Chief Judge Paul Michel: Patent Reform Progress is Likely, But We Must Stay Focused On the Big Picture

By Eileen McDermott
September 15, 2019

“The midsize and smaller players are being priced out of the justice system, when historically it has always been the small inventors that the best technology has come from. No one seems to be looking at the big picture.” – Former CAFC Chief Judge Paul Michel

Judge Paul Michel speaking at IPWatchdog’s Patent Masters Symposium.

Last week during IPWatchdog’s Patent Masters Symposium, former Federal Circuit Chief Judge Paul Michel sat down with me to discuss the state of the U.S. patent system and best options/ predictions for moving forward. He began by lamenting that “the courts have failed and failed and failed” with flawed rulings such as Helsinn v. Teva, which Michel characterized as “completely illogical”, and Impression Products, Inc. v. Lexmark International, Inc. To boot, the Supreme Court has refused to take any patent eligibility cases, and the Federal Circuit has managed to make the harm and illogic of the SCOTUS rulings even worse, Michel said. In fact, they’ve “expanded on the bad rulings of the SCOTUS.”

Part of the problem may lie in a misunderstanding of the true intent of the patent system, according to Michel. “The real point of the patent system is to incentivize innovation, not to encourage creative people. Creative people will create no matter what. Investment is extremely risky and costly—if the incentive to invest shrinks, and there is evidence that it has, we are in trouble.”

Below, Michel offers more of his thoughts on the current patent landscape, including what to expect from pending legislation and why he is cautiously optimistic that change is coming soon.

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Why do you think anti-patent messages are so widespread?

The other side argues based on facts that are misleading. The High Tech Inventors Alliance (HTIA), for example, says that there’s more VC funding than ever. But more VC funding total is meaningless. It’s true that a huge amount of research is still being done, but only because the high-tech companies have so much money that they don’t know what to do with it. So, there’s more R&D only if you look at the impact of the super-rich. But look at the research institutes and biotech firms—they’re going out of business. The proportion of total venture capital money going to real technology R&D has fallen. It’s being redirected to entertainment or going out of the United States. The midsize and smaller players are being priced out of the justice system, when historically it has always been the small inventors that the best technology has come from—inventors and universities and startups. The startup birth rate is the lowest it has been in 50 years. There have been many indicators and warning signs. The small and medium sized entities are the ones getting creamed and they aren’t well organized like the Silicon Valley giants. Tech companies hire lobbyists and PR firms and law firms by the dozens to put their spin on everything. No one seems to be looking at the big picture.

Who do you think is best poised to make change?

The patent system is assumed to be the child of patent lawyers, but they’re the last people who should be making decisions because they make money from litigation. The academy isn’t interested in patents, they’re interested in being quoted, and many academics are supported by big tech companies. The district judges are trapped by the Federal Circuit and Supreme Court rulings. The Justices are arrogant; they think they’re wiser than they are. They like to make big policy decisions beyond their competence and proper role in our three-branch system. The business community has to accept some blame because they were more concerned about taxes and regulation. All the people who should have been paying attention have gone astray. So, by process of elimination, it’s Congress that has to fix it.

With respect to courts making big decisions, what are your thoughts on the Federal Circuit’s use of Rule 36 rulings for Section 101 cases?

It’s very unfortunate. It’s understandable, because the Court is flooded with cases from the Patent Trial and Appeal Board and the courts—the burden is heavy and they’re under pressure to dispose of cases. But when I was on the Court, we used Rule 36 in two very limited circumstances: for pro se personnel cases of no merit at all and for plainly frivolous cases. For any case with any merit, there should be some opinion. I consider it a dereliction of duty not to explain their reasoning in at least three to four pages in order to remain consistent with their mission to clarify the patent law. It’s very hard to justify.

What are your predictions/ hopes for the STRONGER Patents Act and Section 101 reform?

Congress clearly knew that the America Invents Act would have unintended consequences and that they’d have to go back to it. Well, eight years have gone by now and they haven’t adjusted anything. But now I think Senators Tillis and Coons are well-intended and knowledgeable and I see some hope of progress on the legislative front. Unfortunately, Tillis and Coons have felt sandbagged by the very people who wanted Section 101 fixed in the first place because of the Section 112(f) provision. There was a failure of the corporate community to coalesce to support needed reforms that would be reasonable for all companies. It takes leadership and flexibility, and that’s largely missing.

What’s the quickest path to change in your opinion?

The quick fix would be to restore injunctions. The STRONGER bill, however, is more aspirational than real. Ideally, a few parts of STRONGER need to be split out and reengineered and added to the 101 bill. Coons is at the helm of both bills and very knowledgeable and willing.  On the 101 bill, he has Tillis co-sponsoring, but on the STRONGER bill there is no republican on the IP Subcommittee co-sponsoring with him. He needs to modify the bill to make it more acceptable. However, both bills will likely move forward—whether they get out of the Judiciary Committee or not, I’m most concerned about the prospects for progress. My prediction is that Coons and Tillis will work it out and get broader support. You have two Subcommittee leaders who are motivated and informed—that has been the missing ingredient in past attempts at reform.

The fact that Senator Lindsay Graham was willing to reconstitute the IP Subcommittee in the first place shows recognition that there is a problem. It only takes a handful of Congress members to really get going. Normally, it takes five years in Congress for a new idea to get passed into law, but when you’re facing security issues with China due to the inability to patent important technology here, for instance, we might have a combustible mix that will catch fire quickly.

The Author

Eileen McDermott

Eileen McDermott is the Editor-in-Chief of IPWatchdog.com. Eileen is a veteran IP and legal journalist, and no stranger to the intellectual property world, having held editorial and managerial positions at several publications and industry organizations. She has acted as editorial consultant for the International Trademark Association (INTA), chiefly overseeing the editorial process for the Association’s twice-monthly newsletter, the INTA Bulletin. Eileen has also served as a freelance editor for the World Intellectual Property Organization (WIPO); as senior consulting editor for the Intellectual Property Owners Association (IPO) from 2015 to 2017; as Managing Editor and Editor-in-Chief at INTA from 2013 to 2016; and was Americas Editor for Managing Intellectual Property magazine from 2007 to 2013.

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 13 Comments comments. Join the discussion.

  1. Jason Lee September 15, 2019 2:44 pm

    I like Fr. Judge Michel. He is 100% accurate of his diagnosis of what’s wrong with patents, but he is 100% incorrect that we will see patent reform, thousands of inventors are filing over seas already. China wins because of America’s Tech companies addiction to greed and not willing to pay for licences for inventors IPs.

    The uber rich really do not care if America sinks or thrives, when you run an international corporation your are making billions on a global frontier. American politicians addiction to money is no different that an their opioid addicts, they are hooked on money and can not see the grave consequences the nation is facing. Ever great empire has its great fall. America is doing a great service to its foreign competitors and destroying its self from with in. No chance we will see any type of reform for patent rights. Apple Google and Amazon will make sure to keep it that way.

  2. Concerned September 15, 2019 3:02 pm

    We need about 100 judges like Judge Michel on the current bench.

    It has even occurred to me, a one time inventor, how many big companies today started with one or two people. The same big companies of today who now want to burn the patent system down to protect their territory.

    Sad.

  3. angry dude September 15, 2019 11:37 pm

    “Creative people will create no matter what”

    Yeah, right..
    and coders will code .. and workers will work … and welders will weld… same old adage from old people completely out of touch with reality

    Nope !!!

    Creative people will go fishing instead – much more enjoyable and productive

  4. Jeff Hardin September 16, 2019 1:21 am

    It has been said that the PTAB was created to be a faster and cheaper alternative to district court litigation for the patent validity inquiry. But the question is: Cheaper for whom? Because if the answer is big business, sure. It might be faster and cheaper. But if the answer is the independent inventor/small business owner, it is NOT faster and definitely not cheaper. The small inventor/patent owner now has to foot the bill at the PTAB (there is no contingency representation), and the average cost for a single challenge is around $450K per the AIPLA. So even if the STRONGER Patents Act passes, the inventors are still thrown under the bus. Because they cannot afford PTAB, they cannot enforce their IP — the incentive to publicly disclose in pursuit of a patent is gone.

    Until the inventors listed on the face of patents are able to enforce their patents, the AIA US patent system will remain only for the gods. There is no protection for those trying to create the next big thing in their garage.

  5. Paul Cole September 16, 2019 5:31 am

    “Expanded on the bad rulings of the SCOTUS” supports arguments that I have been advancing one way or another for the past 7 years. It is gratifying to have concurrence from such a distinguished person.

  6. N J Thomas September 16, 2019 8:05 am

    Congress needs to hold hearings from small independent inventors to hear the story from their side; how the entire system favors big infringers.

    I regret ever having heard about patents. I should have just used NDA and found a major partner to protect my technology.

    The patent system has sucked the life out of me, and I’m still not done.

  7. Disenfranchised Patent Owner September 16, 2019 3:30 pm

    NJ@6. You, too? The AIA is bad law. It is ruining American innovation and entrepreneurial activity.

    Jeff@4. Nicely written summary of small inventors’ dilemma.

    The AIA either should be repealed or renamed the “Leahy-Smith Anti-Inventor Act.”

  8. Pro Say September 16, 2019 6:01 pm

    The year was 2019.

    After initially raising the hopes of untold 1,000’s of American universities, startups, small companies, and inventors early in the year, Congress months later caved in to big-money Big Tech by substituting the innovation-killing Section 101 / eligibility morass for the innovation-killing Section 112 morass.

    The year is now 2030.

    Welcome to Chinamerica.

  9. Night Writer September 18, 2019 6:32 am

    >>“The real point of the patent system is to incentivize innovation, not to encourage creative people. Creative people will create no matter what. Investment is extremely risky and costly—if the incentive to invest shrinks, and there is evidence that it has, we are in trouble.”

    This is profoundly wrong. People work and focus their energies on things that they believe will be fruitful. People who don’t do this are typically classified as mentally ill. This is akin to Posner’s statement that an inventor only needs a pizza to work. Or Steven’s statement that how you get a computer to do something is you write down what you want in some broad functional language and then a clerk programs the computer. Stevens doesn’t seem to care that there is currently more people with IQ over 150 working on tough “clerk” problems than on all the problems in all of history. And those people with IQs over 150 haven’t been that successful. Progress has been slow.

    Anyway, just more fabricated nonsense. Plus, one thing that people never talk about anymore is that for one person to invent and fix a problem is often more work for that person than continuing with the bad solution. It only makes sense to do the invention if lots of people get the benefit of the invention. That is a huge, huge, point for human motivation.

    What this is saying is that no matter if you get rewards for what you do that you will work. Terrible thinking and counter to everything the USA stands for. It is like saying that a slave is fine with giving away the cotton to someone else because humans will work no matter what.

    Just insane thinking.

  10. Ternary September 18, 2019 4:52 pm

    Very prescient AD@3. I have started limiting my inventive work and have moved on to glassblowing in the hot-shop. (Not fishing, though.) If that is what the US economy supports. I’ll go with it! They want us to be consumers of the tech industry, not contributors and the patent system is rigged accordingly. It seems that technical innovation now turns on a smartphone having a notch or not or the number of pixels in a camera. Good luck with that. I must assume that many independent inventors have reached that conclusion. They have nothing to prove to society, as they have already invented many new devices and methods. They have published their inventions as patent application publications and have established themselves as part of a uniquely American elite.

    However, the Courts and Congress have made clear that all has been for naught. You may get a patent, but its value is zilch, and most likely negative. Even a determined and dedicated stubborn independent inventor eventually gets the message. The inevitable conclusion: start doing something else. It has to get worse, much worse, before it gets better. I understand the advice: don’t give up, it may get better. That advice is no longer reasonable for independent inventors who have been in this for over a decade. We have been outsmarted, out-legislated and out-litigated by the anti-patent crowd, with willing Courts and Congress.

  11. concerned September 18, 2019 11:04 pm

    Ternary @10: “We have been outsmarted, out-legislated and out-litigated by the anti-patent crowd, with willing Courts and Congress.”

    Above statement makes Josh Malone’s accomplishment even more profound. Hard enough to invent something, then have to beat the system that is unfair.

  12. angry dude September 20, 2019 10:01 am

    concerned @11

    Josh Malone admitted himself on this blog that he was extremely lucky and timing was just right for him (in addition to all of his tremendous efforts and persistence and $$$$$$$$ in legal and other expenses – 8 digits there !!! … for a simple bunch-of-balloons invention !!!!)
    A little delay would force his case into another (infringer’s home?) jurisdiction and Josh would join the crowd of disenfranchised and broke patent owners…

  13. Concerned September 20, 2019 11:35 am

    Angry Dude:

    I agree. Mr Malone hit a back to back lottery that even he admits.

    I was lucky, or unlucky, just to invent.

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