The Top 3 Reasons the U.S. Patent System in Decline

By Gene Quinn
April 26, 2017

U.S. patent system in declineToday is World IP Day 2017, and in many parts of the world there is reason to celebrate. In the United States there should be less celebration and more reflection upon how our elected leaders, appointed officials and learned jurists are collectively allowing the engine of U.S. economic dominance to be disassembled before our eyes.

While the U.S. barely clings to the top spot overall in the U.S. Chamber of Commerce 2017 world rankings for intellectual property, when the focus is placed on patents the U.S. tumbled to a tie for 10th place with Hungary in the Chamber’s 2017 rankings. Concerns over software and biotechnological innovations being patent eligible, the omnipresent threat of patent reform that could make it even more difficult to enforce the patent property right, and no clear path to a philosophical or ideological turning point make for little to celebrate this World IP Day in America.

Particularly irksome is the theme for World IP Day 2017, which centers on attracting investment, rewarding creators and making sure that knowledge acquired today becomes freely available for generations of the future. None of that is a reality in the U.S. in 2017. Indeed, so bad has the patent climate become that several pro-patent Members of Congress banned together in 2016 to pass federal trade secret legislation so innovators would have at least some federal protection as patents continue to be of little or no value in certain market sectors. But when information is kept as a secret it won’t be available freely for future generations to build upon, so the social compromise that is the foundation of the patent system becomes severely undermined.

This year the World Intellectual Property Organization (WIPO) explains the chosen celebratory theme as follows:

This year, we’ll explore how innovation is making our lives healthier, safer, and more comfortable, turning problems into progress. We’ll look at how the intellectual property system supports innovation by attracting investment, rewarding creators, encouraging them to develop their ideas, and ensuring that their new knowledge is freely available so that tomorrow’s innovators can build on today’s new technology.

Sadly, in the United States there is not much to celebrate. Thanks to over a decade of truly terrible decisions from the United States Supreme Court and disastrous legislation given to us from the United States Congress, the U.S. patent system is in a very bad place. Of course, the United States Patent and Trademark Office is not blameless. Indeed, there is plenty of blame for an Office that allows patent examiners to get away with submitting fraudulent timesheets (see here, here and here), hires patent examiners who are not fluent in spoken and/or written English, and that seems powerless to do anything about those examiners who haven’t issued patents in years.

There are numerous problems with the United States patent system, extraordinary good could come from undoing several pivotal decisions. So on this World IP Day let’s focus on the top 3 reasons the U.S. patent system in decline. If Congress wants to resurrect the U.S. patent system these three decisions would be overturned. As long as these decisions remain in force the U.S. patent system will continue to suffer and will undoubtedly be looking up in the rankings to the likes of Hungary when the Chamber releases its 2018 world IP rankings.

1. eBay v. MercExchange (2006)

 The Court’s decision in eBay v. MercExchange related to the issuance of injunctions to victorious patent owners upon successful completion of patent litigation. Prior to May 15, 2006, when a patent owner prevailed on the merits in a patent infringement lawsuit, there was a well-established general rule that an injunction should issue absent the presence of a sound reason for denying it. That makes perfect sense given that the patent is an exclusionary right (i.e., the patent grant by its nature demands that no one engage in making, using, selling, offering for sale or importing, much liken injunction).

Starting late in the morning on May 15, 2006, the day the Supreme Court issued its decision, in order to receive a permanent injunction in a patent litigation the victorious plaintiff needs to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

Ironically, patent owners are better off before they are victorious and have withstood all challenges. At least prior to a verdict they have the illusion of an exclusionary right that is akin to an injunction, but once they have prevailed they cannot get a permanent injunction, which is bizarre in the extreme. All a permanent injunction would do different from the terms of the patent grant already awarded would be to continue to allow the district court to maintain jurisdiction to punish recalcitrant defendants who refused to follow the court’s order.

The eBay decision largely removes the possibility of an injunction, which turns the patent system into a compulsory licensing regime, at best. The infringer bears no risk of being told to stop infringing. This significantly tilted negotiating power, value, and minimized opportunity for settlement and maximized the likelihood that patent owners would have to sue. Most patent professionals point to this decision as the single most harmful event, and the one that most needs to be overturned.

The law is supposed to maximize certainty and minimize transaction costs in order to facilitate an efficient, arms-length negotiation of rights. That is what keeps disputes out of court, or if they make it to court it is what gets disputes to settle. eBay has so significantly tilted the playing field that arms-length negotiations of rights is impossible, which is why so many attorneys who represent infringers brag about simply throwing away, or circular filing, inquiry and notice letters they receive from patent owners. Infringers have no risk. They cannot be shut down.

2. Mayo v. Prometheus (2012)

The root of the patent eligibility evil lies with the Supreme Court’s decision in Mayo v. Prometheus. The real mischief of Mayo is found in the fact that the Supreme Court intentionally chooses not to apply 35 U.S.C. 102 (novelty), 35 U.S.C. 103 (obviousness) and 35 U.S.C. 112 (description) to evaluate the claims. The Solicitor General of the United States specifically argued that the Supreme Court should look to those other sections of the statute as the Court itself commanded be done in Diamond v. Diehr, for example. Justice Breyer refused what he called the invitation of the government to allow the claims to be properly analyzed under 102, 103 and 112. It wasn’t an invitation, rather it is what the Patent Act required.

In Diehr, then Associate Justice William Rehnquist explained why considering newness under 101 was inappropriate. Now newness (or novelty) is considered in a patent eligibility inquiry, but this newness is considered without any prior art being applied. That makes the question of newness under 101 purely subjective and untethered to any scientific or technical reality.

Today, thanks to Mayo, decision makers consider whether claims are new, nonobvious and even properly described all under a 101 patent eligibility analysis, which allows decisions to be made without information or thoughtful consideration. It allows claims to be deemed conventional and, therefore, patent ineligible without apply a single piece of prior art or considering priority dates or availability of references or when teachings were made public.

Worse, Mayo also allows these decisions to be made without any claim interpretation. How can you know what a claim covers without a claim interpretation? The answer is simple: You cannot know what a claim covers without interpreting the claim. But at least district courts can dismiss patent infringement lawsuits on motions to dismiss, never having construed the claims, never having applied prior art, and not having the most vague idea what the claim actually covers on a technical or scientific level.

3. Post Grant Administrative Trials (2012)

 Without a doubt the biggest change brought into being by the America Invents Act (AIA), and why the AIA has been an unmitigated disaster, is the creation of three new procedural challenges to issued patents. These post grant challenges – inter partes review (IPR), post grant review (PGR), and covered business method (CBM) review – give those who don’t like patents fresh new opportunities to seek the invalidation of property rights issued by the Patent Office. These new procedures are added to challenges already available in federal district court, as well as reexamination, which continue to be available at the Patent Office.

These post grant proceedings have been so horribly one-sided that it is almost impossible to believe they are being carried out within an American system of any kind. The statute gives patent owners the right to amend patent claims, but the PTAB denies virtually all motions to amend because the PTAB interprets the statute that gives the right to amend as merely a right to file a motion to amend, which they nearly universally deny. Patent owners are also harassed and subject to petitioners ganging up on their patents. Despite the AIA giving the Director the ability to protect patent owners against harassment the Director continues to refuse to exercise this authority.

All of the post grant challenges ushered in by the AIA were a bad idea. They never should have been created in the first place. All the post grant proceedings have done is make infringing patents a more economical choice, while making it more costly for innovators to obtain and keep the protection they need to make innovating a worthwhile endeavor. It was all too predictable that a new tribunal would over assert its own jurisdiction, but the breadth of just how arbitrary, capricious and fundamentally unfair the process would be was simply not predictable. For example, few would have predicted the PTAB would ignore the statutory definition of a CBM patent and instead use their own definition that would render virtually all patents a CBM patent. Moreover, few would have predicted that the PTAB would refuse to consider evidence timely submitted as a matter of right, even fewer would have predicted the Federal Circuit would allow the PTAB to refuse to consider that same evidence.

Future of the U.S. Patent System

If and when these three issues are address there will be reason to celebrate the U.S. patent system. I don’t expect that will be anytime soon, but we do need to remember that we’ve seen the U.S. patent system in near complete collapse before. In the 1960s and 1970s the Supreme Court never saw a patent that was valid, which lead to the creation of the United States Court of Appeals for the Federal Circuit. In the 1970s and early 1980s there was great concern that Japan would win the technology future, which is why President Reagan invested so heavily into the U.S. Patent Office in order to bring down the backlog. At this moment even the Supreme Court reversed course in the early 1980s with two extremely pro-patent decisions in Diamond v. Chakrabarty and Diamond v. Diehr, both of which lasted for over 30 years before the current Supreme Court implicitly overruled those decisions.

The darkness of the 1960s and 1970s is what gave way to the strong foundations built in the 1980s and 1990s. Things will turn around eventually, the only question is when. With China outspending the United States on late stage innovation, the political environment of the early 1980s could be close at hand. We can only hope that will cause our elected leaders to envision the same future that was seen as possible when a strong patent system was seen as the foundation of great economic promise and technological advancement.

 

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 19 Comments comments.

  1. Bemused April 26, 2017 1:10 pm

    Here are my top three reasons why the US patent system is in decline:

    1. The Obama Administration
    2. Google (arguably, #1 and #2 are redundant)
    3. CAFC (where the judges need to grow a pair and start doing their job)

  2. outofbox3.14 April 26, 2017 1:16 pm

    How to increase Patent Quality and settle Patent Rights:

    Proposal:
    Strongly incentivize competitors to monitor patents and notify USPTO of bad claims soon after issue. Shorten USPTO feedback loop to discover & correct underlying quality problem(s)/cause(s).

    Incentive on Competitors:
    Impose increasing claim interpretation standards, that settle patent rights by making it much more difficult to invalidate claims later in time.

    Example:
    Prosecution is only re-opened under the Broadest Reasonable Interpretation standard when the USPTO has been notified of bad claim(s) within 6-9 months (TBD challenge-window) of issue.
    At end of challenge-window, all challenges are aggregated & decision to re-open prosecution made by USPTO Quality Board
    USPTO prioritizes re-opened prosecution (done by Art Units TBD). Quality Board oversees re-opened prosecution (e.g., issues corrective/interactive feedback to Art Unit).
    Quality Board approves claims from re-opened prosecution.
    Following Quality Board approval, claims are to be presumed to be valid and there is a strong attempt to interpret claim(s) so that the claim(s) are valid.

  3. EG April 27, 2017 6:25 am

    Hey Gene,

    Can’t disagree with the 3 examples you noted. With respect to eBay, I would add MedImmune too which, together with eBay, has changed the hold dynamic for patent licensing negotiations which now greatly disfavor the patent owner.

  4. EG April 27, 2017 6:26 am

    Hey Gene,

    Sorry, it should read “whole dynamic.”

  5. Anon April 27, 2017 7:26 am

    As to the examples, I would not limit the eligibility SNAFU to any one single case, but would include the whole panoply of Benson/ Flook/ Diehr/ Chakrabarty/ Bilski/ Mayo/ Alice…

    One reason to do so is to indicate the long running interference with – and the Court’s own scrivening of – statutory law far in excess of any notion of “interpretation” of the plain words of the Act of 1952 (with the desire of the Court to subtly and “implicitly” attempt to regain the power taken from them in that Act of Congress).

    In the case of eligibility, the “legislating from the bench” has NOT been a matter of a single decision at a single point in time. Rather, it is the evidence provided by a thorough study of the series of “legislating from the bench,” with all of the players involved and the politics of those players, played out over time, that provide “the rest of the story” as the late Paul Harvey used to say.

  6. Benny April 27, 2017 9:27 am

    Outofbox at 2 seems to be proposing a European style approach to re-examination, which altogether is not such a bad idea.

  7. Pandos April 27, 2017 9:49 am

    Reason: 9 liberal art majors who grade their own papers.

  8. Night Writer April 27, 2017 10:29 am

    @1 Bemused:

    #3 is Google too. They have been selecting the judges for some time.

  9. angry dude April 27, 2017 9:08 pm

    But … we have robust patent market in US according to some…

  10. Anon April 28, 2017 8:04 am

    In context of my prior post at 5) above, I would posit that the top three reasons the U.S. patent system is in decline are as follows:

    1) The Judicial Branch. This stems from the very top and the desire to legislate from the bench to achieve the Court’s own desired Ends (as opposed to properly applying (or even properly interpreting) the law as written by Congress – that law written appropriately in most cases by the other branch of the government so designated by the Constitution to have that writing authority – and in those cases in which that other branch violates other Constitutional protections, to enforce the (true) highest law of the land – which should not be confused with the words of the Court itself.

    I may occasionally characterize this problem as “an Attack from the Left”, in the sense of “the Left” being a Ends-driven philosophical abrogation of the purposeful checks and balances system that underpins U.S. law.

    The next two reasons share a common fault, epitomized by the Citizen’s United case, but that case not being a originator of the problem, but more a symptom and greater enabler of the underlying problem. I may occasionally characterize this problem as “an Attack from the Right,” in the sense that “the Right” may be synonymous with Big Corp control.

    2) The Executive branch. This stems from a truly unprecedented level of that branch showing signs of being controlled by special group advocacy dollars under Obama (and for which, Trump will not differ from Obama in any meaningful manner).

    3) The Legislative branch. While this branch is the most direct to be blamed – and carries with it the most responsibility (and capability) of making meaningful change, “capture” remains the operative word, closely followed by a partisanship which diverts attention to the truly shameful manner that the power allotted to Congress has been usurped by the judicial branch. I simply do not see a way (given the present internal conflicts) that the Legislative branch will “right the ship” without first acknowledging their own past complicity and second undertaking a truly drastic course correction (by removing the Supreme Court with the duly constitutional power of jurisdiction stripping from the Supreme Court the non-original jurisdiction of patent appeals).

  11. Gene Quinn April 28, 2017 10:29 am

    Anon @10-

    I like your trifecta! Probably wasn’t intended to bring a smile to my face, but it did. Sad that we find ourselves in this state.

    Was on a call yesterday that was truly depressing. Seems that there are some in DC actually asking why we need a patent system and if the patent system can (and should) be dismantled.

    -Gene

  12. Night Writer April 28, 2017 11:41 am

    http://www.cafc.uscourts.gov/sites/default/files/opinions-orders/16-1499.Opinion.4-26-2017.1.PDF

    A write-up on this one from you Gene would be great. This one is a disaster for many applications. Brought to you by Lourie (a man that has no understanding of modern information processing or philosophy) and two Google selected judges: Reyna (the man that said he knew nothing about patent law during his confirmation hearings, but boy would he burn it down), and Stoll (the woman known at Finnegan for doing whatever it takes to get whatever she wants and being incredibly cruel to associates. It is highly likely that she promised to burn the system down for her appointment.)

  13. Night Writer April 28, 2017 11:51 am

    Gene>>Was on a call yesterday that was truly depressing. Seems that there are some in DC actually asking why we need a patent system and if the patent system can (and should) be dismantled.

    It is incredible how ignorant people are about the patent system. I’ve said it before: we are going down. Maybe if Kim Kardashian had patents.

  14. angry dude April 28, 2017 1:53 pm

    Night Writer @13

    Kim Kardashian could easily have a patent on a$$ware or b00bware for full figured chicks

    Michael Jackson patented anti-gravity

    The whole patent system in US is just laughable at this point

    I’m out

  15. Paul Cole April 29, 2017 2:03 am

    Although the outcome in Recognicorp may be fair, there is a central flaw in the judicial reasoning which is central to virtually all recent Federal Circuit decisions on Section 101. The Court has gone straight to judicial exceptions without, apparently, giving any consideration whatsoever as to whether the claimed subject-matter falls as a matter of substance as opposed to mere outward appearance within one of the eligible categories of Section 101. That is an omission which in the case of a law student could and should lead to a failing grade in any properly conducted end-of-year examination in patent law.

    It then has to be said that positive category compliance under Section 101 is not a push-over, and whether claim 1 contains sufficient features to comply with the “transformative” criterion of “process” under the section could usefully be debated. If it did, then that should be the end of the matter because no court can deem positively compliant subject-matter ineligible for judicial exception without breaching the separation of powers doctrine which has never been questioned by the Supreme Court.

    So in my capacity as a law professor (admittedly from outside the US), I give the judicial reasoning a delta.

  16. Night Writer April 29, 2017 8:29 am

    http://www.motherjones.com/politics/2017/04/justice-sonia-sotomayor-dissent-houston-police-shooting?google_editors_picks=true

    Here is the ultimate irony. Sotomayer concerned about the justices being unfair. You see when you do things like burn down the patent system using judicial activism, then you burn the system down. They don’t get the connection.

  17. Anon April 29, 2017 9:26 am

    Mr. Cole,

    I wonder if I would be deemed “skeptical” if I said that the echoes of “I told you so” ring through the air with your statement of “without, apparently, giving any consideration whatsoever as to whether the claimed subject-matter falls as a matter of substance as opposed to mere outward appearance within one of the eligible categories of Section 101.

    After all, all that your observation amounts to is the plain fact that the lower courts are following the actual example of the Supreme Court in applying the Supreme Court’s “Gist/Abstract” sword.

    What you call “only outward appearance of consideration” is the direct “Gisting” effect of the Court not paying attention to the words of our Congress (in 35 USC 112 which states that it is NOT the Court (courts) that decide what the invention is, but rather it is the inventor, through the actual words of the claim, that do sets forward the invention). The Court (and thereby the courts) deem such to be “mere scrivening” and they “know better” in deciding what any mere words are “actually” directed to.

    It has long been noted that the mechanism that the Court has itself scrivened actually removes the statutory categories from the law of 101. Indeed, as the Court has set no limits to its “Gist/Abstract” swordplay, the “warning” that they (glibly) provide about exceptions swallowing the rule is far less a “warning” and an (inevitable – although decidedly not unforeseeable) effect.

    As to “comply with the “transformative” criterion of “process” under the section could usefully be debated” – let’s start the debate as to where in 101 this “transformative” criterion is found. I am not finding it in the plain words of Congress. Can you?

    Night Writer,

    I must say that Sotomayor has been one of the biggest disappointments of the Justices to me (based in part on my personal dealings with her early in her Supreme Court reign, which had led me to make some presumptions about how she would apply the law in her role). Not to say that she is the “worst,” but to say that I truly expected her to not imbibe in the level of legislating from the bench as she has done.

    The case link you provide shows that not only will she imbibe in that judicial activism, but indeed, “they don’t get the connection” when it is their own desired end state that is dumped by the Royal Scrivening.

    There is a phrase linked to Sir Thomas More that applies here:

    https://www.youtube.com/watch?v=NUqytjlHNIM

  18. Night Writer April 29, 2017 9:29 am

    @17Anon what a great video. Wow.

    http://www.bizjournals.com/sanjose/news/2017/04/25/google-intertrust-launch-program-to-defend.html

    Google playing both sides against the middle. Google doesn’t miss a trick.

  19. Night Writer April 29, 2017 9:31 am

    Paul Cole: apparently, giving any consideration whatsoever as to whether the claimed subject-matter falls as a matter of substance as opposed to mere outward appearance within one of the eligible categories of Section 101

    I think the whole thing is unfair, but I also think your point is great. I noticed that too. The logical structure was: this is what they say is more, and it doesn’t fit one of our previous cases. That is perhaps the worst part about this case.

    Note too, –again–the unbelievable ignorance of this. That is essentially saying that if it is not like something old it cannot be patentable. So, no new innovation can be patentable. Lourie is just a disgrace. One of the worse humans I have ever run across. Arrogant. Ignorant. Mean.