Patent Erosion 2013: What Would the Founding Fathers Think?

James Madison, father of the Constitution and proponent of strong patent rights.

As the end of 2013 approaches and I look back on what has transpired I am saddened to see that through the year patent rights have continued to erode. It is difficult to comprehend just how far the pendulum has swung. At one time strong patent rights were viewed by our Founding Fathers as obviously necessary. Now any patent rights are ridiculed as a relic of the past that simply stands in the way of innovation. The reality, however, is that patents don’t stand in the way of innovation; patents foster innovation. But so many won’t even take the time to inform themselves. Rather they equate “innovation” with a new consumer product. But to innovate is to do something new. Innovation has nothing in and of itself to do with a new products or services.

What those urging a weaker patent system want is the ability to release products and establish services regardless of whether they are infringing others. But those who infringe are not innovators, at least not in the most broad sense. Sure, they may have improved something, but if they are infringing then what they have done is copy an innovator. How and why that isn’t self-evident is a mystery. Copying is not innovating!

And if patents were getting in the way of innovation then why aren’t we seeing a standstill in the smartphone industry? The arguments made by the anti-patent crowd are ridiculous on their face, yet decision makers just nod their head in agreement as if they speak the gospel. The truth is the smartphone industry started with the iPhone in late 2007. It is just 6 years old! The phones from 2007 look and function nothing like the smartphones do today, and every new version has new improvements, better battery life, stronger structural integrity, glass that is harder to break, operates faster, has better cameras, etc. etc. For an area that is allegedly being suffocated by  patents there sure is a lot of readily apparent improvement.

[Bio-Pharma]

This is but one example of the nonsense we hear from the anti-patent community, which includes some large tech companies from Silicon Valley that enjoy a natural monopoly (or near natural monopoly). The arguments don’t stand up to the smallest scrutiny and fall apart under the weight of fact. Here is another fact: if patents harm innovation then you would expect to see run away innovation in places with no patent system, but you don’t! So what gives? There are no doubt some in the anti-patent community that are simply ideologically clueless and refuse to let fact get in the way of making a bad decision. But those anti-patent advocates in Silicon Valley have their barrier to entry sewn up and they don’t want to lose dominance, thus they need to weaken the patent system. Of course there is nothing wrong with them advocating in their self interest, but it would be nice if Congress and the Courts woke up in 2014 and realized that their self interest is going to destroy the U.S. patent system and the U.S. economy along with it.

This year we have witnessed the Supreme Court issue a nearly incomprehensible opinion in Association of Molecular Pathology v. Myriad Genetics. Most thought the Supreme Court would get this wrong, and they did, just not for the reason that we feared. Justice Thomas speaking for a unanimous Court came out and said that the isolated DNA claimed by Myriad was not something that occurred in nature, which up until the morning of June 13, 2013, meant that we were dealing with a patent eligible invention. For reasons not fully explained in any satisfying way the Supreme Court found that despite the fact that the claims covered something man-made they were still products of nature and not patent eligible. Bizarre to say the least, but most alarming was that the industry most touched by this decision largely seems to be in complete denial. It has been widely reported that the Supreme Court said that cDNA is patent eligible, but isn’t true. The Supreme Court specifically stated that despite the fact that cDNA is man-made and does not occur in nature it may under some circumstances not be patent eligible. See Why SCOTUS Myriad Ruling Overrules Chakrabarty. This matters because companies locate where they can achieve the strongest patent rights, which in the biotechnology sector since the early 1980s was the United States. History shows that companies move to where patent rights are strongest when they are innovators. This is something to keep an eye on in 2014 and out years. Will the U.S. retain dominance in the biotechnology sector?

This year we also saw the Federal Circuit tie on whether software is patent eligible, but is ridiculous. The Supreme Court has on multiple occasions issued rulings confirming the patent eligibility of software, yet half of the Federal Circuit would find that software is not something that can be patented? Most troubling is that the Federal Circuit and the newly formed Patent Trial and Appeals Board (PTAB) at the United States Patent and Trademark Office seems to be of the belief that if a human could theoretically perform the base calculations then the software is not patent eligible. That is perhaps the most ridiculous thing I have ever heard; it would funny if it weren’t so sad. Watson, created by IBM and victorious on the TV show Jeopardy, is capable of 80 trillion calculations per second. What human could do that many calculations in an entire lifetime? See Is IBM’s Watson Still Patent Eligible? See also Are Robots Patent Eligible? and Did the Federal Circuit Ignore the Supreme Court in CLS Bank?

But the event that takes the cake, in my opinion, is the Innovation Act and the companion legislation moving through the Senate. The Innovation Act was introduced in the House of Representatives in late October, marked-up in late November and passed in mid-December. All of this happened with lightening speed during a historic do-nothing Congress? Not once was there any serious discussion about whether the reforms presented are a good idea and what impact they will have on innovation generally and the incentive to innovate specifically. The House didn’t even speak with innovators! Sure, they paraded the big tech companies to a show hearing, but with very few exceptions big companies don’t innovate. Innovation comes from small businesses, start-ups, Universities and independent inventors, all of who oppose additional patent reform. Even the big companies that actually innovate oppose patent reform. To make matters worse, these patent reforms won’t do anything to solve the so-called patent troll problem – in fact they will make it worse and create super trolls. See Patent Reform: Will Fee-Shifting Solve the Patent Troll Problem? and House Passes Innovation Act, Battle Goes to Senate.

Patent rights are under attack, and have been in modern times at least since the Supreme Court’s decision in eBay v. MercExchange in 2006, a decision that prevented permanent injunctions as a matter of right. For crying out loud the patent is by its very terms an exclusive right? Why in the world wouldn’t a victorious patent owner in an infringement lawsuit be entitled to an Order from the District Court telling the defendant they can’t infringe moving forward? That is all a permanent injunction is, and it is already supposed to what the patent itself is supposed to prevent. A permanent injunction, therefore, merely gives the District Court continued jurisdiction over the dispute in the event the defendant were to continue infringing. All a permanent injunction does is order the defendant to not do what they are already supposed to not be doing and at the same time make it unnecessary for the victorious patent owner to start over at ground zero and bring an entirely new enforcement action if infringement continues. But in the infinite wisdom of the Supreme Court permanent injunctions cannot be given as a matter of right, now are rarely granted and the victorious patent owner in a patent litigation is actually worse off after winning because now the losing defendant essentially has a compulsory license. Further, the losing defendant will only have to pay for future infringement if the patent owner sues again, and again, in what is typically a 5 to 10 year litigation process. Ridiculous!

Make no mistake about it, at every turn patent rights are eroding. You might think that there has been some collective, open-air discussion about whether this is a good idea. Nope! It seems government you get is the government you can afford, and those who have the ear of decision-makers on Capitol Hill are the extraordinarily well funding big tech companies that want to weaken patent rights or do away with them altogether. Indeed, there has been scant consideration paid to the effect of weakening patent rights.

[Varsity-1]

The erosion of patent rights is exceptionally alarming given the fact that the Founding Fathers thought it was self evident that a strong patent system was essential for America. The Founders believed the importance of patent rights to be so self evident that little debate was had on the topic. How the pendulum has swung!

None other than James Madison stated in Federalist Paper No. 43, the usefulness of the Congresses power to award patents “will scarcely be questioned.”  Madison, Debates in the Federal Convention of 1787, at 512-13 (Hunt and Scott ed. 1920). Madison, known as the Father of the Constitution, was the primary proponent of strong patent rights and even convinced the skeptical Thomas Jefferson that without strong patent rights there would be insufficient incentive to take risks and innovate.

But Madison was hardly the only Founding Father who understood the overwhelming importance of a strong patent system. George Washington was also a very strong proponent of a patent system. In fact, on January 8, 1790, during the first State of the Union speech to Congress, given only months after the ratification of the Constitution, President Washington implored Congress to pass a Patent Act!

Washington’s State of the Union was a mere 1,096 words, yet he devoted this passage to patents:

The advancement of agriculture, commerce, and manufactures by all proper means will not, I trust, need recommendation; but I can not forbear intimating to you the expediency of giving effectual encouragement as well to the introduction of new and useful inventions from abroad as to the exertions of skill and genius in producing them at home, and of facilitating the intercourse between the distant parts of our country by a due attention to the post-office and post-roads.

Let’s let this all sink in for a minute. The United States Constitution, which is itself an exceptionally brief document, specifically grants Congress the right to grant patents. Then the first time President George Washington speaks to Congress in his official capacity as President of the United States he implores Congress to pass a Patent Act. It isn’t as if there wasn’t a lot to do to form a new nation, and everyone was on board with patents being of seminal importance. Indeed, just several months after Washington’s address Congress passed the first patent laws as the third Act of Congress.

Another Mount Rushmore President was also a huge proponent of the patent system. Abraham Lincoln, beloved for ending slavery and preserving the Union, is the first and only President to have been awarded a patent. Lincoln’s patent U.S. Patent No. 6,469, was titled “Buoying vessels over shoals.” Approximately ten years after receiving his patent, still not yet having been elected President of the United States, Lincoln delivered his second speech on discoveries and inventions. This often cited second speech was completely rewritten from his first speech on the topic and delivered first on February 11, 1859, at Illinois College at Jacksonville. It is in this speech that Lincoln simply and eloquently explained that the patent system “added the fuel of interest to the fire of genius.”

The entire passage from this famous Lincoln speech is as follows:

Next came the Patent laws. These began in England in 1624; and, in this country, with the adoption of our constitution. Before then any man might instantly use what another had invented; so that the inventor had no special advantage from his own invention. The patent system changed this; secured to the inventor, for a limited time, the exclusive use of his invention; and thereby added the fuel of interest to the fire of genius, in the discovery and production of new and useful things.

Less well known than Lincoln’s often cited “fire of genius” line is something of even more profound significance. Shortly before uttering this now famous line on the “fire of genius” Lincoln explained that three innovations in the history of the world surpassed all others. These innovations were above all others because they facilitated “all other inventions and discoveries.” One of these three seminal innovations was the “introduction of patent laws.”

Lincoln explained:

[I]n the world’s history, certain inventions and discoveries occurred, of peculiar value, on account of their great efficiency in facilitating all other inventions and discoveries. Of these were the arts of writing and of printing, the discovery of America, and the introduction of Patent laws.

And here we stand on the edge of 2014 with patent rights becoming so distorted that they are hardly recognizable. The pendulum has swung a great deal and without the thoughtful leadership of someone in the Senate it will swing further at some point during the first quarter of 2014. Without the Supreme Court standing up and paying attention to the cumulative affect of their patent jurisprudence over the last 8 years we may find that software is no longer patent eligible.

I can’t believe that the Supreme Court would issue such a ruling, but many in the industry are very afraid. By now somewhere between 50% to 60% of all patent applications in some way related to software innovations. A ruling like that would drive a stake through the heart of the patent system, it would destroy the U.S. economy and the winners at the end of the day would be companies from outside the U.S. who would love nothing more than to flood the U.S. market with goods and services. Getting patent decisions wrong in 2014 will come at an enormous consequence. There isn’t any room more for the pendulum to swing without the cord snapping.

The patent system needs a champion in the United States Senate, and needs the Supreme Court to channel the Founding Fathers in something other than a specifically constitutional law case. Will a Senator stand up and do just that in 2014? Will the Supreme Court take the time to understand why strong patents are important to the overall economy, to foster incentive, to spur investment? Time will tell, as it tells all things.