Patent law has always swung like a pendulum. Swinging between more restrictive regimes where patent owners have few meaningful rights and back to a place where patent owners enjoy strong property rights. Unfortunately, throughout history we have spent more time on the end of the spectrum where rights are hard to obtain and easy to ignore.
It is easy to get caught up with the shifting laws and even easier to start looking at the trees instead of the forest. It is easy to understand why innovators and patent owners are focusing in on the trees, so to speak. There has been such upheaval in U.S. patent laws over the last decade. Innovators and patent owners are on their heels playing defense in multiple forums, whether it be on Capitol Hill, at the Supreme Court, at the Federal Circuit or at the Patent Trial and Appeal Board (PTAB) of the United States Patent and Trademark Office (USPTO).
It is sad to say, but Congress has turned decidedly anti-patent over the last few years. There are some signs of hope as patent reform has been slow to move forward in the 114th Congress and the proposed bills have slowly inched in a more pro-innovator direction. There are rumors that the House of Representatives could take up the Innovation Act as soon as the July 4th recess is over, but many close observers continue to believe that patent reform this year remains a 50-50 proposition.
As things have slowed in Congress a bit and innovators have has modest success in conveying their point of view, it is undeniable that the major destructive force in the patent system today is the United States Supreme Court. Indeed, over the last several years, the Supreme Court has become extremely active in the area of patent law. They have made decisions on a number of cases that have significantly altered the patent landscape and negatively affecting patent value. Without any legitimate statutory precedent or authority the Supreme Court is wrecking the U.S. economy just as sure as snow is white and water is wet.
As a lawyer it is hard to watch the Supreme Court. I increasingly wonder how anyone could teach either patent law or constitutional law without simply acknowledging to the students that there is no rhyme or reason in the decisions of our High Court. The truth is the Supreme Court does what they want because they can. Congress is dysfunctional and unlikely to overrule the Supreme Court even when their decisions make no sense.
The United States Supreme Court is in the process of losing whatever credibility the Court once had. This is not to say that the institution has been irreparably compromised, but this particular Supreme Court will almost certainly be looked back at by historians as a largely failed Court that will see many of its decisions overruled by future Courts.
Indeed, over the past few days a 6-3 majority of the Supreme Court ruled that the language of a statute is largely immaterial when interpreting the statute. In King v. Burwell the Supreme Court recently interpreted one particular provision of the Affordable Care Act. Tax credits were authorized by Congress to be given to those who purchased insurance through “an Exchange established by the State…” The meaning of this phrase is undeniably clear to anyone and everyone who prefers intellectual honesty to legal gymnastics that justify a predetermined point of view. The intent of Congress was to provide a carrot to States to set up their own Exchanges. Most States did not set up Exchanges, the Internal Revenue Service still allowed tax credits for individuals who bought insurance on the federal Exchange. Chief Justice Roberts explained that the intent of Congress should be viewed by considering the entirety of the 2,000 plus pages of the bill. Intent of Congress overrides clear, direct and unambiguous statements. Thus, King v. Burwell seems to stand for the proposition that the language of the statute really doesn’t matter.
This is hardly the only example of the Supreme Court reaching an unsupportable decision. This Supreme Court, in Indiana State Police Pension Trust v. Chrysler LLC, allowed secured creditors to take a back seat in bankruptcy to unsecured creditors, which flies in the face of both bankruptcy and commercial law. See High Court Erases Precedent in Chrysler Bankruptcy. In Kelo v. New London, the Supreme Court also ruled that a municipality could seize real estate from one citizen for the express purpose of handing it over to a non-governmental, private entity if it is believed that private entity will make better use of the property.
How can one take a Court seriously if they are going to ignore plain statutory language and allow eminent domain to be expanded to a point where there are no viable remaining boundaries?
The Supreme Court doing whatever they want without repercussions or consequences is not new. Indeed, those who oppose Obamacare and who find the Supreme Court ruling in King v. Burwell impossible to justify are just now having to come to terms with what those in the patent industry have know for many years. The Supreme Court does not let the statute stand in the way of reaching the decision they think is best. Neither does the Supreme Court allow precedent, even their own precedent, influence their decision making process. That is, of course, unless they choose to ignore substantive arguments and claim for some reason that in a particular case their hands are tied because of stare decisis, which they actually recently did in Kimble v. Marvel Entertainment. Given this Court’s track record it is practically comical to see them cite stare decisis.
To call many of the decisions of this Supreme Court arbitrary and capricious would be insulting to any decision that is merely arbitrary and capricious.
In recent years the Supreme Court in AMP v. Myriad held that the patent claims at issue covered a non-naturally occurring DNA segment, but was still nevertheless patent ineligible under the law of nature doctrine. Indeed, Justice Thomas wrote: “we hold that a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated.” Apparently not realizing the logical incongruity Thomas would later explain that Myriads claims could not be saved “by the fact that isolating DNA from the human genome severs chemical bonds and thereby creates a nonnaturally occurring molecule.” Thus, the isolated DNA claims somehow simultaneously cover naturally occurring DNA even though isolating DNA “creates a nonnaturally occurring molecule.”
Further still, in Myriad, Justice Thomas explained that discoveries are not patent eligible. The problem with this sweeping statement is that he is simply wrong. If the Court took the time to actually read the one-sentence statute – 35 U.S.C. 101 – they would have learned that discoveries are patent eligible. Moreover, if the Court understood patent law they would know that pharmaceuticals are patented specifically because of the discovery made. It is a slight exaggeration to say that once the lead compound is determined the drug invents itself, but only a slight exaggeration. As the pharmaceutical industry turns increasingly to computer assisted identification of lead compounds Myriad in conjunction with KSR v. Teleflex means that pharmaceuticals are not patent eligible, and if they are patent eligible they are obvious. But how many actually expect the Supreme Court to rule that way and deliver a deathblow to the pharmaceutical industry? But that is precisely the problem! The Supreme Court has become a Super Legislative body. They ignore the laws they don’t like, re-write the laws they do like, and decide cases on policy rationales. The decisions are then written to explain what they have determined they will do rather than independently analyzing cases under the law and letting the law and facts dictate the outcome.
But wait, it gets worse. In Mayo v. Prometheus, the Supreme Court substantively ignored the mandates of the Patent Act and expanded the patent eligibility inquiry under 35 U.S.C. 101 to swallow the novelty inquiry set forth in 35 U.S.C. 102, the obviousness inquiry set forth in 35 U.S.C. 103, and the description requirement set forth in 35 U.S.C. 112. The Department of Justice specifically pointed out to the Supreme Court that they shouldn’t make 101 the single inquiry because that violated the statute. To this Justice Breyer responded in his opinion writing that the Supreme Court must “decline the Government’s invitation to substitute §§102, 103, and 112 inquiries for the better established inquiry under §101.” Decline the invitation? It really isn’t an invitation! The statute requires consideration of each of the individual sections and generations of prior Supreme Court precedent specifically prohibited conflating the various sections of the statute. But as is typical, the Supreme Court didn’t overrule those prior precedents that mandated a wholly different analytical framework; they merely ignored them because they could.
In Alice v. CLS Bank, the Supreme Court issued another intellectually challenged decision. In a unanimous decision authored by Justice Thomas the Supreme Court held that because the claims are drawn to a patent-ineligible abstract idea, they are not eligible for a patent under Section 101. The problem, however, is that the Supreme Court has never defined the meaning of the term “abstract idea.” Furthermore, not once in the decision did the Supreme Court even use the word “software,” although the patent in question was undeniably a software patent and the Court’s decision has been used at the USPTO, PTAB, in Federal District Courts and at the Federal Circuit to either deny issuance of software patents or declare previously issued software patent claims invalid because the subject matter is patent ineligible. Everyone in the industry knew this decision, one way or another, would have major impact on software patents and the Supreme Court didn’t even use the term once? Are they that hopelessly out of touch?
Even this term the Court’s decisions in in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc. and in Commil USA, LLC v. Cisco Systems, Inc. cause one to raise an eyebrow. In Teva, for example, the Supreme Court explained that the Federal Circuit must give deference to findings of fact made by the district court when interpreting claims, but refused to acknowledge that there are important questions of fact that must be addressed even when making a decision on purely intrinsic evidence. In Commil, the Supreme Court inexplicably raised the issue of patent trolls when they explained they were mindful of the problems with abusive litigation. The problem, however, is that neither party is a patent troll and there was not even a hint of any abusive litigation tactics being employed. Further, the Supreme Court continued to talk about patents being invalid, but it is impossible for an entire patent to be invalid; only a patent claim can be invalidated, not the entire patent. So even when the Supreme Court reaches what most would view as an objectively sound decision they raise serious concerns about whether they really understand patent law enough to be handling cases of such importance.
Against this backdrop, please join me on Monday, June 29, 2015, at 12pm ET, for a free webinar discussion on the Supreme Court. I will moderate a discussion on the ramifications of recent Supreme Court decisions on patent management decisions, particularly focusing on building, monetizing, or leveraging patent portfolios. Joining me will be Teresa Rea, partner at Crowell & Moring, and former Acting Director of the USPTO, and Bob Rauker, current CEO of MedicinusIP, and former Senior Vice-President at Acacia Research. In addition to taking your questions we will address the following:
- Core concerns patent portfolio managers must consider in this evolving environment
- Strategies for both identifying and creating better, stronger patent assets
- How licensing and royalties are being impacted and tactics for coping with the new realities of monetizing patents and portfolio
CLICK HERE to register. Webinar is sponsored by Innography.