Judge Michel says Alice Decision ‘will create total chaos’
|Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog, Inc.
Principal Lecturer, PLI Patent Bar Review Course Posted: August 6, 2014 @ 12:19 pm
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Judge Michel has been true to his promise. He keeps an active speaking schedule, he continues to appear on Capitol Hill to discuss matters of concern for the patent system, he continues to attend numerous industry events, and he has freely given of his time on the record for us at IPWatchdog.com.
In our latest conversation we talked about a great many things, including the seemingly inevitable nomination of Phil Johnson as Director of the USPTO, which now seems very unlikely. We also spent considerable time talking about the Supreme Court’s decision in Alice v. CLS Bank. As you will read in the interview below, Michel thinks the decision was terrible and will lead to nothing short of chaos because there is simply no workable, repeatable test that can evenly and predictably be applied by the numerous decision makers in the patent world.
Without further ado, here is part 1 of my interview with Judge Michel.
QUINN: Thanks, Your Honor, for taking the time to chat with me again today. There are lots of interesting things going on in the patent world and I appreciate your willingness to chat with me about them. One of the things I thought we could talk about would be the Supreme Court’s recent decision in Alice. Maybe we can also talk about the Federal Circuit, some patent office stuff, and if have time perhaps we can get to patent reform. So let’s just jump right into it. I think one of the last times you and I chatted we were talking about 101 and Bilski, and now the Supreme Court has just issued another 101 decision, which I’m not thrilled with. I know some people think I’m overreacting and I’d like to get your take on it. What did you think?
MICHEL: Well, I think that the Alice decision is very problematic for a number of reasons. One is that it is so unclear how the standards annunciated can be applied by all the different decision makers. And there are other problems with it. Of course, it could have been much more worrisome. It could have broadly invalidated all software related patents or all business method related patents or all computer implemented patents and things of that sort and it didn’t do that. But it did, in my view, create a standard that is too vague, too subjective, too unpredictable and impossible to administer in a coherent consistent way in the patent office or in the district courts or even in the federal circuit. And as a result the people who depend on the system, not the decision makers but what I’ll call the “users,” the business people, the inventors, the investment community, and those who advise them, the patent prosecutors, and the general counsel, the chief patent counsel, and companies, all those people are now put to sea with no chart. And I think it risks deterring the investment that the country desperately needs in R&D and commercialization. So it looks harmless on its face but I think actually it’s a very harmful and completely unnecessary departure from a sensible patent policy.
QUINN: That was my reading of it, I am concerned because of the subjective nature of the text. And it made me think about all the texts in the past that we’ve had particularly dealing with computerized or computer implemented methods. One of the reasons so many of the previous tests have failed is because of the way they ultimately wind up being applied, they turn out to be purely subjective and then we’re on to the next test. And I just wonder how is the patent office going to apply this. I think I know how the PTAB is going to apply it. They don’t seem to like patents very much. And many in the district court are skeptical of patents.
MICHEL: Well, it’s bad news at least for the reason that it will create total chaos. No one will know what is eligible and what is not eligible so there will be no predictability, no consistency, and that by itself will create delays and costs and discourage progress that the Constitution was trying to promote by encouraging Congress to create the patent system. Consider the decision makers. You’ve got 9,000 patent examiners, 250 or so board members, approximately 1,000 district judges, and a few other people, the International Trade Commission, the Federal Circuit, and so on. So you’re talking about 10,000 decision makers. I don’t see any way they can apply the Alice standard in a way that’s fair or consistent or predictable. And all the other people who are involved in advising economic actors and business leaders are similarly faced with chaos and uncertainty, delay and extra costs. That is the worst thing that could happen. We need to be reducing delay, reducing uncertainty, promoting greater incentives to invest in R&D and commercialization. And it looks to me like the result will be exactly the opposite. Everything will be slower, more uncertain, less encouraging to invest. So I think it’s a problem. Look, my hope for Alice was that they would not apply the Mayo framework, the 2-step framework that depends on inventive concept, whatever that means. And instead of distinguishing Mayo on the grounds that it was in a very peculiar technological environment and very specific facts, the court in Alice wholeheartedly embraced the Mayo idea. So now we have a new form of non-obviousness which they call, you know, not conventional, well known, used in the past, et cetera. And it’s way too subjective, and it mixes up obviousness notions with eligibility notions, and it’s impossible to make sense out of it. You can’t tell whether inventive concept is exactly the same as the 103 or it’s a lower hurdle, or it’s a higher hurdle. So if it’s the same then it doesn’t add anything. If it’s a lower hurdle, how meaningful is it? If it’s a higher hurdle, how unfair is it because it’s now made ineligible all sorts of things, hundreds of thousands of patents that were eligible before Alice and issued before Alice. So I think it’s a very unfortunate decision and instead of limiting the harmful effects of Mayo or the chaos created by Bilski it’s actually made those effects even worse.
QUINN: I would agree with that. There’s so much to say, so much that bothers me. One, we have a doctrine, the “Abstract Idea doctrine” without a definition of what it means to be “abstract.” And I don’t know how legally you could do that. If this were a real property situation the Supreme Court would get the implications of changing the rules in midstream because our real property system is based on the understanding that today I own this property and tomorrow I’m going own this property as well. So the thing that bothers me most about this decision is what about those patents that have been issued? What about those applications that are in process? You can’t just go back and change them. I mean, could you have defined these inventions, many of them, so that they could meet this amorphous test? I think the answer is yes. But that wasn’t the test when the applications were filed and now you can’t just file or reissue and add new information or go back to add to the application without getting a new filing date which means all kinds of new prior art. This is going to be a mess for many applications that are in process and for patents that have already been issued.
MICHEL: It’s ironic that in i4i the Supreme Court strongly emphasized the reliance interest that people had invested in the elevated burden of proof required to invalidate an issued patent. But when it comes to 101 apparently reliance interests aren’t important any more. So I’m shocked that they didn’t seem to be worried about that. I think that one of the problems is that the Supreme Court is apparently eager to be the policymaker in the patent arena at the expense of Congress. Now if Congress changes the policy it only applies going forward. So everybody can adjust. But when the Court changes patent policy, and patent standards, and patent rules it affects all the 2 million patents that are out there with still unexpired life. And I think it’s very unfortunate that the Court seems to give very little concern to the reliance on the existing law of all of the users of the system and all of the decision makers in the system. So I think we’re in for a lot of trouble. You know, to me another problem is that the Court can’t make good policy because it doesn’t know enough facts. So in Mayo when Justice Breyer writes and all the others agreed with him, that the concern was that patents were going to deter more innovation and invention than they were going to incentivize, he has no basis at all to say that. It’s a pure assumption. I think it’s a completely incorrect assumption. I think the opposite is accurate. But here’s the Supreme Court making policy based on a wild guess that they have no factual foundation for.
QUINN: Well, the facts would suggest Justice Breyer wrong. If you look at, for example, the smart phone which is this current generation’s great new device. It’s only been around since 2007 and it took very little time, very little time to achieve 50% market penetration in the U.S. in terms of number of households. And look at the advances? We’re doing this interview right now recording it on a smart phone. You know? There is no evidence that the smart phone industry has at all been negatively affected by patents. And everybody talks about that patent thicket and so forth. I’ll just throw it out there and you can talk about whichever direction you want to go with this for now. But I think Mayo is famously going to be looked at as being a horrible decision by the Supreme Court. It’s wrong. If a law student wrote it they would get an “F” because it conflates so many different issues. And then also in Myriad, I’ll throw this in there as well. There’s a point in Myriad where Justice Thomas says discoveries no matter how wonderful they are just are not patent eligible. And that’s not what the text of 101 actually says. So I think we have the Court that isn’t looking at the statues. They’re ignoring the 1952 changes to get rid of flagship creative genius. And we’re back somewhere in the early part of the 1900s in terms of Supreme Court patent jurisprudence.
MICHEL: That’s why I say it’s a power struggle between the Court and the Congress. In 1952 the great innovation of the Act that passed then was the addition of non-obviousness as an objective prior art based way to determine patentability. And that test was clearly intended to do away, as you say, with a flash of genius inventive concept notions in the pre-1952 Supreme Court cases. So Congress passes this bold new innovation to make it objective, to make it fact based. And now the Court is undoing all that. It would seem to me to be not productive but destructive and completely unnecessary and really not the right way to be making patent policy. And what are they relying on? They’re relying on assumptions about economics like when Breyer says it’s deterring more innovation or risk deterring more innovation than it’s encouraging or promoting. And what else did they rely on? They rely on dicta in their own cases going back into the 1800s. Well most of those cases and most of those dicta were called into doubt if not outright repealed by the 1952 act instituting the obviousness, non-obviousness regime. So now the Court has trapped the country into economic policy making without factual basis on the one hand. And on the other hand trapped the country with old Supreme Court dicta. So in cases like Gottschalk, and Fluke, and more recently in Bilski, and Mayo, and Myriad, and now Alice, it’s littered with these statements from old Supreme Court case law about inventive concept and the rest of the very things that 103 was enacted to wipe away. So, yes, we’re back where we were in the 30s and 40s and it’s not a good place to be. I think the consequences are astonishingly worrisome for our prosperity, for our global competitiveness, for our technological leadership, for job creation, and for the astounding advances that are being sacrificed. You talk about the cell phones. Certainly to the cell phones and computers in general have proliferated like crazy, been improved at an astonishing rate month by month. Have gotten better, and cheaper, as well as more pervasive. So the innovation has been astronomically successful, not impeded. But consider the medical area, the biotech area. All this new individualized medicine based on more advanced organic chemistry and based on using things in the body’s mechanisms as a way to prevent or cure disease, a huge amount of that is going to be shut down with this ever expanding notion of things being ineligible because they’re quote “mere discoveries.” The Constitution talks about discoveries. So I don’t understand why discoveries per se are thought to be clearly not eligible for patenting. And the same thing with things derived from nature. So many current medicines are derived from things from nature. So these categories are problematic because they’re unscientific, they’re unclear, they’re overlapping, they’re indefinite, and they keep making up new ones. Some people say well there are only three exceptions to eligibility. But they’re really about eight or nine if you look at all the different articulations of them. And none of them are clear or objective.
QUINN: No, none of them are. And I worry because it seems that we have collectively forgotten that the United States was not historically the frontrunner in the biotech industry. It was the UK. And there’s a reason why that changed. And that reason was Dr. Chakrabarty and that Supreme Court decision that said yes to patent eligibility for genetically modified bacteria.
MICHEL: Right. And you know, it’s so ironic some people are calling for the abolition of the Federal Circuit at the very time that many other countries, Japan is an example, but there are many others are moving quickly to create things modeled on the Federal Circuit. Many countries are trying to strengthen their patent system and clarify to make it more efficient at the very time when people here are trying to weaken it.
QUINN: That’s the real reason to be worried about all these decisions. And the Federal Circuit is repeatedly talked about whenever dealing with a 101 issue. Patent eligibility is supposed to be very carefully administered because we’re making a decision at the very beginning before we know where any of this is ever going to lead us. Cutting off patent eligibility at the very beginning is scientifically very dangerous and legally naive.
MICHEL: Also the way it’s going to play in national litigation is very worrisome to me. If I’m accused of infringing your patent and you sue me for infringement the first thing I’m going to do is file a summary judgment motion or even a motion to dismiss alleging that your patent is invalid because it was for an invention that as claimed is ineligible to even be considered for patentability. So then the district judge is going to have to decide that motion with almost no factual basis because at that point there’s been little or no discovery. There’s been little or no analysis by anybody. So the district judge is going to be forced to look at these kind of verbal formulations of the Supreme Court inventive concept, adding enough—they don’t even say it right. It’s not a question of whether the claim covers something more than the abstract idea, the question is whether the claim covers something less than the abstract idea. So even the way they talk about it is backwards.
QUINN: Yeah. That is funny. I hadn’t really thought about it that way. But from a conceptual standpoint they’re just looking at it completely incorrectly.
MICHEL: You know, people talk about unintended harmful consequences of things that Congress does. But the unintended harmful consequences of things the Supreme Court is capable of doing are even worse because the Supreme Court acts without the basis of hearings and submissions and testimony and questioning by members and analysis by congressional research service, or the GAO, and so forth. And it’s just doubly bad when it’s going to affect all the issued patents that were issued under a different understanding of the laws. So the Supreme Court doesn’t have the factual basis that Congress has when it acts. And everything it does effects the past as well as the future unlike legislation.
CLICK HERE to continue reading — In the next installment of our conversation Judge Michel explains that Congress may have to get involved to address patent eligibility, and we also discuss the other patent decisions from the Supreme Court during the October 2013 term, which just concluded at the end of June 2014.- - - - - - - - - - Recently I had the opportunity to sit down with private citizen Paul Michel, who we know in the patent community as the former Chief Judge of the United States Court of Appeals for the Federal Circuit. Judge Michel left the Federal Circuit several years ago now, choosing to retire rather than take senior status. Michel told me back then that he wanted to step down so he could say what needed to be said on behalf of the patent system, something he felt he couldn’t do while a member of the federal judiciary.
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About the Author
Gene Quinn is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.