Confused and frustrated, patent policy experts bemoan America’s absurd compulsory licensing patent system

By Chris Gallagher
May 16, 2017

The English language has interesting group nouns. Groupings like a “gaggle” of geese, a “murder” of crows or a “pride” of lions come to mind. Anyone attending the IIPC’s Capitol Hill Conference earlier this week might wonder if there is a group noun for a gathering of patent policy experts. We would respectfully suggest referring to such gatherings as a “confusion” of patent experts. Many Conference attendees have been on opposite sides over the years, but the experts gathered that day were in concerted agreement that the patent landscape has been carpet-bombed with confusion caused by the Courts, the Congress and the PTO. Despite their collective confusion regarding the roiled patent landscape, as Steve Brachmann and Gene Quinn noted in their joint summary of the proceedings, there were a number of key issues where despite confusion imposed by DC decision makers, general agreement was the order of the day.

The consensus reached by the patent experts in attendance included; frustration with the misleading patent troll narrative that wrongfully claims all patents are “bad patents”, the persistent push of the efficient infringer lobby for comprehensive patent litigation reform despite the fact that patent litigation continues to decrease, and that unanimous view that patents are property, which is after all what the Patent Act declares in 35 U.S.C. 261.

There was no philosophical discussion about liability vs. property legal theory. There was no debate about the “public rights” doctrine the PTAB and the Federal Circuit have dredged-up from juridical obscurity. On the contrary there were repeated references to the appropriateness of analogizing patents to real etate, which the Supreme Court itself has done well over 100 years.

The experts in attendance reminded us of the insanity of the compulsory licensing system that now pervades the U.S. patent marketplace, which when explained in terms of real estate is obviously absurd.

“A man came home from work one day to find a strange family living in his dining room. He wanted to have them evicted but was told he would have to spend five years and millions of dollars proving in court that he owned the room where the invaders had pitched their tent. A judge finally found that indeed he owned his dining room. But instead of ordering the family’s eviction she ordered the invaders to pay rent to the homeowner in an amount hypothetically determined by calculating what he and the squatters would have agreed to before his unwelcome visitors moved-in.”

Despite the fact that this poor fellow was not in the dining room rental business, and regardless of the fact that he had his exclusive right in his dining room confirmed, the squatters had a right to stay as long as they paid what would have been a fair rental had it been unnecessary to sue and live through five years of litigation. The absurdity is palpable, of course. Even in the America of today no judge would allow homeowners to cohabitate with squatters, but a patent is different. Despite the fact that the Supreme Court has repeatedly said a patent in land caries the same rights as a patent in an invention, the patent owner today must come to terms with the reality that exclusivity no longer exists as one of the bundle of rights thanks to eBay v. MercExchange.

In the circumstances described above, court-ordered rental is equivalent to the compulsory licensing now automatically imposed by the lower court lemmings following Justice Kennedy’s concurrent eBay opinion while ignoring the common sense former rule that recognized that the owner of an exclusive right ought to get an injunction from a court that orders no further infringement of that exclusive right. Without such an injunction, which would just confirm what the patent grant itself already allegedly commands, exactly how does a patent confer an exclusive right? It doesn’t, and that is the reality facing patent owners who are forced to share their exclusive rights, which is as ridiculous as it sounds. Our victorious homeowner it seems must dine-out or eat in the kitchen.

Maybe there ought to be an IPWatchdog contest to select the appropriate group noun for gatherings of patent policy experts. I nominate “confusion”. But unless our roiled patent landscape is soon restored, a “frustration” of patent policy experts may be the better choice.

The Author

Chris Gallagher

Chris Gallagher is President of IP Strategic.com and a perennial selection to The Best Lawyers in America. Having spent years as one of the most influential and highly regarded advocates in the New Hampshire Legislature and state administrative agencies, Chris is now focused primarily on federal policies in Washington, DC. Chris has been involved in nearly every substantial New Hampshire economic regulatory initiative over the last 25 years. He has served as general counsel for the New Hampshire Bankers Association and has represented New Hampshire utilities, hospitals, insurers, aggregate manufacturers and numerous other entities. This experience provides him with a uniquely respected voice on Capitol Hill, enabling him to communicate effectively with members whose federal decision-making must reflect and respect the complexities of their home-state constituents.

A frequent speaker and commentator in local and national media on policy issues, regarding financial services, privacy, business and government, Chris has testified on financial services issues before U.S. House and Senate Committees and has been a panelist in Capitol Hill briefings on intellectual property issues. He can be reached at chris@ipstrategic.com

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 23 Comments comments.

  1. angry dude May 16, 2017 9:52 am

    Correct. But to be precise, there are still strong patent exclusive rights enforced by courts for certain (big) patent holders, like pharmaceutical companies – otherwise there would be no pharma in the US, generics manufacturers from overseas would kill US pharma in a matter of weeks
    But for whatever reason they don’t see irreparable damage done to small patent holder with infringed patent(s) when that small patent holder is unable to raise financing and carve out a market niche for himself because his patent is being used left and right by large corporate infringers with tacit permission from US courts

  2. step back May 16, 2017 1:24 pm

    Comrade, comrade …

    What all fuss about?
    But of course when proletariat occupy mansion of capitalist pig innovator it is all good. Property of CPI (Capitalist Pig Innovator) wants to be free.

    What is complaint here?
    If don’t like perhaps you should move to Siberia, no?

  3. angry dude May 16, 2017 2:08 pm

    step back @2

    usually its just “CP” – capitalist pig (without “innovator”)
    and its too cold in Siberia – I prefer Black Sea
    but alas, right now innovation is not on a high priority list over there…

  4. Anon May 16, 2017 2:32 pm

    How about “a Stalin of property rights”….
    😉

  5. angry dude May 16, 2017 2:47 pm

    Anon @4

    ???
    Stalin means no rights for anyone, except the right to die a slow and painful death

  6. Anon May 16, 2017 2:58 pm

    You should read the article above in order to pick up the purposeful irony in my suggestion.

  7. staff May 16, 2017 5:23 pm

    ‘America’s absurd compulsory licensing patent system’

    It’s true. When government permits one party to take the private property of another against their will they sanction and legalize theft. Whatever happened to rule of law? Property is property. Show us a country with weak or ineffective property rights and we’ll show you a country with a weak economy and high unemployment. Sound familiar?

    For our position and the changes we advocate (the rest of the truth) to truly reform the patent system, or to join our effort, please visit us at https://aminventorsforjustice.wordpress.com
    or, contact us at aifj@mail.com

  8. step back May 16, 2017 6:07 pm

    Comrades, …
    All CIPs (Capitalist Innovator Pigs) is equal.
    Some is more efficient and equal than others.
    No?

    What is big fuss here?
    Your Supreme Court this understands and implements.

    If name of small insignificant CIP is Alice and she sue big bank, then outcome very simple. Alice she be ineligible to sue. What hard so much to understand about all this?

    This not grand master chess playing. This just obvious simple politics.

  9. angry dude May 16, 2017 9:28 pm

    step back @7

    “all animals are equal, but some animals are more equal than others”

    true indeed

    this perfectly describes the current situation in US – a giant animal farm

  10. step back May 16, 2017 9:39 pm

    angry @8

    I’d venture to guess that there are a number of readers who never heard of George Orwell or read Animal Farm … which is why, dear comrade, we now repeat the mistakes of past history … blessed art the plow horses for they shall inherit the earth (when buried in it) 😉

    https://www.amazon.com/Animal-Farm-Orwell/dp/0143416316

  11. Poesito May 16, 2017 11:40 pm

    In the manner of the inimitable Yakov Smirnoff:

    In Russia, chaos makes billionaires. In America, billionaires make chaos. What a country!

  12. Curious May 17, 2017 1:15 am

    How about a “contradiction” of experts?

  13. Anon May 17, 2017 8:39 am

    Curious, +1

  14. A Contrarian May 17, 2017 11:31 am

    Our imperfect patent system also struggles with the absurdity of the man who sets his dining room on the public street and sells it to a goon to extract a toll from all who pass.

  15. Gene Quinn May 17, 2017 11:58 am

    A Contrarian-

    You are EXACTLY correct. The problem, however, is the man who sells to the goon on the street (to use your terms) has almost exclusively been Fortune 500 companies. Indeed, according to Karl Fazio, “More than 80 percent of patents litigated by PAEs are acquired from operating companies.” See:

    http://www.ipwatchdog.com/2017/02/21/fight-low-quality-patents-commoditized-technology-threaten-innovation/id=78581/

    So that means those who are responsible for the goons that are being complained of are ones doing the complaining who are enabling the goons. You see, there is a symbiotic relationship. I have been told that AT&T and Cisco are well known to sell patents to the goons specifically so they will harass their other Fortune 500 competitors.

    So let’s not lose sight of the fact that to the extent there is a patent troll problem, the patent troll problem has been a creation of the infringer lobby.

  16. NPE guy May 17, 2017 2:01 pm

    A Contrarian:

    I disagree with this analogy. Nobody is trying to trap people who inadvertently walk into their dining room and use a “goon” to extract unreasonable amounts from the poor victims.

    The reality is that patents are published. Companies developing products could search patents ahead of releasing new products, but they obviously don’t. I understand that it’s virtually impossible to develop a high tech product without infringing somebody else’s patents. Nobody is expecting them to do so. Can we, however, expect them to pay their fair share for the technology that was developed and patented by third parties?

    To come back to your analogy, I see NPEs to be more like Airbnb. They are an intermediary in an imperfect licensing market. Nothing more, nothing less.

  17. Edward Heller May 17, 2017 2:06 pm

    A note from Joseph Story, the true founder of America’s patent system:

    In Pierson v. Eagle Screw Co., 8 Story’s R. 410, Story, J., again said: “But, upon the question of damages, I would upon this occasion state (what I have often ruled before), that if the plaintiff has established the validity of his patent, and that the defendants have violated it, he is entitled to such reasonable damages as shall vindicate his right and reimburse him for all such expenditures as have been necessarily incurred by him beyond what the taxable costs will repay, in order to establish that right. It might otherwise happen that he would go out of court with a verdict in his favor, and yet have received no compensation for the loss and wrong sustained by him. Indeed, he might be ruined by a succession of suits, in each of which he might, notwithstanding, be the successful party, so far as the verdict and judgment should go. My understanding of the law is that the jury are at liberty, in the exercise of a sound discretion if they see fit, (I do not say that they are positively and absolutely bound under all circumstances,) to give the plaintiff such damages, not in their nature vindictive, as shall compensate the plaintiff fully for all his actual losses and injuries occasioned by the violation of the patent by the defendants.”

    Curtis, ’67 Ed., at 345 n.2

  18. Edward Heller May 17, 2017 2:10 pm

    If the rule of damages were as it once was under Story, we could live with compulsory licenses because the patent owner would be fully compensated for the cost of enforcement.

  19. Anon2 May 17, 2017 2:38 pm

    A Contrarian @14

    Your absurdity of a man who:

    owns and does not own

    a dining room which not a dining room because it is a street and not a street because it is a dining room

    which by implication is and is not property at the same time,

    clearly makes you an Expert worthy of membership in the

    “contradiction of experts” (see suggestion by Curious @12)

    which suggestion I now whole heartedly embrace.

  20. Anon May 17, 2017 4:35 pm

    Mr. Heller @ 16 and 17,

    Justice Story is most definitely NOT the true founder of the US patent system.

    I do “get’ why you would want that to be a true statement, with all of your disrespect for the statutory category of process, your desire to return to a pre-1952 understanding of patent law, an artificially (and dangerously so) elevation of the judicial branch above both the legislative branch and of the Constitution which designates NOT the judicial branch, but rather the legislative branch as the writer of the statutory law that is patent law, and your adamant refusal to give full faith and credit to exactly what happened in the Act of 1952, instead, opting to “feed the addict” and think that the Supreme Court is (somehow) the authorized writer of patent law.

    I would further state that the very quote you supply from Justice Story falls short of a proper understanding of the very first reason for equity: to make the transgressed as whole as possible. Yes, Justice Story does indicate that a mere “reasonable royalty” (akin to a compulsory license) is not enough and that juries [emphasis added – and intentional for other familiar reasons] may rightfully “ in the exercise of a sound discretion if they see fit, (I do not say that they are positively and absolutely bound under all circumstances,) to give the plaintiff such damages, not in their nature vindictive, as shall compensate the plaintiff fully for all his actual losses and injuries occasioned by the violation of the patent by the defendants.

    As I said, this falls short and still appears to treat the remedy of injunction as what may – out of context of the meaning of the patent right – traditionally be viewed as a “harsh” measure.

    “Living with” compulsory licenses is NOT making the transgressed as whole as possible, even if the monetary ledger could be appropriately balanced. The nature of the patent right simply is NOT a “positive” right to make money. Instead, the nature of the patent right is the negative right of excluding others.

    We do NOT advance our system (the actual system, and not Justice Story’s system) with any mere “fully accounted” compulsory licensing system.

    That is simply not enough of either a carrot or a stick.

  21. Edward Heller May 17, 2017 4:43 pm

    anon, good post.

    I would and do agree with you that if injunctions were freely available, that we would not have to address at all full compensation at the damages phase. We should still work on restoring the presumption that an injunction should issue unless the infringer can show public or private circumstances why it should not. The burden should be in the infringer.

    But if that day never comes, and may never come because the Supreme Court is unlikely to overturn eBay, we need to look to Story’s views on damages as an alternative.

    Not so?

  22. Anon May 17, 2017 5:56 pm

    To your last question, Mr. Heller, I would respectfully (and emphatically) say “No.

    The matter is simply not a matter of final word by the Court.

    If the Court cannot abide by the directions given by Congress when Congress shared their Constitutionally directed authority (applying equity in accord with 35 USC 283 – in accordance with the principles of equity to prevent the violation of any right secured by patent) then the next proper step is for Congress to take back its sharing of authority.

    Congress should not assume that the Court will act reasonably if the Court refuses to act reasonably. THAT would be an abdication of responsibility on the part of Congress.

    Sometimes “good enough” is the bed fellow of e v i l . Sometimes, it is not prudent to accept “good enough.” That way is the quickest way to guarantee a slippery slope that is too slippery to overcome.

  23. step back May 17, 2017 8:40 pm

    Well, if indeed we are engaged in choreographing street theater, being that we have a dining room set in the middle of the street; let us go further by imagining a gaggle of unclothed “wise” people marching down the street proudly, pontifically and in that, proclaiming themselves to be the “supreme” deep thinkers of our times.

    Let us imagine that they perceive these things they call “laws of nature” and “phenomenon of nature” and “abstract ideas” for which they have devised a magical detection scheme.

    A talkative one of them reveals to us that there are “fundamental building blocks” of primate “ingenuity” (while at the same time continuing to parade naked down the street). He lets us in on an understanding he and his fellow gagglers have about perhaps, thwarting the progress of science by “unreasonably” tying up these “fundamental building blocks”.

    I suspect Shakespeare could have had great fun with this line up of marching in the buff buffoons. Alas for us, they hold great power. The power to easy-wipe away all property rights (and perchance, life and liberty too).

    https://patentu.blogspot.com/2017/05/easy-it-comes-to-us-easy-it-goes-to-us.html