Patent System In ‘Crisis Mode,’ Ex-Fed. Circ. Chief Says
By Ryan Davis
Law360, New York (July 13, 2017, 10:06 PM EDT) -- The former chief judge of the Federal Circuit told a House committee Thursday that the U.S. patent system is in “crisis mode,” with America Invents Act reviews and U.S. Supreme Court decisions like Alice creating uncertainty that is undermining the value of patents.
Former Federal Circuit Chief Judge Paul Michel offered views on patents that differed from those of several members of the House Judiciary Committee at a hearing called “The Impact of Bad Patents on American Businesses,” where many lawmakers instead focused on the abusive lawsuits by so-called patent trolls.
Judge Michel expressed concern about how recent developments in the law have negatively impacted patent owners and reduced confidence in the patent system.
“As things have developed in just the last three years, the U.S. patent system is now in a crisis mode,” he said. “It has been so beleaguered by various forces and reform efforts that it is no longer functioning effectively to incentivize the massive investment repeatedly needed in order to move technology forward.”
He said that U.S. Supreme Court decisions like Alice, which held that abstract ideas implemented using a computer cannot be patented, "have done a lot of good" by allowing cases to be resolved early on before expensive litigation.
"The problem part of it is the standards are so vague and uncertain that there is massive unpredictability and therefore there are tens of thousands, maybe hundreds of thousands of patents under a huge cloud of possible invalidity and are therefore valueless," he said.
He said that while he supports AIA proceedings like inter partes reviews, which he called a "very important second line of defense when improper patents are granted," he said he was concerned that the way the Patent Trial and Appeal Board has implemented them has "departed from what seems to be clear congressional intent."
For instance, he said that the PTAB hardly ever lets patent owners amend claims although the AIA indicates that should be possible, and that the same PTAB panel decides whether to institute a review and then makes the final decision, which he said seems to be at odds with the statute.
The proceedings are also expensive for patent owners, which "means most patent owners are denied the courthouse or denied justice under our justice system, which doesn't seem appropriate," he said.
He estimated that the "vast majority" of patent owners cannot afford to defend valid patents that are actually being infringed because inter partes reviews are so easy to initiate. The unclear standards and increased expense have caused the value of patents to diminish and patent licensing to decrease, the judge said.
"There are many warning signs about trouble but uncertainty of the system is the biggest trouble of all because that deters the needed investment," he said.
He suggested that Congress amend the law to make it clearer what kinds of inventions are patent-eligible and to require the PTAB to conform with the AIA.
Members of the committee said they would consider Judge Michel’s suggestions, although some indicated that they are less concerned with measures to protect patent owners than with drafting new legislation to combat abusive patent litigation.
Judiciary Committee Chairman Bob Goodlatte, R-Va., said that it is “unfortunate that there are some who are now calling to undo much of the progress that has been made on patent litigation reform,” possibly referring to the recently introduced STRONGER Patents Act, which would change the law in ways designed to aid patent owners.
“A strong patent system is not one that enables patents that should never have been granted in the first place to be used as a weapon against American businesses, destroying American jobs in the process,” he said. “A strong patent system is one that has robust mechanisms in place to weed out bad patents and to deter abusive patent litigation from happening in the first place, while facilitating the owners of properly awarded patents in seeking the compensation they deserve when their patents are infringed.”
While he and other committee members suggested that they would push for such legislation, Rep. John Conyers, D-Mich., urged caution.
“Even well-intentioned proposals must be thoroughly analyzed to avoid unintended consequences that harm our patent system, discourage innovation, weaken patent rights or increase patent litigation,” he said. “Accordingly, we must strenuously reject any legislative proposals that would unbalance the patent system, deprive inventors of full legal protection for their inventions, fuel more rather than less litigation, and weaken patent enforcement protections.”
--Editing by Alanna Weissman.
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