Chief Patent Judge Feigns Ignorance Of How Often Patents Are Used To Hinder Innovation

Patents

from the willful-ignorance-or-scary-ignorance? dept

Law professor Doug Lichtman’s latest “IP Colloquium” podcast is an interview with Judge Randall Rader, who’s the chief Judge of CAFC, the appeals court that handles most patent cases. Rader is known for being outspoken and opinionated (but also very, very smart), so it’s always fascinating to hear what he has to say. The first part of the interview is interesting from a purely procedural standpoint, as Rader goes through the process by which the CAFC makes decisions, including the fact that nearly every case is decided almost immediately after the oral hearings. It sounds like they almost never feel the need to sleep on a decision. However, the latter part of the interview is where things get really interesting. While Lichtman and I tend to disagree over copyright issues, we find a lot more common ground on patent issues, with Lichtman pointing out the harm that patents often seem to do to innovation, as well as questioning why independent invention isn’t a sign of obviousness.

Rader’s responses are thoughtful, and interesting, but I feel that he makes some assumptions that don’t have much support, and makes a few other statements that simply are not an accurate representation of reality. Rader starts out by suggesting that it’s simply impossible for any tech firm to “keep up” with technology innovation today (partially true), and the only way to do that is through cooperation (true) and that patents “facilitate” that cooperation (sometimes, but rarely, true). He paints this idealistic, and not very accurate, picture of innovation occurring thusly:

In order to really see the future, you’ve got to bring together some kid writing software in Bangalore, with a laboratory professor in Chengdu, with a university researcher in Kyoto and a startup company in Boston. And they each have a piece of the puzzle which may be “Windows 7,” or whatever the future of technology is, but no single laboratory, no single company, anymore invents the future.

Now, to some extent that’s true. No single company does invent the future, but I actually see that as a pretty strong argument against patent protection in most cases, since patents in situations like that now create transaction costs that hinder innovations that advance the market. It’s putting a toll on innovation, which can be much more efficiently handled in the actual marketplace.

They, if they’re smart, coordinate, and cooperate with the world to achieve that future, and what is it that facilitates that? It’s the patent system!

Extremely idealized and not at all accurate in so many cases these days. Instead, what’s happening is that many folks are putting all of the puzzle pieces together themselves, and don’t need to work with all those other folks. But then someone else shows up, after the puzzle is completed saying “I own this half of the puzzle thanks to this patent, now pay me.” And, making matters even worse is often you get lots of companies showing up, all claiming to “own” large chunks of the puzzle (often in overlapping ways!). And the original puzzle was usually put together without them at all. It’s not about cooperating and coordinating at all. It’s about taxing innovation. Lichtman tries to make this point, segmenting patent situations into two buckets, one of which is positive (sharing useful information among industry players so that everyone benefits) and one is not (someone showing up at your door demanding you pay them for something you came up with yourself). Unfortunately, Lichtman chooses to label that second bucket “licensing,” which I think throws Rader off, since Rader suggests that there aren’t two buckets at all and licensing is part of the key process of that coordination.

Rader does admit that there are cases where companies feel compelled to pay up because the cost of “licensing” is more than the cost of fighting the battle in court. He actually calls it “a form of systematic blackmail” — and he says he’s trying, in his role, to decrease the cost of patent litigation. He suggests a plan to limit discovery for this purpose, which he admits would require a big change in policy (and one that I have trouble believing would actually get anywhere). But that only discusses one small part of the problem, and does not cover many, many, many innovation-hindering situations, especially in cases where there’s independent invention or patent thickets. Lichtman pushes back again, even pointing to situations like Intellectual Ventures showing up at your door with tons of patents.

Rader’s response is really bothersome and ignores the reality. He first brushes it off, by calling it “arguing by anecdote,” but this is a very real situation that happens all the time. He then says he can take the “same sort of factual situation and put a slight twist on it,” and everyone would be fine with it:

“Say you have an Intellectual Ventures-type of entity, who has done the additional work of bringing together the Bangalore kid with the Chengdu university and the Boston startup. They’ve brought them together. And the way you bring them together, of course, is to purchase the intellectual property and put it into a package that presents an innovative vision for the future. Don’t they deserve their share of societal compensation for doing that job — of seeing the way to solve these problems is to bring the Bangalore kid together with the Chengdu professor and the Boston startup. And the answer, of course, is yes.”

Except, the answer is not “of course” yes. In fact, the answer quite frequently should be no. First, the hypothetical here again totally ignores what Lichtman asked: a situation where no one is “bringing together” these disperse folks and “putting things into a package that presents an innovative vision of the future.” It’s a situation where a bunch of folks are successfully building things independently, and then suddenly someone knocks on their door, doesn’t add any value to what’s been done, but claims a right to money. That’s the situation that happens all the time in the tech industry today, and it’s a shame that Rader seems unwilling to admit that. I’m assuming he knows that happens all the time (thinking otherwise would be really scary), so I’m not sure if he’s being willfully obtuse here in response to Lichtman, or if he’s decided that as a judge he can’t admit that the system is broken in this manner.

Lichtman then brings up effectively the same point from a different angle, making the “independent invention” argument, and noting that the FTC is considering whether more weight should be given to independent invention as a defense or as proof of obviousness. Judge Rader here gets noticeably snippy, and responds: “Then the FTC needs to read a couple of Federal Circuit opinions where we’ve already said that.” This leaves Lichtman a bit flabbergasted, and Rader clarifies… with a statement chock full of caveats: “There’s a couple of secondary consideration opinions where we’ve said, yes, independent invention is a… additional factor to be considered as evidence of obviousness.”

Lichtman doesn’t follow through and ask for details (such as which cases), which is a bit disappointing. There are, indeed, a few out there, including one from a couple months ago (in a decision written by Rader — Geo M Martin v. Alliance Machine), but they’re very limited, and are really about prior art — not simultaneous independent invention by multiple parties. If it were really true that the court really considered independent invention, then we wouldn’t have so, so, so many cases involving patents that the accused party was totally unaware of.

Two other points:

• Lichtman points out the ridiculousness of a single product being covered by thousands of patents, pointing out that this also makes the “value” of each patent impossible to determine in any reasonable manner. Rader again either mis- or re-interprets the discussion (slightly sarcastically) to say that this just proves that some patents are more valuable than others. Uh, yeah, that’s not the point Lichtman was making.

  Rader then points out (accurately!) that most innovation is incremental, but then says “we can’t afford to write off those incremental advances.” But that is, once again, ignoring reality. No one is “writing off” those incremental advances. What we’re saying is you incorporate them into products and let the products compete in the marketplace rather than rewarding each increment individually with a monopoly right. Patenting each and every one of the thousands of incremental advances puts a toll and a transaction cost for everyone doing business in that space, and that’s tremendously inefficient and damaging.

• In the discussion on damages reform, Lichtman suggests that “we design the system to exaggerate” damages, in order to act as a punishment and deterrent against infringement, and Rader cuts him off and disagrees, pointing out, sternly, that “the Patent Act says adequate to compensate. It doesn’t say adequate to deter. It doesn’t say adequate to punish.” If only the courts actually paid attention to that in a manner that was in line with the real world. Tragically, it rarely does.

Rader is clearly intelligent and feels strongly about some of these things, but it seems like he’s actually quite out of touch with what’s happening in the field with patents these days in areas where actual innovation is happening. That seems a bit scary to me.

Filed Under: doug lichtman, innovation, patents, randall rader