Former Chief Judge Of Patent Court: We Need To Strengthen, Not Weaken, The Patent System Because [Reasons]

Patents

from the insert-logical-fallacy-here dept

We’ve written a few times about Judge Paul Michel, the former Chief Judge for CAFC, the appeals court that handles all appeals in patent cases. He’s an out and out maximalist, making claims that defy reality and suggesting a truly surprising ignorance of how innovation actually works today.

And yet, he refuses to give up his idealistic (and completely incorrect) notions of how patents work. The latest is a piece he’s written for A Smarter Planet, a blog owned by IBM, in which he attempts to hit back at patent critics while arguing that what the US really needs is stronger patent protection, not weaker, including protection for things like software. The article is full of questionable assumptions combined with logical fallacies. I’m sure Judge Michel is intelligent and knowledgeable (you don’t get as far as he did otherwise), but he does his own legacy a disservice by making arguments like the one he expresses here:

So in April, 1790, the first Congress enacted the first Patent Act. Over the next two centuries, the Act was amended and strengthened regularly, because successive Congresses observed industrialization and economic growth all around them, as under the Founders’ system, the United States went from importing nearly all manufactured goods to itself manufacturing all the products it needed and prospering as a major net exporter.

Within just a little over one hundred years, America surpassed all other nations in wealth and technology, partly because of its strong patent system, aided by wide oceans, abundant natural resources, and universal public education. Throughout the 19th century American inventors outpaced their counterparts elsewhere. During the 20th century, the American patent system helped stimulate the computer revolution as well as astonishing advances in medicine, including creation of whole new fields, such as bio-technology. After a slump in the 1970s, when Japan replaced America as the leading maker of consumer electronics, in the last two decades of the century our nation regained its rapid growth and technological leadership.

This is a nice story — and it’s one that we’ve heard before. Unfortunately, it’s not supported by the actual history. That history shows that the continued patent expansionism post-dated, not pre-dated significant expansions in innovation. That is, rather than encourage innovation, the increases in patenting almost always came after the innovation, when the early innovators then ran to the government to seek to block out follow-on innovations and competition from disruptive new upstarts. Furthermore, study after study has shown absolutely no evidence that strengthening a patent system leads to greater investment in innovation. Instead, it shows greater investment into patenting.

Ironically, criticism of patents and especially of the U. S. Patent and Trademark Office is peaking just as an array of reforms are taking hold. Over the past nearly four years the extraordinary leadership of former IBM executive David Kappos has greatly upgraded PTO operations. The courts, too, have instituted reforms in damages and other areas of controversy. Congress has responded by enacting the America Invents Act, which after a decade of neglect and fee diversion finally has provided the PTO with the resources it needs. The AIA also launched a Patent Pilot Program to have volunteer judges in over a dozen districts largely specialize in managing such cases. And, the private sector has stepped in to help train patent examiners in the newest technologies. In light of all this, now is the time to rely more, not less, on the American Patent System.

I’m not sure what’s “ironic” here. The “reforms” that Michel mentions had nothing to do with the key complaints many made against patents: that they were being utilized by trolls to stifle real innovation, that patents themselves were overly broad and vague, that the damages awarded in patent infringement cases were excessive and had no basis in reality. Earlier versions of the AIA attempted to address some or all of those problems, but they were all left on the cutting room floor after patent supporters whined about them.

As for the “patent pilot program,” it’s difficult to see how that solves anything. In fact, it could actually make the problem worse, not better. As we’ve discussed, CAFC itself, which Michel used to lead, was the result of a similar “experiment,” in which it was believed that centralizing all patent appeals cases to a single court, where a few judges would be “experts” would lead to better outcomes. But it did the opposite. That’s because the judges had little contact with actual innovators, but plenty of contact with patent lawyers, who benefited from massive expansion of patent laws. And so they heard one side of the story over and over again, leading to massive expansion. Doing the same thing at the lower courts, and giving more power to a few judges who will be continually exposed to patent lawyers, is likely to create the same push towards expansionism in the district courts as well.

Nevertheless, some commentators suggest excluding whole business sectors, such as software, from patent eligibility and greatly shortening the patent term for other technologies. A few go so far as to say that only pharmaceutical firms really need patent protection. But the behavior of hundreds of companies in dozens of technologies suggests otherwise. Witness IBM: for the past 20 consecutive years it has received more U.S. patents than any other company in the world. Examples of other companies that rely on patents include Microsoft, General Electric, General Motors, Caterpillar, DuPont and Procter & Gamble. Ignoring such facts, certain commentators even argue that patents deter more innovation than they promote.

This assumes, entirely without proof, that companies that get patents do so because they promote innovation. This is laughable and simply untrue. Once again, studies have shown that patents and innovation are not linked but are entirely independent. Companies, however, see plenty of benefit in using patents in a protectionist manner to stamp out competition. Furthermore, the system is rigged these days such that companies that want to compete need a large patent portfolio not because it helps with innovation, but because it helps ward off some lawsuits from others to avoid a patent nuclear war with both sides suing each other.

Michel lovingly points to IBM’s continual dominance in the patent numbers, but ignores the many stories of IBM’s famed patent bullying, such as the bullying it did against Sun many years ago:

“OK, maybe you don’t infringe these seven patents. But we have 10,000 U.S. patents. Do you really want us to go back to Armonk [IBM headquarters in New York] and find seven patents you do infringe? Or do you want to make this easy and just pay us $20 million?”

To argue that because large companies get patents, the patent system is working is just silly and unsupportable. Those companies don’t “rely” on patents. They get them, because that’s how the system works.

Yet, with many corporations and banks flush with cash reserves and pension and private equity funds seeking places to invest, now should be the era of increased investment in innovation, the country’s best hope for creating new wealth and new jobs. Instead, such investments lag. What, then, is needed to produce the needed private investment? Adequate incentives, for such investments are inherently risky. Slack consumer demand in a continuing recession is part of the problem, but so is the inadequate strength of patents. Obtaining and enforcing them remains far too slow, costly and cumbersome. Still worse, the uncertain scope of patents and the unpredictability of infringement and remedies outcomes inhibit business leaders who need certainty and predictability.

And this is the really nefarious part in Michel’s argument. This isn’t just an argument in favor of the patent system, it’s an argument in favor of trolling operations. Trolls repeatedly try to defend their indefensible efforts by arguing that they’re “investing” in innovation by paying for such “risk.” Anyone who’s experienced any run-in with patent trolls knows this argument is complete hogwash. Trolls do it because it’s a system that allows them to legally shakedown real innovators for money, because it gives them a giant weapon where the cost to pay off the troll is almost always less than the cost to defend (and win) a case in court.

Most informed persons believe, correctly, that innovation holds the key to future prosperity. What we need is a stronger, faster, fairer patent system with quality patents and predictable protections. The issue is whether companies can look beyond short-term earnings and stock prices to also focus on the company’s long-term health and on the needs of the American economy, American communities and American workers.

Yes, we agree that innovation holds the key to future prosperity. The problem is that there is no evidence that the patent system actually increases that innovation, and a ridiculous amount of evidence that it does exactly the opposite. It retards innovation, diverting money from actual innovations that hit the market, to lawyers. The costs associated with the patent system far outweigh any benefits. Could you craft a functioning patent system? Perhaps, but today’s system is not it, and if Judge Michel ever spent time with actual innovators who were the victims of patent trolling, he might learn something. But, you know, that would offend his patent lawyer and patent troll buddies.

Filed Under: cafc, innovation, patents, paul michel