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Why our patent system ended up in the hands of the Supreme Court

By Robert Gebelhoff
May 2 ?

The Supreme Court building in Washington. (J. Scott Applewhite/Associated Press)

The Supreme Court is reviewing an obscure case that may have enormous consequences for American patent law. But in terms of how it might play out, we haven’t a clue.

The case, Cuozzo Speed Technologies v. Lee, illustrates an important trend in American politics: Congress has a tendency to create extraordinarily ambiguous laws, leaving the courts and executive agencies to fill in the holes.

In the case, the tech firm Cuozzo Speed Technologies Inc. argues that one of its patents, issued for a GPS system that notifies drivers when they are speeding, was unfairly canceled under a new review process at the U.S. Patent and Trademark Office, called “inter partes review.” A federal appeals court upheld the cancellation, but the decision was split 6-to-5.

[Patents are supposed to encourage innovation. Without reform, they’ll do the opposite.]

The question in front of the Supreme Court is whether the Patent Office has been too harsh when reviewing patents, and whether it should use standards that more closely resemble what would be used in a trial court. Congress created the process of inter partes review in 2011, designed to root out abuse in the patent system by making it easier to challenge patents and cancel those that should never have been issued. The problem is that legislators were remarkably unspecific in how it would be instituted. As Justice Elena Kagan said during arguments last week, noting that Congress never made clear what it intended to accomplish though inter partes review: “We’re a little bit reading tea leaves, aren’t we?”

Unsurprisingly, the case hasn’t received a lot of attention — it’s not a very sexy topic. But there is a lot at stake: Patents support an estimated $5 trillion of the nation’s gross domestic product and 40 million jobs. They’re also the backbone of many innovative companies in the tech sector.

Historically, when inventors submit a creation to the government to be patented, the Patent Office reviews the technology very broadly to make sure it hasn’t already been patented by someone else or that the innovation isn’t too obvious to be called intellectual property. Theoretically, that review is enough to make finding a new, patentable idea difficult.

Once patents are issued, however, they won’t face the same harsh scrutiny in courts. During patent litigation, judges generally focus only on the plain meaning of a patent’s text without questioning its validity — meant to protect intellectual property.

That’s great for inventors, but strong legal protections also create an adverse incentive for patent-holding companies to threaten others with lawsuits in the hope of squeezing out lucrative settlements. In fact, there exists an entire industry of shell companies — often referred to as “patent trolls” — whose sole function is to collect patents and sue other companies with them.

Congress attempted to fight off the emerging troll industry by passing the America Invents Act, which set up the inter partes review process to allow people to bypass courts and contest silly patents directly through the Patent Office. The idea was to make lawsuits quicker and less costly than traditional trials.

The problem: Congress never told the agency how it was supposed to review contested patents, so the Patent Office decided to use the same broad standards that it has always used to review applications, not the textual standards of the federal courts. This stacked the patent review process against patent-holders, the opposite of what would happen in a court trial. Over the past few years, inter partes review has canceled hundreds of patents, shooting down more than 80 percent of the existing patents subject to review in cases that weren’t settled.

Critics of inter partes review — mostly pharmaceutical and software start-up companies that rely heavily on their intellectual property to do business — have taken to calling the board governing the review the “Patent Death Squad.” They argue that the new system has upended intellectual property rights and stymied innovation in the United States.

Their opponents — generally bigger tech companies like Google and Apple (the common targets of patent litigation) — defend the Patent Office. For them, the new review process is doing what it was designed to do: weeding out bogus patent claims and offering a more efficient alternative years-long court battles.

The Supreme Court is now pitted between these two sets of industries and must decide what standards inter partes review should use. Should it act as an extension of the Patent Office’s application process, striking down most of the patents with a tough standard? Or should it act as a fast-track replacement for the court system, with a lower standard?

But beyond the angry rhetoric from the intellectual property crowd rests a frustration with the legislative process that caused the problem in the first place. Many legal commentators have criticized Congress for leaving the tough decision up to the courts. How could lawmakers pass patent reform without spelling out how to, well, reform the patent system? Chief Justice John Roberts seemed especially irked by the situation during arguments last week, criticizing the lack of clarity on standards as “bizarre.”

Still, the situation shouldn’t be too surprising. Lawmakers on both sides of the aisle were under a lot of pressure to act in 2011 — including from the president, who has long been a proponent of tough patent reform. At the same time, though, the tech industry was — and continues to be — bitterly divided on what that reform should look like. Remember: The issue is driven mostly by corporate lawyers whose companies have huge stakes in how the government will manage intellectual property.

[A patent reform we can all agree on]

As a result, reform is situated between two hornet nests — with big pharmaceuticals on one side and big tech firms such as Google on the other. Health care, legal rights, business development, jobs and innovation are all major players in the intricate patent system, and that translates to a swarm of angry lobbyists and constituents calling congressional offices.

In Theory published a symposium on patent reform in November, and the big takeaway was that deciding on a new direction remains extremely divisive. The fact that Congress punted on the hard questions with ambiguous language shouldn’t come as a shock, especially in an already strained political climate.

Yet Congress has been doing this for decades. It has passed a number of extraordinarily vague laws — from the Civil Rights Act to the Americans With Disabilities Act — and for better or worse, lawmaking has increasingly fallen under the purview of executive action and judicial review. While the president attempts to make policy without the help of Congress by finding wiggle room in already existing laws, the Supreme Court has pushed for greater regulation of greenhouse gases by reinterpreting the Clean Air Act to include carbon dioxide.

The Cuozzo case may be a siloed topic, but it illustrates a lot about American politics. We can criticize our legislative process for relying too much on litigation to develop policy, but there’s a reason it looks the way it does. Lawmakers increasingly see the judicial branch as another policymaking tool, especially when they want to shove the tough questions off to someone else.


Read more:

Abraham Lincoln loved our patent system. Let’s not tear it down.

Patent infringement is theft, plain and simple

A third of the economy is at stake — and trolls are to blame

Don’t let hedge funds undermine public health

Patents are supposed to encourage innovation. Without reform, they’ll do the opposite.

https://www.washingtonpost.com/news/in-theory/wp/2016/05/02/why-our-patent-system-ended-up-in-the-hands-of-the-supreme-court/