The Agenda

Abolish the Federal Circuit

Mike Masnick summarizes a new article by Jonathan Masur in the Yale Law Journal:

When the numbers came out showing that 2011 represented yet another record year for patents granted, it was such a non-surprise that I didn’t even bother mentioning it. The number of patents granted just keeps going up. And yes, there were two small dips during the past decade, but they corresponded with the rare situations in which the Supreme Court finally took an interest in some element of patent law and pushed back on the Federal Circuit (the appeals court that handles all patent issues) and the USPTO. We’ve discussed at length in the past, the problems of having a single appeals court that solely focuses on patent issues, because you lose the diversity of opinions (made worse at times when some of the judges on the panel have been former patent attorneys — or, most famously, when a judge at the court was the same former patent attorney who wrote the last major update to patent law…).

However, Steve sends over a fascinating Yale Law Journal review article by Jonathan Masur that notes this problem of the Federal Circuit can be explained structurally, in that the relationship between the PTO and the Federal Circuit combined with the fact that there’s no “adversarial” party contesting a patent grant, means that the patent system is effectively rigged to only expand, even if that goes against the best interests of society.

Fortunately, Tim Lee has offered a solution to the problems posed by the Federal Circuit:

In 1982, Congress became concerned that patent law was too complex for generalist judges. So it created a new court, the United States Court of Appeals for the Federal Circuit, and gave it exclusive jurisdiction to hear appeals in patent cases.

This had the unintended consequence of dramatically increasing the influence of the patent bar over patent law. Not only do Federal Circuit judges spend all their time hearing arguments from patent attorneys, but some of them are former patent attorneys themselves. In its first two decades, the Federal Circuit gradually shifted patent law in the pro-patent direction favored by most patent attorneys. Patents became easier to get and harder to invalidate. The courts allowed tougher punishments against infringers. And the Federal Circuit unilaterally eliminated traditional limits on patenting software and “business methods.”

The creation of the Federal Circuit had another unintended consequence, too. The Supreme Court relies on disagreements among appeals courts — known as “circuit splits” — to help it figure out which issues require its attention. And when the Supreme Court takes a case, the existence of multiple, conflicting precedents gives the justices more raw material from which to fashion their own decisions.

But when the Federal Circuit became the only court ruling on patent cases, there were no more circuit splits and no more competing legal precedents. That might be why the Supreme Court seems to have barely noticed that the Federal Circuit was dramatically reshaping patent law in the 1990s. The high court reviewed only about a dozen Federal Circuit decisions between 1982 and 2004, and the ones it did review tended to be on narrow, technical issues. The Supreme Court finally began to give the Federal Circuit’s handiwork some serious scrutiny when Chief Justice John Roberts took the bench. And the justices did not like what they saw. In the Chief Justice’s first three terms, the high court heard five different patent cases, and all of them resulted in unanimous or near-unanimous reversals of pro-patent decisions by the Federal Circuit.

But a lot of the damage had already been done. Hundreds of thousands of low-quality patents had been approved under the permissive rules the Federal Circuit had developed during the 1990s. Those patents may be technically invalid under recent Supreme Court decisions, but that’s of little help to a small company that can’t afford to litigate the question. So contra The Economist, a key element of any serious patent reform agenda should be to decentralize authority over patent appeals.

This seems like a sensible move — and potentially appealing to those who enjoy abolishing things. 

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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