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May 15, 2009

View from the Bench

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.

Posted by Patent Hawk at May 15, 2009 9:52 PM | The Patent System

Comments

Nice pick up from 271 and IP Watchdog.

Let's see if the tech blogs pick this up as fast as they picked up the anti-patent thread of the ACLU-cancer gene story...

If his honor is even half correct, where should we focus our attention on fixing the system? (psst, I can give you 6 hints - get it? 6 hints)

Posted by: Noise above Law at May 16, 2009 7:15 AM

Thanks for the posting.

Judge Michel knows of what he speaks...providing a number of excellent, clear-thought, useful quotes.

Posted by: Steve M at May 17, 2009 6:05 AM

Agreed, much common sense it there, but surely no more than we expect that from a man in his position.

However,when Chief Judge Michel says:

"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."

I begin to have my doubts. Those 2,900 cases that didn't go to trial settled because going to trial is so expensive. Are we to understand that the goal of the patent law system in the USA is to make litigation through to trial as expensive as it can possibly be made, to pull down the number of cases that go to trial, and bump up the number of cases that settle before they get to trial? I ask because that's what some in the English litigation community used to argue, till nearly all the business decamped to Duesseldorf, where a much higher proportion of cases go through to trial. These days, in English patent litigation, still 90+% settle before trial, but trial comes within 9 to 15 months of starting the action, after much less expense than hitherto, and there's less point in appealing than there ever was hitherto. My point is that improvement only comes after recognition that the status quo won't do.

Perhaps the difference is that patents judges in England are recruited from the ranks of patent litigators. Does Judge Michel have any idea at all, as to the level of waste or inefficiency in any of those 2900 cases per year that he doesn't see on appeal?

Posted by: MaxDrei at May 17, 2009 1:25 PM

Hi Max,

Litigation is a vetting process, of a patent's claims (infringement), its validity, and its value.

That process would still have to go on even if the PTO were granting only valid patents.

The reason litigations settle is because the process has reached a point where both parties comprehend. Until that point, one party is in denial. Going to trial means, rationally, that one party remains in denial, or, that the parties' contentions are uncertain, and the process needs adjudication.

This is not a perfect world, nor will it ever be, because humans are not entirely rational.

You should have a lot of doubts, and they should not be one-sided.

Posted by: Patent Hawk at May 17, 2009 5:45 PM

Thanks Hawk, but I'm not sure I follow you. Litigation should be a "last resort". At least, that's what the English Rules of Civil Procedure command. With clear rules from the courts, the question whether an accused embodiment falls inside the scope of a claim is a relatively simple objective thing to determine. So too whether that scope includes anything old or obvious.

I'm sceptical that, until a case settles, one side is "in denial". Both adversaries are simply working on the basis that something will emerge from the discovery phase that will win the case for them (or at least prevent the other side winning). That's not irrational, is it?

As to your last sentence, am I being told off for being "one-sided" or complimented for not being one-sided?

Posted by: MaxDrei at May 18, 2009 2:58 AM

You're quoting the chief judge of the court that hasn't won a case at the Supreme Court in ... forever to support your position that all's well in the patent world?

Posted by: Alan McDonald at May 18, 2009 3:47 AM

Well, Alan, let's be fair - the Federal Circuit and the Supreme Court come to the problem from totally different perspectives. The CAFC, under its Congressional mandate, has tried (perhaps overzealously) to introduce certainty into patent law - TSM, "reasonable apprehension of suit," strong limits on DOE through estoppel, almost automatic injunctions to a prevailing plaintiff, etc. The Supreme Court would rather decide everything on a "totality of the circumstances" test, which doesn't promote much certainty. It was only a matter of time (and an executive whose Solicitor General encouraged the Court to take up these cases on review) that the two courts clashed. No surprise the Supreme Court won those battles, but it might have been more prudent for the court to be less certain of its own omniscience with regard to patent law, and to give more deference to the Federal Circuit.

Do you think patent law has improved after the past few years of Supreme Court involvement? (Except, of course, for lawyers who now have more opportunity to counsel, litigate and argue the fine distinctions of each individual set of circumstances in their totality?)

Posted by: Kevin E. Noonan at May 18, 2009 7:07 AM

If this ideological clash is indeed inevitable, and given the ensuing lack of surprise that the Supreme Court will win the battle, what should an appropriate (i.e. non-time-wasting) mandate be for the CAFC? Is deciding everything on the totality of individual circumstances reconcilable with bright-line rules?

Is this a battle that Congress needs to pick up again in relation to settling supremecy with regards to the Supremes (if even possible)?

Posted by: breadcrumbs at May 18, 2009 8:27 AM

"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."

Absolutely correct!

Posted by: John Prosecutor at May 18, 2009 12:35 PM

"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."

Given the district courts records at the FedCir, many district court cases slip through the sieve too.

Posted by: John Prosecutor at May 18, 2009 12:37 PM