How The Patent System Is Rigged To Only Expand What's Patentable

from the keep-turning-the-ratchet dept

When the numbers came out showing that 2011 represented yet another record year for patents granted, it was such a non-surprise that I didn't even bother mentioning it. The number of patents granted just keeps going up. And yes, there were two small dips during the past decade, but they corresponded with the rare situations in which the Supreme Court finally took an interest in some element of patent law and pushed back on the Federal Circuit (the appeals court that handles all patent issues) and the USPTO. We've discussed at length in the past, the problems of having a single appeals court that solely focuses on patent issues, because you lose the diversity of opinions (made worse at times when some of the judges on the panel have been former patent attorneys -- or, most famously, when a judge at the court was the same former patent attorney who wrote the last major update to patent law...).

However, Steve sends over a fascinating Yale Law Journal review article by Jonathan Masur that notes this problem of the Federal Circuit can be explainedstructurally, in that the relationship between the PTO and the Federal Circuit combined with the fact that there's no "adversarial" party contesting a patent grant, means that the patent system is effectively rigged to only expand, even if that goes against the best interests of society:

Because of the manner in which patent cases make their way from the PTO to the Federal Circuit, the PTO has a decided institutional interest in granting more patents than it should. And because of this same interaction, the Federal Circuit is engaged in an unwitting expansion of the patentability rules. The key lies with the asymmetric nature of appeals from the PTO to the Federal Circuit. When the PTO denies a patent application, the aggrieved applicant may appeal to the Federal Circuit. When the PTO grants a patent, however, there is no losing party to appeal--the victorious applicant merely walks away with its patent. That patent is unlikely ever to see the inside of a courtroom, given how few infringement lawsuits are litigated. Like most administrative agencies, the PTO wishes to avoid appeals and especially reversals. In order for the Agency to accomplish this, it need only err on the side of granting excessive numbers of patents--even invalid patents--for which there is no appeal. This desire to avoid litigation is a source of the invalid patents now being issued by the PTO in vast numbers--the patent system’s first problem.

But, as he notes, that's not the only problem. There's also the fact that since the PTO will now only reject patents that are clearly outside the law, the Federal Circuit only has opportunities to expand the granting of patents, not to reign it in:

The second problem, the ongoing expansion of the rules governing what types of inventions may be patented, stems from the PTO’s proclivity to grant any plausible patent. Because of the PTO’s efforts, the patent applications that the Agency denies will predominantly concern inventions that are unpatentable under current law. When a disappointed patent applicant appeals such an application to the Federal Circuit, that court has two options. It can reject the patent under existing law, preserving the law as it stands, or it can grant the patent under a new, more expansive understanding of what is patentable. The circuit denies most of these applications. But when the Federal Circuit eventually decides a case in favor of an applicant, it creates a new precedent that enlarges the scope of what may be patented. The process then repeats itself, with the PTO denying more boundary-pushing patent applications and the Federal Circuit being presented with further opportunities to expand the limits of patentability. The result is a natural inflationary pressure on the law, generated entirely by the types of cases that the PTO sends to the Federal Circuit.

Is there a way to fix this? Masur suggests that awareness alone might create some pressure on the Federal Circuit to "create new, more constraining precedent." He also suggests that they might "vote strategically against self-interest in certain cases" such as by voting against a patent they think is a good patent "simply in order to forestall the law's outward momentum." That seems like significant wishful thinking -- which he admits with a bit of an understatement: "This would require a focus on issues with which circuit judges do not typically concern themselves, not to mention a surprising level of tactical shrewdness from a circuit that has not previously displayed any such inclination."

He also notes how Congress and the Supreme Court have the power to curb excesses, which the Supreme Court has done just a little bit (which, as noted above, explains the brief dips in patents). Separately, the executive branch could get involved and pressure the PTO to limit its approvals.

But, in the end, the key point that set off this problem is the lack of anyone to push back on a granted patent (until such time as they're sued, in which case a different series of issues are being dealt with). So of his key suggestions, one is to open up the ability for third parties to challenge patents -- even before they're issued. And to weigh against the inflationary pressure of the current Federal Circuit, he suggests that these challenges show up in the Federal Circuit too -- so that that court now also has incentive to curb excesses, rather than just inflate them. Definitely an interesting idea.

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