To patent, or not to patent. . .

For most of us on the Western Slope, the topic of patents is pretty dull.

Yet, from the iPhone to e-cigarettes; aspirin to airplanes, all these great inventions we love and loath are the product of inventors, innovators, and entrepreneurs, who, in exchange for sharing the technology with the public, are granted a monopoly (patent) over the invention for a limited number of years, usually twenty.

Patents allow inventors to recoup the cost of research and development and to be able to make a profit from their hard work. Strong patents rights also have a consumer benefit. When competitors are blocked from copying and flooding the market with cheap knock-offs, it means real innovation has to occur in order to avoid infringement. If a copycat is merely tweaking, society’s knowledge base isn’t being expanded.

US Supreme Court hear 90 minutes of arguments in
Oil States v. Greene on Nov. 27, 2017. Matt Soper photo.

On Monday, Nov. 27th, the U.S. Supreme Court heard oral arguments in Oil States Energy v. Greene's Energy, a case which could drastically change whether an inventor opts to patent new technology, or, like the Coca-Cola recipe, keep it as a trade secret.

The legal question is fairly simple: whether patents are property rights, like land or cars, or whether they are public rights, similar to a marriage licence, driver’s licence, or licence to practice medicine.

If patents are held to be property rights, then only a Federal Court has the power to take that property away from its owner. If the Supreme Court decides patents are akin to licences, then the U.S. Patent & Trademark Office (PTO), as an administrative agency, may invalidate the patent at any time after its been issued.

Let’s say you have spent thousands of dollars and hours researching and developing an invention, then several thousands more in attorney and PTO fees, and then, after a cumbersome multi-year process of examination against prior art, the PTO finally issues you a patent. With this patent you build a business and hopefully are successful. At this point in time, you aren’t going to take too kindly to the Patent Trial and Appeals Board within the PTO accepting a petition to review the validity of your patent, especially since the Board doesn’t afford parties the same due process and procedural protections as courts.

The America Invents Act 2011, among other reforms, created the Inter Partes Review (IPR) process for administratively reviewing the validity of issued patents.

Congress created IPR on the presumption that the PTO had issued too many bad or weak patents over the years. Patent trolls take these “bad patents” and assert frivolous lawsuits with the goal of scaring the end user into a settlement. IPR was designed to make challenging bad patents cheaper and faster. However, as of Jan. 2018, it will cost a petitioner $30,500 to initiate an IPR and the patent owner will spend at least $300,000 defending the patent.

Instead of juries determining whether a patent was nonobvious or novel, Congress moved this determining process to the PTO – an executive agency. Such a change also meant patents were no longer treated as property and presumed valid, unless proven otherwise, but instead, IPR treats issued patents as if they are still in the application process.

Currently, roughly 75% of patents subjected to the IPR process are declared invalid. The losing party may appeal to the D.C.-based Court of Appeals for the Federal Circuit (CAFC). However, CAFC has only reversed 10% of the PTO’s IPR decisions.

The Court's liberal justices appeared to voiced support for IPR. Justice Sonia Sotomayor noted during oral arguments that the ability to appeal “saved” the IPR system.

Colorado’s-own Justice Neil Gorsuch questioned the fairness of a system that could allow a government agency to take property after it had been granted.

Conservatives on the Court seemed concerned about the government’s ability to void patents too easily.

The fact that an overwhelming majority of patents subjected to IPR are revoked and CAFC acts as a rubber stamp for the PTO means small businesses and micro inventors are discouraged from pursuing and developing patented technology.

This author believes issued patents are vested rights that should only be taken away through a court of law and not via an administrative board.

A decision is expected in June 2018.

* Matt Soper, a legal scholar, is a CMU alumnus and resident of Delta, Colo. He holds law degrees from the Universities of Edinburgh and New Hampshire. Contact him at matt.soper@alumni.law.unh.edu. 

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Matthew Soper, "To patent, or not to patent." Grand Junction Daily Sentinel (Dec. 3, 2017) p. B5.

Timeline details Marijuana votes and regulations (Delta County, Colorado)

2000 Amendment 20: Medical Marijuana

Cannabis / Marijuana Plant.
Image KVNF/2012

            Colorado’s General Assembly referred Amendment 20 to the voters for the November 2000failed in Delta County, with 60.34% of the electorate voting against the referred measure. Orchard City largely followed the county results, with 59.78% voting against the referred measure.
election. While the amendment passed with 53.5% of the vote state-wide, the amendment overwhelmingly

            Amendment 20 is codified in article XVIII, section 14 of the Colorado Constitution and provides legalized limited amounts of medical marijuana for patients and their primary caregivers. An informal rule between the Colorado Department of Public Health and Environment and the Drug Enforcement Agency limited primary caregivers to five patients.

            Amendment 20 has a provision whereby people who need marijuana for medical purposes may obtain the drug free of charge.

2006 Amendment 44: Recreational Marijuana

            The first attempt to legalise recreation marijuana was brought before the Colorado electorate in November 2006. Amendment 44 failed state-wide with 58.92% voting no. In Delta County, 68.78% voted against legalising marijuana for recreational purposes. In Orchard City, 75.15% of the voters said no to decriminalising marijuana for recreational purposes.

If passed, Amendment 44 would have changed state law to allow people over 21 to possess an ounce or less of marijuana without legal penalty. Colorado at the time had a law which imposed $100 fine for simple possession of an ounce or less.

2009 CO Dept of Public Health & Environment caregiver limit rejected

           

            In July 2009, the Colorado Board of Health, by one vote, rejected the adoption of limiting caregivers to a max of five patients. The failure to adopt this formal rule effectively approved the dispensary model for Colorado.

2009 First Medical Marijuana Dispensary opens in Orchard City

            In July 2009, following the failure of the Health Department to adopt the five patient rule, the Grand Mesa Herbal Dispensary, LLC, becomes the first retail medical marijuana dispensary to open in Orchard City.

            At the time, “the LLC’s registered agent, Jay, told the DCI. ‘I was asked by a local oncologist to start the dispensary,’ When asked about the town’s proposed moratorium on medical marijuana dispensaries, Jay said, “I’ve lived here (in Orchard City) 17 years, We all know this is a conservative area. I have a license. My plan was to open a location in Telluride. Telluride is an adult town, and I thought they would legalize it (marijuana) there the way Breckenridge did.’”

2009 Ogden Memorandum

            On October 19, 2009, Deputy United States Attorney General, David W. Ogden, issued a memorandum to prosecutors and federal agents saying it was not the policy of the Obama Administration to prosecute medical marijuana patients and caregivers who are in compliance with state law. The effect of the Ogden Memorandum was the “Green Rush” and medical marijuana dispensaries businesses popping up all over Colorado, including Orchard City.

2009 Moratorium on medical marijuana dispensaries (Orchard City)

Orchard City adopted its first moratorium on medical marijuana dispensaries on November 18, 2009. The moratorium was for 180 days to provide the town the ability to research and discuss the issue.

2010 Ext Moratorium on Medical Marijuana Dispensaries (Orchard City)

In May 2010, Ordinance 2010-03 was adopted by Orchard City Trustees which extended the 2009 moratorium on medical marijuana dispensaries.

Between the two moratoriums, “Grand Mesa Herbal Dispensary, moved and expanded its operation from a sequestered site on Fruitgrowers road to a highly visible location on Highway 65.  The town's moratorium had not included any prohibition against existing marijuana dispensaries expanding their operations.”

2011 Orchard City bans medical marijuana facilities

On July 1, 2011, Orchard City Trustees formally banned medical marijuana facilities.

2011 Delta (City) Referred Measure A

            In July 2011, the City of Delta held a special election to consider whether an ordinance to prohibit medical marijuana businesses from operating from within the jurisdiction of the city. The referred measure passed with 68% voting for the prohibition of medical marijuana businesses.

           

2012 Amendment 64: Recreational Marijuana

            In 2012 a super majority of Coloradoans, 55%, voted to legalise personal use and regulation of marijuana. The amendment provides for licensing of cultivation facilities, product manufacturing facilities, testing facilities, and retail stores. Local governments have the authority to regulate or prohibit such facilities.

            In Delta County, voters soundly rejected Amendment 64, voting 55.8% against legalisation. Precincts 9 and 10, which are the Town of Orchard City, voted 60% against legalising of cannabis.

2013 Ordinances prohibiting retail pot passed by every municipality in Delta County

            In the summer of 2013, Orchard City trustees approved Ordinance 2013-01, prohibiting retail marijuana, which had been under draft and revision form since November 2012. At the public hearing to consider whether to adopt the ordinance, only one member of the public spoke against prohibiting retail marijuana. The other members of the public were adamantly for prohibiting retail sales within the town limits. The ordinance passed unanimously.

            The ordinance prohibits commercial marijuana cultivation, product manufacturing, testing facilities, and retail marijuana stores. Crawford, Cedaredge, Delta, Hotchkiss and Paonia also adopted similar ordinances during 2013.

            In August 2013, the Hotchkiss Town Council enacted an ordinance which banned commercial marijuana enterprises from entering the town’s jurisdiction. The ordinance also carried a criminal penalty for violating the commercial prohibition of a fine of $999 and not more than one year in the county jail.

            Delta’s City Council, in mid-August 2013, also voted unanimously to “opt-out” of Amendment 64 and prohibit retail sales. Within the City of Delta, 56% of the population voted against the amendment and in 2011, 68% of the population had voted locally to prohibit medical marijuana dispensaries.

2013 Proposition AA: Taxes on the Sale of Marijuana

            In November 2013, 65.27% of Coloradoans overwhelmingly approved a taxing measure to treat recreational cannabis like any other business. The General Assembly referred proposition implements a 15 percent marijuana excise tax, plus a 10 percent state sales tax.

            The tax was a bit less popular in Delta County than around the state, as 57.42% of the citizens voted in favour of Proposition AA.

2014 Paonia Ballot Questions 2B and 2C

            In November of 2014, voters in Paonia were asked whether the town should establish and operate a retail marijuana cultivation facility (2B) and whether the town could tax the unprocessed retail marijuana and amend the tax as an increase or decrease, not to exceed a total local tax of 10% (2C).

            In Paonia, 53% of the voters rejected Question 2B and 62% voted for Question 2C. After the vote, many attributed the rejection to a campaign launched by a group of high school and middle school students. The students walked door-to-door campaigning against Question 2B.

2015 Proposition BB: Marijuana TABOR Refund Measure

            Colorado law required the vote because the revenue exceeded the initial estimate. The overall revenue was more than voters approved for a marijuana tax in 2013. TABOR requires a projection to be made in a tax’s first year. The voters, with 69.39% voting in favour, allowed the state keep a surplus in pot tax revenue. The measure allowed Colorado to keep $66 million in surplus revenue. The vast majority of these monies will be used for schools.

            Delta County voted 63% in favour of allowing the state to keep the excess collected.

2016 Hotchkiss Ballot Issue 2A

            In April 2016, Hotchkiss voters considered whether to allow medical marijuana centers, optional cultivation operations, and possible sale of medical marijuana –infused products within the town’s jurisdiction.

            Ballot measure 2A was rejected by the voters, with 54% voting against allowing medical marijuana dispensaries and the optional cultivation operations.

2017 Proposed licencing of commercial cultivation and retail dispensaries

            On February 1, 2017, the Orchard City Trustees held a work session where the topic was means to enhance the town’s revenue stream. The trustees stressed the town was not going broke in the short term, but medium and long term forecasts predicted significant budgetary shortfalls. Trustee Dick Kirkpatrick drafted a report which proposed among other alternatives the recommendation the town licence commercial cultivation operations and retail marijuana dispensaries. 
            Over 100 residences turned up for the work session and nearly two dozen publicly stated their opposition to commercial cultivation and retail marijuana operations. Those who expressed their opposition included the County Sheriff, a former naval officer, former trustees, business leaders, and retirees. Few spoke in favour  of marijuana, they included: marijuana industry representatives from Denver, locals who hoped to make their fortune in the “Green Rush”, and residents who saw revenue from marijuana licencing fees as a means to generate revenue without raising water fees or establishing a sales tax.   

UPDATE:

            The Orchard City Board of Trustees, during their Sept. 13, 2017 regular meeting, voted to rescind the decision to repeal the 2011 and 2013 prohibitions on medical and commercial marijuana businesses within the town limits.

            Also during the Sept. 13th regular meeting, the board voted to referrer three measures to the April 2018 ballot. Each of the three questions will ask voters a yes/no question about preferences for revenue generation. The three questions are: 1) implementing a sales tax in town; 2) implementing a property tax in town; and 3) allowing marijuana business that would produce tax revenue for town government.

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A version of this research was published in the Delta County Independent on 1 March 2017, Surface Creek Section.

The Student Debt Crisis

Student debt is a very real crisis in America and a growing concern in nations like the UK. When I graduated from law school in May 2013 I had borrowed a staggering $138,943. This original principal amount paid for my total cost of attendance, which included: tuition, fees, and housing. It should be noted; I even had a graduate program scholarship worth several thousand dollars that reduced the amount I had to borrow.

The intensity of a professional degree makes working during the school year very difficult. The summers are reserved for unpaid internships, which are the number one way students land jobs upon graduation. After all, the goal of this highly expensive education is to end up practicing law and making enough money to repay said debt.  

Unlike many students, I managed to graduate from my undergrad debt free with the aid of scholarships and summer jobs and had even saved enough to travel Europe for the summer after commencement. Additionally, I not only earned an LL.B. degree, but also two LL.M.s, which means my total cost of attendance on average, per year, was less than $30,000. I do not mind repaying what I borrowed, but the hyper interest and fees the government levied seems outrageous to say the least. Not to mention it being a super tax on poor students who borrowed to improve their lot and their family’s lot in life. See tax burden chart for Delta County.

Sitting two and a half years after graduation, my debt burden has grown to $231,930.[1] Difficulty with the bar exam and the lingering effects of the financial crisis on the legal services industry has made finding a job in law incredibly challenging. The tenuous realities of the economy were noted when the Federal Open Market Committee (FOMC) opting to keep the Fed rate at 0%-0.25% - where they have been for the seven years since the financial crisis.[2]

While it may seem insane, the interest rates on my student loans range from 8.5% to 9.5%. Tack on fees and that is how the principal has grown by 60% in 2.5 years! As of 8 Dec. 2015, even the bank prime loan interest rate was 3.25%.[3] Although the Federal Reserve has no direct role in setting the prime rate, many banks choose to set their prime rates based partly on the target level of the federal funds rate--the rate that banks charge each other for short-term loans--established by the FOMC.[4]

The Fed has kept interest rates low to making capital easier to acquire. While student interest rates are over 10-times higher than the Fed rate, the fact that the loans are originated from a government lender has made raising the capital to earn a degree much easier.

Unlike other loans, student loans cannot be included in a bankruptcy. This means that if a graduate encounters a financial hardship, such as long-term unemployment, health related hardships, or general changes in the industry or world which effects entering the labor force, there is no recourse for restructuring and setting aside certain obligations. It should be noted, that law does permit setting aside some student loan obligations for permanent disabilities which did not exist at the time of the origination of the loan.

The Fed’s goals are maximum employment and an inflation rate of 2%.[5] The FOMC looks to any Federal Unemployment Rate of 5% or less per annum as full national employment. This is regardless of the Labor Force Participation Rate, which sheds light on the discouraged workers and long-term unemployed who are no longer filing for unemployment benefits.

Congress has created income-based debt repayment schemes to help those who are struggling to make the minimum monthly amounts. While this scheme has helped reduce the monthly repayment costs, the interest continues to accrue at an alarming rate. This is harmful to the borrower, because the reason for borrowing was because the borrower was poor. Maintaining high rates of interest for the term of the loan means an original $138,943 loan over a 30 year period means $281,648 will have been paid in interest. However, the repayment scheme for those facing financial hardship is even worse, as forbearance rolls unpaid interest into the principal. Thus, my Dec. 2015 re-adjusted student debt obligation of $231,930 will turn into $702,070 over a 30 year period, with $470,140 being additional interest. All in all, an original principal amount of $138,943 will, over a 30 year term, generate $751,788 in interest income for the U.S. government.

The other scheme Congress has is what is called the 10 year plan. This plan allows for debt forgiveness to occur after 10 years of working for the government or a non-profit entity. The policy purpose being that these jobs pay less than the private sector and would be challenged for the debtor to repay the burden. The other policy idea is to encourage smart, but non-wealthy students to earn graduate and post-graduate degrees. For forgiveness to be effective, in addition to the above, there must be 120 consecutive minimum payments made to the Department of Education.

For example, my Department of Education minimum payment is set at $2,760 per month. Assuming I follow the 30% Rule[6], the economic idea that a maximum of only 30% of a person’s income should go to rent or mortgage payments, I’d need to earn at least $4,667, presuming my rent was near the Denver, Colorado average of $1,400 per month.[7] This seems entirely doable, since that would be $56,000 per annum. After subtracting $33,120 for the yearly student loan minimum repayment and $16,800 for total rents, also don’t forget taxes, which between state and federal would be about $11,356. Add these three items up and each year you are going in red by at least $5,276. All this assumes you are not eating, commuting, having to buy clothes, or pay for emergencies.

The reality is that a person would need to earn over $100,000 in their government or non-profit job for ten years to survive financially. Even at $100,000, a borrower in my shoes would really just be surviving, as utilities, food, heath expenses, clothing, costs of children or dependents, insurance, etc. adds up very quickly, even if you are as frugal as someone who survived the Great Depression.

A problem for many policy makers is what if a young person goes off to law school or med school or engineering or business school and wants to come back to a poorer, rural region to serve the legal or medical or business needs of a small community. This debt burdened professional is not working for the government or a non-profit, thus one repayment play is off the table. Yet, should these communities be entitled to professionals who would serve the needs of that region? Often debt saddled student-borrowers are forced to work in the cities, leaving a void in poor, rural areas, where incomes wouldn’t be high enough to make payments, live, and support a family. 

I would like to see a plan that throws back the obligation to the original principal amount, then ties repayment to income and the Fed Rate. Considering the policy that student loans help smart, but poor students achieve careers in the learned professions which in turn helps elevate families to higher income brackets, thus leading to more tax generation. It is also a matter of fairness not to use forbearance provisions to hike up the aggregate repayment amount. High interest on loans is essentially a tax on poorer students who had to borrow to attend professional schools. The interest also punishes hard work and success by rewarding these borrowers less than their wealthier cohort who may make less, but would have more disposable income to spend, adding to the national GDP. Creating ways to allow for greater social mobility is a good idea; however using these methods to punish those who seek a better life seems highly unethical.

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[1] U.S. Dept. of Education, Loan Servicing. Navient-SallieMae Account of Matthew Soper. 29 Nov. 2015 Print.

[2] Neate, Rupert. “Federal Reserve keeps interest rates unchanged but hints at December rise.” The Guardian 28 Oct. 2015. Web. 7 Dec. 2015.

[3] Federal Reserve System. Selected Interest Rates -- H.15. 8 Dec. 2015. Web. 9 Dec. 2015.

[4] Federal Reserve System. FAQ – Credit, Loans, Mortgages. 2 Aug. 2013. Web. 9 Dec. 2015.

[5] Neate, Rupert. “Federal Reserve keeps interest rates unchanged but hints at December rise.” The Guardian 28 Oct. 2015. Web. 7 Dec. 2015.

[6] See: http://www.bloomberg.com/bw/articles/2014-07-17/housings-30-percent-of-income-rule-is-near-useless accessed 9 Dec. 2015.

[7] See: http://www.denverpost.com/business/ci_29013199/average-metro-denver-apartment-rent-drops-5-downtown accessed 9 Dec. 2015.

Balancing fairness and justice: airlines' cancellation policy creates turbulence

I had booked my air plane ticket with American Airlines (AA) a few months ago to fly back to Colorado in October, but in the interim accepted a job and needed to fly earlier. I called AA today to see if I could cancel, rebook, acquire credit, etc.

AA informed me they wouldn't refund, nor rebook my ticket without me paying the minimum $200 service fee. They further said either the named passenger could fly or the seat would be empty. The AA agent said, any change - refund, name change, rebooking - would carry a $200 service fee. The AA agent, upon seeing that my ticket was $141 said that I was ahead to cancel, take the loss and purchase a brand new ticket when I was ready to fly. I opted to rescind the reservation. I presume the $141 I had paid in-advance would be regarded as pure economic loss.

I understand the contract analysis that the bargain for exchange was $141 in exchange for non-refundable reservation/ticket. If I had contracted for a refundable ticket, that would have been $1,056.

Playing out the fact pattern a bit more, let's say that AA sells the seat I cancelled to another. That means AA not only gets my $141, but also gets to profit from making another sale. Even if AA doesn't resell my cancelled seat, they still have a greater bargain than they contracted for, as without me riding the plane, they would have better fuel efficiency because the plane would be lighter, from less body and cargo weight.

Perhaps it is that I am poor and $141 is a lot of money to me, but it seems unfair. I thought about unjustified enrichment as a possible legal basis for action, but such an action is only to prevent a breaching party from receiving the benefit. Since I am breaching party, I wouldn't have a right to claim AA is unjustly enriched.

On the regulatory side, the Department of Transportation has determined that notice of terms concerning refunds and monetary penalties is sufficiently important to be given directly to passengers. The regulations say, "A passenger shall not be bound by any terms restricting refunds of the ticket price, imposing monetary penalties on passengers, or permitting the carrier to raise the price, unless the passenger receives conspicuous written notice of the salient features of those terms on or with the ticket." 14 C.F.R. § 253.7.

Not that a non-refundable ticket bounds AA to not granting refunds, it is just that to award a refund of the ticket price carries a $200 service fee. Perhaps the software licence or call center's staff are expensive, but $200 seems a bit hefty for a service fee. Makes me wonder at what point does a fee become a monetary penalty? Conversely, it seems keeping the ticket price is a constructive monetary penalty. Also, the service fee is a constructive form of restricting refunds, as who would pay $200 to get a $141 ticket refund?