When Does Vanguard's Patent(s) Expire?

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Boglenaut
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When Does Vanguard's Patent(s) Expire?

Post by Boglenaut » Fri Jan 06, 2012 2:44 pm

I am just curious... when does Vanguards patent(s) expire where ETFs are a share class of the Mutual Fund?

That should be an interesting time.

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Re: When Does Vanguard's Patent(s) Expire?

Post by ScottW » Fri Jan 06, 2012 3:33 pm

Vanguard originally filed a utility patent (6,879,964) in March 2001 for VIPERs, but then filed an amended patent (7,337,138) March 28, 2005. Utility patents are good for 20 years from the filing date, so they either expire March 2021 or March 2025. I'm not sure if amended patents reset the lifespan. You can search on the patent #s in Google if you're interested.

In any case, it'll be a while . . .

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Re: When Does Vanguard's Patent(s) Expire?

Post by Boglenaut » Fri Jan 06, 2012 3:52 pm

ScottW wrote:Vanguard originally filed a utility patent (6,879,964) in March 2001 for VIPERs, but then filed an amended patent (7,337,138) March 28, 2005. Utility patents are good for 20 years from the filing date, so they either expire March 2021 or March 2025. I'm not sure if amended patents reset the lifespan. You can search on the patent #s in Google if you're interested.
What a good answer!
In any case, it'll be a while . .
OK, I want to go on record as the first one to start a thread on this topic! :wink: :wink:

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Re: When Does Vanguard's Patent(s) Expire?

Post by KyleAAA » Fri Jan 06, 2012 3:56 pm

Off topic, but I don't think something like that should even be patentable. I'm surprised it is.

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Re: When Does Vanguard's Patent(s) Expire?

Post by Boglenaut » Fri Jan 06, 2012 4:05 pm

KyleAAA wrote:Off topic, but I don't think something like that should even be patentable. I'm surprised it is.
I agree. Some things I see patented are just silly.

No problem going off topic...this thread was otherwise due to fade away. :)

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Re: When Does Vanguard's Patent(s) Expire?

Post by madsinger » Fri Jan 06, 2012 4:17 pm

Boglenaut wrote:OK, I want to go on record as the first one to start a thread on this topic! :wink: :wink:
Starting this thread is an obvious move by any PHOSITA!

http://en.wikipedia.org/wiki/Person_hav ... in_the_art

:wink:

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Re: When Does Vanguard's Patent(s) Expire?

Post by etarini » Fri Jan 06, 2012 4:24 pm

Since the OP's question was answered, and the topic of things that shouldn't be patentable has been brought up, I'd like to nominate what I consider to be the most outrageous patent: Amazon's One-Click ordering.

Even I would have to admit that I don't think it's done much harm, but they should still be ashamed of themselves.

Eric

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Re: When Does Vanguard's Patent(s) Expire?

Post by pointyhairedboss » Fri Jan 06, 2012 5:46 pm

I am curious how we, the shareholders of Vanguard funds, supposedly the owners of Vanguard, benefit from these patents? If not, why waste time and money creating/advancing/enforcing such patents. The only answer I can see if that Vanguard is doing what is best for Vanguard business, with little eye towards whether such a move provides any benefit to Vanguard shareholders. Seems their focus may be a little off.

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Re: When Does Vanguard's Patent(s) Expire?

Post by dickenjb » Fri Jan 06, 2012 6:31 pm

Uh last time I checked in order to be patentable an invention had to be:

1) novel
2) useful
3) unobvious

Those who think ETF's as a share class of the open end funds should not be a patentable invention - which criterion do you feel it does not meet?

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Re: When Does Vanguard's Patent(s) Expire?

Post by chipmonk » Fri Jan 06, 2012 6:40 pm

dickenjb wrote:Uh last time I checked in order to be patentable an invention had to be:

1) novel
2) useful
3) unobvious

Those who think ETF's as a share class of the open end funds should not be a patentable invention - which criterion do you feel it does not meet?
I think the part most of us take issue with is (3) unobvious. The key is that for an invention to be patentable it has to be non-obvious to a person having ordinary skill in the art.

It seems to me that the idea of an ETF as a share class of an open-ended mutual fund is rather straightforward to someone with an average understand of finance and mutual funds.

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Re: When Does Vanguard's Patent(s) Expire?

Post by chipmonk » Fri Jan 06, 2012 6:44 pm

pointyhairedboss wrote:I am curious how we, the shareholders of Vanguard funds, supposedly the owners of Vanguard, benefit from these patents? If not, why waste time and money creating/advancing/enforcing such patents. The only answer I can see if that Vanguard is doing what is best for Vanguard business, with little eye towards whether such a move provides any benefit to Vanguard shareholders. Seems their focus may be a little off.
Good question, and I'd like to know the answer too.

Has Vanguard ever threatened legal action against another mutual fund provider proposing to set up an ETF share class?

This is just speculation but... it may be that Vanguard acquired these patents for "defensive" purposes. Especially in information technology and software, patents are a complicated, ridiculous mess, and many large companies now amass them without any real intent to use them to attack other companies, but only to protect themselves with retaliatory patents in case they themselves are attacked. Protecting Android against lawsuits from Apple, Nokia, Microsoft, etc. has been cited as one of the main reason motivating Google's acquisition of Motorola's mobile phone division.

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Re: When Does Vanguard's Patent(s) Expire?

Post by hicabob » Fri Jan 06, 2012 6:51 pm

dickenjb wrote:Uh last time I checked in order to be patentable an invention had to be:

1) novel
2) useful
3) unobvious

Those who think ETF's as a share class of the open end funds should not be a patentable invention - which criterion do you feel it does not meet?

Things often seem obvious after someone else explains it . My biz partners neighbor made many millions by inventing the "pi tape" - measure the circumference and it will tell you the diameter - or using another scale measure the diameter it will tell you the circumference. It's a nice example of a simple yet successfully patentable concept.

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Re: When Does Vanguard's Patent(s) Expire?

Post by sport » Fri Jan 06, 2012 7:25 pm

pointyhairedboss wrote:I am curious how we, the shareholders of Vanguard funds, supposedly the owners of Vanguard, benefit from these patents? If not, why waste time and money creating/advancing/enforcing such patents. The only answer I can see if that Vanguard is doing what is best for Vanguard business, with little eye towards whether such a move provides any benefit to Vanguard shareholders. Seems their focus may be a little off.
If Vanguard does things that are "best for Vanguard business", it should help Vanguard grow its business, and thus have lower unit costs (economies of scale). Lower costs for Vanguard mean lower expense ratios for Vanguard funds. Therefore, it seems that Vanguard, by helping itself, also helps its shareholders/customers. I see nothing wrong with Vanguard's focus.

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Re: When Does Vanguard's Patent(s) Expire?

Post by archbish99 » Fri Jan 06, 2012 7:35 pm

chipmonk wrote:
pointyhairedboss wrote:I am curious how we, the shareholders of Vanguard funds, supposedly the owners of Vanguard, benefit from these patents? If not, why waste time and money creating/advancing/enforcing such patents. The only answer I can see if that Vanguard is doing what is best for Vanguard business, with little eye towards whether such a move provides any benefit to Vanguard shareholders. Seems their focus may be a little off.
Good question, and I'd like to know the answer too.

Has Vanguard ever threatened legal action against another mutual fund provider proposing to set up an ETF share class?

This is just speculation but... it may be that Vanguard acquired these patents for "defensive" purposes. Especially in information technology and software, patents are a complicated, ridiculous mess, and many large companies now amass them without any real intent to use them to attack other companies, but only to protect themselves with retaliatory patents in case they themselves are attacked. Protecting Android against lawsuits from Apple, Nokia, Microsoft, etc. has been cited as one of the main reason motivating Google's acquisition of Motorola's mobile phone division.
And, too, the point is rarely (though sometimes) to prevent other people from using them; it's to claim a slice of your competitor's income. Microsoft makes more money annually in licensing fees of the patents it holds on Android phones than it currently makes on Windows Phone itself. Vanguard's advertised advantage is being the lowest fees in the industry. Licensing income from other companies increases their ER, but enables Vanguard to further lower theirs because they have an alternate source of income.

Which is, incidentally, how we the shareholders benefit. I would bet Vanguard isn't being restrictive with the patent, just tying a modest licensing fee to it.
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Re: When Does Vanguard's Patent(s) Expire?

Post by nisiprius » Fri Jan 06, 2012 7:43 pm

I'm not sure what happened or how it happened, but it happened circa 1989 or so. The big computer company I was working at a notice from the legal department posted on every bulletin board in the building:

"IMPORTANT.

To those who think computer programs cannot be patented:

THEY CAN BE."

with directions on how to contact the legal department.

The ability to patent computer algorithms and business processes is completely bonkers, in my opinion. What held it off for a couple of centuries was that patents had to relate to things that produced a physical result. It was not true that patents required a "working model," but that was the general spirit. A patentable thing was a physical gadget. My grandmother patented something having to do with women's underwear, something about hooks and clasps, I'm not sure what. There were design patents--the Statue of Liberty had one. Nothing about intellectual property is clear, and it didn't just encompass gadgets, but the general idea was that it had to be a gadget, and the patent office tended to refuse patents to anything that involved mechanical calculation.

Then someone snuck by some kind of thermostat that used firmware, I think, on the grounds that the firmware was just emulating something that could have been done by a physical linkage but wasn't, or something like that, and a few court decisions went the wrong way, and all hell broke loose.

It was intensely annoying because up until then, free sharing of knowledge had been the norm in the programming community, and you had the infuriating absurdity of all sorts of stuff that was more than obvious to any programmer getting patented. The one I remember was the technique of animating a screen cursor by using an XOR function, that was so obvious that the problem was to think of any other way it could be done.

I'm sure you're aware of the "sideways swinging patent?" A five-year-old boy discovered that he could make a playground swing swing sideways by pulling alternately at the chain on the left and right, a process that is obvious to any five-year-old skilled in the art, and his father, a patent lawyer, for obscure motives, successfully obtained Patent 6,368,227 on it. Click on that link and look on it, if you haven't already heard about it. That one got a storm of publicity and apparently was eventually cancelled, but the fact that the patent was granted in the first place was appalling.

So Vanguard probably had to patent the business process, lest someone else patent it and demand that Vanguard pay them royalties, maybe. I dunno. It's insane.

What would have happened if Maxwell had been able to patent Maxwell's equations? If Boole had been able to patent Boolean algebra? Is a chord progression a business process--what if someone decided to patent the plagal cadence? Put half the hymns in the world out of business...
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Re: When Does Vanguard's Patent(s) Expire?

Post by TheEternalVortex » Fri Jan 06, 2012 7:49 pm

I would hope that this is just a defensive patent.

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Re: When Does Vanguard's Patent(s) Expire?

Post by Archie Sinclair » Fri Jan 06, 2012 7:50 pm

archbish99 wrote:And, too, the point is rarely (though sometimes) to prevent other people from using them; it's to claim a slice of your competitor's income. Microsoft makes more money annually in licensing fees of the patents it holds on Android phones than it currently makes on Windows Phone itself. Vanguard's advertised advantage is being the lowest fees in the industry. Licensing income from other companies increases their ER, but enables Vanguard to further lower theirs because they have an alternate source of income.

Which is, incidentally, how we the shareholders benefit. I would bet Vanguard isn't being restrictive with the patent, just tying a modest licensing fee to it.
I've never come across another company with mutual fund-ETF hybrids. And Vanguard describes this structure as "unique" (https://advisors.vanguard.com/VGApp/iip ... RsOverview), which wouldn't be true if there were other companies licensing the patent.

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Re: When Does Vanguard's Patent(s) Expire?

Post by pointyhairedboss » Fri Jan 06, 2012 7:52 pm

So Vanguard probably had to patent the business process, lest someone else patent it and demand that Vanguard pay them royalties, maybe. I dunno. It's insane.
Not necessarily. Once Vanguard released their 'ETFs as a share of mutual funds' product, they demonstrated the art. If somebody were to later patent the concept, Vanguard has the prior art defense.

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Re: When Does Vanguard's Patent(s) Expire?

Post by pointyhairedboss » Fri Jan 06, 2012 8:08 pm

I think the part most of us take issue with is (3) unobvious.
I agree...

The ability to patent computer algorithms and business processes is completely bonkers, in my opinion.
Amen.

Theoretically, patents are supposed to stimulate innovation. This instance demonstrates - yet again - how patents can stifle innovation. It is likely the case that competitors won't even bother to introduce similar products because of this patent. This hurts consumers as they have less selection as a result of less competition. Additionally, having an etf as a shareclass of a mutual fund makes good business sense independent of whether its patentable. Vanguard would have introduced the product regardless of whether it had a patent. So, in summary, the ability to patent in this instance didn't stimulate the innovation, and it has since stifled innovation.

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Re: When Does Vanguard's Patent(s) Expire?

Post by pointyhairedboss » Fri Jan 06, 2012 8:15 pm

If Vanguard does things that are "best for Vanguard business", it should help Vanguard grow its business, and thus have lower unit costs (economies of scale). Lower costs for Vanguard mean lower expense ratios for Vanguard funds. Therefore, it seems that Vanguard, by helping itself, also helps its shareholders/customers. I see nothing wrong with Vanguard's focus.
That is probably the least lame explanation that can be made. I don't agree with it. I would guess that the increased competition would motivate Vanguard to lower their expense ratios more than any increase in assets. I know that Vanguard is supposed to offer products 'at cost', but a vaguely recall several occasions where Vanguard introduced price cuts and/or increased features right about the time a competitor offered a competing product, which tells me 'at cost' is a bit flexible.

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Re: When Does Vanguard's Patent(s) Expire?

Post by KyleAAA » Fri Jan 06, 2012 9:03 pm

dickenjb wrote:Uh last time I checked in order to be patentable an invention had to be:

1) novel
2) useful
3) unobvious

Those who think ETF's as a share class of the open end funds should not be a patentable invention - which criterion do you feel it does not meet?
It does not meet one or three. Three for sure.

But I disagree with the entire premise of the American patent system to begin with, so EVEN IF it did meet the above three criteria I still think it shouldn't be patentable. The system is stupid and the patent office doesn't even check prior art before granting a patent. Worse, it doesn't do anything to publicize the fact that it's considering granting a patent so that people who are already using the process can step forward. Case in point: Google patented a process either last year or the year before that I had personally been using (along with literally millions of others) for years. The process was no secret and was described in detail on thousands of websites all over the internet for as long as I can remember. I didn't even hear about it until I read about it on some SEO blog.

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Re: When Does Vanguard's Patent(s) Expire?

Post by nisiprius » Fri Jan 06, 2012 9:19 pm

ETFs as a share class of mutual funds might not be obvious. The two beasts work in different ways. I don't understand how either of them work, but I know that they're different! Mutual funds have to redeem shares themselves and have cash on hand to do that an snapshot the NAV at 4 p.m. and all that. ETFs have to make creation units and whatnot. And both of them have to meet regulatory requirements that are probably quite a bit different. Vanguard has said that they couldn't make an ETF out of the old Total International Stock Index Fund because it was a fund-of-funds and an ETF isn't allowed to be a fund-of-funds, and so forth.

So there might be a lot of non-obvious machinery under the hood that takes the same raw material and fashions them into creation units in such a way that both sets of regulatory requirement are met, or, gosh knows what.

In a Dilbert cartoon I wish I'd snipped, the pointy-haired boss begins by saying that "Reasoning that anything I don't understand must be easy..."
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Re: When Does Vanguard's Patent(s) Expire?

Post by nisiprius » Fri Jan 06, 2012 9:31 pm

So what is the patent exactly. Google patents, click click, George Sauter... who'd have thought that would be a common name? He invented a [url=ttp://www.google.com/patents?id=TsZFAAAAEBAJ& ... CDMQ6AEwAA]veneer cask[/url] in 1898 that keeps beer cooler. That's probably not it. Optical spectroscopy soil analyzer, 1994. Probably not it.

Investment company that issues a class of conventional shares and a class of..., 2001. That sounds good.

Patent 7720749, Filing date: Feb 25, 2008, Issue date: May 18, 2010Purchase and selling of exchange-traded shares in an investment company that ... That sounds good, too.

Is this "obvious?" (Shrug) Obviously I'm not "skilled in the art." I dunno. But maybe it's not as obvious as all that.

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Re: When Does Vanguard's Patent(s) Expire?

Post by bigH » Wed Jan 18, 2012 10:37 pm

As someone who works in the industry, domesticly and globally, this is a topic I know well. Unfortunately, I cannot share
much. What I will say is that our patent system is one of the best in the world and played a crucial role (along with our capital markets) in our countries growth in our relatively short history. It is not perfect but does its job to encourage inventing by companies of all sizes and individuals.

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Re: When Does Vanguard's Patent(s) Expire?

Post by gtwhitegold » Tue Mar 12, 2019 7:54 pm

Revisiting this since we are about 12 months away from the expiration of Vanguard's ETF as a share class of a Mutual Fund patent. It will be interesting to see if Schwab, Fidelity, or other such firm will submit fund registration documents for new funds with this structure, or a merger of their existing ETFs and Mutual Funds.

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Re: When Does Vanguard's Patent(s) Expire?

Post by Slacker » Tue Mar 12, 2019 8:15 pm

chipmonk wrote:
Fri Jan 06, 2012 6:40 pm
dickenjb wrote:Uh last time I checked in order to be patentable an invention had to be:

1) novel
2) useful
3) unobvious

Those who think ETF's as a share class of the open end funds should not be a patentable invention - which criterion do you feel it does not meet?
I think the part most of us take issue with is (3) unobvious. The key is that for an invention to be patentable it has to be non-obvious to a person having ordinary skill in the art.

It seems to me that the idea of an ETF as a share class of an open-ended mutual fund is rather straightforward to someone with an average understand of finance and mutual funds.
I'm responding to something from a long time ago, but I wanted to point out that in order for something to be deemed non-obvious (based on 35 USC 103), you have to meet specific legal guidelines. For example, it had to have been non-obvious at the time of the invention, not just looking back with hindsight. The invention has to be taken as a whole (you can't just piece meal together individual components of prior art and claim that something isn't obvious in that manner). Non-obviousness need be shown within the art of the invention (financial transactions) with PRIOR ART...you can't use non-analogous prior art from a different field of endeavor. You would need to provide a teaching, suggestion or motivation for arriving at non-obviousness. While Graham v Deere and KSR v Teleflex make the determination of obviousness easier on the Patent Examiner, you still have to provide a reasoned statement, with evidence before you can state something is non-obvious. This prior art need be shown to have been filed or published before the date of invention.

WRT novelty (35 USC 102 (a, b or e)), you better be able to show essentially an identical (item to item matched) invention in prior art, otherwise it IS NOVEL based on the statutes. Remember, you have to produce the prior art that was filed or published and widely available BEFORE the date of the invention.

Usefulness - well, I'd say the bigger question that keeps on getting batted around in the courts is one of whether or not something is an abstract idea vs usefulness when dealing with business methods and software. I have never heard of a rejection for usefulness (how is an Examiner going to prove that an invention isn't useful?).

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Re: When Does Vanguard's Patent(s) Expire?

Post by abuss368 » Tue Mar 12, 2019 8:28 pm

I was surprised to learn that Vanguard filed a patent for ETFs as a share class of a fund. When the patent expires I am not so sure it will change much in the industry. Vanguard will continue to do what it does best: lower the cost for investors.
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Re: When Does Vanguard's Patent(s) Expire?

Post by david » Tue Mar 12, 2019 8:31 pm

Slacker wrote:
Tue Mar 12, 2019 8:15 pm
chipmonk wrote:
Fri Jan 06, 2012 6:40 pm
dickenjb wrote:Uh last time I checked in order to be patentable an invention had to be:

1) novel
2) useful
3) unobvious

Those who think ETF's as a share class of the open end funds should not be a patentable invention - which criterion do you feel it does not meet?
I think the part most of us take issue with is (3) unobvious. The key is that for an invention to be patentable it has to be non-obvious to a person having ordinary skill in the art.

It seems to me that the idea of an ETF as a share class of an open-ended mutual fund is rather straightforward to someone with an average understand of finance and mutual funds.
I'm responding to something from a long time ago, but I wanted to point out that in order for something to be deemed non-obvious (based on 35 USC 103), you have to meet specific legal guidelines. For example, it had to have been non-obvious at the time of the invention, not just looking back with hindsight. The invention has to be taken as a whole (you can't just piece meal together individual components of prior art and claim that something isn't obvious in that manner). Non-obviousness need be shown within the art of the invention (financial transactions) with PRIOR ART...you can't use non-analogous prior art from a different field of endeavor. You would need to provide a teaching, suggestion or motivation for arriving at non-obviousness. While Graham v Deere and KSR v Teleflex make the determination of obviousness easier on the Patent Examiner, you still have to provide a reasoned statement, with evidence before you can state something is non-obvious. This prior art need be shown to have been filed or published before the date of invention.

WRT novelty (35 USC 102 (a, b or e)), you better be able to show essentially an identical (item to item matched) invention in prior art, otherwise it IS NOVEL based on the statutes. Remember, you have to produce the prior art that was filed or published and widely available BEFORE the date of the invention.

Usefulness - well, I'd say the bigger question that keeps on getting batted around in the courts is one of whether or not something is an abstract idea vs usefulness when dealing with business methods and software. I have never heard of a rejection for usefulness (how is an Examiner going to prove that an invention isn't useful?).
Re: usefullness
If they can prove it can't work such as with a free energy/perpetual motion device.

Re: published art, it doesn't have to be widely published. It just needs to be published publicly. Single copy in a college library counts.

One thing noone mentioned, there's Patent Term Adjustment of 800ish days*. That potentially adds to the term.

IMO there are incredibly large 35 USC sec. 101 issues with the parent patent.* This patent likely wouldn't survive a challenge*. Looking at the issued claims in the newest patent, I think there's a similar problem.*

* Not legal advice. Don't rely on this.

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Re: When Does Vanguard's Patent(s) Expire?

Post by Slacker » Wed Mar 13, 2019 7:35 am

david wrote:
Tue Mar 12, 2019 8:31 pm
Slacker wrote:
Tue Mar 12, 2019 8:15 pm
chipmonk wrote:
Fri Jan 06, 2012 6:40 pm
dickenjb wrote:Uh last time I checked in order to be patentable an invention had to be:

1) novel
2) useful
3) unobvious

Those who think ETF's as a share class of the open end funds should not be a patentable invention - which criterion do you feel it does not meet?
I think the part most of us take issue with is (3) unobvious. The key is that for an invention to be patentable it has to be non-obvious to a person having ordinary skill in the art.

It seems to me that the idea of an ETF as a share class of an open-ended mutual fund is rather straightforward to someone with an average understand of finance and mutual funds.
I'm responding to something from a long time ago, but I wanted to point out that in order for something to be deemed non-obvious (based on 35 USC 103), you have to meet specific legal guidelines. For example, it had to have been non-obvious at the time of the invention, not just looking back with hindsight. The invention has to be taken as a whole (you can't just piece meal together individual components of prior art and claim that something isn't obvious in that manner). Non-obviousness need be shown within the art of the invention (financial transactions) with PRIOR ART...you can't use non-analogous prior art from a different field of endeavor. You would need to provide a teaching, suggestion or motivation for arriving at non-obviousness. While Graham v Deere and KSR v Teleflex make the determination of obviousness easier on the Patent Examiner, you still have to provide a reasoned statement, with evidence before you can state something is non-obvious. This prior art need be shown to have been filed or published before the date of invention.

WRT novelty (35 USC 102 (a, b or e)), you better be able to show essentially an identical (item to item matched) invention in prior art, otherwise it IS NOVEL based on the statutes. Remember, you have to produce the prior art that was filed or published and widely available BEFORE the date of the invention.

Usefulness - well, I'd say the bigger question that keeps on getting batted around in the courts is one of whether or not something is an abstract idea vs usefulness when dealing with business methods and software. I have never heard of a rejection for usefulness (how is an Examiner going to prove that an invention isn't useful?).
Re: usefullness
If they can prove it can't work such as with a free energy/perpetual motion device.

Re: published art, it doesn't have to be widely published. It just needs to be published publicly. Single copy in a college library counts.

One thing noone mentioned, there's Patent Term Adjustment of 800ish days*. That potentially adds to the term.

IMO there are incredibly large 35 USC sec. 101 issues with the parent patent.* This patent likely wouldn't survive a challenge*. Looking at the issued claims in the newest patent, I think there's a similar problem.*

* Not legal advice. Don't rely on this.
True that by statute it doesn't have to be widely published. Now, which examiners have the time and access to find that single copy in a college library? Remember, the examiner has roughly 7 to 13 hrs to understand the application, review for formal matters, conduct search and issue an office action. Given that only the examiners are allowed to use broadest reasonable interpretation... Once the examiner issues the application, dealing with a bad patent will be tougher.

WRT free energy devices - we aren't discussing a mechanical or electrical system here. Context matters.

I have not reviewed the patent being discussed, I don't know this art, and the guidelines for 35 USC 101 have changed many times since 2000.

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Re: When Does Vanguard's Patent(s) Expire?

Post by ReformedSpender » Wed Mar 13, 2019 8:10 am

Doesn't confirm expiration date, however, Gus Sauter does a good job explaining the Vanguard patents around the 24 minute mark in his interview with Rick Ferri

https://rickferri.com/podcast/episode-0 ... ick-ferri/

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Re: When Does Vanguard's Patent(s) Expire?

Post by sport » Wed Mar 13, 2019 10:29 am

A quick search shows that Vanguard has 11 patents relating to ETFs. You can find them here:
http://patft.uspto.gov/netacgi/nph-Pars ... D2=&d=PTXT

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Re: When Does Vanguard's Patent(s) Expire?

Post by bryanm » Wed Mar 13, 2019 10:46 am

sport wrote:
Wed Mar 13, 2019 10:29 am
A quick search shows that Vanguard has 11 patents relating to ETFs. You can find them here:
http://patft.uspto.gov/netacgi/nph-Pars ... D2=&d=PTXT
Interesting to note that the latest issuance in that list is January of 2014, just a few months before the Supreme Court decision in Alice that made patenting of financially-related concepts substantially harder.

For anyone who thinks these are bad patents, you might be interested to know that since this thread launched, there have been substantial changes in how the Patent Office allows challenges to bad patents. A new procedure, known as Inter Partes Review (IPR), allows anyone to challenge the validity of a patent (on certain grounds, such as obviousness in view of published prior art). All it takes is a few hundred thousand dollars in legal fees! Pretty sure the forum has some users with that kind of cash...

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Re: When Does Vanguard's Patent(s) Expire?

Post by GAAP » Wed Mar 13, 2019 11:25 am

chipmonk wrote:
Fri Jan 06, 2012 6:40 pm
I think the part most of us take issue with is (3) unobvious. The key is that for an invention to be patentable it has to be non-obvious to a person having ordinary skill in the art.
The first ETF was launched in 1993. The Vanguard patent is dated 2005.

Must not have been too obvious...
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Re: When Does Vanguard's Patent(s) Expire?

Post by KyleAAA » Wed Mar 13, 2019 11:51 am

GAAP wrote:
Wed Mar 13, 2019 11:25 am
chipmonk wrote:
Fri Jan 06, 2012 6:40 pm
I think the part most of us take issue with is (3) unobvious. The key is that for an invention to be patentable it has to be non-obvious to a person having ordinary skill in the art.
The first ETF was launched in 1993. The Vanguard patent is dated 2005.

Must not have been too obvious...
That would probably have more to do with business realities than how novel the concept is. Many patents in the tech world make me scratch my head because they are so blindingly obvious. In many cases, people were doing them long before the patent and just never thought it important enough to bother with, or they were just against software patents in general. I think that's probably getting better as the patent office becomes more tech-aware. In this case, the business model would have to have aligned with the strategy to make sense and I can't really think of anybody other than Vanguard in the early 2000s where it would have even been a possibility. Same thing with the ipod: Apple was the only company in a position to combine sleek consumer hardware with music. Sony tried several years before but since they were also a large record label, couldn't make it work: the other labels wouldn't work with them.

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Re: When Does Vanguard's Patent(s) Expire?

Post by Dottie57 » Wed Mar 13, 2019 11:57 am

KyleAAA wrote:
Wed Mar 13, 2019 11:51 am
GAAP wrote:
Wed Mar 13, 2019 11:25 am
chipmonk wrote:
Fri Jan 06, 2012 6:40 pm
I think the part most of us take issue with is (3) unobvious. The key is that for an invention to be patentable it has to be non-obvious to a person having ordinary skill in the art.
The first ETF was launched in 1993. The Vanguard patent is dated 2005.

Must not have been too obvious...
That would probably have more to do with business realities than how novel the concept is. Many patents in the tech world make me scratch my head because they are so blindingly obvious. In many cases, people were doing them long before the patent and just never thought it important enough to bother with, or they were just against software patents in general. I think that's probably getting better as the patent office becomes more tech-aware. In this case, the business model would have to have aligned with the strategy to make sense and I can't really think of anybody other than Vanguard in the early 2000s where it would have even been a possibility. Same thing with the ipod: Apple was the only company in a position to combine sleek consumer hardware with music. Sony tried several years before but since they were also a large record label, couldn't make it work: the other labels wouldn't work with them.
iPod came before there was an iTunes music store - no cooperation needed.

IPod 2001
Music store 2003

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Re: When Does Vanguard's Patent(s) Expire?

Post by Ping Pong » Wed Mar 13, 2019 12:06 pm

The beauty of an ETF is that the implicit cost of flows are borne solely by the people causing them. When you have a dual share structure, the ETF holders have to subsidize the cost of flows caused by the traditional fund holders.

It looks like Vanguard is now starting to make the ETF share class less expensive to compensate them for this side effect.

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Re: When Does Vanguard's Patent(s) Expire?

Post by Ged » Wed Mar 13, 2019 12:10 pm

etarini wrote:
Fri Jan 06, 2012 4:24 pm
Since the OP's question was answered, and the topic of things that shouldn't be patentable has been brought up, I'd like to nominate what I consider to be the most outrageous patent: Amazon's One-Click ordering.

Even I would have to admit that I don't think it's done much harm, but they should still be ashamed of themselves.

Eric
It isn't Amazon who should be ashamed. They are just doing their job. It's the US Congress, USPTO and the United States Court of Appeals for the Federal Circuit who should be ashamed.

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Re: When Does Vanguard's Patent(s) Expire?

Post by jhfenton » Wed Mar 13, 2019 12:14 pm

Ping Pong wrote:
Wed Mar 13, 2019 12:06 pm
The beauty of an ETF is that the implicit cost of flows are borne solely by the people causing them. When you have a dual share structure, the ETF holders have to subsidize the cost of flows caused by the traditional fund holders.

It looks like Vanguard is now starting to make the ETF share class less expensive to compensate them for this side effect.
That was an argument made by Vanguard's competitors when Vanguard launched the dual share-class structure. But if you look at performance, it has not been an issue. You simply don't see any mutual fund drag on the ETF share class. And in less liquid markets, where Vanguard was worried about drag, Vanguard has had purchase fees on the mutual funds to compensate. Sometimes those have gone away (e.g. VSS/Vanguard All-World ex-US Small Cap) when the fund grew large enough, and sometimes they haven't (e.g. Vanguard ex-US Real Estate, Vanguard EM Govt Bond Index, Vanguard Int Corp Bond Index & Long Corp Bond Index).

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Re: When Does Vanguard's Patent(s) Expire?

Post by Chester Peake » Wed Mar 13, 2019 12:41 pm

Retired (11years ago!) patent agent* here, formerly in-house at a very large company.

I started as an engineer/mathematician and engineering manager, and then made the transition to patent agent in my late 40's (out of necessity at the time). I also have about 50 US patents on my own inventions as an engineer, for whatever they're worth.

Engineers and computer people often misunderstand two aspects of patents: (1) the patented invention is defined solely by the formal claims, not whatever might appear in the patent's specification (the wordy part), which serves more-or-less to give meaning to the terms used in the claims, and (2) -- this is the hardest part -- my opinion and your opinion make no difference whatsoever about the validity of a patent, the patent process, and so forth, unless our name begins with the title "examiner," "commissioner," "judge," or "justice."

As mentioned above, the game changes frequently, both as laws and practices change, and as new PTO commissioners come and go, each with his own thoughts about how things should be done.

Two questions come to mind about software and business-method patents. The first concerns "statutory subject matter," meaning whether or not a class of invention is patentable as proscribed by US law. The best guide to this is "case law" -- i.e., court decisions over the recent past. These decisions are supposed to trickle down from the Commish to the primary examiners, to the examiners. Sometimes, they don't.

The second question concerns obviousness. Someone famous (Learned Hand?) once noted that only God works from scratch; consequently all inventions are combinations of known things. Making the call as to which combinations are obvious and which are not is difficult and often controversial. At one time, an examiner needed to find explicit teaching in the prior art suggesting a combination in order to hold it obvious. My guess (retired too long to know for sure) is that this requirement has been superseded. One thing for sure, though, is that if you find documentation of an invention that predates a patent on said :happy (!) invention (as defined exactly by the claims), the patent can be overturned fairly easily.


* A patent agent is admitted to the patent bar, but not the state bar. The SCOTUS has called the work of a patent agent "the practice of law (Sperry v Florida)," but the practice is limited to matters before the patent office (e.g., no litigation in court). The qualifications for becoming a patent agent include an engineering or scientific education (but not a law degree), and the passing of a difficult "bar exam" administered by the patent office. People think that this should be a fun job. A lot of the time, it's not.

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Re: When Does Vanguard's Patent(s) Expire?

Post by bryanm » Wed Mar 13, 2019 12:58 pm

Lots of good thoughts there Chester. I think you're thinking of Chief Judge Markey of the U.S. Federal Circuit (the appeals court for patent matters, and second highest authority on patent law after SCOTUS), who said of obviousness "Only God works from nothing. Man must work with old elements."

On your comment about explicit teaching to combine, the Supreme Court addressed that in KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398 (2007) (link is to Wikipedia). The bottom line is that explicit teaching of a combination is not a legal requirement for obviousness under current law. "Obviousness" as a legal doctrine has basically branched from the term as it is used in plain English, and one should not try to apply the plain English definition while ignoring the legal background. That's a big part of what keeps patent lawyers employed.

Now we're really down in the patent weeds :)

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Re: When Does Vanguard's Patent(s) Expire?

Post by nisiprius » Wed Mar 13, 2019 1:27 pm

Not sure that it matters much.

In 2001, when Vanguard introduced what were then called "VIPERs," Vanguard had lots of index funds, and nobody else had lots of them. Fidelity had a handful (the Spartan funds). DFA had a lots of "passive" funds but they were not index funds.

I'm thinking that VIPERS were valuable to Vanguard because they let Vanguard instantly create ETFs out of any index fund, turn the crank and the ETF pops out, instantly giving them several dozen ETFs to put on the market. Vanguard was, and even today probably is, the only company in that position.

Suppose the patent does expire. What company do you see as having an existing line of index funds, but no corresponding ETFs, and a desire to make corresponding ETFs? Fidelity, just possibly Fidelity. Anybody else?

I'm not sure the business process is really valuable to anybody else but Vanguard. If there had really been companies eager to make ETFs out of mutual funds, they'd have figured out what little changes they could ring to get around the patent; we'd have FIBERs (Fidelity Index Benchmark Equity Receipts) and TRIPPERs (T. Rowe Price Psych Edelic Receipts) and DUFFERs (DFA Unmanaged Fama-French Equity Receipts) and BOOGERs (Blackrock Optimally Oriented Growth Equity Receipts). Even if they'd infringed Vanguard's patents, I can't see Vanguard spending money in a patent fight. Last big patent fight I remember was the one that Polaroid won against Kodak, and what a Pyrrhic victory that was.

I suspect the patent was just routine defensiveness for the sake of defensiveness. Legal best practice. But we will see.

Incidentally, "VIPER" was the only time I can recall Vanguard flirting with a hip marketing name; it apparently didn't go well.
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Re: When Does Vanguard's Patent(s) Expire?

Post by KyleAAA » Wed Mar 13, 2019 2:46 pm

Dottie57 wrote:
Wed Mar 13, 2019 11:57 am
KyleAAA wrote:
Wed Mar 13, 2019 11:51 am
GAAP wrote:
Wed Mar 13, 2019 11:25 am
chipmonk wrote:
Fri Jan 06, 2012 6:40 pm
I think the part most of us take issue with is (3) unobvious. The key is that for an invention to be patentable it has to be non-obvious to a person having ordinary skill in the art.
The first ETF was launched in 1993. The Vanguard patent is dated 2005.

Must not have been too obvious...
That would probably have more to do with business realities than how novel the concept is. Many patents in the tech world make me scratch my head because they are so blindingly obvious. In many cases, people were doing them long before the patent and just never thought it important enough to bother with, or they were just against software patents in general. I think that's probably getting better as the patent office becomes more tech-aware. In this case, the business model would have to have aligned with the strategy to make sense and I can't really think of anybody other than Vanguard in the early 2000s where it would have even been a possibility. Same thing with the ipod: Apple was the only company in a position to combine sleek consumer hardware with music. Sony tried several years before but since they were also a large record label, couldn't make it work: the other labels wouldn't work with them.
iPod came before there was an iTunes music store - no cooperation needed.

IPod 2001
Music store 2003

The ipod didn't take off until after the music store was released. Early reception was tepid. It was the pairing that was the innovation. Before that, the ipod was just a mediocre MP3 player in a sea of MP3 players and sold as such.

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Re: When Does Vanguard's Patent(s) Expire?

Post by Dottie57 » Wed Mar 13, 2019 2:54 pm

KyleAAA wrote:
Wed Mar 13, 2019 2:46 pm
Dottie57 wrote:
Wed Mar 13, 2019 11:57 am
KyleAAA wrote:
Wed Mar 13, 2019 11:51 am
GAAP wrote:
Wed Mar 13, 2019 11:25 am
chipmonk wrote:
Fri Jan 06, 2012 6:40 pm
I think the part most of us take issue with is (3) unobvious. The key is that for an invention to be patentable it has to be non-obvious to a person having ordinary skill in the art.
The first ETF was launched in 1993. The Vanguard patent is dated 2005.

Must not have been too obvious...
That would probably have more to do with business realities than how novel the concept is. Many patents in the tech world make me scratch my head because they are so blindingly obvious. In many cases, people were doing them long before the patent and just never thought it important enough to bother with, or they were just against software patents in general. I think that's probably getting better as the patent office becomes more tech-aware. In this case, the business model would have to have aligned with the strategy to make sense and I can't really think of anybody other than Vanguard in the early 2000s where it would have even been a possibility. Same thing with the ipod: Apple was the only company in a position to combine sleek consumer hardware with music. Sony tried several years before but since they were also a large record label, couldn't make it work: the other labels wouldn't work with them.
iPod came before there was an iTunes music store - no cooperation needed.

IPod 2001
Music store 2003

The ipod didn't take off until after the music store was released. Early reception was tepid. It was the pairing that was the innovation. Before that, the ipod was just a mediocre MP3 player in a sea of MP3 players and sold as such.
I bought one before the apple. Music store. I ripped my music.

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