Theranos was Fraudulent, What About Its Patents?

In Launching the Innovation Renaissance I argued that patents should be given for specific inventions rather than just for broad “ideas”:

Thomas Edison invented and patented numerous products: the light bulb, the phonograph, movie film and much else besides. (At one point the patent office required that patents be accompanied by working models.) The invention of products typically requires the expenditure of sunk costs in a way that the creation of ideas does not. Today it is not necessary to implement an idea to patent it, and many patentable ideas are so broadly phrased that they could not be implemented in a model.

Edison famously said that “genius is one percent inspiration, ninety-nine percent perspiration.” A patent system should reward the 99 percent perspiration, not the 1 percent inspiration. In inventing the light bulb, for example, Edison laboriously experimented with some 6,000 possible materials for the filament before hitting upon bamboo. If Edison were to patent the light bulb today, he would not need to go to such lengths. Instead, Edison could patent the use of an “electrical resistor for the production of electro-magnetic radiation,” a patent that would have covered oven elements as well as light bulbs.

Daniel Nazer, who holds the Mark Cuban Chair to Eliminate Stupid Patents at the Electronic Frontier Foundation, points out in an excellent article that giving patents for vaguely stated ideas was exactly the problem with Theranos and its so-called patents.

Holmes found a more receptive audience at the USPTO. She says she spent five straight days at her computer drafting a patent application. The provisional application, filed in September 2003 when Holmes was just 19 years old, describes “medical devices and methods capable of real-time detection of biological activity and the controlled and localized release of appropriate therapeutic agents.” This provisional application would mature into many issued patents. In fact, there are patent applications still being prosecuted that claim priority back to Holmes’ 2003 submission.

But Holmes’ 2003 application was not a “real” invention in any meaningful sense. We know that Theranos spent years and hundreds of millions of dollars trying to develop working diagnostic devices. The tabletop machines Theranos focused on were much less ambitious than Holmes’ original vision of a patch. Indeed, it’s fair to say that Holmes’ first patent application was little more than aspirational science fiction written by an eager undergraduate.

…Two legal doctrines are relevant here. The “utility” requirement of patent law requires that the invention work. And the “enablement” requirement means that the application has to describe the invention with enough detail to allow a person in the relevant field to build and use it. If the applicant herself can’t build the invention with nearly unlimited time and money, it does not seem like the enablement requirement could possibly be satisfied.

The USPTO generally does a terrible job of ensuring that applications meet the utility and enablement standards.

Despite never having built a working product, Theranos accumulated hundreds of patents. These patents are now the only thing of value left but the patents aren’t valuable because of breakthrough science, the patents are valuable because they can be used to force people who do breakthrough science to cough up part of their return.

As Nazer puts it:

Accused of having lied to investors and endangered patients, the company leaves us with a parting gift: a portfolio of landmines for any company that actually solves the problems Theranos failed to solve.

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So, Theranos is just another Big Business (or at least exceedingly well funded business) anti-hero, right?

Theranos is dead and buried, but the USPTO is alive and stifling innovation as vigorously as it can. Who do you think the villain is here?

Well, I know who Prof. Tabarrok wants to have as the villain - the FDA, right?

As for the USPTO stifling innovation - I thought it was the patents trolls that were the problem, after they found a profitable market opportunity based on the fact that the U.S. Constitution explicitly provides monopoly commercial grants in the case of patents and copyrights. Followed by those subject to patent trolls starting to create patent pools, like this one - 'OIN is a defensive patent pool and community of patent non-aggression which enables freedom of action in Linux.' https://www.openinventionnetwork.com/

However, there is no question that the USPTO took an exceedingly expansive view of what could be patented, but really, you don't want to be mean to a billionaire with the foresight to patent one-click ordering, do you? 'While it’s unclear how much money 1-Click brought Amazon, one estimate, which assumed the technology increased Amazon sales by 5 percent, valued the patent at $2.4 billion annually.' https://digiday.com/marketing/end-era-amazons-one-click-buying-patent-finally-expires/

Of course, such a business process patent was never enforceable in Europe, which likely explains why Europe lacks the sort of innovation that marks America, at least if some MR commenters are to be taken at face value.

Yeah, I notice that the deregulation cheerleaders have been a bit subdued in the wake of the Theranos debacle, which would never have come to a head without the police powers of the FDA , securities regulators, and Justice Department.

"Let a thousand Theranoses bloom!"

John Carreytou from the Wall street journal is almost single handedly responsible for Therano's downfall. FDA, regulators, and the Justice Department did practically nothing and are now biting at the pieces or a dissolved company trying to get some notoriety.

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but the USPTO is alive and stifling innovation as vigorously as it can. Who do you think the villain is here?

By 'vigorously' stifling innovation you mean the USPTO is not employing a priesthood of experts to try to figure out what will and won't work in real life from the millions of patents in the database.

Just for giggles imagine someone does take her blueprint and actually gets a machine that works out of it. Are we all experts in blood testing here to say impossible? If they did the machine would make millions and strictly speaking Theranos's many creditors would be entitles to see some of that money from their lost investment. It would also be even worse for Holmes's character that she *could have* produced something useful from her idea but didn't.

But then that's science fiction. Since her blueprint cannot work no company can make a working machine out of it so in theory there's no need for the Patent Office to void her patent. It's not an issue anymore than Elan Musk has to worry about paying Gene Rodenberry's estate if he develops warp drive for his Mars rockets.

I think what you're saying here is that a poorly conceived patent could be tapped by a 'patent troll' to attack future *real* innovations. Like the idea of running multiple tests from a micro-droplet of blood getting tapped by some troll that buys Holmes's patent from Theranos' liquidation sale. But here I think the solution is setting a high bar for a patent claim against an innovator rather than asking the Patent Office to proactively try to figure out what will and won't work in real life.

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We now have proof Ray Lopez is full of shit (not that we needed more). The man has been bawling about how no one talks about patents for years, and now here's a post exclusively about them, and he's not here.

If Tabarrok made a post about growth or innovation or whatever, old Ray would be here complaining about how no one talks about patents. So, where is he?

Bonus trivia: the age of consent in the Phillipines is 12. Yes, 12. Yikes.

@msgkings - penis envy?

That's why you're not posting here about patents, penis envy? I wouldn't advertise that if I were you, but you've never had a problem revealing personal information.

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Maybe bankrupt companies should cede their patents to the public. They need to be recertified and then bid out or something.

"but why not be original? Why not be herself, anyhow? And, getting up she had taken her fashion from her mother, a Paris fashion book of the time of the Emperor..." V. Woolf

Yes, I do think an orgy of self-love is in order

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The USPTO generally does a terrible job of ensuring that applications meet the utility and enablement standards.

They also do a terrible job with the obviousness and prior-art tests. What, exactly, are they good at?

All patent applications should be provisional. Until a patent is challenged and successfully defended, it should not be presumed to be granted. It's not reasonable to expect the USPTO to actually do a good job on any front when evaluating a million patents a year, but they can require that people file their paperwork correctly, insure that the at least the claims of the patent meet the standards and properly track filing dates. But acceptance of a patent should have the form of, "reasonable expectation that a patent should be granted".

Then the small set of patents that ever need to be challenged can be adjuticated in a non-court room setting by experts - basically the heightened scrutiny that it simply does not make sense to apply to all applications.

That plan sounds good, but to prevent any negative effects, government should pay adjutication costs.

Otherwise freely filed patents become a excess burden on innovators.

(Great post Alex, this is MR at its finest.)

...? If the innovator isn't willing to defend their patent, it probably shouldn't be defended.

I was thinking it would go (1) patent filed, (2) cease and desist or royalty demand sent from the filer to another innovator, (3) second innovator asks for adjudication.

I don't want the second innovator blocked or burdened by bad or too broad claims.

You could say loser pays, but if the patent office is essentially deferring review, it seems more their responsibility.

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It costs about $1 million to litigate a patent and just having a trial doesn't guarantee the "right" outcome. It seems likely to me that many inventors wouldn't want to litigate given the large costs. This advantages well funded companies (like Theranos) at the expense of those actually innovating.

It's more like $5M. But, if you have a good claim, companies like Burford will bankroll it.

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I would recommend that when a patent is challenged, both the challenger and the provisional patent holder have to pay a fee - something in the range of $10K-30K each. Then the patent office uses the funds to conduct an in depth study of things such as prior art, utility, etc and reaches a conclusion which has something like the status of a currently granted patent. Afterwards, if the challenger wants to go to court, they can, but now they face a much more uphill battle. The tricky part is to find the right up front fee for investigation. It can't be too large that a wealthy challenger can make defending patents too expensive, but any useful patent should be worth at least $10K to establish, and that $20K should provide enough funding to the patent office to do a much better job evaluating the patent worthiness. Or you could have imbalanced models where the defender pays a $5K fee and the challenger pays $50K. You can play around with these amounts to encourage different kinds of patent related activity, but I think it would work much better than the current system with ridiculous legal fees for any challenge.

@mpowell - as a practical matter your proposals have already been adopted, de facto, though not de jure. During litigation, which costs roughly about $10M these days, minimum about $1 M (bare bones), a special magistrate is typically appointed by the trial judge who brings in experts to determine the real value behind a patented invention. Sometimes a cheaper version of this is done via the so-called "reexamination" and "reissue" procedures before the US PTO.

Which raises the question: what's the value of the 'presumption of validity" (35 U.S. Code § 282) of patents, which is the purpose of an initial examination by the US PTO? It's basically for patent trolls. Since it costs a minimum of $100k in legal fees to overcome a bogus troll patent that's covered by Section 282, that's what people are fighting over when a troll patent is used to shake down businesses. In some ways, no different from a bogus claim of a 'slip-and-fall' at a local supermarket or in front of an icy store front. I've argued when I was working in the field (I'm retired now), as have others, that we do away with preliminary examination of patents, that is, do away with 35 U.S. Code § 282, and just go with an 'open registration' of patents, as is done in Japan and Germany for certain inventions, and as is done already with US copyrights, and simply litigate the worth of such inventions when and if somebody infringes. It would eliminate all patent trolls, as well as all patent prosecution attorneys and agents, so it won't be popular, but society will be IMO better off. And it will eliminate several thousand federal patent examiners at the US PTO, most of them highly paid and many making over $100k a year.

Much better. You're welcome.

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There is no such thing as a provisional patent. Never was. There IS a temporary provisional application for a patent.

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> All patent applications should be provisional. Until a patent is
>challenged and successfully defended, it should not be presumed to be
>granted.

This exists in China and some other countries. It is called a "utility model"

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We have this, to a degree. It is called the Patent Trial and Appeal Board. Validity is not assumed in these challenges, and they are relatively inexpensive ($500k or so).

However, without a jury, many companies do not seem to get a fair shake, and the board has had its fair share of political shenanigans.

Frankly, $500K sounds like way too much. How much is a patent examiner paid? The process should not be a board review, it should be the patent office just taking an in depth look at the patent. This should not require more than a few man-months of effort.

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"It's not reasonable to expect the USPTO to actually do a good job on any front when evaluating a million patents a year"

Then reduce the flow of spurious applications by:

(1): Charge $10K per application. High, but not out of reach for a typical person.

(2): Demand that every application fulfill the working model requirement;

(3): penalize applicants who claim to have a working model but actually don't with a $20K fine.

I think you could stem the flow of applications pretty quickly.

With #2 and #3 in place you don't really need #1, and you don't put up a barrier to poorer inventors.

sure, I'll buy that, although I don't think $10K is too over the top. The intent is to ensure that people submitting patent apps they should know they have a high chance of success because their application is novel.

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Pointing out that Edison didn't invent the lightbulb might be on a par with "It's not the Nobel Prize in Economics."
It's late. Ray's not here. I'll be that guy.

Indeed. Why is Edison and the light bulb routinely trotted out as the paradigm? He was beaten to it, and lost the subsequent patent case. Would his phonograph be a better example?

The more you understand about Edison, the more you come to realize that he is an argument AGAINST patents...

Well, depends on how big of a fan you are of Hollywood, at least to a certain extent.

And what you think of AC compared to DC - https://en.wikipedia.org/wiki/War_of_the_currents

The outcome of the war of current is not as relevant here as the, ahem, conduct.

Well, here are examples of conduct as noted in the link -

'As the use of AC spread rapidly, the Edison Electric Light Company claimed in early 1888 that high voltages used in an alternating current system were hazardous, and that the design was inferior to, and infringed on the patents behind, their direct current system.'

and

'Brown also claimed that alternating current was more dangerous than direct current and tried to prove this by publicly electrocuting animals with both currents, demonstrations that received technical assistance from Edison Electric. The Edison company and Brown colluded further in their parallel goals to limit the use of AC with attempts to push through legislation to severely limit AC installations and voltages. Both also colluded with Westinghouse's chief AC rival, the Thomson-Houston Electric Company, to make sure the first electric chair was powered by a Westinghouse AC generator.'

The importance of the electric chair was PR - it was intended to cement the idea in the public imagination that AC was more deadly than DC.

Indeed, the use of theatrics and scare tactics being early evidence that the patent system was doing more than protecting an inventor's ability to recoup compensation for his innovation. i.e. an early hint at rent seeking.

Foreshadowing the contemporary issues of patent trolls, buying patents to squash them, patents for vague, obvious and natural things, and all the rest of the perversions we see now.

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You guys are kind of ignorant.

"Edison filed his first {electric light} patent application for "Improvement In Electric Lights" n 14 October 1878. "

The whole point is that any number of people can claim to have invented the light bulb if you are just going with coming up with the idea. It's much harder to actually make it work. Edison did indeed produce many working models.

Furthermore, Edison didn't loose a patent case for his light bulb either. It went to court and Edison's claim was upheld.

"Eventually on 6 October 1889, a judge ruled that Edison's electric light improvement claim for "a filament of carbon of high resistance" was valid."

https://en.wikipedia.org/wiki/Incandescent_light_bulb

"Edison didn't loose a patent case for his light bulb either." He lost to Swan, and solved the problem by effectively buying Swan out by means of a merger.

Ok, fair enough. Specific to the UK, since Edison hadn't filed patents there but essentially correct.

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"Pointing out that Edison didn't invent the lightbulb might be on a par with "

+1, the original post is correct. Most of what followed isn't correct.

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Hi catter. CNTRL + F + "Ray" or "Lopez" only gives one hit, showing a deficient comment section when it comes to patents.

AlexT brings up a good OP, and I've argued the same, 'bring back patent models' or, to be more legally precise: "abolish constructive reduction to practice" (paper patents). But if you want to keep paper patents but still make the patent system stronger, you should award two patents: one for constructive reduction to practice and one for actually making the paper patent work (assuming of course it's not trivial to make the paper patent work, that can be determined by law). That way, the paper patent inventor gets a reward but so does the actual inventor who made the patent work, and the paper patent guy would share in any royalties the actual inventor makes (and vice versa), as is done now with 'blocking patents' that are cross-licensed. As for paper patent trolls, you can adopt the "English rule" where the troll pays the defendants costs if the troll loses, and further, force the troll to show their paper patent actually works, rather than, as is done now, simply reading whether the alleged infringing product is covered by a paper patent claims (a fine point, no big deal, since personally I don't think trolls are such a big deal).

Bonus trivia: Elizabeth Holmes, an attractive DC native, took five days to write her patent she says, but actually even a pro could easily spend three to five days to draft a complex patent application, so I have to admire her, unless, as is possible, she might have spent two or three weeks and is lying about how much time she spent, to make herself look efficient. I've heard stories of patent applications drafted in a few hours, to beat a so-called statutory bar deadline (legal deadline) and they went on to make tens if not hundreds of millions of dollars for their inventor, despite spelling mistakes and problems in explanation. Judges will try and save a poorly drafted patent if the invention is a so-called pioneer patent invention, meaning the invention is truly breakthrough.

Attractive?

[SHUDDER]

Great post, Ray.

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Theranos was not solving a meaningful problem in the first place anyway. Not one person ever complained to be taken a sample of blood for testing instead of just a drop. This would not have amounted to any substantial productivity gain in the medical industry anyway.

they were leveraging/exploiting some peoples "fraught"
about phlebotomy

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hmm. I had at least assumed from the outside, that automated low-invasive blood testing would be a huge benefit

there would be benefits if it worked.
but there are some inherent problems with fingerstick blood analysis
(hemolysis of red blood cells) that make measuring routine stuff
like a potassium level unreliable. whenever anybody who didn't drop out of stanford after a semester or two act brought this issue
up with the theranos meme zombies it was waved away

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I suppose it's the difference between Edison the inventor and Einstein the theorist. I'm not a patent lawyer, but those I have worked with, without exception, have a background in technology, with BS and graduate degrees in physics or engineering or science as well as law degrees. Those are the patent lawyers who write the applications. But today that's not where the money is, today the money (for lawyers anyway) is in litigation, so many well-known "patent" lawyers are actually litigators. But I would not be too critical of the USPTO, which has as its mandate encouraging inventors (by issuing patents) while distinguishing between actual inventions and ideas or theories. Unfortunately, there's no flashing light signifying the distinction for the patent application reviewer.

That's why famous Brazilian writer Mr. Verissimo said America's practical mindset created an Edison because it never wanted an Einstein.

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This is kind of a stupid point. Edison wouldn't have to go to such lengths today because which filaments emit light upon being exposed to current are well understood. They were not in Edison's time.

So enablement requirements vary dramatically from field to field depending on whether the field is well understood. Drugs, biomolecules, disease treatment methods usually face very high enablement barriers (The uspto rejects drug treatment claims all the time based on animal data because of no human data). Unfortunately, engineering devices and software are considered "well understood" (for reasons i don't completely understand but may have something to do with the fact that examiners in biotech often have phds and device fields may just have bachelor's degrees, so are less equipped to know theory)

However, for most electronic devices, this arrangement works well. A Patent describing the new generation iphone using minor improvements in existing materials and batteries doesn't take a phd to understand.

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My first question would be to confirm if
1) the USPTO makes more money approving patents than declining them and
2) Cost (largely effort but could also be other resource costs) associated with defending a decline of an application.

They make money either way. Arguably more for rejecting a patent. The grant fee for patents is tiny. Applicants mostly pay when filling (a few thousand), to submit late replies to examiners arguments, and to ask for a new round of examination when an Examiner rejects their claims

The incentive for approving or not approving patents is mostly a careerist concern for examiners. If they reject on bogus arguments too often, applicants will file appeals and being overturned on appeal looks bad. Ditto, having patents they granted overturned in court is also bad.

... might want to take a peek at the revolivng door for inspectors.

Just a hunch of course

It's not extensive, mostly because examining patents doesn't automatically make you good at writing or arguing them. At my 200 person patent firm, we have 3 ex examiners, and the examination corps is big

What about the inspectors' bosses?

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"... and the controlled and localized release of appropriate therapeutic agents."

Interesting post. I hadn't heard before that she was also expecting to treat as well as diagnose with her little patch. I thought it was all about the one-drop draw and immediate result. She was even more ambitious than I supposed.

To be fair to her, seems like she entered college around the time that the idea arose that not finishing college was cooler than getting a degree: perhaps the logical conclusion to the admissions process and US NEWS college rankings and acceptance to fancy schools becoming so paramount. It undoubtedly is cool to not finish college because you've truly got better things to do, but when the college itself acquiesces in this notion, and even promotes it - that should make you question the whole enterprise.

A family friend dropped out of Most Prestigious Business School in his third semester to "work on an app" - something about your phone introducing you to other people in your vicinity. This seemed like a slender thread on which to drop out of school, but his parents were on balance more proud than dismayed; and I had the impression the school did nothing to deter him from this path, or possibly encouraged it. This is what the *smart* kids do!

That project will likely fail, but your family friend will learn things from that failure that are not taught in school.

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School vs. not school:
School has a lot to offer but, unfortunately, most people can't even properly apply the specific methods they "learned" in school, much less draw generalities from them and apply the generalities. That's not the school's fault, but it does make the value of *education* questionable - even if the paper you get at the end has value.

But that still doesn't tell us much about the kids that drop out to pursue projects. Are they smarter because they knew they were to stupid or lazy to learn? :) Or are they smarter because they'll learn important lessons not available in school? Or are they smarter because - knowledgeable or not, smart or dumb - they'll simply have more work experience than their peers and thus are likely to do much better financially in the long run?

I'm not sure he got quite as decisively far as *failure* but in any case, I think applying the word "work" to playing around with an iPhone is charitable. But a wobbly definition of "work" is not unique to this econ website, nor even to today's posts.

He's a dreamy, sweet-natured fellow, and probably was in the awkward - and common - position that his parents' grand educational ambitions for him were not matched by a clear-eyed view of his personality and strengths. They got better at that, with succeeding children.

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I agree, though, he proved he was willing to take a risk. To be willing to disappoint people, or depart from their script for you, is no small thing. It may have been a risk that was culturally-approved at the moment, but a risk nonetheless.

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Why we do open software and open research. The trend in industry is to invalidate any possible patents with an actual piece of software distributed to the public. I do that on my blog if I happen to discover some novelty somewhere, no that I am an inventor. However I can usually guess where the patents will be coming from having experience with software patents.

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Two movies are in the works about Holmes and the Theranos fiasco, one set to star Jennifer Lawrence. Why not have Holmes play herself?

'Why not have Holmes play herself?'

Lawyers. Doing that would be a minefield from multiple directions.

For example, she could not claim that her acting was 'fictional' if she was playing herself. Or, if the film was successful, one assumes that various defrauded investors would attempt to recoup their losses in any way they could.

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Those eyes. What is it about Americans that they fall for the girl with they eyes? Theranos, The Green New Deal.

To be fair in Canada we have a Prime Minister whose popularity is directly proportional to how often he prances around without a shirt.

Same for cat videos I presume.

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Isn't it a requirement for a patent that you have reduced the idea to practice and demonstrated utility?

Is there a patent lawyer in the audience?

Re Reduction to Practice requirement:

"Actual reduction to practice refers to the actual construction of the invention in physical form: in the case of a machine it includes the actual building of the machine, in the case of an article or composition it includes the actual making of the article or composition, in the case of a process it includes the actual carrying out of the steps of the process. Actual operation, demonstration, or testing for the intended use is also usually necessary. The filing of a regular application for a patent completely disclosing the invention is treated as equivalent to reduction to practice and is known as constructive reduction to practice. The inventor who proves to be the first to conceive an invention and the first to reduce it to practice will be held to be the prior inventor, but more complicated situations cannot be stated this simply. Thus, there are two (2) kinds of reduction to practice: Actual and constructive. Actual reduction to practice requires making a working model of the invention that demonstrates that the invention will work to fulfill its intended purpose. Constructive reduction to practice is accomplished by the filing of a patent application that enables one of ordinary skill in the art to make and use the invention without undue research or experimentation. The date of conception of an invention is meaningless unless it is coupled to the date of reduction to practice by diligence. Diligence must also be shown from the date of actual reduction of practice to the filing date of a patent application."

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"These patents are now the only thing of value"

A patent just gives you the exclusive right to make, use, or sell the claimed invention. So, what is the value of that right? It depends on whether someone else would actually want to make, use, or sell that invention.

In this case, because Theranos's products didn't work i.e., were "fraudulent," nobody else is going to want to do it, much less buy a license to do so. Thus, the patents here have no value.

This assumes that Theranos's patents are exactly co-extensive with their inventions. If Theranos got patents on results (i.e., the notion of doing certain blood tests with a very small blood sample) without actually describing a working technical solution, the patents would block someone with an actual technical solution.

You can't patent "results." You can only patent a "new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof."

Now, if they came up an non-obvious way to do certain tests with very small blood samples, then god bless. But, in that case, they really invented a "working technical solution" to an important problem. It's not "fraud."

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"I argued that patents should be given for specific inventions rather than just for broad 'ideas'...the 'enablement' requirement means that the application has to describe the invention with enough detail to allow a person in the relevant field to build and use it"

"Abstract" ideas are already unpatentable, and the "enablement" requirement already requires (in theory) that a person of "ordinary skill" be able to practice the invention after reading the description in the patent. The problem is that no one actually knows what these requirements mean. What does it mean to patent a "product" not just a "broad idea"? Should Edison's patent on his light bulb also cover light bulbs that are only trivially different from his product? What constitutes "trivially different"? The problem is not the patent laws per se. The problem is finding a concrete way to state what is patentable that can be unambiguously and consistently applied by examiners (and juries when patents are challenged in court). We try to treat IP like real property, but delineating the boundaries of IP with words is not nearly as unambiguous as delineating a piece of land with a fence.

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Investors who lost all their money in a venture and still think they would recover some of that money from patents written by the people who defrauded them in the first place. That sounds pathetic.

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I do not blame the USPTO. People who managed to defraud investors for so long would have found a clever way to game the patent system if it was somewhat "smarter". Btw if the process was "smarter" it would certainly be much more expensive and we would have blog articles blaming the fact that a USPTO filing would have been too expensive for the "genius undergraduate inventor in her student room".

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A patent is only as valuable as its ability to stand up to scrutiny during a legal proceeding. The people in the system that are scrutinizing patent claims are rarely cutting edge experts in the relevant field. In practice, things like the invention story really do have an impact on the value of a patent, as they are persuasive to the actors that are ultimately deciding validity and infringement.

Theranos patents are going to have a bad smell attached to them that will follow them everywhere. There will be some base assumption that the patents are less likely to be valid by mere association. If litigated, the plaintiff's attorney would probably spend a significant amount of time explaining that, while Theranos did not achieve it's loftly goals, it did accomplish X, and here is the proof. The patents litigated would have to be shown to cover X accomplishment, and that the defendant company took the idea of X and ran with it, and created a successful product.

With the stigma from the patent's origin, it will be a high bar to clear.

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Excellent discussion.

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Patent protection should somehow be conditional on the holders ability to bring it to production. Whoever can organise the productive use of an idea faster, the state should prioritise protecting that individual. Let the laws encourage competition and collaboration.

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My understanding is a patent issued by the patent office is not considered valid by capital markets. The best way for validation is to win a lawsuit. Following that an analysis needs to be done. A lot of credibility of the patent depends on the credibility of the owner and how deep her pockets are (to defend lawsuits).

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So we're talking about a patent with a priority date of 2003, which has generated zero dollars in licensing and will presumably expire in 2023 having continued to generate zero dollars? This is an indictment of the system?

Patents are defensive. They are valuable to a company with a working product, because they help protect against their property being stolen. They are valuable to an inventor with a working product, because they allow that invention to be monetized. They are much less valuable to a fraudulent company or a fake inventor, because there's no product to protect and no invention to sell.

I think you're taking your eye off the ball here. Patent trolls are minor grifters on the edges of the system. Inventors are the heart of the system. Why would you interfere with the economically significant activity in order to handcuff the grifters?

"They are much less valuable to a fraudulent company or a fake inventor, because there's no product to protect and no invention to sell."
You don't seem to be familiar with patent trolls. They make money by using the legal system to tap into the revenue stream of others since they make no products themselves. The patents written are also overly broad and vague as mentioned by Alex so they can rope in as many targets as possible. This sleight of hand makes lawyers not inventors the heart of the system. Every human system including the patent system needs to re-evaluated every so often in light of how it is actually used because people are very clever at gaming the system.

Theranos had $700 million dollars of investment money, and was valued at billions. That was assuming the technology was legit. In contrast, patent trolls hit up companies for $50K. We're talking about several orders of magnitude here.

It's also possible for a company with $700 million in investment to generate a valuable patent portfolio even when the main product is a fraud. They did employ some real scientists, and we shouldn't assume that every single patent they applied for is bogus.

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The real problem with Theranos wasn't that their product didn't work. It's that it couldn't work. Single droplets don't give good enough statistics for an accurate measurement. Tests run on finger sticks give results that don't agree with tests run on venuous draws.

I think any patents in this area are likely to be just about as valuable as Theranos stock, and for the same reasons.

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+1000. This is an abuse and existential threat to our culture of innovation. Patents are government enforced legal landmines that could go off anytime someone with a good idea actually creates a successful product. In society, it also incorrectly rewards the skills of finding legal gotchas over the skills of actually innovating something. Thank you, Mark Cuban, the EFF, and Alex Tabarrok for calling attention to this.

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