Judge Michel, Panelists Contemplate the CAFC Past, Present and Future on Day Two of CON2020

Judge Paul Michel (left) and Gene Quinn at Virtual CON2020.

Headlining day two of IPWatchdog’s CON2020 was Retired U.S. Court of Appeals for the Federal Circuit (CAFC) Chief Judge Paul Michel, who offered attendees 12 “perspectives” on the present-day Federal Circuit to provide context for some of the Court’s current problems. Ultimately, said Michel, these problems need to be fixed via legislation, not the courts, and the key to speeding up that legislative process is for individuals and companies to become involved and proactively advocate for patent reform at the local level.

Looking Back

Michel’s 12 perspectives began with an historical overview of judicial trends around patent law since 1950. While 1950-1980 saw weak patents, routine invalidations, inconsistent rationales and overly strict antitrust enforcement, thereby allowing countries like Japan to take the lead in emerging technology sectors, 1980 through 2010 saw a series of developments—like Bayh-Dole, the creation of the CAFC, and the Chakrabarty decision—that resulted in a patent boon and sent the United States soaring to number one in innovation. But beginning in 2010, that pendulum began to swing back again.

The power to shape patent law began to shift from Congress to the courts, and specifically to the Supreme Court and the CAFC. “In my view, the courts as a whole have been a major failure in terms of the effectiveness of the patent system,” Michel said. The contradictory and confused rulings that were increasingly coming out of the courts on various points of patent law during this period led to Michel’s perspective number three, which outlined the impact these shifts soon had on investment trends. This includes sharp decline in investment in patent-dependent technologies over the decade  2010-2020, a shift of venture capital funding from these technologies to areas like entertainment, hotels and movies, and VC money fleeing to the EU and Asia/China. This is borne out by statistics that show patent filings by U.S. companies at the USPTO are down, while filings by foreign applicants are up. “Our system has become rather unstable because the law keeps changing and is unpredictable, unreliable, unscientific and uneconomic,” Michel said. “The courts seem to be completely oblivious to this.”

Fall from Grace

Michel’s fifth perspective reflected on the many areas in which patent owner rights have been rolled back by the courts in the last decade, including eligibility (“no patent is safe from invalidation on 101”); injunctions; high rates of institution and invalidation at the PTAB; and cost. All of which have led to the United States falling in international rankings on IP and from number one to number 16 in terms of public investment in R&D.

Aggravating the situation is that “patent litigation has become the sport of kings,” Michel said. Only the very rich can now see litigation through to conclusion, putting startups at a huge disadvantage because “they can’t afford the war.” The United States has the lowest net startup formation rate we’ve had in half a century, said Michel. Even with the surge in the litigation funding industry, startups remain disadvantaged because litigation funders are very selective, preferring companies with a large portfolio of very strong patents.

Get Your Butt in the Seat

Michel’s final thoughts focused on possible solutions, which included impetus from a new administration or congress to enact change, noting that it was the Carter and Reagan administrations that got the ball rolling on the positive reforms made beginning in 1980. But most importantly, said Michel, is local involvement of patent lawyers, corporations and universities. Going to Washington D.C. isn’t enough, he explained.

In a Q&A with IPWatchdog founder and CEO Gene Quinn, Michel added that he does not expect the Supreme Court to revisit 101 precedent “for many years to come,” but that if Congress starts to move ahead swiftly with legislation, that might speed up the timeline for the courts to consider reviewing the issues. Another potential avenue for change via the courts is if judges retire or take senior status, Michel added. Considering many of the most high-profile cases recently have split sharply on the decision to go en banc, even two new judges who are “fairly balanced” on patent issues could result in more cases being taken en banc and, potentially, more issues being resolved by the court.

Quinn agreed with Michel that local advocacy is key and said that showing up in person at fundraisers, having meetings with representatives, or at least calling them on the phone is crucial to building pressure from the bottom up.

“There are 100,000 commercial corporations in America today, and 101 reform is being blocked by about 10,” Michel said. Everybody else needs to speak up.”

Quinn agreed, recalling the words of his friend, the late Todd Dickinson, who passed away unexpectedly earlier this year. On the topic of legislative advocacy, Dickinson used to say: “Your butt needs to be in the seat.”

Is the CAFC Even Relevant?

Later, in a panel titled, “The Future of the CAFC: Is the Court Still Relevant?”, Michel, Robert Stoll, Russell Slifer, Meredith Addy and Quinn discussed the current state of the CAFC, including the overuse of Rule 36 judgments, the lack of unity among CAFC judges, and the unwillingness or inability of some judges to properly consider technical questions that may arise.

The discussion was moderated by Stoll and began by reviewing how the CAFC has strayed from the primary purpose for which it was created in the 1970s. Judge Michel commented that the CAFC has become increasingly “fragmented” since 2012, and Russell Slifer agreed, noting that the Court no longer provides a “common predictable voice in IP.” Quinn commented that he has written articles on how the CAFC has lost the relevance it once had and how it is beginning to resemble courts prior to the formation of the CAFC.

The panel then moved on to how the CAFC tends to give certain topics, such as 35 U.S.C. § 101, no more than a superficial review. Addy observed that appeals from the PTAB are reviewed by the CAFC using the high standard of substantial evidence, but explained that in many cases there is little to no evidence upon which to base their decisions. Further, Addy and Judge Michel commented that it is improper for the CAFC to review legal questions, such as a finding of obviousness, using a standard intended for review of factual findings.

Excessive Use of Rule 36

The panelists also discussed the CAFC’s increasing use of Rule 36 Judgments, wherein the CAFC issues a judgment without a written opinion. Judge Michel explained that it used to be the “culture of the court” not to used Rule 36 Judgments except for in blatantly frivolous cases. Michel also commented that the CAFC should be publishing written opinions on nearly every case which would be possible if they wrote more concise opinions that drove to the heart of the issue at hand. Slifer noted that the CAFC only seems to be interested in reviewing certain types of appeals from the PTAB, such as appeals that require interpretation of statutes, but does not seem to be interested in reviewing questions that require reviewing and interpreting claims. The panelists agreed that the CAFC’s use of Rule 36 is excessive and at times it is not even apparent if the judges are clearly understanding the technology of the cases.

A Look at the Judges

The discussion then turned to the makeup of the CAFC judges and their backgrounds. While most of the panelists agreed that there is a great benefit to having judges who have practiced as patent attorneys with technical backgrounds, Addy expressed that the background of the court is very diverse. Addy also noted that, while she does not agree that a technical background is necessary, it is important for the judges to take more time to understand the technology underlying the cases. Judge Michel stated that he believes “the number of CAFC judges that are career patent attorneys should be proportional to the number of patent cases that the CAFC handles,” which is approximately 3/4 of the cases.

Slifer presented a slide show including a chart listing of all of the CAFC judges and whether they were patent attorneys, had technical degrees, and had corporate experience. Judges Pauline Newman and Alan David Lourie were the only judges out of 18 that had all three credentials. The chart noted that seven judges have technical degrees and five are patent attorneys. The slide show also included a pie chart showing the category of appeals filed with the CAFC in FY 2019. The greatest percentage of appeals, 43%, were patent cases from the USPTO and the second largest percentage, 22%, was patent appeals from district courts.

IPWatchdog also recently published an article analyzing data on how CAFC judges have ruled on patent eligibility issues since the Alice decision.

Get Your Friendly Filing Right

The discussion concluded with comments on effective amicus briefs. Judge Michel noted that very few briefs include actual technical or other data and the inclusion of such data would make the briefs more persuasive. Stoll noted that the inclusion of new arguments in amicus briefs is necessary to make the briefs more persuasive, as rehashing arguments of record is not sufficient.

CON2020 Continues

Join CON2020 again tomorrow, September 3, when Raymond Millien of Volvo will deliver a keynote and panels will examine injunctive relief in patent infringement cases and IP transactions and portfolio management. Register here to attend for free.