Pathological Patenting: a Summary by Eric Gallo

Pathological Patenting:

The PTO as Cause or Cure

By Rochelle Dreyfuss

Summary by Eric Gallo

Prof. Dreyfuss’s work analyzes the diagnosis and proposals settled by Adam Jaffe and Josh Lerner in their book Innovation and its Discontents: How Our Broken Patent System is Endangering Innovation and What to Do About It.

This summary consists mostly on citation from Prof. Dreyfuss’ work. Some words were added to ease readability. The sentences are mainly statements that called the author’s attention. Indentated and in small letters, the reader is provided with additional research that helped the author to better understand the article. None of the following should be attributed to  Eric Gallo’s, unless it is expressly indicated. The conclusion of the article is cited word by word, since it provides a valuable extract of the article. A brief personal opinion is provided at the end of the summary. Readers are encouraged to review the summary and suggest modifications. This work was done with educational purposes.

Introduction

The number of patents raised dramatically in the 80’s. Thickets of strong but invalid patents are raising transaction costs and creating a drag on innovation. There are two main problems caused this situation:

• Exclusive jurisdiction of the Federal Circuit over federal patent appeals.
• Underfunding of the USPTO.

One cure is proposed:

• Improving the efficacy with which patent validity is tested.

Patent Validity (from Evaluating the Validity of a United States Patent by Arnold B. Silverman, 1990).

If the technology falls within the claims, the next phase of evaluation is to determine whether the patent is valid. If the patent is invalid, there can be no infringement, regardless of whether the technology is embraced by the claims.

A United States patent is presumed to be valid.

Ways of invalidating a patent:

• Attempt to find prior art which is more relevant to patentability of the claims than the prior art which was cited by the Patent and Trademark Office examiner.
• Prove that the invention was in public use or on sale in the U.S. more than a year prior to the date of the application.
• In order to obtain a patent, the invention must be useful, novel and unobvious. If it does not meet the previous requirements, the patent is invalid.
• If the inventor has derived the invention from another, the patent is invalid.
• The patent statute requires that the specification disclose the invention in such a manner as to enable any person skilled in the art to which it pertains to make and use the same. It further requires that the disclosure reveal the "best mode" contemplated by the inventor of carrying out the invention. Failure to comply, derives in an invalid patent.
• The statute also requires that the specification conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his or her invention. Failure to do so can result in patent claims being held invalid.

I. Symptoms

In the last 25 years, the patent system has undergone 2 fundamental changes:

• The number of patents skyrocketed: it is difficult to assemble the rights needed to pursue lines of research or manufacture products without attracting litigation.
• The exclusionary power of patents increased dramatically: the probability that a patent will be found valid and infringed has risen substantially.

Cross license: transaction of patent commonly used in settlements when an infringement is argued.

Patent trolls: firms whose only business is to hold up established companies and force them to pay hefty fees.

According to the Electronic Frontier Foundation,

“A patent troll uses patents as legal weapons, instead of actually creating any new products or coming up with new ideas. Instead, trolls are in the business of litigation (or even just threatening litigation). They often buy up patents cheaply from companies down on their luck who are looking to monetize what resources they have left, such as patents. Unfortunately, the Patent Office has a habit of issuing patents for ideas that are neither new nor revolutionary, and these patents can be very broad, covering everyday or commonsense types of computing – things that should never have been patented in the first place. Armed with these overbroad and vague patents, the troll will then send out threatening letters to those they argue infringe their patent(s).  These letters threaten legal action unless the alleged infringer agrees to pay a licensing fee, which can often range to the tens of thousands or even hundreds of thousands of dollars” (EFF).

While criticizing the Jaffe and Lerner’s proposals, Prof. Dreyfuss states that the existence of some bad patents does not tell us whether the system as a whole is sick.

“The growth in successful PTO application was instead twice as large as the growth of international counterparts, is hard to explain in any manner other than declining standards in the USPTO”. Lerner and Jaffe use this statement as evidence and explanation of the skyrocketing of the number of patents in the United States.

Doctrine of Equivalents historically operated to expand the scope of patents beyond their literal meaning.

Dennis Crouch on Doctrine of equivalents:

“For more than 150 years courts have seen the “patented invention” as being roughly defined by the patent’s claims and infringement occurs when someone’s unauthorized activities include each element of a patent claim. Using its common law power, the Supreme Court long ago expanded the scope of infringement beyond the literal confines of claim elements in order to also capture “equivalents.” Thus, even if outside of the literal scope of a written claim, an accused infringer may still be liable if its activity is deemed equivalent to the claimed invention” (Crouch, 2013).

The near merger of scientific advance with technological application erodes the lines that once the law drew to protect basic science from privatization.

The real disease, then is not merely invalidity, but rather the absence of meaningful accommodation of the law to a shifting technological landscape.

The Supreme Court has not taken many patent cases until recently.

The court’s scope decisions entrench low level of skill, virtually guaranteeing an explosion in valid but low-quality patents.

II. Diagnosis

• In 1982, the Court of Appeals for the Federal Circuit (too supportive of patents) was given exclusive jurisdiction over federal patent appeals.
• Beginning in 1990’s the PTO was initially required to supply itself out of filing, examination and maintenance fees, and later was told that some of these fees would be diverted to the general revenue.

Prof. Dreyfuss iteratively states that those are not the only situations that endangers the system. She argues that major scientific developments caused the law to be behind the exponential advance of technology, negatively affecting the patent system.

In the name of facilitating review, courts essentially rejected use of common sense.

We could blame the Federal Circuits for strengthening patent remedies and for making it harder to prove invalidity.

“Patent remedies are ways in which an infringer is required to compensate the patentee for the damages caused by his infringement.  They usually consist of injunctions and royalty payments” (Gallo).

Jury trials have negatively affected the system, but there is not much to do since they are a constitutional right.

It is not always the Federal Circuit’s fault.

Before: new technology was considered unpatentable unless the Congress states the opposite. Now: new technology is considered patentable unless the Congress states the opposite. This change was made by the Supreme Court in Diamond v. Chakrabarty. In Diamond v. Diehr, the Supreme Court expanded patents to software and business methods.

Bias is not the problem of the Federal Circuit (It was established for the express purpose of creating the expertise needed to bring coherence to patent law). It has failed to adopt methods used by the Supreme Court to Improve the law, such as requiring brandeis briefs and implementing damage control vehicles for their decisions.Federal Circuit is not required to justify the doctrines it adopts, situation that leads to some sort of impunity or debauchery. Creating a specialized appellate court can promote uniformity, but not coherence. Without percolation or dialogue, perfecting the law is difficult.

Authors acknowledge that the real issue is not invalidity but patents that ought to be invalid because they represent minor advances.

Specialization ties the Supreme Court’s hands. Lawyers seeking review rely on pre-Federal Circuit appellate opinions or on old Supreme Court precedents.

III. Cure

Mark Lemley’s observation: comprehensive examination of every application is misguided because many patents are never exploited.

If post-grant opposition (proposed by Jaffe and Lerner) operates effectively, it will set up a virtuous cycle and discourage the filing of unworthy applications.

There should be three patent tests, according to Jaffe and Lerner:

• Pre-grant, which Prof. Dreyfuss judges as potentially inefficient.
• Post-grants, with a $50,000 fee.
• Trial, in which the burden of proof should be set to provide  a meaningful opportunity to invalidate the patent, and juries should be eliminated.

Conclusion

“The authors diagnose the recent proliferation of strong patents as symptomatic of a problem in the way the system is administered: by an agency supported by patent seekers and by a court overly-focused on patenting. The confluence of an explosion in patenting, the Federal Circuit’s establishment, and the PTO’s financial restructuring is provocative. However, when these events occurred, equally dramatic shifts were happening in the organization, methodology , and production of science. Because these changes altered the factual bases on which the patent law is grounded, a strong argument can be made that the observed problems are not caused merely by the implementation of the law, but also by its articulation: by an institutional failure to keep patent law and policy abreast with developments at the technological frontier. The authors’ proposals, although not designed for that purpose, would go a long way toward fashioning a PTO that could fill the vacuum”.

Brief Personal Opinion

Prof. Dreyfuss succeeds in clearly portraying Jaffe and Lerner’s symptoms, diagnosis and proposed cures. The reader of the article may feel confident enough to speak and even debate about their book without reading it, as a result of Prof. Dreyfuss remarkable analysis. Where the author fails is in providing clear examples that evidence her hypothesis: that other significant events affected the patent system and not only the two identified by Jaffe and Lerner. Since there is no doubt about Prof. Dreyfuss ability to clearly organize her articles, it can only be said that she assumes that the reader will be capable of inferring the conditions which led to a drag on the evolution of the system, like Moore’s Law, for example. Taking in consideration that the article’s main audience is highly educated subjects, that assumption might be correct. If that is the case, the lack of evidence that supports the author's theory should not be considered as a failure.

Bibliography

1. Dreyfuss, R. (2006). Pathological Patenting: The PTO as Cause or Cure. N.p.: HeinOnline. Retrieved from http://its.law.nyu.edu/faculty/profiles/representiveFiles/Pathological%20Patenting_3778DBD9-9E8A-B8FC-FFE0FFC3619B985A.pdf
2. Silverman, A. B. (1990). Evaluating the Validity of a United States Patent. In JOM. Retrieved from http://www.tms.org/pubs/journals/JOM/matters/matters-9007.html
3. Patent Trolls. (n.d.). In Electronic Frontier Foundation. Retrieved from https://www.eff.org/issues/resources-patent-troll-victims
4. Crouch, D. (2013, February 21). Doctrine of Equivalents: On the Rise Again?. In Patentlyo. Retrieved from http://patentlyo.com/patent/2013/02/doctrine-of-equivalents-on-the-rise.html