Chief Judge Paul Michel: Patent Reform Progress is Likely, But We Must Stay Focused On the Big Picture

Judge Paul Michel speaking at IPWatchdog’s Patent Masters Symposium.

Last week during IPWatchdog’s Patent Masters Symposium, former Federal Circuit Chief Judge Paul Michel sat down with me to discuss the state of the U.S. patent system and best options/ predictions for moving forward. He began by lamenting that “the courts have failed and failed and failed” with flawed rulings such as Helsinn v. Teva, which Michel characterized as “completely illogical”, and Impression Products, Inc. v. Lexmark International, Inc. To boot, the Supreme Court has refused to take any patent eligibility cases, and the Federal Circuit has managed to make the harm and illogic of the SCOTUS rulings even worse, Michel said. In fact, they’ve “expanded on the bad rulings of the SCOTUS.”

Part of the problem may lie in a misunderstanding of the true intent of the patent system, according to Michel. “The real point of the patent system is to incentivize innovation, not to encourage creative people. Creative people will create no matter what. Investment is extremely risky and costly—if the incentive to invest shrinks, and there is evidence that it has, we are in trouble.”

Below, Michel offers more of his thoughts on the current patent landscape, including what to expect from pending legislation and why he is cautiously optimistic that change is coming soon.

Why do you think anti-patent messages are so widespread?

The other side argues based on facts that are misleading. The High Tech Inventors Alliance (HTIA), for example, says that there’s more VC funding than ever. But more VC funding total is meaningless. It’s true that a huge amount of research is still being done, but only because the high-tech companies have so much money that they don’t know what to do with it. So, there’s more R&D only if you look at the impact of the super-rich. But look at the research institutes and biotech firms—they’re going out of business. The proportion of total venture capital money going to real technology R&D has fallen. It’s being redirected to entertainment or going out of the United States. The midsize and smaller players are being priced out of the justice system, when historically it has always been the small inventors that the best technology has come from—inventors and universities and startups. The startup birth rate is the lowest it has been in 50 years. There have been many indicators and warning signs. The small and medium sized entities are the ones getting creamed and they aren’t well organized like the Silicon Valley giants. Tech companies hire lobbyists and PR firms and law firms by the dozens to put their spin on everything. No one seems to be looking at the big picture.

Who do you think is best poised to make change?

The patent system is assumed to be the child of patent lawyers, but they’re the last people who should be making decisions because they make money from litigation. The academy isn’t interested in patents, they’re interested in being quoted, and many academics are supported by big tech companies. The district judges are trapped by the Federal Circuit and Supreme Court rulings. The Justices are arrogant; they think they’re wiser than they are. They like to make big policy decisions beyond their competence and proper role in our three-branch system. The business community has to accept some blame because they were more concerned about taxes and regulation. All the people who should have been paying attention have gone astray. So, by process of elimination, it’s Congress that has to fix it.

With respect to courts making big decisions, what are your thoughts on the Federal Circuit’s use of Rule 36 rulings for Section 101 cases?

It’s very unfortunate. It’s understandable, because the Court is flooded with cases from the Patent Trial and Appeal Board and the courts—the burden is heavy and they’re under pressure to dispose of cases. But when I was on the Court, we used Rule 36 in two very limited circumstances: for pro se personnel cases of no merit at all and for plainly frivolous cases. For any case with any merit, there should be some opinion. I consider it a dereliction of duty not to explain their reasoning in at least three to four pages in order to remain consistent with their mission to clarify the patent law. It’s very hard to justify.

What are your predictions/ hopes for the STRONGER Patents Act and Section 101 reform?

Congress clearly knew that the America Invents Act would have unintended consequences and that they’d have to go back to it. Well, eight years have gone by now and they haven’t adjusted anything. But now I think Senators Tillis and Coons are well-intended and knowledgeable and I see some hope of progress on the legislative front. Unfortunately, Tillis and Coons have felt sandbagged by the very people who wanted Section 101 fixed in the first place because of the Section 112(f) provision. There was a failure of the corporate community to coalesce to support needed reforms that would be reasonable for all companies. It takes leadership and flexibility, and that’s largely missing.

What’s the quickest path to change in your opinion?

The quick fix would be to restore injunctions. The STRONGER bill, however, is more aspirational than real. Ideally, a few parts of STRONGER need to be split out and reengineered and added to the 101 bill. Coons is at the helm of both bills and very knowledgeable and willing.  On the 101 bill, he has Tillis co-sponsoring, but on the STRONGER bill there is no republican on the IP Subcommittee co-sponsoring with him. He needs to modify the bill to make it more acceptable. However, both bills will likely move forward—whether they get out of the Judiciary Committee or not, I’m most concerned about the prospects for progress. My prediction is that Coons and Tillis will work it out and get broader support. You have two Subcommittee leaders who are motivated and informed—that has been the missing ingredient in past attempts at reform.

The fact that Senator Lindsay Graham was willing to reconstitute the IP Subcommittee in the first place shows recognition that there is a problem. It only takes a handful of Congress members to really get going. Normally, it takes five years in Congress for a new idea to get passed into law, but when you’re facing security issues with China due to the inability to patent important technology here, for instance, we might have a combustible mix that will catch fire quickly.