On July 9, 2010, I sat down with the Honorable Paul Michel, the recently retired Chief Judge of the United States Court of Appeals for the Federal Circuit. In this interview, which lasted for 1 hour and 40 minutes, we talked about his experiences as a prosecutor in Philadelphia and then in Washington, DC where he was a special prosecutor in the Watergate investigations and the lead prosecutor in the Koreagate investigations (see Part I). We also discussed the decline in the checks and balances the federal system; the Founding Fathers and how they viewed patents and how the Patent Office used to be held in such esteem (see Part II).
In this third installment things get interesting, perhaps even a bit explosive. The former Chief of the Federal Circuit pulls no punches and talks openly and honestly about Congress, laying the blame for the decline of the Patent Office squarely on the feet of Congress who has since 1992 siphoned off at least $750 million thanks to fee diversion. This has left the Patent Office short on resources to do what needs to be done. The Judge also makes the case for regional Patent Offices and getting involved in the patent reform debate so that a handful of companies can’t dominate the discussions to their sole benefit. He talks about perhaps setting up a think tank to promote a pro-patent and innovation agenda, and how it is a “travesty” that patent rights cannot be enforced in a relevant time frame through litigation because of backlogs in the federal court system. I think it is fair to say that Congress was in the cross-hairs during this segment of our interview and some of what Chief Judge Michel tells me was surprisingly forceful, direct and extremely critical. Having said that, I think practically everyone in the industry will agree with him. I know I sure do!
Without further ado, here is Part III of my interview with the Honorable Paul Michel.
QUINN: I don’t know that this is gonna come out in the interview, but you are extraordinarily passionate about this, I can tell. And that’s why I’m going to interject this now because I want to make sure that people realize, and I get the sense that this may have played a very important part in your decision to decide not to take senior status. Is that fair to say?
MICHEL: Sure. I wanted to be able to speak out about the patent system, about the court system, about the political system because I think the country is in big danger of eroding and going into a long term decline, technological, economic, employment levels, standard of living, standard of health, you name it. And it’s easy to avoid that slide if we just wake up and make a few course corrections. So I, for some reason of other, have always tended to move to where the biggest challenge was. So when Watergate broke I ended up at Watergate. When the Church Committee got involved, I ended up at the Church Committee. When Koreagate was kind of a big deal, I ended up in Koreagate, and so on. And I guess I’m still on the same kind of quest to try to find where the biggest problems and where the most good can be done if people focus on things correctly. So I’m just reacting to that same instinct, I’m not even sure where it ever came from. Probably my parents, I guess, they were great teachers.
QUINN: I suspect, and this is going to sound funny to people who don’t know the inside baseball in our area, but this seems almost a more difficult and thankless challenge than any of the other challenges you’ve willingly taken on in your career.
MICHEL: Well, I have a pension, you know. I was a judge long enough, and I’m old enough that I have a pension, so I have a certain amount of economic security. And I’m going to try to earn some money, because my financial situation is not good at all. Another thing people don’t know is that the purchasing power of all federal judges in the last 20 years has actually gone down. It’s gone up 17% for the average worker, and it’s gone down 24% for federal judges. So my finances are not in good shape. But I do have a generous pension, and I’m hoping to be able to earn some money doing mediations and arbitrations, and case evaluations, and other consulting. And between the pension and those earnings, I hope to be able to continue this public advocacy push for strengthening the economy and the technology systems and the IP system. Actually quite a number of people have volunteered to help, including by contributing money. I have had at least a dozen people, who come forth and said we would like to help, or our company would like to help, our law firm would like to help, our industry group would like to help. So I may put together some small entity. I want to keep it very non bureaucratic and lean and agile. But I might put together some small kind of entity based on contributions in order to carry on the work of advocacy and to some extent to kind of correct the record where certain studies had been done or certain books have been written. For example, there are some books written by some people with an economics background that in my opinion are absolutely wrong and that trash the patent system. But they don’t understand the patent system, so they’re mis-applying their economic learning to something they don’t really understand, and they end up saying, well, the patent system stunts more technological development than it incentivizes. I think that’s plainly wrong. But it might be important for somebody to come up with some studies and some books and articles that prove that it’s wrong. So that’s the kind of goal that this little foundation or institute or think tank might try to pursue.
QUINN: See, I deal with that on an almost daily basis and with the blog that I write being, directed largely to the folks in the industry, but also to try and reach out to business people and to try to reach out to others whenever I write a pro patent piece. And, you know, I’ve taken to calling myself the patent apologist, because that’s what others will call me. And they say with no support whatsoever, that patents hinder innovation. Even when you point out facts to them, then they go to the extent to say, oh, well, you’re biased, as if they’re not biased in their analysis. It strikes me that it’s just factually correct to observe that countries that have adopted intellectual property laws and systems have enjoyed from that moment forward economic success. And that’s one of the things WIPO has been doing for at least a couple decades now that I know about, trying to get third world countries, and developing nations to change their laws to become more favorable in bringing in outside investment. What I see as a big impediment to what we know needs to happen to benefit the industry, are these folks that are out there that are turning public sentiment in directly the wrong way, so that those people in Congress are decisions making authorities, aren’t just hearing from the people who know what the industry needs, but are hearing from a very large and vocal group that say the exact opposite with no facts. And sadly it seems those are the folks that if any listening is going on, they’re the ones that are getting listened to.
MICHEL: Well, there are 30,000 companies, commercial companies in the United States that have at least 100 employees. Fifteen companies out of the 30,000 have driven the whole patent reform movement in the Congress. They’re nearly all either Silicon Valley so-called high tech equipment or chip makers and so on, or Wall Street financial firms. So they’ve been heard loud and clear by the Congress, but the other 29,985 haven’t been heard, as far as I can tell. So there’s a huge imbalance in who is being listened to. I just think it’s astounding that 15 companies could create such an amount of political power when what they’re recommending looks to me like it will be on the whole detrimental to all the other companies and to universities and to independent inventors, and to research institutes, and good for whom? For those 15 companies and nobody else. That’s just astounding to me that that they can get away with that.
QUINN: It is to me, too. So let me ask you this, if you were to put forth an action item, what action item would you like to see these other companies take action on, that have an interest, but have not come to the table? And I ask it this way, and let me give you an idea of where I’m going with this. Back when the claims and continuations rules came out and it was only Dr. Tafas and then GlaxoSmithKline, I, and I don’t think I was the only one, but started pounding the drum and saying, look, you all have interests here, and if you have a line item in your budget that has a patent anything, you need to go to your patent attorney and have him draft a letter or an amicus brief, or a motion just to let the judge know, hey, this is a very important decision, and this is why it’s important to us. And that worked, to some extent, I don’t know whether I drove that or others drove it, but that message got out and on the district court level there were over 50 amici.
MICHEL: It’s the same problem in the IP world as in the general political world, I think. And the problem is that a few people with extreme self interest at stake and a lot of money and power, and connections can create a huge amount of force. And then if you have tens of thousands of other people who have an interest, but it’s not a burning interest to them. It’s a significant interest, but it’s not at the top of their list. What often happens is the small number of people with the burning interest scream and yell and create a huge ruckus. And the thousands and thousands and thousands of other people or companies, because it isn’t a burning issue with them, are silent. And then the elected politicians hearing only the squawks of the few for whom it’s viewed as their biggest problem end up with a totally skewed view of things. I think you’re exactly right. Everybody else who’s affected needs to come forward and speak up. That’s true with patent reform, it’s true in funding in the patent office, it’s true in having a more effective court system. I think it’s scandalous that it takes five or six or seven or eight years to conclude a patent litigation in this country. That’s ridiculous. It should be able to be done in a year at the trial level and less than a year at the appellate level. It should be done in two years, not eight years. We’re so slow and we’re so expensive we’re going to destroy the economic foundation of this country if we can’t revive the courts and the patent office so that they can operate accurately and inexpensively, and rapidly.
QUINN: I’d like to go down that line about patent litigation, but let me ask one more from another angle. I know, because some attorneys have told me that when I wrote and said, look, get out there and file an amici, that some attorneys told me they took that amici to some clients that they knew were, you know, interested, gonna get affected and they said, look, you know, are you interested in doing this? And there was a number of companies that did, that said, okay, let’s do something. So my thought is that there will likely be some attorney who read this interview, I would think. If you could say to them what message could and should they be giving to their clients to maybe not necessarily help you, but help you help the system? What type of ammunition would be useful? I don’t get the sense that this is, call your congressman or write your congressman type of stuff. But maybe it is.
MICHEL: I think it is. If a small but significant minority of business leaders would press Congress to help, Congress would respond. You probably wouldn’t need more than 15 or 20% of the corporate CEOs of the thousand biggest companies in this country to get involved in order to significantly move the Congress off the dime. I think it’s entirely possible. There are a thousand big companies, and we only need 15%? That’s 150 CEOs. I think it’s entirely possible to motivate 150 CEOs to write and call senators and representatives, particularly from their areas and create a strong force for good. And that’s exactly what I’m engaged in trying to do, is to try to motivate a small segment of business leaders and a small segment of the media to get knowledgeable, get involved, get motivated, and get active. I think it will make a huge difference. You don’t need to have 90% participation. Fifteen or 20% participation I think probably will push you over the brink. I think it’s doable. But there are a lot of problems. I’m told that CEOs of companies large and small are very fixated on regulation and taxation and other problems like that, and the health of the IP system is not on their radar at all. And I’m told by many sources, and I think it must be generally true that the general counsel of most of the companies in this country don’t know much about the IP system, don’t care much about the IP system, don’t really see the full value that the IP system brings to their own company. And I’m told that’s there is a gap between the chief patent counsel of the typical company general counsel. That the general counsel doesn’t really know about patents, so you take care of that, don’t bother me with that and so the political muscle that the CEO has doesn’t get mobilized because the CEO doesn’t understand, the general counsel doesn’t understand, and the chief patent counsel does understand, but doesn’t have the clout inside his own corporate hierarchy to motivate the higher-ups to do something.
QUINN: And that’s why I almost think that it needs to be a corporate grassroots movement with the smaller companies because it matters so much to them. And one of the things that’s worried me a lot is it strikes me that during a recession or a pull back or difficult economic times, however you want to characterize it, that large companies do exactly the opposite of what history tells us they should be doing. They cut research and development, they cut patenting their assets, acquiring the assets. And then the small companies, the startup companies, the upwardly mobile growth companies, then surpass them. Now, the way that they have historically done this is by aggressive research and development, aggressive use of the patent system, aggressive acquisition of investment to fuel that. And I worry that that’s not happening because of the dysfunction of the patent office.
MICHEL: That’s exactly right. Seventy to 80% of new jobs are created by small or middle-sized entities. Seventy-five percent of the CEOs of those entities say they can’t get investment funding that they need from venture capitalists or other sources without strong and fast patents. So if this is where all the new jobs are coming from, and if having a good patent is the key to getting the money to be able to develop the product, commercialize the product, hire new people, expand the operation, absolutely, the patent system’s weakness is killing the economic future of this country, killing job creation, killing technological leadership. I don’t think this is a complicated problem. This isn’t like figuring out some mystery, this is a question of acting on what’s known to be true.
QUINN: Well, the other thing that worries me, too, when you talk about the patent system, or patent office directly, is I personally think Director Kappos is doing a tremendous job. But I also realize he’s gonna run out of things he’s able to do on his own. He’s getting very creative with the provisional’s maybe 24 months. But then the rules he actually, rather than Congress erasing 12 in the statute and writing in 24, he’s got to create 100 pages of rules in order to achieve that.
MICHEL: Once again, Congress is the bottom line. Congress controls everything. They control all of his authorities. They control the fee levels. They control the spending level that’s allowed. They control whether money is diverted or not. You can’t reform the patent system, or the patent office unless you can get Congress to do the right thing, and do it fast.
QUINN: Well, let’s jump back to the point in time when you were advising Senator Specter. Let’s say you were doing that today, because I supposed this would be a judiciary, perhaps, or maybe a finance issue. You’re advising one of the senators on one of those committees that would have some jurisdiction. What do you tell me that the Congress needs to do?
MICHEL: I would invest a billion dollars tomorrow in reviving the patent office. And I might take it out of the stimulus money that’s already been appropriated. I think it would have a very large impact quite quickly and pay off every year for the next five or ten years. Then the rest of the financing the patent office could be based on fees. They need to be raised some reasonable amount. But if you could give an emergency transfusion of cash to the patent office, fix the IT systems, improve the pay scales, secure more space for an expanded examiner cores. You would soon start seeing good results, and they would continue for years and years and years. And you wouldn’t have to keep appropriating a billion dollars every year if you did the billion dollar emergency transfusion up front,. Fees could maintain it beyond that. Kappos is terrific. He’s very smart, he’s very hard working, he’s very articulate, totally sincere. He’s doing everything he can do. But his hands are tied at every turn. He has about 12 different very creative pilot programs underway. But a pilot program can’t solve the problem unless it can be expanded, be scaled up to cover the whole office, to cover all the applications. And he can’t do that. He can’t create satellite offices. He can’t raise the pay levels of examiners. He can’t get new space for more examiners without congressional authorization. So he not only needs money, he needs power granted to him that he doesn’t now have. So I think Kappos has basically run out the string with these 12 imaginative pilot programs. And unless Congress is going to back him up, I don’t think we’re going to get a revived patent office and the country will suffer for decades if we don’t do it.
QUINN: Let me ask you about that then; the regional offices. Because that’s something I think makes some sense. Recently when Kappos was on the Hill there were a number of Congress men and women on the panel that seemed enamored about talking to him about, well, why don’t you come on out to our district and open up a regional office. So maybe that is sort of a way to get the camel’s nose under the tent. So you think regional offices are a good idea, and do you think that may be able to get that on the radar screen.
MICHEL: Of course. Almost every federal agency I know of has regional offices. The patent office is the odd man out. This isn’t something we don’t know how to do. We do this every year, every day, in practically every agency in the country. They all have regional offices other than the patent office. This is not a hard problem to engineer. This is a question of authority: you have to have the authority to do it. I’m told he doesn’t have the legal authority to open an office in Detroit or Los Angeles, or wherever it might be. Congress has to give it to him or he can’t do it. It’s that simple.
QUINN: It’s interesting you just mentioned, you said Detroit, right? Beause I thought that one thing that could happen here is to benefit everybody, when we look at those parts of the country that need some economic revitalization.
MICHEL: Well, look at those parts of the country where there are thousands of unemployed engineers who are experienced, competent people, many of whom are experienced in the patent system as well as their scientific or engineering discipline. They’d make the perfect patent examiner and you could solve an employment problem and a backlog problem very efficiently by hiring those experienced people where they are now. Detroit, Houston, wherever it is. Maybe several different places. I think it’s an obvious good idea. Of course it has challenges to it. Anything involving growth and expansion has challenges but I think it would pay off in a very short timeframe and be an extremely efficient way to solve a series of problems. And it’s kind of shocking that these things aren’t even being discussed.
QUINN: They’re not.
MICHEL: They’re not even on the radar of the congressional committees. They’re all focused on the past. How did we used to do it? We used to divert money. How did we used to do it? We used to require all the examiners to be in Alexandria. So their mindset is we should continue doing what we always did because we assume it’s okay. But the truth is, it isn’t okay, it’s creating a disaster. So they need to change it. But they don’t know that; they need to be educated. Who’s going to educate them? Business leaders and media people. Of course the IP community is the fountain of the ideas. But the IP community’s political clout is very slim. So unless you can get the business community or the media on your side as your allies, the IP community just doesn’t have enough muscle to make it happen. It’s the same thing with federal judges. We can’t get more judgeships because our political clout is almost zero. If the business community said we want more federal judges because we need trials that are over in a year, not in eight years, Congress would do it. I bet you Congress would do it.
QUINN: Well, and to pick up on that, that’s something that we had talked about before as well about the federal vacancies at the judicial level. Can you give us a sense, what are those vacancies? What do they mean, particularly to folks in our area that always get booted down the line because of the criminal cases. And it’s not just in patents, it’s in all civil areas. But it seems in our area, these trials just go on forever, they’re never ending.
MICHEL: Right. It’s a travesty. If a patent can’t be enforced rapidly its value plummets. If you can’t get a verdict, or you can’t get an injunction for eight or nine years, you might as well not even have a patent; it’s not operable. So the slowness of the federal courts is just as dangerous to the economy as the slowness in the patent office.
QUINN: Well, what do you think about the proposal where you have some specialized district court judges who are more like what I would call patent SWAT team? That are trained, they handle patent cases, they fly in and out of district courts. I know Judge Radar has sat as a trial judge in a number of courts and it seems he’s been able to fly in and out as necessary and handle things remotely in large measure. Do you think that’s a solution?
MICHEL: Sure. Federal judges in less busy districts should take some of the patent cases from districts that are too busy to handle them rapidly. And that’s done to an extent. I worked hard to get that expanded. But in the final analysis there aren’t very many districts that have a light docket. Most districts have an extremely heavy docket, and they have severe delays in every kind of case. So part of the solution has to be to fill all the vacancies; we can’t afford in this country to have 100 vacancies as a permanent state of affairs. That’s 12% of the total force. Would you send an army that’s 12% under strength into a major war? I mean, it’s ridiculous. In addition to that, the judiciary needs 100 additional judges. So we’re actually 200 short of what we need to try cases rapidly. So we’re cannibalizing our future in order to save a very small amount of money that would be needed to create 100 additional federal judgeships in the right districts around the country. It’s the stupidest investment decision imaginable. It’s going to save a few million dollars, cost the country tens of billions of gross domestic product, job creation, tax revenues, family welfare, and so on. It’s just a stupid decision in my opinion. Every year the federal judiciary asks for more judges. And every year Congress brushes it off because we have no political clout. So unless and until the business community says, “You know what? We really do need those judges, because we need to be able to try commercial cases in a year not a decade.” If the business community would say that, Congress would listen. If we judges just keep saying it, we already know what happens; they ignore it. Congress after Congress after Congress has been asked by the judiciary to create additional judgeships. Every single Congress, they ignore us. So we know the answer. Unless other people become allies, it won’t happen.
Up next, in the final installment of my interview with Chief Judge Paul Michel we discuss Bilski v. Kappos and what he thought of the Supreme Court’s decision. Judge Michel also talks about how only one of the Justices who decided Bilski ever decided a patentable subject matter decision, leaving the impression that the Supreme Court should probably just leave well enough alone. He also talks about how the patent system is now favoring extremely large companies over independent inventors, start-ups and small businesses. Plus, the fun stuff!
For more of my interview with the Honorable Paul Michel, see: