Thursday, 11 September 2014

Bold Proposal on U.S. Patent Reform: Eliminate the U.S. Court of Appeals for the Federal Circuit

The Cato Institute is "a public policy research organization — a think tank – dedicated to the principles of individual liberty, limited government, free markets and peace," which operates the Cato Unbound forum, an online journal.  This month's journal features a discussion titled, "Patents and Public Choice."  The feature essay is authored by Eli Dourado, a research fellow at the Mercatus Center at George Mason University, and critically tackles the U.S. patent system.  There is one responding essay by Professor Zorina Khan (I recently highlighted one of her papers concerning patent trolls, here).  Forthcoming essays will be published by Professor John F. Duffy of the University of Virginia Law School and Professor Christina Mulligan of the Brooklyn Law School.  Mr. Dourado's essay is titled, "The True Story of How the Patent Bar Captured a Court and Shrank the Intellectual Commons."  The essay essentially argues that the U.S. Court of Appeals for the Federal Circuit, the supposedly specialist patent court in the U.S. with nationwide jurisdiction over patent appeals from U.S. district courts and jurisdiction over patent appeals from the United States Patent and Trademark Office, has been captured by the patent bar and has continuously expanded patent eligible subject matter to the detriment of innovation.  He points to software patents as a problem, including a discussion of the tragedy of the anticommons, as well as patent trolls.  Despite the U.S. Supreme Court's attempt to reign in software patents, he believes the Federal Circuit will continue to evade Supreme Court precedent (maybe true, but the composition of the court has been changing).  Here are his proposals for reform:

It would be better instead simply to abolish the Federal Circuit and return to the pre-1982 system, in which patents received no special treatment in appeals. This leaves open the possibility of circuit splits, which the creation of the Federal Circuit was designed to mitigate, but there are worse problems than circuit splits, and we now have them.

Another helpful reform would be for Congress to limit the scope of patentable subject matter via statute. New Zealand has done just that, declaring that software is “not an invention” to get around WTO obligations to respect intellectual property. Congress should do the same with respect to both software and business methods.

 . . . Current legislation in Congress addresses this class of [patent troll] problem[s] by mandating disclosures, shifting fees in the case of spurious lawsuits, and enabling a review of the patent’s validity before a trial commences.

What matters for prosperity is not just property rights in the abstract, but good property-defining institutions. Without reform, our patent system will continue to favor special interests and forestall economic growth.

I am not so convinced that returning to the uncertainty and splits of jurisdiction existing before the creation of the Federal Circuit and “races to the courthouse” is going to put us in a better position.  And, the party advocating for change and carrying the burden of proof may need to make a stronger case for reform given the relative success of the biotechnology and information technology industries in the U.S.   Professor Khan offers an incisive rebuttal, here.  This blog has featured posts challenging the assertion that patents in the information and technology communications space are inhibiting innovation, here,  [Although I do wonder about price.] and describing counter-arguments to proposals to reduce the Federal Circuit's influence over patent law, here.  We look forward to Professor Duffy and Professor Mulligan's essays.  [Hat Tip to Professor Dennis Crouch's Patently-Obvious Blog for a lead to the essay.]  


Anonymous said...

This is an interesting radical proposal, but on its own it will go nowhere. Cato Unbound fail to constructively discuss the failings of the Federal Circuit and don't offer ways in which the Federal Circuit could be better regulated. A lot of expertise will have been built up around all the people involved in the Federal Circuit and that should not be simply thrown away. One must work within the system, and at the moment the system won't consider the possibility of abolishing the Federal Circuit. It is easy to be radical, but much harder to actually propose and push changes which have a chance of being implemented.

Mike Mireles said...

Thank you for your comments. Yes, I agree with you. I do think that the paper is provocative and will stimulate debate. To me, that in itself is good. Although I do also think we should exercise some care in what we propose depending on the circumstances. I am not saying that Mr. Dourado should not have made his proposal. It does go beyond my understanding of Chief Judge Wood's (U.S. Court of Appeals for the Seventh Circuit) proposal concerning the Federal Circuit.

Anonymous said...

Mike, I agree, but a more nuanced article would lead to a more nuanced debate. Now everyone will simply defend the existence of the Federal Circuit. Instead we could have a debate focussing on how to change the Federal Circuit which would have been more constructive. Radical articles are interesting and get attention, but they lead to very polarised positions which is not helpful. The ideal article is perhaps one that diligently and objectively discussed the pros and cons of all positions