The thousands of licenses and agreements made possible by a strong U.S.
patent system far outweigh the inefficiencies of patent litigation so often
cited by the press and other critics of patents, Chief Judge Randall R. Rader of
the U.S. Court of Appeals for the Federal Circuit said in a Nov. 14 speech.
His predecessor, Paul R. Michel, pointed to the “unprecedented success at
building industry and commerce” in the United States as evidence, from a
comparative law perspective, of the benefits of awarding and protecting patent
rights. “Every major technological invention in the 20th century was developed
in the United States,” he said.
Both were speaking at a session in Washington, D.C., titled, “Patents and the
Public Good,” sponsored by the Washington, D.C., and Northern Virginia chapter
of the Licensing Executives Society.
Raymond Van Dyke of Van Dyke Law, Washington, D.C., moderated the conference
and provided an overview of the “beating in the press and in the court of public
opinion” that the patent system has taken recently.
Though the jurists were keen to attack the popular press for
misrepresentation of issues, two recent publications that cannot be ascribed to
journalists were of particular concern to Van Dyke and the judges:
Richard A. Posner of the U.S. Court of Appeals for the Seventh Circuit listed
“general problems posed by the structure and administration of our current
patent laws, a system that warrants reconsideration by our public officials,” in
There Are Too Many Patents in America,” published July 12 in the Atlantic
Federal Reserve Bank of St. Louis issued a working paper in September titled,
“The Case Against
Patents,” which began, “there is no empirical evidence that [patents] serve
to increase innovation and productivity, unless the latter is identified with
the number of patents awarded--which, as evidence shows, has no correlation with
“With the negativity abounding, it would be best to reconsider the hyperbole
and review the positives of a strong patent system to our nation and the world,”
Van Dyke wrote in the conference materials.
Rader contended that the value in the patent system is evident in
developments that the press does not cover: “the thousands of licenses and
agreements facilitated by the monetization of ideas,” which are made possible
only because of the existence of a strong patent system.
The chief judge's comments were often directed to complaints that software
should not be patent eligible under 35 U.S.C. §101, and often in the context of
complaints that the smartphone patent wars proved that litigation over software
patents is killing innovation.
Referring in particular to the highly publicized fights around the world
between Apple Inc. and Samsung Electronics Co., he complained that the press
does not report that 40 percent of Apple's parts are made by Samsung. “They're
working together, cooperating as they compete,” Rader said. Indeed, he said it
was one of the virtues of the patent system that it brought the two companies
together. He asked, “Where's that talk in the press?”
“For every point of conflict, … there are a thousand agreements that did
not result in litigation,” Rader estimated. “For every dispute that's
considered so controversial, … thousands of agreements and market efficiencies
are achieved by the patent system that far outweigh the inefficiencies of
He further contended that the availability of patents in the United States
can create connections among multiple international participants in any one
invention as well as all follow-on innovations. A software innovation, for
example, Rader said, could be initiated by work done by a programmer in India,
with system analysis in Japan, implemented by a startup in Germany, funded by a
research clinic in Boston. That happens only through cooperation, Rader said,
and the cooperation results from that software programmer in India filing a
“The patent system brings the rest together,” he said. “The patent system
permits worldwide cooperation on the problems of mankind.”
Michel began his speech with statistics showing that the percentage of
patents litigated has remained about the same, roughly 1.5 percent, for quite a
long time. The amount of litigation today, he said, then, is not surprising in
that “there are more patents, we're a bigger country, and there's much more
Though he acknowledged that cases are taking longer to come to a conclusion
and are more costly than they should be, he rejected the criticism that there
has been a spate of frivolous lawsuits. He said that the proof would be evident
in the number of cases where plaintiffs were sanctioned for frivolity, but there
have been none. “So how can I accept the idea that the country is besieged by
frivolous lawsuits?” he asked.
He next took Posner to task for a comment in the Atlantic Monthly
article. Posner distinguished industries--such as pharmaceuticals--for which the
patent system's incentive offers a net economic benefit, from those where “the
cost of a specific improvement may be small, and when that is true it is
difficult to make a case for granting a patent. The improvement will be made
anyway, without patent protection, as part of the normal competitive process in
markets where patents are unimportant.”
Michel said, “What factual data [did Posner supply] in support of that
statement? Zero. No data. No statistics. No study.”
The former chief judge laid much of the blame for the misinformation in the
press, however, at the feet of “special interests with tons of money who are
very angry about the patent system because they get sued [for patent
infringement].” He identified about a dozen large information technology firms
in Silicon Valley, Calif., and large banks in New York City as the primary
Those firms fought to weaken the patent system in the patent reform debate
that led to the America Invents Act, Michel said. But are those firms really
suffering? Apple is one of those firms, Michel said, and it is now “the
wealthiest company ever in the history of mankind anywhere on the planet.”
Michel warned that attempts to further weaken patents are continuing. To
those who believe that Congress will not do anything more to limit patent rights
because of “patent fatigue” after the AIA debate, he said, “Don't bet on
He cited the persistent rumor that members of the Senate and House Judiciary
Committees are pursuing a “technical amendment” to the AIA that would in his
view actually be substantive (119 PTD, 6/21/12), and two recent legislative
developments recently that show “Congress's antagonism to the patent system”:
6245, the Saving High-Tech Innovators from Egregious Legal Disputes Act of 2012,
or SHIELD Act, would allow a court to give full costs, including reasonable
attorneys' fees, to an accused infringer of a patent covering computer hardware
or software that won its case (149 PTD, 8/3/12).
judiciary committees have held hearings to limit the ability of the
International Trade Commission to issue exclusion orders barring imports of
infringing goods (139 PTD, 7/20/12, 134 PTD, 7/13/12).
Michel then turned to his argument for a strong patent system based on
comparisons between the United States and other countries. Look at Europe
further, he said. The country with the strongest patent system on the continent
is Germany, he contended, which is also the strongest economy there and now has
a huge export surplus.
The success of industry and commerce in the United States is a logical
consequence of the connection between patent protection and incentives for
investment, he suggested.
First, he said, echoing arguments made by politicians throughout the recent
pre-election debate, “Almost all new job creation can be attributed to
startups.” The question, accordingly, he said, is: “If startups are so important
to the creation of jobs and job creation is so important to the economy, where
do the startups get the investment to form and grow?”
Michel said that the investment community funds startups only to the extent
that it can predict returns worth the risk, and the risk can be mitigated
proportional to the strength of the protection of a startup's intellectual
Michel noted that the patent system is also facing potential criticism within
the executive branch. The Department of Justice and the Federal Trade Commission
will hold a hearing
Jan. 10 that they say is aimed at exploring “the impact of patent assertion
entity (PAE) activities on innovation and competition and the implications for
antitrust enforcement and policy.”
Michel was skeptical about the ability of the DOJ and FTC to assess the
patent system. He pointed to past FTC studies, such as its 2011 report, “The
Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition”
(45 PTD, 3/8/11). “These are academics who know a lot about economics but almost
nothing about patent litigation and patent claims,” he said.
In addition, the Government-Industry-University Research Roundtable, a
division of the National Academy of Sciences, is planning a forum on patents,
which, Michel said, will start from “the premise that the patent system is
Stephen A. Merrill, executive director of a different National Academies
division--Science, Technology, and Economic Policy--later countered Michel's
criticism. “That the Academy would be swept along by and align itself with
critics of the patent system is antithetical to the way our projects originate,
committees are formed and vetted, studies are conducted, and their conclusions
and recommendations reviewed,” Merrill told BNA.
A representative of the GIURR division did not respond to an inquiry about
that organization's planned forum.
By Tony Dutra
Michel is a member of this publication's advisory board.