Judge Paul Michel to Patent Masters Attendees: It’s Time to Wake Up to Preserve Our Patent System

By Eileen McDermott
March 16, 2020

“The CAFC affirms the PTAB in approximately 90% of the cases, so, ‘ironically, the PTAB is actually more powerful than its reviewing court in defining the reach of basic patent law doctrines,’ Michel said.”

Retired Chief Judge of the U.S. Court of Appeals for the Federal Circuit Paul Michel told registrants of IPWatchdog’s Virtual Patent Masters program taking place today  that the U.S. patent system has been “weakened to the point of being dysfunctional.” This dysfunction has been especially harmful to small businesses and startups, as well as to innovation in the life sciences industry—which we need now more than ever.

Asked by IPWatchdog CEO and Founder Gene Quinn whether the coronavirus pandemic may be a wakeup call to those in power about the importance of incentivizing innovation in the life sciences area, Judge Michel noted that experts in the vaccine industry have indicated that China now dominates vaccine research and production. “The current circumstances may shift the thinking of policy makers quite suddenly and quite far,” Michel said. “We definitely are crimping the human health efforts for prevention and cure of symptoms. Let’s hope this really is a wakeup call for our leaders.”

Michel laid out the trajectory of the U.S. patent system over the last decade, which he said has seen an overall drop in patent value of 60%.  “According to the National Venture Capital Association’s records, VC investment flows are going away from patent-dependent technologies like chips and toward entertainment and hospitality,” Judge Michel said.  Worse, those investments are flowing away from America to countries like China, where patents are more reliable.

This phenomenon was created by a series of shortsighted judicial, legislative and regulatory actions made independently of one another over the last decade that have had a crippling effect on patent rights. By the end of the decade, a series of “repeated, really radical interventions by the Supreme Court and Congress had left the system weakened and unreliable,” explained Michel. The U.S. Patent and Trademark Office (USPTO), Patent Trial and Appeal Board (PTAB) and Federal Trade Commission (FTC) then “piled on,” each acting “without coordination or awareness of the actions of the others” and without examining the economic downstream effects.

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From eBay in 2006 to KSR v. Telefex in 2007, to Alice in 2014, the Supreme Court first undermined injunctions, which are necessary to vindicate the right to exclude that patents are meant to confer; made obviousness determinations more susceptible and less predictable; and muddled patent eligibility law. These three major lines of development were most harmful, Michel said, but they were further exacerbated by the America Invents Act’s (AIA’s) implementation of inter partes review (IPR), which has proven to be “excessively effective.” While IPR was intended to be an alternative to litigation, it has become “a prelude to infringement suits in nearly all cases,” Michel said, which has hit patent owners very hard—especially startups and small businesses. IPRs add several years of additional delay in reaching final judgments, increasing expense for patent owners and unpredictability for investors.

Worse, Congress has not returned to adjust AIA reviews and the Supreme Court has denied review since Alice in 50 cases involving Section 101.

Congress can only do two things now: over-correct or nothing, Michel said. “For now, it seems they’re doing nothing.” SCOTUS’ inattention span is even longer than Congress’. None of the cases has been revisited much less revised. In the view of many, the Federal Circuit has extended these harmful cases, and now—faced with an onslaught of appeals from the PTAB—has made the problem worse by deciding almost half of patent cases via Rule 36, meaning with no opinion at all. The CAFC affirms the PTAB in approximately 90% of the cases, so, “ironically, the PTAB is actually more powerful than its reviewing court in defining the reach of basic patent law doctrines,” Michel said.

All of this might not matter so much considered in isolation, but other countries have taken the cue to strengthen their own systems, filling the gap created by the U.S. situation. Michel explained that patent eligibility is broader and more certain now in Europe and Asia, including China. Injunctions are routine in Europe and Asia, including China. Obviousness determinations are more rigorous, scientific and predictable. Litigation costs overseas are only a small fraction of the USD 4 to 8 million it costs here to get to a final judgment. Judicial delays suffered here are multiples of the delays encountered overseas. “Patent justice is simply unaffordable for most firms [in the United States] today,” Michel said.

“Time to money is a key consideration for investment decisions. We are no longer secure as #1. Congress needs to wake up, stay informed, and pay attention. Our whole society needs to wake up and recognize the urgent need to restore the patent system.”

Join the Conversation

IPWatchdog’s Virtual Patent Masters Program is taking place today from 9:00AM to 2:30PM and, in addition to Judge Michel, will include high-profile speakers such as Makan Delrahim, Assistant Attorney General for the Antitrust Division, U.S. Department of Justice; James Carmichael, former Administrative Patent Judge at the PTAB and the Founder of Carmichael IP; Q. Todd Dickinson, Senior Partner with Polsinelli and former Under Secretary of Commerce for Intellectual Property and Director of the USPTO; Honorable Theodore Essex, former U.S. International Trade Commission (ITC) judge and now Senior Counsel at Hogan Lovells; Scott McKeown of Ropes & Gray’s intellectual property litigation practice and chair of the firm’s PTAB group; Robert Greene Sterne, founding director of Sterne Kessler Goldstein & Fox; Robert Stoll, Co-Chair of Drinker Biddle’s Intellectual Property Practice Group and retired USPTO Commissioner for Patents; Jamie Underwood, Partner and Global IP Strategist in Latham & Watkins’ Intellectual Property Litigation and ITC Practices; and John White, Patent Attorney and Lecturer, Adjunct Law Professor at the University of Virginia School of Law and Principal Lecturer in the PLI Patent Bar Review Course.

 

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 14 Comments comments. Join the discussion.

  1. Hugh March 16, 2020 3:22 pm

    “those investments are flowing away from America to countries like China, where patents are more reliable.”

    Did you ever think you would hear such a thing? What a cosmic catastrophe!

  2. angry dude March 16, 2020 8:27 pm

    Hugh @1
    “Did you ever think you would hear such a thing?”

    It’s a cognitive dissonance members of US patent bar must be experiencing today

    China was always synonymous with IP theft and piracy

    Quite the contrary !

    Keep up good work, fellas

    I told you all where things were heading back in 2006…

    No cosmic catastrophe… just the “land of the free” is not free anymore
    The doc said “to the morgue” – to the morgue it is

  3. Concerned March 17, 2020 5:23 am

    All the trickery in the patent system and all the financial engineering in the stock market will eventually be self correcting at a huge expense just like the sub prime mortgage scam.

    Matters in this country do not get corrected by appropriate means, the matters get correct when it becomes dire.

    And there are always disingenuous people along the way that tell us straight face how great the perversion is for society. People like Judge Michel get ridicule when speaking the obvious truth just like Warren Buffett got ridiculed for sitting on massive cash when the collective stock matter was 150% of the entire GDP. Now Mr. Buffett looks like a genius (again) and Judge Michel will be proven to be spot on.

    Our parents told us that there are no shortcuts such as stealing. It takes hard work.

  4. Night Writer March 17, 2020 5:43 am

    CJ Michel is right, of course. And I can’t express how much it means to me to hear from decent rational people. But I think what is missing is that what is driving this is massive amount of money. Just look at someone like Lemley. Everything that he does that is anti-patent (and really anti-IP) is pushed out by 100’s of workers for the anti-patent lobby. They pay professors to write papers. They pay lawyers in large law firms to lobby Congress to weaken patents. They lobby the Scotus to weaken patents through there amicus briefs and control of the press. Etc.

    I am just not sure how we can turn the tide under such an enormous external body pulling the water where it pleases.

  5. Amnon M Cohen March 17, 2020 7:24 am

    The honourable Chief Judge, Paul Michel also used the model of America joining the World War 2, quoting Churchill, that only when things are real bad America rises back to it glory; which means that The Fix will come when Congress realizes the flows in the ongoing erosion of the USA PTO.
    When during the 1980s I did submit my input, the USA PTO did accept some but not all the proposal’s parts, which are still my Trade-Secrets, because parts of the proposal do not make it work.
    I also agree with the honourable Chief Judge, Paul Michel opening statement regarding the USA mandate of Patents to be cultivating new original economic growth for the nation, which the directors of the USA PTO seem to not be focused on, as well with his point that if Americans register first in European location, this will raise the concern needed from the Politicians.
    As to The FIX, my proposed Pre-patent Pre-partnering Registry does offer it with the yet far reaching concept of “Global Taxation Treaty” proposal as the general information posted at the related website (http://prepatent.org) where the general proposal is shared as the next step of the USA PTO modernization from the discovery or innovator position that the administration plus legislation can be served better with less load on the PTAB and with yet increased numbers of new and higher quality applications from small as well as large entities.

  6. Concerned March 17, 2020 7:58 am

    Angry Dude:

    Fyi: To your point about big corporations that steal our IP and then park their money offshore.

    On a side note, Washington DC is now confronted with the possibility of bailing out cruise lines that intentionally headquarter overseas to avoid our taxation. Do we bail them out with our tax money?

  7. AAA JJ March 17, 2020 8:30 am

    “The CAFC affirms the PTAB in approximately 90% of the cases…”

    With the likes of J. Prost and J. Dyk donning their hindsight goggles every day what do we expect?

  8. angry dude March 17, 2020 10:43 am

    Concerned @5

    “Washington DC is now confronted with the possibility of bailing out cruise lines that intentionally headquarter overseas to avoid our taxation. Do we bail them out with our tax money?”

    Absolutely not !

    The last time I was on a cruise (Royal Carribean) all the stuff were low-paid non-US citizens (asking for tips all the time), so there is almost no job creation for Americans there
    They just take money from US taxpayers and park it offshore
    And Americans come off those huge boats overweight and unhealthy (I gained 5 pounds on a 9 day cruise)
    And btw those huge cruise ships are built in Finland or elsewhere, not US

  9. angry dude March 17, 2020 10:56 am

    Night Writer@4
    “I am just not sure how we can turn the tide under such an enormous external body pulling the water where it pleases”

    WE CAN’T
    BUT there are entities out there with unlimited resources – much more powerful and more wealthy than all of the FAANG entities combined (and all of US economy combined – Elon Musk predicted China will be 2-3 times bigger than US economically)
    Those entities are called COUNTRIES, big countries

    China in particular can bury US easily in just one day – already started with Coronavirus
    This is just a precursor of things to come

    Until congress critters realize that in order to protect themselves and their own families and lifestyles from hostile foreign entities they have to protect all Americans and the Constitution – nothing will change and looting will continue

    But we need another Congress for that to happen

  10. angry dude March 17, 2020 1:47 pm

    Amnon M Cohen @5

    The Fix ??

    Dude, how about double-blind examination of all patent applications by the USPTO ?
    The identity of applicant is hidden and the identity of examiner is hidden too
    (with severe penalties for disclosing identity on BOTH applicant’s and PTO’s side)

    No large or small entities
    Examination fees about 10K per patent application – in line with attorney fees
    A team of 3 examiners working on each US patent application
    Real experts in the field with scientific degrees and preferably industry experience

    No incompetent and corrupt PTAB “judges” are allowed to touch US patents – PTAB has to go !

    Only real courts with real judges and juries (and scientific experts and witnesses on both sides)

    Alas, not with this congress…
    To the morgue then

  11. Gene Quinn March 17, 2020 3:25 pm

    angry dude @9…

    I’ve been taking a closer look at your recent comments in light of some real nonsense I’ve seen coming from you. I’ve grown tired of your Nurse Ratched style. Your conspiracy theories and sniping might pass as thoughtful in many other corners of the Internet, but not here. You have repeatedly been warned, but to no avail. So, it is time for us to say goodbye.

    Cheers.

  12. Clifton D. Croan March 18, 2020 11:32 am

    Thank you, Gene Quinn.

  13. anonymous March 19, 2020 11:49 am

    Coronavirus has shown us we need to repatriate manufacturing. Manufacturing goods domestically is a national security need that was long underappreciated. Likewise, keeping investment and innovation here is also a national security need. While manufacturing cannot be restored over night, legal protections for innovation can be addressed immediately.

    Congress, NOW is the time to fix Alice/101. It is a national security need and it must be done URGENTLY.

    Trust America’s innovators. Trust experts like Judge Michel. Trust that legal protections for distributed, democratized innovation will solve not only medical issues, but that such innovation will be the engine to restore this suddenly struggling economy.

    Congress, please act NOW. Urgently. National security requires it. Even a $1T cash bailout won’t do as much as unleashing innovation and the entrepreneurial spirit.

  14. PTO-Indentured March 21, 2020 11:47 am

    SCOTUS, CAFC, PTAB and Congress — have strayed so far adrift in U.S. patent stewardship, so near to guaranteeing by a decade+ of pronouncements an anti-constitutional/opposite outcome, so antithetical, it’s as if their purpose were

    “To promote the regress of science and useful arts, by unsecuring for all times to U.S. authors and inventors the exclusive right to their respective writings and discoveries.”

    U.S. Const. Art. I, Sec. 8, Cl. 8

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