The Rogue Court That Made Patents So Destructive

from the cafc-cafc-cafc dept

We've written many, many times about the problems created by the Court of Appeals for the Federal Circuit, CAFC, who (among other things) is the appeals court that has jurisdiction over all patent appeals. It's a court that has been around for 30 years as of this week, and in the opinion of many, has been an unmitigated disaster. Of course, if you're a patent lawyer or a patent troll, you might think the opposite. As we've discussed in the past, CAFC has spent the last 30 years massively helping patent holders by expanding the definitions of what was patentable, and generally being much, much, much more favorable to patent holders than appeals courts had been back when jurisdiction was split among the 12 difference circuit appeals courts. With its 30th anniversary this week, Tim Lee has written a post detailing how it "wrecked the patent system." It's a great read, covering a number of key points.

Lee kicks it off by pointing to Adam Jaffe and Josh Lerner's seminal book, Innovation and Its Discontents, published in 2004. If you want to see a patent system defender turn bright red, just bring up this book. They go absolutely ballistic about it, insisting that it's all myths and lies made up by critics who don't understand the patent system. You see, in the world of patent lovers, the only people who are allowed to criticize the patent system, are those who are patent lawyers. Everyone else, in their book, simply doesn't understand the facts. Of course, when you suggest that perhaps it does make sense that economists might be able to highlight how bad patents harm the economy, they have no reasonable answer. Either way, you can't get past facts, and Jaffe and Lerner's facts clearly show a massive shift in favor of patents due to CAFC. From their book, here is the rate in which patents were found valid and infringed upon appeal from 1925 up through 2000.
Whether or not you agree with Jaffe and Lerner, there is no denying that there's a pretty massive shift at the moment CAFC is created. Lerner and Jaffe focus their reasons why on "judicial capture," specifically fingering Judge Giles Rich, an unabashed patent system supporter and a former patent lawyer who basically wrote the 1956 Patent Act, and then got to "interpret" his own work as a CAFC judge. Of course, patent system supporters argue that Judge Rich was just one judge, and even while there were some former patent attorneys on the CAFC bench, it was never the majority of CAFC judges. Lee's piece does a really good job explaining how a variety of issues have made it such that CAFC judges almost always favor expanded patent powers:
...the heavy load of patent cases on the court's docket means that the judges of the Federal Circuit are constantly interacting with patent lawyers. In addition to hearing their arguments in the courtroom, they read the same patent law publications as the lawyers, hire young patent lawyers to clerk for them, and are invited to speak at events organized by the patent bar.

Moreover, the prestige of the Federal Circuit itself is directly tied to the prominence of patent law in the American legal system. If the Federal Circuit had followed the stricter rules in place before the court was created, patent law might have remained a legal backwater, receiving little attention from either the legal profession or the general public. That, of course, would have made the Federal Circuit a less prestigious place to work.

[....] patent appeals are exclusively heard in DC by judges who live and breathe patent law. Unsurprisingly, this leads to insular thinking. For example, when we interviewed Paul Michel, who served as the Federal Circuit's chief judge from 2004 to 2010, he didn't seem to understand the problems facing small software companies. "If software is less dependent on patents, fine then. Let software use patents less as they choose," he said, seemingly oblivious to the fact that software companies don't have the option to opt out of patent troll lawsuits.
Lee also goes into detail on how CAFC effectively "overruled" the Supreme Court on various issues related to patents, in part because, historically, the Supreme Court ignored patent issues as being petty, "commercial" disputes, unrelated the the weighty constitutional issues that it was focused on. Thankfully, over the past seven or eight years, the Supreme Court has become a lot more interested in patent issues, almost always slapping down CAFC. Even so, as Lee notes, patent lawyers know that CAFC often seems to hold itself to a different standard:
This dismissive attitude toward Supreme Court precedents apparently survives to this day among patent lawyers. In the wake of this year's decision limiting patents on the practice of medicine, patent attorney Gene Quinn wondered, "How long will it take the Federal Circuit to overrule this inexplicable nonsense?" Obviously, the Federal Circuit can't "overrule" a Supreme Court decision. But with enough persistence, it can, and often does, subvert the principles enunciated by the nation's highest court. And when it does so, it almost always works in the direction of making patents easier to obtain and enforce.
These all represent real problems and the really bizarre thing is that it makes absolutely no sense for this single court to exist. Part of the reason that we have all of the different circuits is to create differing viewpoints from different courts, which then allow the Supreme Court to consider the different opinions and to point out which is proper. But without any circuit split issues to deal with, and with that form of "judicial capture" going on in CAFC, the results are a one-way ratchet, except in the few cases where the Supreme Court decides to step in, despite a lack of circuit split. Lee points out that we could see a lot more interesting rulings if we just treated patent cases (as we used to) like most other cases, and let each circuit decide the appeals separately:

The consolidation of the patent jurisdiction in a single appeals court has also deprived the judicial system of valuable viewpoint diversity. Consider Judge Richard Posner of the Seventh Circuit Court of Appeals. This summer, he threw out the entire patent lawsuit between Apple and Motorola, arguing that the patent system had descended into "chaos." Posner was able to hear the case because he was temporarily filling in as a trial court judge, but the Federal Circuit—not his own Seventh Circuit—will hear appeals in the case.

Under the pre-1982 judicial structure, Posner and his colleagues on the Seventh Circuit Court of Appeals would have heard appeals in some of the nation's patent lawsuits. If his comments in the Apple/Motorola case are any indication, Posner would sharply disagree with some of the Federal Circuit's precedents. This kind of disagreement among appeals courts, known in legal jargon as a "circuit split," would signal the Supreme Court that it needed to step in and resolve the dispute.

Posner's skeptical view of the patent system may be explained by the fact that he's an academic as well as a judge. This background may have exposed him to academic criticisms of current patent jurisprudence that aren't as well known to other judges. Similarly, if the Ninth Circuit Court of Appeals (based in San Francisco) were allowed to hear patent appeals, some of its judges might share Silicon Valley's skeptical attitude toward software patents. Such dissenting views would provide balance to the Federal Circuit's pro-patent rulings and give the Supreme Court the raw material it needs to fashion a sensible body of patent law.

This is a pretty big problem -- and one that is much more significant and troubling that the "problem" that the government was trying to "solve" with the establishment of CAFC. The issue then was that people would "rush" to different courts to file their patent lawsuits, trying to use jurisdiction shopping to find a favorable court. Of course, switching to a single federal appeals court didn't even do anything to fix that problem. Just ask patent trolls their opinion on East Texas to see why.

All of this matters quite a lot. Beyond just the fact that CAFC's various rulings have massively expanded patent law (such as by recognizing that software and business methods could be patentable, despite most people believing neither were prior to CAFC's rulings, or by establishing much more restrictive rules on when a patent could be invalidated), it's become unfortunately common for some (including people we otherwise agree with) to think that the solution to the problems with today's patents is because judges aren't that familiar with patents, and thus it would be best to set up specialized courts or even specialized judges, who focus mainly on patent issues. But, of course, that seems to be making the exact same mistake all over again. Such courts or judges become victim to the same pressures as CAFC has, creating the same broken incentive structure that has resulted in such problems in the first place.

On this 30th anniversary of CAFC, it seems only reasonable that one step towards fixing the broken patent system is a simple one: end having all patent cases the jurisdiction of CAFC and send those cases back to the individual circuit appeals courts.

Filed Under: cafc, circuit splits, expansion, giles rich, history, judiciary capture, patents, software patents, supreme court

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  1. icon
    saulgoode (profile), 2 Oct 2012 @ 1:06am

    When the fourteen highest courts in the nation can't arrive at any agreement on the meaning of a particular law, perhaps it is time to rewrite that law -- or scrap it completely and start over.

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