Patent reform is popular today, whether it comes from Congress, the courts, the White House, or Patent Office regulations and guidance. Yet the term “patent reform,” by itself, is misleading, because virtually all of the reform today only improves the patent system in one direction: protecting accused infringers and weakening patent rights. Consider the following recent reforms:
- removing the ability of the first inventor to claim priority over a later inventor who files first;
- creating several new post grant proceedings at the Patent Office, which have been wildly popular, reducing the cost of challenging patent validity by an order of magnitude, and earning the Patent Trial and Appeal Board the name of a “death squad,” a name which the Board’s former Chief Judge describes as somewhat accurate;
- creating a mechanism for third parties to challenge patent applications during examination;
- reinvigorating, in a string of recent decisions, old judicial exceptions to patentable subject matter, which resulted in an entire new cottage industry for defeating patents without a trial and without traditional consideration of the prior art;
- lowering the standard for invalidating a patent under the indefiniteness doctrine;
- repealing a new judicial rule intended to prevent infringers from escaping liability based on technicalities due to divided infringement;
- placing the burden on the patent owner to prove infringement, even if the potential infringer hailed the patent owner into court through a declaratory judgment action;
- affirming a broader interpretation of the patent exhaustion doctrine;
- limiting the ability to enforce patents against those who supply components with the intention of inducing infringement;
- slowly eroding the doctrine of equivalents until it is virtually impossible for a patent owner to successfully use the doctrine in court;
- dramatically lowering the standard for invalidating a patent as obvious without a trial;
- allowing a licensee to sue for declaratory judgment of patent invalidity without breaching the license;
- dramatically increasing the difficulty for a winning patent owner to obtain a permanent injunction.
The first three come from the America Invents Act in 2011. The rest generally track the anti-patent decisions of the Supreme Court since about 2006. You can find a complete list of these decisions here. By my conservative count, since 2006, the Supreme Court has issued 14 anti-patent decisions, 4 pro-patent decisions, and 8 relatively patent-neutral decisions. This trend began with the rise of the Roberts court, in contrast to the Rehnquist court, which generally left alone a new Federal Circuit that Congress created to unify and strengthen the patent system.
In view of the above, the fan of patent reform might rejoice. The fan might observe that these reforms correct genuine problems with bad patents and patent trolls. I can agree with the fan of patent reform that these reforms help correct many real problems with the patent system. In other words, I believe that the patent system was biased in favor of patent owners along a number of dimensions (and arguably still is).
Where I disagree with the fan of patent reform is that I also believe that the patent system is biased against innocent inventors along a number of (different) dimensions. Consider whether the following strikes you as fair to the solo inventor working on an invention in her garage:
- Experts have concluded that as many as 54% of patents are “worthless.”
- It costs about $2-4 million dollars to successfully enforce a valid patent through trial.
- Patents are so weak now that some law professors generally recommend that accused infringers simply ignore demand letters.
- Patent owners lose the strong majority of their cases and the number of ways to prove a patent invalid has increased dramatically over the last 150 years.
- Moreover, although an accused infringer only needs to succeed on one argument to win, a patent owner must succeed on all arguments (i.e., infringement and each separate invalidity argument), for each different defendant, lawsuit after lawsuit, or else the patent owner loses and the patent becomes worthless.
- In practice, the courts, and sometimes Congress, make patent reform retroactive after companies have already invested millions of dollars securing large patent portfolios, effectively undermining the value of these portfolios in a kind of ex post facto government taking.
- The legal standard for obviousness is defined in terms that are extremely unrealistic and unfavorable to inventors. Instead of considering what was actually obvious to a flesh and blood human being, the courts consider what was obvious to a quasi-omniscient, robot-like fictitious character who magically knows about every relevant prior art reference in existence, no matter how obscure the reference is.
- Although the courts pay lip service to the concept of hindsight bias in evaluating obviousness, multiple studies show that the courts and juries systematically fail to overcome hindsight bias. When mock juries are given prior art without access to the patent, they systematically fail to reproduce the invention.
- Even when patent owners win in court, they are routinely denied a permanent injunction against infringement and instead are forced to accept a compulsory license that has less financial value. Moreover, patent owners may not be able to recover their full damages if the infringing product uses thousands of different inventions, thereby obscuring the issue of causation in the damages analysis.
- The new Patent Office proceedings routinely revoke patents without the traditional and constitutional protection of a jury, much less a presumption of validity or a non-political Article III judge with a guaranteed salary and life tenure. The Patent Office does not presume that patents are valid even though the Office forced the applicants to go through a lengthy and expensive examination process to prove their validity. Similarly, the Patent Office forces the patent owner to defend the patent under a lower standard of evidence and a broader standard of claim construction than the traditional standard used in court.
- In view of the previous point, a patent owner can prevail in court to obtain a multimillion dollar reward and then have the award voided by an administrative proceeding at the Patent Office.
- It costs about $25,000 to prepare, file, and prosecute a patent application to allowance, and this cost can vary significantly depending on the Examiner, art unit, and appellate process (by contrast, copyrights are free and obtained instantaneously).
- The Patent Trial and Appeal Board has a backlog of about 22,000 appeals, resulting in an average appeal pendency of about three years.
- Quality review at the Patent Office focuses almost exclusively on preventing bad allowances. There are arguably no corresponding internal procedures to review and prevent widespread bad rejections by examiners and the resulting cost on the American business and innovation community.
What’s stunning about this list is that almost nobody talks about reforming patent law to correct these biases! In general, the only biases that are socially and politically acceptable to correct are biases in favor of patent owners.
My final point should be obvious: it is profoundly unfair to correct biases in the patent system to protect accused infringers if we do not also correct biases in the patent system to protect inventors. Moreover, in making this point, the defender of inventors can agree that modern patent reform corrected many biases that favored patent owners. But we can’t stop there. If the patent system is biased in dozens of ways, then we can’t just correct the ways that favor inventors. After all, many of these biases will cancel each other out. A bias that favors inventors can be canceled out (to some extent) by a bias that favors accused infringers (and vice versa). Moreover, these two biases might not have anything to do with each other. For example, the bias of ex parte prosecution favors inventors, but this bias is canceled out (to some extent) by the unrealistically low standard for obviousness that favors accused infringers.
It is interesting to ask why modern patent reform overwhelmingly protects accused infringers without also protecting inventors. One popular explanation is that the Federal Circuit took its Congressional mandate too strongly, and ended up strengthening patents too much, so modern patent reform simply brings the system back closer to a fair equilibrium. An alternative explanation is that big established corporations like Google have partly outgrown their need for patents and now have a disproportionate influence on Congress and the courts (with the deep pockets to afford the best lawyers and lobbyists). Google no longer needs its Page Rank patent to thrive, even if the solo inventor in a garage still needs patent protection. Personally, if I had to speculate, I worry that the patent reform asymmetry fits within a larger trend of decline in the great Western traditions of innovation, due process, meritocratic competition in the race to invent, reliance on property rights and business investments, and strong support for intellectual property as distinct from real and personal property. Ultimately, I can’t be sure what the real causal explanation is. Yet, regardless of one’s political views, the reader can still see that modern patent reform is unfairly asymmetric (due to the numerous examples that I cite above).
Patent reform itself is not a bad idea. But patent reform should protect innocent inventors as much as innocent accused infringers. Patent law is biased in both directions. Recently, patent reform has corrected many biases to better protect accused infringers. But we still have a long way to go to correct many other biases to better protect America’s inventors.