Several weeks ago I published The Top 3 Reasons America’s Patent System is in Decline. While those familiar with America’s patent system could likely rattle off more than three reasons, I chose only three because if there were a reversal of fortunes on those three points America’s patent system would be immediately begin to flourish. They were: (1) the Supreme Court’s decision in eBay v. MerchExchange; (2) the Supreme Court’s decision in Mayo v. Prometheus; and (3) the creation of post grant administrative challenges at the Patent Trial and Appeal Board.
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 America’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 and America would become an also-ran in the burgeoning technological revolution, but that never happened.
President Ronald Reagan, conservative icon, was a supporter America’s patent system. It was President Reagan who demanded a build up of the USPTO as part of his overall strategy to make America great again and compete with the Japanese for technology dominance. It was President Reagan that demanded the Patent Office push down unacceptably high pendency rates, getting the average pendency down to 18 months. President Reagan accomplished this goal by reaching a compromise with Congress. According to then head of the USPTO, Gerald Mossinghoff, President Reagan would commit to reducing patent application pendency if “Congress would enact a meaningful increase in user fees, which the USPTO could retain…” See Ronald Reagan, The Intellectual Property President (an essay in Reagan Remembered).. Thus, President Reagan did exactly the opposite of what politicians have been doing over the last generation. President Reagan did not raid the USPTO coffers, instead he reinvested in the USPTO so they could do their job.
As a result of the shifting technological dominance to Asia by the end of the 1970s, particularly to Japan, President Reagan also appointed a Presidential Commission on Industrial Competitiveness to determine why America was losing its competitive edge. That Commission was headed by John Young, then CEO of Hewlett Packard, and included numerous leaders of American businesses. The Commission Report, which was issued in 1985, analyzed a massive migration of technology and industry from the United States to Germany, Japan, Korea and other parts of the globe. The Report concluded that the lack of meaningful intellectual property protection was a principal driver of that outflow of technology and industry, and that corrective action was required. See A Short History Lesson on Patent Policy.
With respect to intellectual property, the 1985 Commission Report explained:
Since technological innovation requires large investments of both time and money… Research and development are always risky. If the developers of a new technology cannot be assured of gaining adequate financial benefits from its commercialization, they have few incentives to make the huge investments required.
Today, the need to protect intellectual property is greater than ever. A wave of commercial counterfeiting, copyright and design infringement, technology pirating, and other erosions of intellectual property rights is seriously weakening America’s comparative advantage in innovation….
Those same words could be spoken with equal force today.
Future of America’s Patent System
The problem today, however, is two-fold: (1) The Federal Circuit, which was created in order to bring stability to patent law, is among those that are destabilizing patent law; and (2) President Donald Trump has yet to announce any clear vision that acknowledges the need for government to promote innovator friendly policies.
The entire reason the Federal Circuit was created was to harmonize patent laws across the United States and act as the chief patent appeals court in the United States. So if the Federal Circuit declines to provide stability in uncertain, unstable and evolving areas of the law the Court is not living up to the reason it was created. If the Federal Circuit does not recognize that patents are important property rights that must be presumed to be valid and adjudicated to be valid in all but the most extraordinary cases, then the Federal Circuit has become no different than the Supreme Court and other federal courts from the 1960s and 1970s, which is a real concern.
The problem associated with an absence of leadership from President Donald Trump on the issue of patents and innovation policy is difficult to understand. For reasons that are unknown, President Trump has allowed Obama Administration USPTO Director Michelle Lee to continue as Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office. While it is very difficult to get high-caliber candidates interested to serve at the end of a second Presidential term given the limited amount of time there would be to accomplish anything meaningful, we are at the beginning of a new term now where there has been a tremendous optimism associated with the possibility of a new, pro-inventor, pro-innovation policy coming from the Administration. While it is openly known in DC circles that numerous A-List candidates were not interested in the position during the second Obama term, today there are numerous high-caliber, eminently qualified candidates who are interested in the position. There are also many who have interviewed for the position – some rumors putting the number interviewed as high as 16 candidates – yet the President and Commerce Secretary Wilbur Ross continue to rely on an Obama appointee who has a track record of supporting policies preferred by those who do not respect the patent rights of others. To call this confusing seems insufficient.
Indeed, Lee has in her speeches while Director used the famous quote from Thomas Jefferson often used by infringers to justify the stealing of intellectual property as victimless. Jefferson wrote: “He who receives an idea from me, receives instruction himself without lessening mine; as he who lights his taper at mine, receives light without darkening me.” To patent owners this fundamental disrespect of rights, and view that taking really takes nothing at all, is difficult to accept coming from the Director of the Patent Office. What Lee and others do not seem to appreciate is that inventors have been besieged by bad legislation, bad judicial rulings and an Executive Branch that for the last decade believed patents are the problem.
With all due respect to Thomas Jefferson, he is wrong, and so too is Michelle Lee. When you take from me you do lessen my right. If you take from me and I do nothing about it, whether that is my choice or because the law is not there to assist me, how can I ever expect anyone to do anything but take from me? Why would you pay me for my rights if willful infringers ignore my patent rights and take what they want and don’t pay? And if no one is going to pay then how can innovators make the business of innovating worthwhile enough to innovate? It should be no great mystery why China is outspending the U.S. in late stage innovation. China respects patent rights and gives patent owners meaningful remedies for infringement, the U.S. no longer does.
As we know from our experience in the 1980s, a strong patent system was the primary driver for the economic achievements that unleashed American enterprise and allowed the United States to compete on the world stage. It worked in the 1980s to address what was a similarly difficult time, and it will work today. Given the confluence of events we may be seeing history repeat itself. Of course, that will require real leadership and cooperation from a Federal Circuit that was created to address this very problem. It will also take real leadership from someone with the vision of President Reagan, and an executive team that embraces innovators as the solution.