Elizabeth Holmes, fraudulent inventor - ably assisted by a patent system asleep at the wheel
This is both old and still ongoing news in the sense that Elizabeth Holmes was busted as a fake in 2015, goes on trial for fraud in July 2019 - facing a possible 20 years in jail - and will, as is pretty much inevitable these days, be the subject of a Hollywood movie.
Also on trial as an accomplice is, or ought to be, the patent system that helped Holmes and her tech company Theranos build a massive castle on sand.
But we’re already well ahead of ourselves. Who is Elizabeth Holmes and what has she been up to? A lengthy account of her extraordinary rise and fall is here, in the Mail Online - not a source we’ll be relying on too often, I promise, but well worth reading.
Briefly: starting in 2003 in California, the then 19-year old Elizabeth Holmes claimed to have invented a device that could run multiple diagnostic tests from a single drop of blood. In medical terms, a holy grail. But rather than first do years of research and prototyping to be confident that her idea worked, she simply announced: here it is, I’ve done it.
And lots of rich people fell over themselves to believe her, in a frenzy of collective stupidity that should be the envy of funding-starved genuine inventors everywhere. A fervent and well-connected self-publicist, Holmes and her startup company Theranos were soon awash with cash from investors including Rupert Murdoch, Henry Kissinger and US pharmacy giant Walgreens. By 2015 Theranos was valued at £7bn, making Holmes America’s youngest self-made billionaire.
Who needs proof when you've got patents?
Unfortunately, it was all a colossal sham. The Theranos technology didn’t work and couldn’t work. Test results were faked and employees who knew the truth were bullied, silenced, bought off. The photogenic Holmes ran an ugly company.
Quite extraordinarily, none of the investors who showered Holmes with money insisted on being shown proof that she had actually done what most of those ‘skilled in the art’ felt was not achievable. By the time the cupboard was opened and found to be empty, it was too late.
Partly through deliberate deception and partly through Holmes having more front than Blackpool, it took until 2016 for the by-product to hit the fan. In a swift and brutal fall from grace Theranos was valued at zero, then dissolved, then Holmes and her deputy were arrested on multiple fraud charges that seem unlikely to end happily.
But the patents will go free, and they don’t deserve to go free. The many Theranos patents should be as much of a busted flush as the company itself. Instead, like post-apocalypse mutant insects they will survive, and quite possibly help other chancers to prosper in years to come.
What patents indeed. Here begins a very significant part of the Holmes/Theranos story that the Hollywood scriptwriters may choose not to dwell on. (‘Who’s the bad guy?’ ‘A patent.’ Pause. ‘Who can we get to play a patent?’)
For some of what follows I’m indebted to Daniel Nazer, writer and attorney at the Electronic Frontier Foundation, for his brilliant piece on the Theranos patents. It’s essential reading for any inventor who doesn’t already know about the malign influence of patents on innovation.
A quick Espacenet search lists 959 patents (count ‘em - I haven’t) with Theranos as the applicant. The earnest tone is set by sample titles such as Systems, devices, and methods for bodily fluid sample collection; Image analysis and measurement of biological samples; Methods and systems for assessing clinical outcomes.
Granted, many of these will be duplicates of patents registered in multiple countries. And the total is easily dwarfed by the likes of Apple, Microsoft, Google and (dare one say it) Huawei.
None the less, for a company that was a scam from start to finish, that’s a huge amount of money and effort spent on patenting.
Out rolled patents, in rolled cash
But the more important point is that Theranos had to have patents in order to acquire credibility as an investable new tech company. Investors needed to see patents before they’d part with their money. It’s the way big-bucks innovation works. No patent? Forget it, pal.
So Theranos churned out patents and the cash rolled in, which meant Theranos could afford to churn out yet more patents and look even more dynamic and all-conquering.
What no investor did, even as scepticism about Theranos’ claims mounted, was check the patents against the actual technology. In a glaring failure of due diligence, nobody demanded to be shown proof of function. It seemed to be taken for granted that the patents were telling the exciting, riches-round-the-next-bend story everyone wanted to hear.
The reality was that the Theranos patents didn’t tell a story at all, because - thanks to a complacent, self-satisfied patent system - they didn’t have to. Daniel Nazer makes the damning point that while after more than ten years a reliable blood testing device still eluded Theranos, the US Patent Office had not only granted it scores of patents but hailed Elizabeth Holmes as a role model of innovation and entrepreneurship.
Showing how an invention works is for wimps
It's worth remembering that the whole point of patents used to be to disclose how something works. Your patent for a novel mousetrap had to disclose enough detail to enable someone ‘skilled in the art’ to follow your information and make one that worked. That was the basis of the conditional monopoly that was your reward from the patent system. If you couldn’t show how it worked, you had no business applying for a patent.
Things have changed since then.
The Theranos patents couldn’t disclose how anything worked because Theranos itself couldn’t make anything work. The patents disclosed not what the company could do, but what it aspired to do. That is not what patents are for, but it is what the modern patent system has let them become. In their eagerness to pile ‘em high and rake in the fees, patent offices now seem indifferent to whether or not an invention can be shown to work.
The patent system’s lack of rigour enabled Elizabeth Holmes to hoodwink far too many people for far too long. The patent system, so eager to fuel the myth that without patents there is no innovation, acted in effect as her more than willing accomplice.
Dubious patents fuel IP arms race
It’s highly likely that the number of patents granted is part of an IP arms race between nations - perhaps particularly between the USA and China. Quantity rather than quality now counts, as patents become part of a nation’s soft power arsenal.
So how many other fake high-fliers like Elizabeth Holmes are there chancing their luck in the patent system? How many more unworkable bits of technology have been patented? If you drill down into the patents granted to XYZ Corp, how many of them describe work that hasn’t begun and perhaps never will? How many patents exist purely and simply to game the system?
At a guess, a lot - because common sense says that a system that nods dubious patents through will act as a magnet to applicants eager to exploit such a useful weakness.
There is no science behind this next statement, but when we do patent searches for clients it’s common to find patents that withhold more information than they disclose. For example, elaborate schematic drawings abound that say little more than, ‘Our invention is this very clever box that goes between these two other boxes’. Heavy on text often means light on meaningful detail. And with many patents one feels that a mile-long queue of persons skilled in the art would fail to make anything of the content.
Bad patents frustrate good innovation
OK, there may be shedloads of duff patents, but so what? Why does it matter?
It matters because every patent is prior art. Once published, it stays published forever. In years to come, technologies may emerge that achieve what Theranos claimed for itself but couldn’t do. The existence of the fake Theranos patents may then make it difficult for the genuine innovator to claim novelty and get adequate IP rights.
Worse, if the genuine innovator tries to patent while the Theranos patents are still in force, whoever owns them - and it seems they’ve already been assigned to another entity to offset debt - could claim for infringement. It stands to reason that if you’re holding a bunch of patents that are worthless unless someone infringes them, you’re going to be watching like a buzzard for the slightest sign of ‘infringement’.
That makes every currently unworkable or fanciful patent a potential barrier to innovation. Nobody is counting, but at the furious rate patent applications are entering the global system there might soon be millions of them.
Can we expect the patent system to do much about this? No, we can’t.