Patent Law

View from the Bench

By Gary Odom and Jordan Kuhn

CAFC Chief Judge Michel spoke at an FTC venue last December, pouring cold water on those hot and heavy for patent "reform." Junk patents are nothing more than a gnat in the ointment. There is no litigation explosion. Hope for improvement from further post-grant review process is fantasy given turnover at the PTO. Excessive damages are a myth. Judge Michel swats statistically challenged academicians calculating otherwise. And patent trolls? Give it a rest, Judge Michel advises. Finally, as anyone with a lick of sense knows, patents are an intellectual property: "The essential element of property is it is alienable. You can sell it."

Judge Michel considers junk patents a problem of outliers, not systemic.

I've been on the court for twenty years and eight months, and I cannot ever remember seeing a single patent, I'm sure they're out there, but I can't remember seeing one where every single claim was invalid. I've seen innumerable patents where some of the broader claims either were indefinitely broader or were damn close, but in all of those cases, the narrower claims seemed to me equally clearly to be plainly valid. So what we really have is a problem of some over-broad claims getting through the system, slipping through the sieve that in the ideal world would catch them.

On the so-called "litigation explosion," which in reality is packing all the firepower of a tired old fart.

I keep hearing that we have a 'litigation explosion' in patent infringement cases... When I look at the cases as they flow through the court year after year, my strong impression, and that's all it is, it's not scientific, is these tend to be the closest, most difficult cases, so if we're trying a hundred of the closest cases a year out of 3,000 that are filed, that doesn't sound very wasteful or horribly inefficient to me. It's not perfect, but it's not terrible either.

On post-grant review:

Now, certainly the existing reexamination process has been less than a stellar success, and it certainly doesn't look faster than the courts, as slow as the courts are, compared to how they should be. I can't testify about how much cheaper it is, but the stories I've heard don't sound too encouraging, and then there's a big question of: Is it adequately accurate? Is it more accurate than what would happen in a well-run district courtroom? I'm not sure.

The core problem with adding further burden to the PTO lies with atrocious attrition.

We have a horrendous revolving door. I'm told that the average examiner has been in the corps less than three years. Less than three years! That's a horrible fact in this country, even for our ongoing system of ex parte examination. If you try to lay on top of that a new beefed up litigation-like re-exam process, are there people there who can do it? Can the examiners do it? Can the supervisors do it? Even the board is also drowning in cases.

Excessive damages is a non-issue.

[W]hen you talk about the courts, their awards, people talk about excess damages. Everyone can cite some example of what they consider a horrendously excess damage award. A fair number of what I've read in print turn out to be nonexistent cases. I kept reading about the windshield wiper case where the cost of the car was used as the metric of damages, but I haven't been able to find such a case.

Judge Michel mentions "Professors Jaffee and Lerner" at the beginning of a paragraph on damages that ends with "there's a lot of misunderstanding out there."

There are a lot of apocryphal cases that turn out to not really exist, and there are certainly some very large damage numbers; no question about that. On the other hand, most of those large damage amounts involve very large markets, very large profits, so we shouldn't be surprised, I wouldn't think. In any event, a few examples, if they're not very representative, hardly prove that excesses are common, but that's the charge, that half the time the damages are wildly out of proportion to anything that would be sustainable in common sense. It's easy to use words like 'appropriate.' The FTC talks about whether damages are 'appropriate.' Well, it's a little bit in the eye of the beholder. What you might think was appropriate I might think was way too little or way too much, but it's a pretty inexact yardstick.

On the NTP v. RIM Blackberry case, which is often cited as outrageous: "it's not clear to me it's excessive."

On patent holders who don't practice their asset:

[W]hy should we assume that a nonmanufacturing patent owner shouldn't be allowed to enforce its patent? What is wrong with a university owning patents based on research of its faculty scientists or research institutes or small inventors or small innovative companies that either can or don't want to try to manufacture products themselves but license their inventions so others can make them?

Well, are these patentees really illegitimate somehow? I mean, after all, at least up until now a patent has given its owner the right to exclude, not the obligation to make. Then some say, well, it's not so much the non-practicing entities, it's certain companies that don't invent at all, but merely acquire and enforce patents, and of course calling them 'trolls' just confuses the analysis because obviously a troll is a bad thing.

It's a pejorative label. (Some people who used to complain about trolls allegedly have become trolls [referring to Peter Detkin of Intellectual Ventures, former of Intel]). But I don't think that it's helpful -- it's a slogan. It's a label. It's an excuse to not think carefully about the problem, as far as I'm concerned. It's like talking about 'questionable patents.' It's an excuse to not think carefully about the problem as far as I'm concerned. It's like talking about questionable patents. It's not helpful if we're going to try to diagnose the real illness and prescribe a useful medicine.

Ending on the obvious: patents are property.

Besides, patents, like any other form of property, the essential element of property is it is alienable. You can sell it. You can sell it to anybody you want to for whatever price you want to sell it. Why should that be prohibited? Why should I be prohibited from buying patents if that's what I want to do, whether I invented them or not, whether I am going to practice them or not, whether I'm a research institution or a university or not? There might be some reasons. Maybe some of them are good, but it's not self-evident, at least not to me.

Transcript of Judge Michel's talk.

Full post as published by The Patent Prospector on May 16, 2009 (boomark / email).