossible to find an example
of an in vivo conversion product that has been held patentable in a court. So that would make you, I
think, question the value of your portfolio if you have a bunch of in vivo conversion patents, and a lot of
companies do. The PTO says yes, you can, and then the courts, when push comes to shove, says you
can't. There's a case called Mayo v. Prometheus that was decided not this year but last year by the
Supreme Court, and it actually talks about metabolites, metabolites of thiopurine drugs. And this case
introduced the issue of whether you could patent a method of taking a sample from a human, using
information from the sample to make a diagnosis, using the diagnosis to calibrate a treatment, and then,
for example, if a patient needed more of the drug, injecting more, or if the patient needed less, then
lowering the injection schedule. So it involved not just use of information but also manipulation of the
human body. Well, this went up and down in the courts several times. It went to the patent appeals
court, the Court of Appeals for the Federal Circuit twice, and the Court of Appeals for the Federal Circuit
seemed to think it was patentable. And in the end, the Supreme Court after giving that court, the
patent court, two chances said no, it's not patentable. Again, not terribly good for the biotech industry.
>>: You haven’t said why yet.
>> Andrew Torrance: Well, I think the reason is that courts are reluctant to give patent rights to
anything that has to do with the human body, possibly to do with the 13th Amendment, possibly to do
with -- I hate to use this phrase because it's going to sound trite, but a gut reaction that people have that
humans are not patentable, even aspects of humans, even things that the human body does, even
human thoughts applied to things. Courts and people in general do not react well to the idea of
property on that subject matter.
>>: When they put up an argument, what do they say?
>> Andrew Torrance: Oh, they use all sorts of different arguments. If I can go briefly back to this here,
there's no consistent argument that the courts use. They bend over backwards in all sorts of ways to
come to the same conclusion. I don't think they want come out and say despite what the Supreme
Court said, you can't actually patent anything under the sun that's made by man, but what they do
mention, and I have a paper that sort of catalogs the rhetoric, not the part of the decision that you can
count on for the rule, but the sort of you know, the musings of the judge. They often talk about
differences between what's outside the body and inside the body, things that are natural versus
unnatural, things that are synthetic versus part of the body. So a lot of that rhetoric, to me, has to do
with some sort of magical patenting boundary that's just around here on the skin. I know that's not very
sophisticated and very scientific, but I think you'll see in the line of cases that I've looked at, it's a
pattern that holds true for every area of biotech that involves the human body. So we've got these
metabolites. The Supreme Court sort of is the capstone decision on that line. Then we've got human
embryonic stem cells. And what's sort of fascinating is that a European patent called the Edinburgh
patent almost by accident ended up claiming a human being right in the claim. I don't think that it was
intentional, and it was picked up by, by folks who realized how bad that was and opposed the patent.
And the patent owners quickly said oh, gosh, gosh, we didn't mean to include a human being in the
claim scope, so they cut it back not to include a human, but this got a lot of people thinking about
human embryonic stem cells and patents and whether they ought to be patentable.
>>: You say, if you go back to the previous slide->> Andrew Torrance: Sure.
>>: The claims are directed towards a method of isolating or enriching, and so the method of interacting
with cells, I mean what, why do you say it was claiming part of the human body?
>> Andrew Torrance: Sure. If you look at claim 48, it's a method of preparing a transgenic animal. And
then if you look into the specification, and I'm -- for those of who are not patent folks, and you should
be proud about that [laughter], the specification can often breathe life into what the claims mean. So if
you take the claim 48, transgenic animal, and then if you go to the specification, it says animal cell is
intended to embrace all animal cells, especially mammalian species, including human cells. This is a
routine piece of language that you find in a lot of biotech patents, so read that back in, and it's a method
of preparing a transgenic human. And so that's one of the reasons why people reacted very, very badly
in Europe to this patent. Did you want to follow up?
>>: Well, I just, I just, I bristle over the fact that I think it's really a method of interacting or creating
things, and I don't -- it's not claiming part of the human being itself. It's a method of doing something.
>> Andrew Torrance: Well, it's a method of making a human being. Do you disagree? Claim 48, it's a
method of preparing a transgenic human being.
>>: Did they, I mean, was the controversy over the ethical issue that you mentioned in TRIPS before,
that making human beings is bad? Is that what the controversy was?
>> Andrew Torrance: Was the controversy from TRIPS? Is that what you're?
>>: Yeah.
>> Andrew Torrance: No, the controversy actually was more centered on European law, and actually
there's a more recent case called the Brüstle case where the European Court of Justice said you cannot
patent human embryonic stem cells. And so that's another part of this trend, but this is a very early
part. This is 1999. This is only a couple of years after the first human embryonic stem cells became sort
of known in the press. Well, created, in fact.
>>: It seems like there's a difference between patenting a human embryonic stem cell and patenting a
method for causing them to reproduce.
>> Andrew Torrance: I agree with you. There would seem to be a difference. What seems to happen
consistently though, the closer you get to the human body, the closer you get to a human entity, the
more the courts seem to bristle and the more Presidents make statements about it and the more the
European Court of Justice says no, and it's interesting. I'm not suggesting that that is a scientifically
defensible principle here. What I'm saying is it's more a kind of a feeling about humanness and
ownership of humans. Yes.
>>: I'm just a little confused. The patent itself, was it meant to cover the particular method of coaxing
these stem cells into reproducing or any reproduction of this line of cells?
>> Andrew Torrance: There were a whole bunch of claims that ran the whole gamut. This one here is a
very general claim. It's just a method of preparing it and then it gave steps for how to prepare it. There
were other method claims for preparing it as well.
>>: Hypothetically if one of these cells were to grow into an entire human and 15 years later that
person reproduced with another human, is this where the problem starts to arise?
>> Andrew Torrance: I mean that would certainly be a problem if reproducing fell into somebody's
claim. I'm pretty sure the human would win, not the patent holder->>: I hope so. [laughter]
>> Andrew Torrance: But I think you're touching on something that's, that's, it's really important.
People are worried, not just about this language; they're worried about the implications downstream.
There's a case that I'll talk about called the Monsanto case, which dealt with reproducing seeds, and it's
interesting. Seeds are not humans. And the Supreme Court found about a month ago that the patent
rights are sort of refreshed every time you plant a new seed. So you can plant a patented seed, as long
as you have a license, right, from Monsanto, and then it grows and then it makes new seeds. If you take
those seeds and if they are still covered by the patent and you plant them, the patent rights are
renewed every time you use the seeds. So every generation, the patent rights are renewed, which is in
contradistinction to the exhaustion principle, which I'll talk about at the end, which says once you buy a
patented item, you can really do whatever you want with it. You can't reconstruct it. You can't make
copies of it, but you can do whatever you want. So after the first sale, the rights of the patent are
exhausted, but with respect to these seeds, they seem to be renewed every generation, and I'll talk a
little bit about the facts of that case. With respect to humans though, I think a court would find
differently.
>>: With the seeds case though, you could also use that as more [inaudible] too so?
>> Andrew Torrance: You could use it as multiple copies?
>>: Yeah. I mean you're planting one seed and you're getting thousands and thousands of seeds, right?
>> Andrew Torrance: Right and I think that's a policy reason why the court found the way that it did,
yeah. But there was a legitimate argument on the other side that once you plant the plant the first
time, all further uses were part of exhaustion, rights. It just turns out the court didn't agree with that.
>>: Can I ask a summarizing kind of question?
>> Andrew Torrance: Sure.
>>: Is it the case that -- your area particularly personally is bio, your training and so on, but is it the case
that if you take biology, patents in biology, the human entity stands out as special for a variety of semi
rational and rational and emotional reasons, from bio? Monsanto seeds, chemical, synthetic biology,
human body, human beings especially?
>> Andrew Torrance: Yes.
>>: What you found?
>> Andrew Torrance: Yes, I agree. Exactly. I call it a human bar to patentability. And I like the fact you
called it semi rational because I agree. It's not a rational principle. It's a semi rational, semi emotional
principle. So this stem cell, this stem cell issue came up in the U.S. as well. The Wisconsin Alumni
Research Fund has some of the fundamental patents on human embryonic stem cells. These have been
challenged and challenged and challenged and weakened and weakened and knocked down, both here
and in Europe and other countries, so much so that the company that was the great hope of human
embryonic stem cells, Geron Corporation, which had a license to these WARF patents, it literally got out
of the business a year ago. It decided that this was not a fruitful area because the patents were dying.
So there's been a big backlash in the public, and there's been a big backlash against stem cells. And I
think I mentioned already that this European Court of Justice case, the Brüstle case, said you can't
patent human embryonic stem cells in all of Europe. How about organisms per se? Well, in the U.S. it
appears you can. In Canada, where I happen to be from, you can't. You can't patent so-called higher
organisms. Despite the fact that that's sort of a nonsense term in biology, you can't patent higher
organisms, although, in Canada a couple of years later, it turned out you can patent every single part of
a human -- a higher organism, including all of their cells or their genes. And in fact, those are better
rights than having rights to the whole organism, but the U.S. has been pretty consistent. You can patent
things. Monsanto case, I think I already covered this. Essentially it was a farmer who sold his seeds to a
grain elevator and then went around back and bought some seeds, the mixed seeds, and then replanted
them. And he thought that because he'd sold them, these rights had been exhausted and he could buy
the mixed seeds from the back, which of course, were all Monsanto seeds, just from different farms, and
then go and plant them again without Monsanto's license. Monsanto disagreed, went to the Supreme
Court. The Supreme Court sided with Monsanto, but these are not human cells. So there's a bunch of
patents that involve methods of human thought, and there's a doctrine called the mental steps doctrine
that essentially says the closer this is to simply human thought that's not tethered to something in the
real world, the less patentable it is. Now this became a live issue again in both a noncase called
Laboratory Corporation v. Metabolite, a case that made it all the way to the Supreme Court. It was a
method of diagnosing a person. Made it all the way to the Supreme Court and when everybody
expected a decision in 2006, instead the court said oops, we never should've taken this case, and they
sent it all the way back down. They were probably waiting for->>: I'm sorry. I just wanted to clarify.
>> Andrew Torrance: Yeah, sure.
>>: In diagnosis, there are procedures like Bayesian updating from symptoms to probability
prescriptions or diagnoses. You would say, you would, that's mechanized thought, but down as laws of
probability on paper?
>> Andrew Torrance: Yep.
>>: But we don't call that thought necessarily. These are principles of centrifusion.
>> Andrew Torrance: Right.
>>: What about the diagnostic policy was the thought?
>> Andrew Torrance: So in this particular diagnosis, it was a method of diagnosing a certain deficiency,
and the doctor would take a sample and examine the sample. And if the sample was, you know, high
they'd look at a chart and if it said high, oh, this guy has too much. And if the sample said low, this guy
has too little, so treat him accordingly. Or if he's in the middle, he's healthy.
>>: What's the thought part?
>> Andrew Torrance: The doctor. Taking the results of the test and looking at a chart.
>>: But that could be automated, right?
>> Andrew Torrance: Exactly, so I think you're onto something important here. The closer it is to
something that a human can do or does, and this has a lot to do with how you claim the invention, the
more likely it is to be found barred as human thought or barred under the mental steps.
>>: The area of artificial intelligence is about replicating or going beyond human abilities.
>> Andrew Torrance: But I would predict that that's --
>>: -read on those cases?
>> Andrew Torrance: What I would predict is that the more you put this into a machine, the more a
machine does it and not a human, the more likely you are to have patentability. The more you have a
human involved, the less likely it's patentable. But there's a number of cases where people have come
up with methods of alternative dispute resolution, and you know, ten steps. You get the people in a
room. You give them water. You say hello, how are you. Hello, how are you. You try and get them to
some sort of common ground, and then you have them sign a paper. People have actually filed and
received patents like that, so you might think that's just ridiculous claiming [laughter] and maybe it is,
but it reveals a principle here, which is the closer it is to the human mind, to human thought, the less
patentable.
>>: I've never heard discussions of these cases in my whole entire career in machine learning and
research. And, for example, in the '80s we built full base, expert system in medicine. They take expert
doctors and they have them reason about these modular rules, and then they would chain it together
like doctors do.
>> Andrew Torrance: Yep.
>>: No one ever said, by the way, you can't patent an expert system. Its expert human knowledge is
encoded in a fund of knowledge that's being used in a system as reasoning like a human that was like a
thumbs-up to capturing the protocol correctly. I've never heard about people saying that's thought; you
can't patent that.
>> Andrew Torrance: Well, I would say just be increasingly careful because a series of cases including, I'll
just skip to the Bilski case. The Bilski case has a lot to say about systems sort of like that. No, no, no,
they're great questions. The Bilski case, the Prometheus case, and even the Myriad case, all talk about
methods that involve both some automated steps and some human steps. And to the extent that
there's a human involved, that's where it seems to get dangerous, at least according to the court. Now,
one of the reasons you may not have heard of this is that these issues don't come up very often, and
they didn't used to come up very often at all. The courts seemed to be either comfortable with patent
rights or completely bored by patent rights, so they never take cases. The last ten years though, the
Supreme Court has taken case after case after case. It's an embarrassment of riches. The more they
look at this stuff, the more they expound about human issues.
>>: There's a rising field called human computation and crowdsourcing where there are, there are
programmatic calls to people to do tasks like a mechanical trick, for example. Human thoughts being
used in larger algorithms. We filed a number of exciting patent applications, exciting because they're
going to cover lots of rich technologies that are about how you build algorithms that learn how to use
people ideally and use their thought ideally in larger systems of problem solving. I'm chairing a
conference on this in June -- in November, so it's like so the fact that these big Supreme Court rulings
might read on this whole new area of very exciting work about human computer symbiosis is->>: Isn't it different to patent like an algorithm for what you do with the output of the human?
>> Andrew Torrance: And by the way, you cannot patent an algorithm, per se; that is black letter law,
but you can patent the application of the algorithm to a problem.
>>: Okay.
>> Andrew Torrance: Yeah, so if you're ever, if you're ever drafting, don't say, "I claim this algorithm."
Say, "I claim a method of blahbitty, blahbitty, blah." [Laughter]
>>: Let me chill out here and take a deep breath before we go to these cases here.
>> Andrew Torrance: Absolutely, absolutely. Well, first I hope that your exciting cases are exciting
scientifically but they don't excite the interest of the Supreme Court. [Laughter] That's not the kind of
excitement that Microsoft or any other company needs.
>>: Still do a conference without patenting your [indiscernible]->>: We don't patent everything, of course, but these are, I would say, some of most innovative things
that I think I've done in my life, and therefore I want to share them and protect them for Microsoft.
>> Andrew Torrance: What I would say like as a prescription though, is that patent attorneys are able to
adjust to this. They're able to claim it in a different way, so don't claim it as involving human thought.
Claim it not using human thought. Automate it. Don't claim it as an algorithm; claim it as a method of
applying principles to some tangible result. So there are ways around it, but there is a fundamental
principle which is watch out. The more the Supreme Court looks at things and sees human thought, the
less they like the patentability of that.
>>: Can we go back to that slide though?
>> Andrew Torrance: Sure.
>>: These cases.
>> Andrew Torrance: Oh, sure, sure, absolutely. So this Abrams case is just an old case that says it's
self-evident that thought's not patentable. Gottschalk v. Benson, the Supreme Court case that talks
about unpatentability of purely mental steps. That would be the alternative dispute resolution system,
which is kind of silly anyway. I mean maybe it's an effective method, but the patentability of that
appears silly to me. Then Diamond v. Diehr, the court started to pivot a bit. This is a year after Diamond
v. Chakrabarty. Diamond was the commissioner of patents. It said that mental processes and abstract
intellectual concepts are not patentable, but it also laid out the patentability of some thoughts applied
or algorithms that were applied to, for example, curing rubber. And then Bilski dealt with an investment
method that was sort of like the alternative dispute resolution. It was heavily human intensive. It
hadn't been automated to the extent that probably the inventor should've to get patents. Prometheus
v. Mayo, this is one that I told you about taking a sample, making a judgment, calibrating the treatment.
And then the Myriad case involves taking a genetic sample, seeing if you've got the BRCA1 or BRCA2
gene that's indicative of higher percentage chance of breast cancer, or to a lesser extent ovarian cancer,
so it involved method steps as well. The Supreme Court punted on method steps in Myriad. In
Prometheus, I'd say it cast tremendous doubt on the patentability of methods that even involved the
manipulation of the human body. They weren't just simply looking at a chart. They actually did
something to the human body. Okay, gene patents. A lot of people have protested the possibility of
patenting genes. Michael Crichton's my favorite quotation. "You or someone you love may die because
of a gene patent . . . gene patents are now used to halt research, prevent medical testing and keep vital
information from you and your doctor.” This was in the New York Times, the front of the review section,
I think, in 2007, so this attracted a lot of attention. Interestingly, genes weren't always seen as
something that were potentially patentable. There's been all sorts of different concepts of genes from
units of heredity but we don't know what they were, to the word gene, to genes as particles, genes as
DNA sequences, then genes as information in the '60s, and then genes as computer programs. And then
finally genes as BioBrick parts, synthetic DNA, which you've probably all heard about. I've done a lot of
work with the synthetic biology community. Seeing genes as little bricks that you can plunk together
and make things with.
>>: Did any of those concepts lead to, like, Watson and Crick have [inaudible] patenting. What did
Watson and Crick do about when they discovered the sequence?
>> Andrew Torrance: As far as I know they didn't engage in patenting at all. I think the Nobel was
enough for them [laughter]. There are alternative rewards available [laughter]. There's been sort of an
assault on gene patents since about 2005, so fragments of genes were found unpatentable not by the
Supremes, but by the patent appeals court, the Court of Appeals for the Federal Circuit in 2005 on the
grounds that they were on part of an invention, not a whole invention. That was bad for Craig Venter
and Solera because a lot of their patents were on fragments of genes. There's empirical evidence that
actually there's very little litigation that goes on despite all of the worries that Michael Crichton and
others have talked about. There's been all kinds of Congressional activity trying to ban genes as
patentable subject matter, and there's a fascinating, which have not passed by the way yet, but there's a
fascinating section to the America Invents Act, Section 33, which is not codified. What that means is if
you look up the law, the America Invents Act, you look up the law, as it's codified into the American legal
code, you won't find Section 33. Well, does that mean it's not law? No, it's law. It's just hidden law and
it appears that there was some sort of compromise. Section 33 says you can't patent a human or
anything directed to a human. That's sort of loose, weasely, lawyer language. It's right there in Section
33, but it's not right there in the patent code, but it is law, but you can't find it unless you know that it's
there.
>>: Restricted [indiscernible]?
>> Andrew Torrance: Good question. What does it mean? Nobody knows yet. The courts haven't dealt
with it, but I would say that "directed to" means broader than just a human being, per se. So it could be
really broad or it could be narrow, but I'd say that my research suggests it's probably on the broader
side.
>>: If you have an inventor that is in the lab and building genes just on his own or her own sequence
that has some interesting properties that they haven't discovered anywhere in biology. It's a new gene,
but it's really cool, has a great effect. They receive a patent on this, it goes through the system, it's a
great patent, licensed everywhere, and then some animal or human is discovered to have a mutation
that has this gene forming naturally in their body, but no one ever knew about it before. It appears in
biology all of a sudden 16 years later, what does that mean given current law about this kind of thing
and precedent?
>> Andrew Torrance: Well, so you're probably okay at least for those first 16 years [laughter] because if
you synthetically produce the gene, that's exactly the kind of DNA that I think is highly patentable, but in
part it's highly patentable because there's nothing to do with the human body. It's not plucked from it.
It might be sort of inspired by it, but the more synthetic, the more designed, the more modified, the
better, the more patentable.
>>: But then the minute it's discovered?
>> Andrew Torrance: The minute it's discovered an issue arises in patent law: Was it inherent in
nature? Was it something that existed in nature already?
>>: Let's say it was.
>> Andrew Torrance: Well, let's say it was. So the issue then would become: Is it inherent enough that
you immediately lose your patent rights? Would that be a good way to defend against a patent suit or
could the patent office simply say oh, now that we know it's out there we will get rid of the patent
rights. It's quite possible because inherency is that powerful doctrine and the idea is exactly what you
said. If it's out there in nature, even if you don't know about it, oh well, too bad, so sad. You can't get a
patent on something that's out there in nature. On the other hand, if you take this to the extreme, to
the sort of ridiculous extreme, there may have been every version of synthetic gene at some point in the
history of evolution, and so does that make them all unpatentable? My guess is the courts wouldn't go
that far. The courts would say look, this guy didn't take it from nature, he wasn't inspired by nature, and
a reasonable person could not have found it, and so therefore he gets to keep his patent rights. But it's
a great question because if it was easy to find or if it was straightforward to find and the guy didn't find
it, then it probably would nullify his patent rights. That's a great question. So do human genes have
patents or not? Well, the ACLU said they shouldn't, and to everyone's surprise, a court in the Southern
District of New York said absolutely, you should not get patents on unmodified genes, and they even
said mean things like, you know, the practice is a lawyer's trick. Mean to lawyers but maybe nice for
other people, so the district court said no. Big surprise to people. This went to the patent appeals
court. They said no, no, you can patent patents -- I'm sorry -- you can patent genes; we've been doing it
for a long time. So then the Prometheus case was decided by the Supreme Court, and the day after the
Supreme Court said, hey Federal Circuit, take a look at our new Prometheus case, apply it to this gene
question again, and take a second shot at seeing whether genes are patentable. So it went back down
to the appeals court; they looked again they said yeah, yeah even with Prometheus they're sill
patentable.
>>: What was Prometheus?
>> Andrew Torrance: Oh, I'm sorry. Prometheus was the treatment case where you take the sample,
and then you figure out whether the person has too much or too little of a metabolite, and then you
calibrate their treatment. Yeah, sorry about that. That's the Prometheus case.
>>: I thought that was the Sinki case.
>> Andrew Torrance: Bilski. And well, so Prometheus is both, because it's methods of thought plus
things that actually do, like, make a change in a tangible fashion. So the Prometheus case was that case.
The Supreme Court decided and immediately said, patent appeals court, look at this case again. You get
a do-over. You might think that's a strong signal that maybe they had got it wrong, but the court didn't
say you got it wrong and you have to find the other way. They just said take a look now that we've
elucidated this area of law. So they looked at it again; they said, no, they’re still patentable. Then it
went back up to the Supreme Court and about what two, two weeks ago almost exactly, the 13th, the
court said you can't patent unmodified human genes. The court did not give very much guidance about
what you could patent, but it suggested that once you started to modify them, they were probably on
the more patentable side, and the synthetic genes you're talking about, highly patentable I would say.
Yeah, so you get this rather big decision for biotech. Myriad Genetics, that owns the patents for BRCA1
and BRCA2, its market cap has gone down significantly since then. Interesting that right after the
decision, it spiked up by about 12 percent. People thought whoa, did we not read this case right? And
then it started decaying and decaying and decaying. I think about a third of the market value of the
company is gone now. On the other hand, generic companies immediately leapt into the market and
offered the test that's normally $4,000 for I think now down to $300 some of competitors are offering it
for. So why is it unpatentable? Well, maybe it's just really complex, and if it's so complex and ununderstandable, maybe you can’t get a patent for that because you're not really teaching the public
anything that the public can replicate. Maybe there's a morality issue, and certainly there is a view, an
old, old view in patent law, that things that are immoral should not be eligible for patents. For example,
Judge Story, a famous judge, said things are unpatentable if they're injurious to the morals, the health,
or the good order of society. That's a long time ago though, 1817. Since then, since 1817, the courts
have gradually cut back on using morality as a reason not to give patents. It’s such an important
principle that actually Einstein wrote to one of his lovers that he really liked being a patent clerk -- I
don't know if you knew he was patent clerk -- he really liked being a patent clerk because you didn’t
have to think about the moral issues of the day; you just said patentable, unpatentable. Well, I think
that probably, as smart as he was in so many other ways, maybe that's not true. Maybe there actually
are inherent morality issues in patents, especially biotech; you need to take these into account well, not
to mention human-thought-related patents.
>>: Is there any modern precedent to, like, morality issues like gambling machines being unpatentable
like Las Vegas?
>> Andrew Torrance: No, in fact, [laughter] some people would like that, but there's the case called
Juicy Whip v. Orange Bang, one of the best named patents cases ever [laughter]. That was the great
case that involved one company that owned a technology for producing delicious, you know, drinks that
are swirled around in the plastic container. So you're the theme park; you come in; you see the
delicious orange stuff rolling around, and say, I want that. But it turns out the stuff in the plastic bin,
that's not what you get. That's actually highly toxic neon chemical, but [laughter] actually there's a big
container below the desk, and that's where they pump the stuff out from, so that's just to get you to buy
[laughter] and so another company that replicated that swirly machine -- this is fascinating to me --they
said you can't sue us. These kinds of patents are immoral, [laughter] which means we can do it too
without infringing [laughter]. They ended up losing and the court said look, moral utility has not been
applied broadly in recent years; basically the patent office has nothing to do with morality. Patents are
here; morality's here; never the twain shall meet.
>>: Is this still done? That's scary [laughter] I meant the actual invention itself. We're buying
something else?
>> Andrew Torrance: I would never impugn the morality of vendors. I'm sure it's exactly what you see
that you get. Yes?
>>: Okay, but is it just that what we would consider so morally reprehensible today that we wouldn't
want to give a patent on it, or it's just not something people are trying to patent, like a gas chamber or a
torture machine or something crazy like that?
>> Andrew Torrance: People do try and patent those things. Now, gas chamber, I don't know, but they
do try and patent things that a lot of people would consider highly, highly immoral. You can imagine the
sorts of areas of subject matter that people might, you know, patent dangerous or torture devices. If
you try and patent thermonuclear weapons, you can patent them, but you'll immediately get a visit from
the government, and they will ask to have these patent rights, and you may not be able talk about it
ever again. That's right in the patent laws. There are certain so dangerous inventions that you can't get
the patent for your purposes only. So anyway, basically patents are not really a moral subject, but
maybe they really are. Maybe underneath the surface, morality still bubbles along, even though the
courts pretend that they don't. I think this is the best explanation: humanness. All these inventions
have to do with the human body, structure or function of the human body. That's, to me, the most
uniting common theme. And the 13th Amendment is, I think, a really eloquent expression of what we
think about human bodies and ownership. I personally think this is the most consistently reproducible
reason why courts decide against all these human inventions. There’s another one -- and there's lots of
unease in the law about human patents, including the Europeans who come right out and say the
human body at various stages of formation and development and the simple discovery of one of its
elements etc., etc., cannot constitute patentable invention, so the Europeans are sort of explicit. I think
the American law is more implicit. It sort of bubbles up. The Europeans just come out and say it.
Human body is not property when it's alive. At least not in the U.S. It's not property when it's dead
either, which actually leads to all sorts of black market trade in parts from morgues. And it's, in general,
never really been something that the law has seen as ownable: bodies, except for slavery, and we, you
know, fortunately have the 13th Amendment and other like amendments around the world that have
ended that practice. Human data seems to be protectable. I included this for Eric's sake. And the
America Invents Act, Section 33, the sort of half hidden law. By the way, it looks like it was a
compromise. People said no, you can't ban kinds of inventions, and other people said, well, we really
want to ban human inventions. Okay, fine, you can ban them, but you can't put them in the law where
people will find it. It's a weird kind of Congressional result. There's another theory that maybe there's
just a repugnance. I think, again, the repugnance has to do with the human body, but economists have
called this a sort of repugnance idea.
>>: Can you go back again? It feels too fast for me.
>> Andrew Torrance: Sure, yeah, sure. So the idea here that the law, of course, can ban things that are
bad for society, and that the patent law doesn't override that. I think that biological inventions are
vulnerable especially in light of Myriad. I think the markets have agreed with me on that. There's all
kinds of significant legal milestones that all, to me, lead in the same direction, and whatever the
explanation, I'd say that human-related biological inventions, not highly patentable. Okay, so I am going
to change direction, and I'm going to do this one fairly quickly, because I really want to show you the
results more than the method.
>>: We have till noon by the way.
>> Andrew Torrance: Okay. No, no problem I mean, believe me, I will fill in [laughter] and continue
asking questions; I'm happy to take questions. Yeah?
>>: I guess what I'm interested in is, at the Supreme Court level, you see the prospect of, I don't want to
say better educated because I don't want a value statement, but more scientifically oriented legal
leadership at that level. Might see, might be less semi rational and more to look at things as inventions
and understand the course of biology and people as just being where they sit in the biological taxa as
not being so special and maybe move away from what I would view as a semireligious view?
>> Andrew Torrance: Oh, I love it. I love it. I love your question. First of all, I'm glad you're so
optimistic. I'm not as optimistic.
>>: I didn't say what I thought; I said is it possible?
>> Andrew Torrance: I mean it is possible. But here's what runs against it. We have a specialty patent
court, and that patent court was meant to, originally meant to be sort of consistent, to come up with a
consistent patent law and to be generally propatent, because before 1982 and the Court of Appeals for
the Federal Circuit was set up, patents received very uneven treatment and sometimes very negative
treatment. There's a great, there's a great little vignette from this period that involves Thurgood
Marshall. Thurgood Marshall was a judge on the Second Circuit Court of Appeals, one of the prestigious
courts of appeals; it's New York City, and he was being considered for a Supreme Court position. He was
being questioned about his views as all Supreme Court justices tend to be, and somebody said, Mr.
Marshall, what makes a good patent? What makes a patent strong? What's a good patent? He said, I
have no idea. And this person said, I don't understand; I mean the Second Circuit Court of Appeals, they
hear lots of patent appeals. You see lots of patents. I happen to know you've heard a bunch of patents.
How do you not know what a good patent is? And he said, well, I've never seen one. [Laughter] Now
what that meant was that the Second Circuit was very, very negative towards patent rights. Different
circuits have been more propatent rights. The Eastern District of Texas tends to be very strong on
patent rights, for example, but the court of appeals was brought in to make the law consistent and to be
more positive. The idea being, in the early '80s, that the U.S. really needed to smarten up on science
and technology, and one way to do that was to strengthen intellectual property rights, so that court
came in pretty much with a mission to strengthen patent law, and I think in a lot of regards they did.
The consistency helped because people could make rational, investment-backed decisions knowing
what patent rights were and weren't, but there was also a general leaning towards propatentability.
They sort of took the Supreme Court's “anything under the sun that is made by man” as a mandate and
were skeptical of cutting the rights back. Well, the Supreme Court has not generally been terribly
interested in patent law, but in the last ten years they have. In the last ten years, the Supreme Court
and the Court of Appeals for the Federal Circuit have gotten into repeated, I would say, sort of spats.
The Court of Appeals for the Federal Circuit will say something, and if the Supreme Court doesn't like it,
they'll either say, no, you're wrong or they will say, try again. And I think both are equally reprimanding
if you think about it. Well, this has increased and there's some -- I think there's some evidence that the
Court of Appeals for the Federal Circuit has reacted by saying, look we get to hear these cases all time;
we can outlast you. We'll just keep hearing them. When you make a new rule, we'll say we love that
rule; that's the rule we've been using, and then they’ll go ahead and go what they did before. You could
interpret it differently. You could say that maybe their interpretation of Supreme Court jurisprudence is
different than a lot of other people's. You could also say that the facts change the results, so maybe
they're looking very specifically about the -- at a Supreme Court judgment and saying well, this really
had to do with a woman named Jane and a man named Fred, and we're here dealing with a man named
George and a woman named Diane, so the facts are different, so we don't have to apply the same rule.
Now I'm obviously turning this into a little bit of a cartoon, but there's been, it appears, some tension
between the courts. The Court of Appeals for the Federal Circuit can hear as many cases as it wants.
And so it could overwhelm the Supreme Court with decisions, and the Supreme Court is not going to fill
its docket with patent cases, but the Supreme Court has upped its intake of patent cases, and as I'll show
at the very end, I think it's reacted in a different way than the Court of Appeals for the Federal Circuit
and it's cut back on patent rights. They might say they've put patent law back where it should have
been or put it into comportment with the rest of the law, but the Court of Appeals for the Federal Circuit
and Supreme Court are often pushing in different directions these days, which is fascinating to watch.
And it may make for good law, or it may make for bad law, but it's created a lot of energy and
excitement of the good and bad kind in patent law. Let me talk to you about something different, which
is experiments. I wonder if anybody knows what the paintings are on the left and the right side. Any
idea? Anybody know who the painter is?
>>: Monet.
>> Andrew Torrance: Monet, very good. Monet. Spent a summer at Rouen in France basically painting
the same cathedral again and again and again under different light conditions, and what we tried to do
was we’ve tried to change a bunch of conditions in a semi controlled system and see what happens with
the shading of the patent law to make it sound more poetic than it is. So this is collaboration with Bill
Tomlinson; he's at the Bren School of Information and Computer Science at UC Irvine, and research
assistants Brian Davies and Nitin Shantharam. We have created a system called The Patent Game that
I'll show you quickly in a second, and we've tried to test a bunch of hypotheses in patent law. For
example, do patents spur innovation? Fairly basic question, and also in patents, do property rights,
injunctive relief, the ability to tell people to stop, do they perform better than liability relief or liability
rights, in other words, you can keep infringing but you just have to pay me some sort of a royalty. Those
are very different outcomes in cases. Patent owners would generally like the property rights. They'd
like to be able to tell people to stop. Maybe because they have a better bargaining position to get a
license, but also they would like to be able to stop competitors from competing, if possible. So I'll show
you some empirical results. So again, just to refresh your memory, the idea of patents in the first place
is to promote the useful arts by securing limited monopolies. And the Patent Act has tried to implement
this in the U.S. There's very similar acts in a lot of other countries, more or less dictated by the World
Trade Organization's TRIPS agreement. And again, the traditional claim is that without the prospect of
patent protection, you get inefficiently few innovations. Sort of a tragedy of the commons in a way.
Now, the National Academies and a number of other organizations tried to look into the fundamentals
of the patent system back in the early part of the 2000s, and they came out with a report called “Patents
in the Knowledge-Based Economy,” and I've since had a chance to work with one of the authors. I did a
little project for the National Academies last summer on synthetic biology and standards setting, so I got
to talk to him about what he was thinking when he wrote this report, which helped me get a little bit of
insight into what they were thinking when they wrote quotations like this: “Having reviewed all the
literature on patents, the National Academies” -- You know, this is a consensus organization; these
aren't crazies on the fringe. They said, “The literature on the impact of patents on innovation must be
considered emergent.” That's a really nice, polite way of saying there's no evidence that patents
influence innovation one way or the other. It's emergent; we're just beginning, in 2003, to discover
what role patents play in spurring innovation. Isn't that kind of fascinating, given the fact that the
Constitution way, way, way, back in the 18th century said the whole purpose of patents is? Well, there's
an assumption here. There's an assumption that it does. Another thing they said is: “The effect of
patent policy has many dimensions, some fundamental to understanding the determinance of
innovation generally, and these continue to challenge scholars, both theoretically and empirically.”
Another polite way of saying let’s figure out how this thing works because we don’t understand it, and
we're not convinced by the evidence out there. This was a comprehensive survey of everything they
could find. So we decided that it would be fun to look into this. This all -- this project all started when
we were looking for a footnote for the proposition, the seemingly easy proposition that patents spur
innovation. So I was looking for a footnote, some reference, because patents -- I mean legal academics
are sort of footnote-happy. And I sent my research assistant out; he couldn't find one and I thought, do
I have to do everything myself so I looked. I couldn’t find one either. I thought, this is a little bit strange
because I thought the whole purpose of the patent system was -- and I'm a patent attorney, and I
practice patent law. And when I practiced patent law, I sure knew that it spurred innovation because I
billed a lot of money for it, but it turns out that it's sort of an open question, so we decided that our
approach would be simulation games. There's a bunch of different advantages to simulation games. Of
course, there's disadvantages too, but you can enable rigorous manipulation of experimental conditions.
You can integrate human interaction with real-time computational processes, so these are not computer
simulations with no humans. This is a game that people actually play. And you can allow for precise
data collection, so, as you can imagine, we logged every keystroke in this game. It's dynamic; it uses
human behavior to model human behavior. Lots of data. You can change the parameters; you can
compare results based on alternative sets of parameters, and you can directly test alternative
hypotheses. If it's compelling and fun, so the theory goes, and some of you, for all I know, work in this
area, if it's compelling and fun, people appear to forget that they're playing a simulation game, and
that's considered good, because then they're playing for the objectives; they're playing for the goals.
You only need to explain the rules. You don't have to explain what you're simulating. So as long as
people understand what to do, they'll do it. You don't need to explain the background. It's easy to
generate lots of good sample sizes, and it's, in the law at least, it's an untapped data source. We wanted
to successfully simulate patent systems, collect a lot of data, and test specific hypotheses. For example,
how does it spur innovation? Do the outcomes vary with specific parameters, and what is the optimal
system for innovation? Well, I'll tell you right away, we've only really done the first two. And our results
are by no means definitive, but we're -- our goal is eventually to try and come up with a set of
parameters that appear to outperform all the other sets of parameters and then maybe use that to help
inform public policy. The patent system can't possibly be optimal as it is, I would think. I mean it would
be very unlikely if it were, so maybe if it were more optimal, it would serve society a little bit better. So
we tried to make it sort of easy to use. We used Ruby on Rails, which I know is open source, so some
people have said well, you used open source, so obviously it was anti-patent from the first [laughter]
from the get-go. Drag and drop inventing, pull-down menus, event updates, auto refreshing, and the
goal for the user is simply to win and we gave out prizes. We gave out -- we paid users to play and we
gave prizes for winning. So we tried to implement a bunch of things in the patent system in this game
and the sort of joke that I tell is that my collaborator who was setting up this game, he said give me the
parameters you need, so I gave him a list of about 70. He said okay, you can have five. And then I said
well, I really need more than five. He said okay, you can have seven. So obviously it's a stripped-down
version of the patent system, but you put combinations of elements together to make inventions. You
can make things or you can patent them or you can do both. There's prior art, so if somebody else has
done something, you can't get a patent. You can license. You can sell, both in and out. You can sue
people for infringement, so if you witness infringement, you can sue them, and you can get both
injunctive relief and damages, or neither, or one or the other. So we've got all sorts of different possible
treatments. We have a patent term, so often the patent term is something like 10 minutes instead of 17
years. Those experiments can be a little bit too.
>>: Can you capture trade secrets?
>> Andrew Torrance: Well, we don't in most of the versions of the game, but we have one version
where you can basically keep the stuff that you're doing secret. We haven't tested it though.
>>: Because like my initial reaction is that that is one of the key aspects of patent law, allowing people
to publicly share and if you're not studying that, I'm not sure how the --
>> Andrew Torrance: Yeah, so we're doing one thing at a time. We do have, we have plans for a bunch
of new experiments, two of which I'm planning on doing this summer, and yeah, so trade secrets are
one of the things we want the look at. The problem is we want to isolate trade secrets to some extent
against patents, so we're trying to design trials where you could adequately isolate the effect of trade
secret versus no trade secret and see what the effect is. But I agree. I think trade secrets are very
important. Hard, hard, hard to study in the real world because nobody will tell you. Easy to study in
something like this because you can hide invention.
>>: Right but I can imagine a -- I'm surprised there hasn't been studies like this in the past where you
find key inventions that were patented and you imagine a world where they were, where the
technology would have been withheld for a year in lock-down mode and not been shared. It's not even
licensing or simple nuanced variations of that patent, but a whole concept that gets out into the world
that fields all sorts of inventions that you wouldn't even know that it's the original invention. The
[indiscernible] out there in the world to stimulate thinking in general and creativity.
>> Andrew Torrance: There's a lot of theoretical literature on trade secrets and there's not a lot of
empirical stuff yet. Mainly because people just don't want to tell.
>>: And going backwards imagining?
>> Andrew Torrance: Oh, yeah, okay yeah.
>>: Imagining patented inventions that if they were delayed by X years in being publicly described, what
that would have done to technology over decades.
>> Andrew Torrance: That would be great to study. I'm not aware of studies like that, but you're right.
That'd be a great study. Trade secrets are sort of the orphan of IP. They're always taught as an
afterthought. I don't know how many people here ever took an IP class, but you have the big three:
trademarks, patents, and copyright, and then there's usually a lecture or possibly two on trade secrets.
It shouldn't be that way because it's a huge iceberg. No. No problem at all; any other questions are
welcome. There's costs in money and in time in our game, so it costs you money to patent, for example.
And also costs you time to make decisions and to do certain things versus others, so opportunity costs.
And you can do multiple users versus no users. We can have computers play against each other but we
prefer the putting-humans-in-a-room version.
>>: Do you have an option for just releasing it like open source or anything like that?
>> Andrew Torrance: We do. We do. It's just that we have so many other things that we've been trying
to do, so yeah, we both agreed that we would like to just release this.
>>: Are you going to make?
>> Andrew Torrance: I'm sorry I thought you meant our game.
>>: No, within the game.
>> Andrew Torrance: Because ironically, our university's patented the patent game [laughter]. In the
game, we absolutely do. What a great question. Yes, we allow people to open-source. So what opensourcing essentially means is you create your invention and then you declare it open source, and then
nobody can ever own it, so yes. And one of the experiments I'll show you has an open-source version
right in the data, so it was a great question. Yeah, I misunderstood. One of the questions people
sometimes ask jokingly is, have you patented the patent game or is it open source? We're actually going
to release it open source because we haven't pursued the patent. Our universities decided it wasn't as
lucrative as they originally thought. This is sort of the interface. You sort of pull down -- I don't know if I
have a little zipper here, but you pull these little tiles. They can be anything. Here they're As, Bs, Ds,
and A, B, C, D and E. They could also be three-dimensional or two-dimensional tiles that you fit
together. They could potentially be three-dimensional. Then we keep track of how much money each
of the players have. We often have 20 players at once. Here's your portfolio; this is what you own. And
if you want to license or sell it, you just click to make it available, and you set the price, and then these
are other patents that are out there. And each patent sort of has a value. The value is reflective of what
you can sell the product for on the market. And then over here, there's events, and the events sort of
scroll down. When you have a game with a lot of people going, the events scroll down really quickly. So
we can slow the game down as well if we want people to see everything, but in some ways it's very
realistic to have so much information here that you really have to choose what you're going to do. Are
you going to be inventing things? Are you going to making things? Are you going to be watching for
infringers? So we can change all of these different parts. There's a bunch of strategies people could
use. Play it safe, some people just don’t care; they just make everything, whether or not it infringes or
not. You can license, sell, enforce; all kinds of mixed strategies are possible. Couple of things before I
show you the actual data. People seem to like playing it. They love winning. They invent selectively and
strategically. Players often license and assign their stuff. They often litigate. There's a lot of litigation
going on. People get really angry when you infringe their inventions. It's fascinating psychologically to
watch. And they seem to care about the legal rules. They try and learn what the rules are so that they
can manipulate them and win. So the hypothesis -- one hypothesis is that if you have patent protection,
you're going to get more inventions. We have IRB-approved trials. We tested three systems and here’s
your question. So we had a pure patent system. We had a system where you could get patents or you
could deliberately open-source them. And then we had a pure commons where there are no patents,
no open-sourcing. So for this particular experiment, here's the sample sizes. The games were 30
minutes long. And only the treatments varied, so one treatment was patents, one was patents plus
open source, and another one was commons, no protection of any kind. So here’s what we found for
innovation. This is the number of unique inventions in a game. We found that the pure patents system
performed okay. And the patent and open source system performed about the same; they're not
statistically significant but the pure commons performed better. More unique inventions.
>>: [indiscernible]
>> Andrew Torrance: First-year law students who had never taken an IP class before. We've also done
tests on IP students who have take -- they have successfully completed intellectual property law. So we
actually tested whether it mattered if you knew about IP law. The theory being, maybe if you're
ideologically committed to the system, somehow you'll make the pure patent system work. [laughter]
It doesn't. It doesn't work though.
>>: [indiscernible] getting this money exchanged, is that right?
>> Andrew Torrance: Well, they earn money, and at the end of the game the winner gets a big pot, and
they also get paid for their time.
>>: That's what I -- in the pure commons system, how do people get paid? I mean who pays?
>> Andrew Torrance: The winner, the winner of the game, so the person who has the most money at
the end. If I go back to the interface here, I'll show you. We track the amount of money people make,
so in the pure commons, you make money by making and selling. You don't make money by licensing,
assigning, etc. You just make money by making and selling things. You pull down these things. You try
and discover, you know, valuable combinations, and then you make and sell them, and then your money
goes up. Does that make sense?
>>: You're making and selling something that somebody else can make and sell too?
>> Andrew Torrance: That's right and in fact, what often happens is somebody will make a valuable one.
Somebody will spot that and then everybody will start making the valuable one.
>>: So you've sold it once and then everyone else is making it so?
>> Andrew Torrance: That's right, in the commons system. In the patent system, you make and sell it,
and then some people jump on, and then you sue them.
>>: So when you're selling, is there sort of a finite amount that the market in the game can buy?
>> Andrew Torrance: So we've experimented with different supply and demand curves. We don't know
what the perfect one is. Most of these early experiments, you could sell as many as you want, and the
price would stay the same. So we recognized that depending on -- if everybody sold the same thing, the
price would probably go down. We understand that that may affect some of the experiments. We've
twiddled a little bit with that. We haven’t done a full-scale experiment with that kind of a model but we
will.
>>: I'm actually doing a paper on this topic and I want to understand robustness of the results. For
example, if you change even unspecified nuances that could be specified parameters how the system
works?
>> Andrew Torrance: Mm-hmm.
>>: [indiscernible] of the designs and nuances of how things are bought and sold, the robustness of
these results and the sensitivity –
>> Andrew Torrance: I agree.
>>: -variation?
>> Andrew Torrance: So all I can offer in that regard is I'm going to show you two sets of results. I could
show you three sets of results. I'll show you two sets of results with very different parameters and
generally speaking, the results are the same, even when the parameters are very different, so we have
not explored that space yet. We've got a couple of different snapshots. The results: the common seems
to always do really well, and the patents system almost always does fairly badly. Yes.
>>: It seems like in the commons system, you've taken a user who's got a limited amount of attention,
and you've given them the three scenarios; you've given them a number of things to occupy them. And
the common one, you've actually reduced the number of things they can do. They can invent, make, or
sell. They can't litigate or license, so could your results just be explained by users having fewer things to
do, so the invention takes up a bigger portion.
>> Andrew Torrance: They could. Yeah, they could, so hopefully -- [laughter] what's that?
>>: Well, it is, but it isn't, because you can't hire additional resources here. I mean, Microsoft has hired
me to do the patenting so that the engineers don’t have to.
>> Andrew Torrance: Yeah.
>>: And it's an added cost, but it's not necessarily that if you didn’t have that, that Microsoft would
actually hire an engineer in my place. I don't think that's true.
>> Andrew Torrance: Yeah. One of our plans is to automate some of the processes for the players, so
allow them to set up a production line and then make the thing without actually clicking a button, and
so then they could actually go and do the litigation, etc., so we do want to see whether this attention -- I
like the way you put it -- sort of the attention issue, is a significant driver of the results. We don't really
know at this point, but it's a really good point, yeah.
>>: Also, the question of the computer commons. We talk about the selling. If you put something
under open source and you put it out there, you're not making your money off the selling of it. You're
making it off some alternative services that you're providing.
>> Andrew Torrance: Right, it’s like a reputational enhancement.
>>: So how does that really work in this model? If you're really making the money off the sale, you
never have an initial [indiscernible].
>> Andrew Torrance: Yeah, it's not a very good open-source model for a couple of reasons. First of all,
it's not copyright-based, because open source is copyright-based and this is patent-based. We put this
in because we were really intrigued by whether people would choose to make things public. But it's not
a perfect analog for actual open source. So I'm not sure that I can give you any satisfying answer. But
this is kind of a quasi open source, patent open source sort of system and yeah.
>>: Do you see it work even with the pure commons?
>> Andrew Torrance: Pardon me?
>>: Pure commons. How do you -- what are you selling in the pure commons?
>> Andrew Torrance: Oh, you discover useful combinations and then you sell those. You make and sell
them.
>>: It's not necessarily software or anything [indiscernible] analogs for machines?
>> Andrew Torrance: Oh, yeah, I mean it's fairly abstract. It's A, B, C, D, E, F, combinations thereof.
>>: Are you putting the computer commons under an open-source license or not?
>> Andrew Torrance: No, we just don't even address legal issues. You can just -- it's just a free for all.
You just make and sell. Does that make sense?
>>: I'm not sure why you can sell it. I mean if it's pure commons and you [indiscernible]?
>> Andrew Torrance: Oh, it’s commons in the sense -- I'm sorry, it is commons in the sense that you
can’t patent it, but you can still buy and sell things. So it would be like there are no patents, but you still
made software and you sold it in the store and other people could also sell exactly the same software.
>>: So you have an exclusive right over that item. You get to say I get to sell this and nobody can copy
it?
>> Andrew Torrance: In the commons no, everybody can copy it.
>>: It's like a drug that the patents expire, right?
>> Andrew Torrance: Exactly. It's like the patent’s expired, yeah.
>>: Is the confusion just that the difference between the individual item, like, I've got this pen and I
have some magic pen copier and I could make millions of them versus I have this pen and you see it and
you make a very sort of similar pen design and make your own copies of your pen that does the same
thing as mine but just not just a copy. Like I can sell one pen, right?
>> Andrew Torrance: Yeah, a pen with a certain specification, let's say. It's a pen that has A, B, C, D, and
E, and anybody that sells a pen with A,B,C,D, and E under the commons system doesn't have to worry
about patents and everybody can sell that same pen.
>>: But don’t they need sort of the equipment or industrial machinery to make more pens? They can’t
just staff it?
>> Andrew Torrance: Although in our system it's -- in this experiment here, it's simply people clicking,
like, pulling the combination down and then selling it.
>>: Is there a cost to that?
>> Andrew Torrance: There's a time cost and ->>: Well, so it's not exactly ->> Andrew Torrance: We can make it monetary cost as well, but this experiment doesn't have the
monetary cost. And this experiment also doesn't have the sort of the automated manufacture. We
want to set up production lines at some stage where you can spend a little time setting up a production
line and then it just goes and then you go and invent some new things and sell some new things.
>>: [indiscernible]
>>: How do you model the business risks? The whole premise of the patent system is before you invest
in innovation you want to have a reasonable return for your money. And I don't see where you're
modeling the barrier to entry and the business risk at the front end.
>> Andrew Torrance: Yeah, I agree with you. We’re not explicitly modeling it. You’re right.
>>: Any one of these unmodeled dimensions can change the graphs wildly.
>> Andrew Torrance: Totally. Totally and we freely admit that. So, you know, we're sort of at the
beginning of exploring this space, but yeah. Yes, I freely admit that and hopefully we can model it better
later. Yeah?
>>: And to their earlier point about the quid pro quo and disclosure in the pure commons, is there
essentially publication of the invention as soon as it's sold? Like do I see Bob has sold A, B, C?
>> Andrew Torrance: Yes. Yeah it says up on the little -- the events tracker.
>>: Have you thought about a way to model that in a commons space where Bob sells something but
you don't know what it is because he didn't, he didn't patent it, therefore he didn't disclose it?
>> Andrew Torrance: Yeah absolutely. It’s a trade secret.
>>: It's secret?
>> Andrew Torrance: Yeah.
>>: So you have?
>> Andrew Torrance: So we have a way of shutting that off; we just haven't -- we haven't experimented
with that very much, but we would like to shut that off and do a trade secrets experiment at some stage.
We just haven't done it yet.
>>: Have you seen price competition modeled in the?
>> Andrew Torrance: We don't yet. So that could also affect.
>>: You’re commons; you’re selling something somebody else is selling?
>> Andrew Torrance: And that price doesn't go down. Yeah, but obviously it should, and so we’re
working on supply and demand curves and price curves to add into it. Yeah.
>>: I think so this all from the perspective of the manufacturers. Would you ever look at it from the -because I think the most important thing is actually from the consumer perspective, you know, does this
actually allow me to get a better quality product for cheaper?
>> Andrew Torrance: Yeah.
>>: And that's one of the most important things, which I think actually the current patent system has
completely messed up, if you ask me, so?
>> Andrew Torrance: [laughter] Again, we can't really shed too much light on that, but we would like to
manipulate these experiments and look into that. But no, I mean you pay the same price in this
experiment here every time and the quality is, I mean, it's sort of perfect quality. It's got an A, a B, a C,
and a D, if that's the invention.
>>: So back to the thing about trade secrets, have you given any thought to partial information or like
reverse engineering, like I can pay a time cost to learn what the other person is selling?
>> Andrew Torrance: Well, you can sort of do that by event tracking. You can see what they're making,
and then you can sort of see whether their profit's going up. If you put those together, if you're careful
about that, then you can tell, oh, I should be making A, B, C, and D, because that's a really valuable
invention. But beyond that, not yet, no. I'm going to show you some more data here. I want to share
the next experimental. So productivity, in other words, the total number of inventions that were made,
not just unique inventions, the pure commons pulls away. So here’s unique inventions. Here’s total
amount of stuff being made in the system, and then here's the amount of money being made in the
system. So statistically there’s no difference between the pure patent and the patent open source
model, but in all three, there's a robust statistical significance between the pure commons and the other
two treatments. Okay, so, you know, there's a bunch of different possibilities. What explains this?
Maybe the patent game is just really bad. And maybe this is a bad simulation and that's possible.
Maybe we need better parameters, better players, etc. Maybe we need psychology students who are
the classic experimental subjects, not law students, or maybe despite the received wisdom, maybe
patents are not doing what we thought they did. There's a lot of authors working on this, including
Heller and Eisenberg, saying that sometimes you get too much patents and that trips everybody up.
That does happen, by the way, in the patents, patent version. People end up not being able to make
very much because they're constantly infringing, and it ends up being just this bloodbath of
infringement. Then Eric von Hippel has suggested that users and open innovation are actually much
more productive than proprietary inventions. Yochai Benkler, Larry Lessig, Besson and Moyer wrote the
book, Patent Failure, which says that only really in biotech are patents succeeding. They say in software,
not succeeding at all, really messing things up. Then Eleanor Ostrum, similar views, and she won the
Nobel. Doesn't make her right, but she did win the Nobel for this sort of, this view that the commons
are maybe better than we think. So we changed the rules a little bit. There's a classic paper in law
called Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, that's where the
Monet thing comes from. And it's Calabresi and Melamed. They said it really matters whether you've
got property rights, that is, the availability of injunctions, or liability rules, the availability of damages.
So we did this. We basically looked at property rules and liability rules by allowing people -- oh and
there's strong support in economics, by the way, that you want property rules.
>>: [inaudible]
>> Andrew Torrance: Sure. That property rules should give you the most productive economy. That
liability rules are unfair, because it allows people to use your property and simply pay you after the fact
when you should have the right to keep people out, the right of exclusion. So there's this strong, strong
support in the legal literature for property rules over liability rules, so we thought that we would
implement this. So here's the hypothesis: patent property rules will promote progress of the useful arts
more than will liability rules. So similar claim as before, it’s just now we're varying property rules and
liability rules. We did similar experiments but here are the treatments: injunctive relief, damages, both,
and neither. Same sort of set up as before. Same sort of treatment – same experimental set up but
here are again, the four treatments that we did. And we measured the same things as before:
innovation, productivity, and social utility, or wealth, or whatever you want to call it. And so here’s
what we got. If you get injunctive relief and damages, very few inventions are created. If you get just
injunctive relief, you get a slightly larger amount, not statistically different. If you get damages alone,
it's actually considerably higher. It starts to separate itself from these two, and if you get neither, you
get tremendous unique inventions produced. How about total inventions? Damages do really well
compared to anything with injunctions; commons does even better, and then, in terms of wealth, again
the damages do really well compared to injunctive relief, and there's the neither treatment. So again,
the results are you get the most of everything without rules. Things are high with liability rules, so
getting damages is helpful. It's low with a property rule, and it's lowest with both rules, but it's not
really different; it's the presence of injunction seems to keep everything tamped down. So it's possible
that liability rules spur innovation, productivity, and wealth more than property rules if we're reflective
of reality. What's interesting is 2006 in eBay v. MercExchange, the Supreme Court said you can't
automatically get injunctive relief if you have a finding of infringement. Sometimes you can, sometimes
you can't, but before that the federal circuit had said you automatically get an injunction if you win a
patent case. So it's interesting the Supreme Court may or may not be trying to say the same thing, that
too much property rights may actually be bad for innovation. They didn't say that, but the result since
then is that many fewer people get injunctive relief after infringement findings, so choice of legal rule
seems to be important. Same possible explanations: maybe we did it badly or maybe there's something
here. Maybe our system would be improved if we had damages rather than just property rules being
the dominant result. So, we're not claiming to be either Calabresi or Melamed or Monet, but we
thought the results were kind of interesting, so we've got a lot of other different experiments that we're
thinking of for the future. We'll do some this summer. So finally, I'll skip through this one pretty quickly
because I think the interesting thing is the current day. Design patents are a different kind of patent
rule. They cover designs, not useful inventions. The outline of our argument is that over the years, the
kinds of designs that are like computer-generated imagery have not been subject to design patents.
And yet, since the last 15 years or so, you've been able to get design patent protection for, for example,
the screen of your iPhone or your Windows Phone. This has never been endorsed by a court and all of
the legal authority goes the other way. There was a change made in the patent and trademark office
that simply said, okay, fine. We'll let you have design patents, and since then they've proliferated.
They've led to things like the Apple Samsung case, but there's no good legal authority for it, and I'll try
and suggest why. So, design patents are one of the ways you can protect visual intellectual property.
>>: Can I just ask a ->> Andrew Torrance: Yeah, sure.
>>: You said there's no court that's weighed in on them and then in the next sentence you said Apple's
case.
>> Andrew Torrance: Right, except they didn't weigh in on whether you could get design patents for
visual, for CGI. They simply said they assumed that away, so what happens in courts, I mean as you
probably know, if the court isn't asked the question, it often doesn't answer the question. So you can
ask, you know, was there infringement and they'll say yes. If you had asked can you even get a patent
on this, they might say oh, that's a different question; no, you can’t get a patent on it. So that's sort of
the question here. So CGI design patents, there's lots and lots and lots of them out there; in fact, the
very first one was a type font in 1842, kind of like a CGI patent. The original statute was sort of written
up in an afternoon by the head of the patent office. He just thought we need protection for designs. So
all kinds of things he thought could potentially be protectable by design patents. The design patent laws
says this: whoever invents any new, original, and ornamental design for an article of manufacture may
obtain a patent therefor, subject to the conditions and requirements of this title. So a lot of other
patent law applies, but there's unique things like new, original, ornamental, and the one that I think’s
important, article of manufacture. And they're for 14 years, by the way, not for 20 years. There's been
a shift over the years in ornamentality doctrine. It used to be that they needed to be pretty to qualify.
But basically this fell out of use, and the Court of Appeals for the Federal Circuit more or less removed
the ornamentality requirement, and now, as long as it's not functional, it's considered to be ornamental.
And I've actually done some empirical and experimental work on this that shows that over the years
since the formation of the Court of Appeals for the Federal Circuit, it's mattered less and less and less
whether you're attractive or not.
>>: [Indiscernible] who scored these?
>> Andrew Torrance: Well, I scored them. I ran a bunch of experiments with students looking at designs
in a darkened room.
>>: [Indiscernible] score attractiveness?
>> Andrew Torrance: They scored attractiveness, and then I looked at every single case between ‘82
and 2010 and came up with the result of the case and then put them against each other.
>>: You have shockingness and revulsion for the?
>> Andrew Torrance: Exactly.
>>: For a great movie?
>> Andrew Torrance: Yeah, exactly. So ornamentality has changed over time. This idea of article of
manufacture has also changed over time, so from the very beginning, it had to be a physical object in
order to get ornamentality -- or sorry -- in order the get design patent protection. It had to be an article
of manufacture, something tangible. A variety of cases involving things that weren't quite physical, for
example, cards divided into spaces covered with foil by narrow bands with a dozen pearl buttons in rows
of three by four oh, I'm sorry about that. What did I do here? Okay, it looks good there? Okay, I’ll just
continue on. So if it wasn’t physical and tangible, you weren't able to get design patent protection.
Here's another one: an album case done on a baseboard in an upright or nearly vertical position having
on its exterior an oval, ornamental frame with an open center. Courts didn't like things that weren't sort
of physical. So if it wasn't an article of manufacture, you couldn't get protection. Over the years, this
was a consistently held principle, and here is a influential case digest: Design patent may be granted only
for a design embodied in a material object. 1987, adding mere graphics does not make it patentable. So
this is 1987. Here's other examples of things that may or may not have qualified but they were physical.
A roof, a grandstand, here's one that was a real challenge. The Hruby case, which was a fountain. Could
the pattern of water be a design patent? And the court fairly revolutionarily found that it could. The
court said that yeah, the pattern of water, as long as a pattern is permanent, it qualifies as an article of
manufacture. Pre-1996, the patent office said no, you cannot get design patent protection for
something that's not physical. But what's interesting is, and the cases were consistent in this regard,
what happened was the commissioner of patents in 1996 just decided that he would change it. He
would change the rule and say you could get computer-generated imagery, and here's a case that stands
for, some people say this proposition, but what's interesting is it's a case on type fonts. The only that's
ever found CGIs as design patentable, is a case that involves a type font, and think back to the very first
design patent: that was a type font. So this is a case that deals with something that has been patent
eligible since 1842. It may not reflect computer-generated imagery. So there's a bunch of images raised
by computer-generated imagery. Their impermanence, they’re everywhere; they're very, very easy to
get, and apparently they’re worth a lot of money. The Apple Samsung case would seem to say that
they're worth a lot of money. No court though has yet determined the patent eligibility of computergenerated imagery. So I think in this field, we're basically waiting for a Diamond V. Chakrabarty case, a
fundamental case that says what can and cannot be design patentable. In the meantime, every
company including Microsoft has lots of these things, and they're worth a lot of money, but people
don’t tend to challenge. Why? Well, why would Samsung or Apple challenge the patent eligibility of the
thousands of and thousands of design patents that they have? So I think we're waiting for a decision
here. So my final slide -- what I've done is I've looked at all of the Supreme Court -- significant Supreme
Court patents cases over the last decade and I tried to divide them up into different categories, and all
of these cases except one are negative in their results for strong patent rights. So it's been no friend to
strong patent rights. Injunctive relief, the eBay case said you don't necessarily get it. Exhaustion and
jurisdiction, well, Microsoft v. AT&T said infringement outside the U.S. is not something that you can
enforce within the U.S. Quanta, the Kirtsaeng case, which is actually a copyright case, both say that
exhaustion rights, the first use of something exhausts the rights, and the patent owner has no rights
after that. The Monsanto case, the seed case, goes in the other direction, but that may be because it's a
living invention, and it's really important to agriculture, and it's not human. Patentable subject matter,
we talked a lot about this. There's been a narrowing of patentable subject matter, particularly in the
area of thought, algorithm, and human-related inventions. Nonobviousness, it's harder to get a patent
now presumably, because the nonobviousness standard in KSR v. Teleflex appears to be a higher
standard than it was before. Then licensing issues. It used to be that if you had a license it was rude in
the legal sense to challenge the validity of the patents in the license but the MedImmune v. Genentech
case says no, you can be a paid-up licensee and sue to say that the patent is invalid at the same time.
Stanford v. Roche, you've got to be really careful about ownership of inventions. You’d better nail those
rights down right away, because otherwise the inventor officially owns the rights, and they might be
able to leak out of the company or the university. And then finally, a case that was just decided last
week, the FTC v. Actavis case. It's a generic drug case but the really, really interesting thing is that
patents were originally created in the Statute of Monopolies, in 1642 in England as an exception to the
rule against monopolies. So no more monopolies, but patents stand alone. So it's long been thought
that antitrust concerns don't apply to patents, per se, but this case suggests that the FTC can investigate
people who have patents and for the uses of those patents, in a way that was probably unclear before.
So patents now seem to fall under antitrust guidelines along with all of the other restrictions on patent
life.
>>: That story, what was that story there with Actavis?
>> Andrew Torrance: Oh, this is what's called a reverse payments case. So a drug company had a drug
that was under patent and it was coming towards the end of patent, and a generic company challenged
the patent -- there's a whole pathway for challenging patents, the Hatch-Waxman Act. They challenged
the patent, and in response, the drug company said what if we pay you not to challenge us? And the
company said how much? And they came to an agreement that seemed mutually beneficial. Having
come to the agreement, the drug company was able to keep making a fairly large monopoly profit and
the generic company was happy, I guess, because they agreed to the reverse payment settlement, so
they made money for doing nothing, and the drug company made money under its patents. The FTC
thought this was anticompetitive, that the whole point of Hatch-Waxman was to get generic drugs out
there and to challenge patented drugs. But the fascinating thing is that now explicitly we have a
Supreme Court case that says antitrust scrutiny can be made of people's patent portfolios. It probably
was always true, but now we have fairly strong authority that you've got to be careful of the antitrust
implications patent uses. Big deal, I think. So I think that trend in general is clear. Patent rights have
been sort of chopped away at the sides and in some cases more fundamentally than that. I don't think
the Supreme Court has been a propatent court, and I think the trend probably continues. So that is
what I have to say.
>>: Thanks very much. [applause]
>> Andrew Torrance: Thank you.