How the Supreme Court legislated patent reform

By Paul Morinville
June 6, 2016

Supreme Court stormIn my high school civics classes, I learned that the people created the American government by granting only certain rights to it. The rights we didn’t grant, we kept for ourselves or the States. I learned that law is the execution of the authority of government backed by legally applied violence. The authority of law was well understood by the people, so the people put in place mechanisms to separate powers to both control and limit the power of government. A loss of control or delimiting of power would certainly mean a loss of our rights.

A primary construct of the government we created is that the body closest to the people, Congress, was granted the sole and exclusive domain of writing law. Placing that power closest to the people helps to ensure that our rights are protected. The judicial branch, with its unelected lifetime appointed judges, was tasked to interpret the meaning of law – not to create law.

Unfortunately, my high school civics teacher was wrong. The part he didn’t understand was the reality of how government really operates. Today’s government is untethered to the very documents that created its existence in the first place. How the government uses its power and how the application of that power is separated for the protection of our rights is no longer a respected tenet of government – at least not respected by the government. The results we have not were long ago predicted. We lose our rights and that loss is clearly illustrated in the story of patent reform since 2005.

Article I, Section 8, Clause 8 of the Constitution (the document that constructs the government) constructs a patent as nothing but an “exclusive Right” and this is the only place in the entire Constitution that the word “Right” is even used.

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;

The “exclusive Right” is strong language. It demands injunctive relief, which is presumably why the Court of Appeals for the Federal Circuit stated there is a “general rule that courts will issue permanent injunctions against patent infringement absent exceptional circumstances” when they overturned the trial court in a case called eBay v. MercExchange. That general rule stood since the Patent Act of 1790, 216 years.


In 2005, the first round of patent reform legislation, the Patent Reform Act of 2005 (H.R. 2795), hit Congress. In it were several provisions intended to change how patent law had worked for over 200 years, but the most interesting provision was limiting access to injunctive relief.

SEC. 7. INJUNCTIONS.

Section 283 is amended by adding at the end the following:

`In determining equity, the court shall consider the fairness of the remedy in light of all the facts and the relevant interests of the parties associated with the invention. Unless the injunction is entered pursuant to a nonappealable judgment of infringement, a court shall stay the injunction pending an appeal upon an affirmative showing that the stay would not result in irreparable harm to the owner of the patent and that the balance of hardships from the stay does not favor the owner of the patent.’.

The Patent Reform Act of 2005 was an attempt to legislate that injunctive relief be stayed pending an appeal if the patent owner does not suffer “irreparable harm”. If the patent holder does not have a product on the market, it is nearly impossible to prove “irreparable harm” will be caused by staying an injunction. The remedy for infringement is assumed to be money, not market position. Money can be awarded after the appeal so there may be harm, but it would be repairable harm because it would be awarded upon the conclusion of litigation.

While I disagree that Congress can change the plain meaning of the Constitution with legislation alone, Congress without question believed that legislation was required to make such a foundational change to the meaning of a patent right, which is why they legislation was

The Patent Reform Act of 2005 included provisions delving into other procedures and operations within the federal courts. The courts don’t appreciate Congress telling them how to run their courtrooms, so they did not like the legislation and feared it would pass. So the Supreme Court decided to take matters into their own hands in an apparent effort to stall the legislation thereby avoiding Congressional encroachment on their turf. To accomplish that they took up the case called eBay v. MercExchange.

The Supreme Court’s decision in eBay v. MercExchange changed the nature of a patent right from its Constitutional foundation as a private property right, an exclusive right, to some sort of a public right by crafting a four-step checklist to award injunctive relief:

“That test requires a plaintiff to demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law 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.”

The patent holder must satisfy all four steps in order to be awarded injunctive relief. Unfortunately, the test is impossibly difficult for most patent holders to pass. Demonstrating step (1), (2) and (3) inherently requires a product on the market. The patent holder must overcome an infringer arguing that without a product on the market, the patent holder is only seeking money and therefore cannot suffer irreparable harm if an injunction is denied. The balance of hardships easily falls on the infringer’s side because the infringer’s customers would be without the product and the patent holder is only seeking money.

Demonstrating step (4) requires an argument related to the public interest in a patent right. This redefines a patent right, which was a property right capable of attracting investment, as some sort of public right virtually incapable of attracting investment. If a big company steals your patented invention and massively commercializes it using their existing market and deep pockets thus running you out of business, it is practically impossible to prove that the public interest is served by injunctive relief. After all, the public interest is served by access to new technologies, which is the point of the patent system to begin with, and the patent holder has no product, never mind the infringer stole it to begin with. Therefore, enjoining the infringer would deny the public access to the new technology, which is a disservice to the public interest.

To summarize the Supreme Courts decision: If you steal it, you keep it, because it serves the public interest. I hope they do not expand the domain of that logic to my car, my house or my business.

In eBay v. MercExchange, the Supreme Court legislated Section 7 of the Patent Reform Act of 2005 in the form of case law. This meant that Congress didn’t have to pass it and it was subsequently dropped. eBay v MercExchange cannot be considered an interpretation of law. The Constitution, black letter law and dozens of cases over hundreds of years created unquestioned precedent for automatic injunctive relief barring exceptional circumstances. The courts rewrote all of patent law, which is clearly legislating from the bench to change the very nature of a property right.

Over the last ten years, one bad patent reform bill after another has been introduced and then pushed by a fantastic lobbying and public relations effort that has dumped hundreds of millions of dollars on Washington DC. eBay v. MercExchange is not the only legislation enacted by the courts in their effort to avoid Congressional meddling with their turf. Legislation was introduced related to damages, willful infringement, inequitable conduct and obviousness, all of which were enacted in whole or in part by the courts, presumably to avoid passage of the legislation in Congress.

If Congress believes that legislation is required to change patent law, why do the courts believe they can legislate via case law to achieve the same laws? Certainly, the courts must know they are legislating from the bench and that is a separation of powers issue far more damaging to our rights than one branch changing the rules of another.

I believe the infringer lobby has taken this turf war to heart and it has become their key strategy in passing laws favorable to them and damaging to small inventors. All they really have to do is push legislation into Congress that goes to the core of courtroom procedures and then spend massive dollars to present the legislation as a fait accompli to make the Supreme Court believe it will pass. In the end, it really doesn’t matter if the legislation passes Congress because the courts will legislate it through case law to avoid Congressional encroachment on their turf.

This sad state of our government was to be avoided by separating those who pass law from those who interpret law. Not surprisingly, we are losing our rights as a result of the courts legislating through case law. At this point, we have lost one of the most important rights, patent rights, and this loss is harming job growth and our economic competitiveness.

Congress is set up deliberately to debate the merits of legislation in an open and approachable forum. This creates law that fully considers the rights of the people. I can attest personally that anyone can walk into Congress, make their case and expose the unintended consequences of bad legislation. Members of Congress are directly elected by the people, and this direct accountability places the people’s interest up front in the legislation they consider.

Conversely, the courts are in no position to determine the unexpected consequences of legislating through case law. Access to the court is limited to parties directly affected by a specific case. While access can be opened to those with the financial wherewithal to write amicus briefs, it is not required. No person can just walk in off the street to explain the unintended consequences of any particular court decision. Federal judges and Supreme Court Justices are not elected. They are lifetime appointed, which, of course, means they have virtually no connection to the people and the decisions they make will never affect their paycheck. Said differently, the courts live in an intellectual vacuum devoid of the knowledge of unintended consequences and personal responsibility. The courts were not granted the power to write law for good reason.

That said, it is what it is. The courts will legislate if they believe Congressional legislation will pass and tamper with their turf. Inventors can use this understanding to push the courts to fix their misguided meddling. Inventors should push legislation into Congress and loudly support its passage so the Supreme Court believes it will pass. If they believe it, they will legislate for us and we don’t have to worry about passing anything through Congress.

 

The Author

Paul Morinville

Paul Morinville is Founder and former President of US Inventor, Inc., which is an inventor organization working in Washington DC and around the US to advocate for strong patent protection for inventors and startups. US Inventor has been walking the halls of Congress knocking on doors and sitting down with hundreds of offices to explain the damage suffered by inventors due to patent reforms. Paul is President of SemiComm HK, a Hong Kong company licensing patents in China, and an independent inventor with dozens of U.S. patents and pending patents in enterprise middleware.

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. Curious June 6, 2016 9:03 am

    To summarize the Supreme Courts decision: If you steal it, you keep it, because it serves the public interest.
    Nailed it.

    Actually, let me suggest a modification –> if you steal it and are big enough, you get to keep it because it serves the public interest. Small guys don’t serve the public interest.

  2. Night Writer June 6, 2016 9:47 am

    Very good point. The way the judiciary is getting around your points — I think–is saying that these “patents’ are different ones that are from the promote the general welfare section of the Constitution.

    Let’s fact it. We have in a post-Constitutional America. The judges don’t care about the law or the Constitution. All of this is related to Trump’s accusations against the judge. The issue is: would a federal judge discriminate against Trump because of Trump’s views on immigration. So, has the judiciary become rotten to the core. In my estimation, in view of patent law, yes. Yes, I believe that a federal district judge would discriminate against Trump because he doesn’t like Trump’s politics. We have become a third world country with the justices leading the march. (If Alice is OK, then why isn’t discriminating against Trump OK. If Lemley not having to be ethical in publishing his papers is OK, because patents are “bad”, then why is discriminating against Trump not OK.)

    They all go to professional ethics and the justices have led the charge to show us they have none.

  3. Night Writer June 6, 2016 9:49 am

    I think we should seriously think about wiping all judges and justices and appointing new people with professional ethics. And guess what? As radical as that sounds just wait another 10 years if we continue down this path of appointing people with no ethics that are just doing to do what they think is right no matter the Constitution or law.

  4. Edward Heller June 6, 2016 12:16 pm

    The real problem is this: without the threat of an injunction, the efficient infringer infringes with impunity. In the end, if he loses in court, he pay the very same royalty that others pay.

    Story long ago recognized that legal damages were not enough because if the patent owner were required to litigate to obtain nominal damages, enforcement of a patent would soon exhaust any patent owner. That is why Story held that when a patent was clearly valid and infringed, that the jury could award the patent owner his cost of enforcement, including his attorney fees.

    What this argues that if the validity of a patent has previously been sustained, in court or the PTO, and infringement is clear, that juries should award enforcement costs and attorneys fees in addition to nominal damages. This in many cases would be larger than a reasonable royalty.

  5. Skeptic June 6, 2016 12:18 pm

    “Exclusive right” means injunction as the necessary or at least default relief. Because I say it does. Anyone who thinks “exclusive right” could mean monetary damages is violating the Constitution, because they interpret it differently than me. “Exclusive right” to my invention, which is a small part of my competitor’s product, must mean the right to stop them from selling their entire product.

  6. angry dude June 6, 2016 12:28 pm

    The purpose of big infringer’s lobby was clear from the very beginning – substantially weaken all patents in general, especially software-related patents, and to create a legislative mess to make an outcome of each and every patent case a complete uncertainty, so that the party with the biggest legal team and resources to keep the fight for years wins at the end… one way or another

    I can say that US Patent system in its current state is MUCH worse than playing against a casino.
    In casino at least you have an opportunity to walk away with your intermediate wins, unless you decide to stay in the game for long enough to wash your fortunes down the drain
    As far as I’m concerned US Patent System is dead
    Amen, brothers

  7. Night Writer June 6, 2016 12:34 pm

    >>with the biggest legal team and resources to keep the fight for years wins at the end… one way or another

    As proof look at the revenue of InterDigital one of the NPEs supposed targeted by the AIA and Alice. It is doing fine in terms of revenue. The added complexity probably just favors it as it can afford to pay complex legal fees to maneuver through all the complexities.

  8. Mr. V June 6, 2016 1:55 pm

    Excellent piece Paul.

    To the rest of you:

    Why don’t we just join US Inventor, Inc. and help Paul and his colleagues beat it into Congress’s head that these waves of “patent reform” whether by legislative or judicial means are going to lead to the end of US innovation as we know it!

  9. JR June 6, 2016 2:47 pm

    Right on. Well-stated.

    My question is this: where are all the jobs promised by the AIA? Why isn’t anyone pointing to the appalling job growth numbers and calling congress to the carpet on the fact that job growth is dismal?

    Quite obviously, who is going to invest in a new business when that investment can be taken by somebody larger as soon as the business becomes valuable?

  10. Edward Heller June 6, 2016 4:06 pm

    Skeptic, consider the lease. The tenant does not pay. If he does not pay because the owner is not repairing, then he might be justified in nonpayment. Should a court of law evict simply because he is not paying if he is willing to pay if the repairs are made?

    If the exclusive right is fully amenable with damages/ongoing royalty, I think there may be a real problem with an injunction. However, that does not eliminate the problem that the patent owner had to sue which is not cheap and is not made whole simply by receiving that which he was otherwise owed when validity and infringement are clear. That was Story’s point.

  11. Ned Heller June 6, 2016 4:44 pm

    In this vein, it is important to note that the Supreme Court is considering enhanced damages this term in the Stryker case. That should go a long was to fixing the problem of the efficient infringer. It may not, however, be entirely sufficient without adding in attorney’s fees on top of any enhancement. I don’t know whether a statory change is necessary given the historic cases that suggest that an award of attorneys fees as damages is necessary to prevent willful infringement in absence of an injunction.

  12. staff June 6, 2016 5:40 pm

    ‘Today’s government is untethered to the very documents that created its existence in the first place.’

    Sadly, many of us agree. That same document which granted the federal government specific and limited powers is now largely ignored, except when convenient, by it and many of its employees, agents, and members.

    Fortunately, we believe there are still some good, honorable and wise leaders in Congress and the courts and we seek their support in course correction for our patent system and our Republic. The same patent system which was to help protect the property rights of inventors has been commandeered by Chinese and large multinational invention thieves and used to rob and crush us. With the help of our growing allies in Congress and the courts we are determined to restore the patent system and complete the vision of our country’s founders. There will be no safe place for thieves to hide from justice -no matter their size or wealth. To this end ‘we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.’

    For our position and the changes we advocate to truly reform the patent system, or to join our effort, please visit us at https://aminventorsforjustice.wordpress.com/category/our-position/
    or, contact us at tifj@mail.com

  13. Jeff June 7, 2016 3:55 am

    Love the article, but would like one problem to be fixed for clarity. The garbled sentence “which is why they legislation was” needs to be fixed. But thanks for a great piece on a terribly serious problem.

  14. Anon June 7, 2016 5:47 am

    Paul,

    One power that belongs to Congress is called jurisdictional stripping. Since patent appeals are not a matter of original jurisdiction for the Supreme Court, the Congress could strip the Supreme Court of the ability to hear patent appeal cases.

    As long as a proper inferior Article III court is involved, the sanctity of Marbury v. Madison would be preserved (that case is not a matter that the Supreme Court itself must be involved, but merely that an Article III court be involved).

    Given the “corruption” (read that as simian training) that the current inferior court has been through (and if in doubt, read the Federal Circuit Alice opinion), I would suggest that a new inferior court be created, stocked with those who can appreciate the value of innovation, and that jurisdiction stripping be applied to keep the Supreme Court from its tendencies to write law from the bench.

  15. Curious June 7, 2016 10:03 am

    I would suggest that a new inferior court be created, stocked with those who can appreciate the value of innovation, and that jurisdiction stripping be applied to keep the Supreme Court from its tendencies to write law from the bench.
    A great idea that has been often floated about. However, it is a tossup recently as to who has been more patent-unfriendly — the courts or Congress. Heck, under the guidance of Ms. Lee, all three branches of government have been decidedly innovator unfriendly (and infringer friendly).

    Regardless, I expect little relief from Congress. They are far more interested in scoring political points than helping to strengthen the intellectual property rights of the small businesses that drive our economy.

  16. Eric Berend June 7, 2016 10:35 am

    @ 15., ‘Curious’: scoring of the “political points” you mention, is kept primarily for the benefactors of the ‘K Street cabal’.

  17. Eric Berend June 7, 2016 10:47 am

    Paul, my compliments: this is an excellent composition* that reiterates valid Constitutional observations of other interested observers as regards separation of powers, and advances a specific concept with some precedence in organization of our courts.

    Further, your expounding upon the bureaucratic nature of the SCOTUS’ *ultra vires* application of *stare diesis*, borders on brilliant, especially for those who have little prior understanding of such intricacies.

    Thanks again for your unflagging efforts to ensure genuine inventors’ interests are not lost in the banal, corrupted shuffle that is present day U.S. legislation, including that which illicitly issues from the judicial bench.

  18. Eric Berendt June 7, 2016 10:49 am

    * footnote to 16., above: aside from one dangling sentence fragment.

  19. Night Writer June 7, 2016 3:17 pm

    >Said differently, the courts live in an intellectual vacuum devoid of the knowledge of unintended consequences and personal responsibility.

    Bryer recently admitted that he takes as fact what he reads in the briefs submitted to the court and that he where he gets his factual knowledge that the troll problem is out of control and that most patents should not have been granted.

  20. Anon June 7, 2016 6:13 pm

    Night Writer,

    The reason why we see (and continue to see) so much propaganda is because of Justices like Breyer who show that propaganda works.

  21. step back June 7, 2016 8:36 pm

    Night Writer @19:

    … and that is how he [Breyer J.] gets his factual knowledge that the troll problem is out of control and that most patents should not have been granted [in the first place].

    Spot on.

    Here is the crux of the problem. Inadmissible and non-cross-examinable “expert testimony” sneaks its way into the case at the highest appellate level. These imperial vicars don’t even realize they are being sold a stack of invisible clothes to wear at the parade. But hey, who are we to shout, Look they’re naked? Let Little Boy do it (Big Boy’s younger brother).

  22. step back June 7, 2016 9:54 pm

    Another way to understand how and why the Supremes are legislating their own version of patent reform is to recall the “gist of invention” fiasco.

    Long ago, in a previous time of utter insanity, the courts were invalidating patents left and right by defining on their own what the “gist of the invention” was and then determining if this gist thing was worthy of a patent. Did it rise to a significantly more elevated level? Generally the answer was, no.

    Congress put a stop to that insanity by including in section 112 a passage which says it is the inventor who defines that which he regards as his invention.

    So the courts (including SCOTUS) were temporarily blocked from using their much favored “gist of the invention” test.

    But now, thanks to Alice/Mayo they found a new way to sneak the same formulary in. It’s called the “directed to” test.

    http://patentu.blogspot.com/2016/06/you-didnt-inventbuild-that-part-ii.html

  23. Night Writer June 12, 2016 10:38 am

    The big picture: Claim elements a, b, c, …, z. Rather than use 102/103/112 to analyze the elements of your claims they say that claim element a is a witch. And then they come up with just convoluted non-science (non-law and illogical) reasons why element A is a witch.

    Just ask the lowly Ned about ROMs and his bizarre machinations.