Drake part 7

Panel 7: Patents and Commercial Law

Prof. Sapna Kumar, University of Houston Law Center

The Accidental Agency?

Fed. Cir. is functionally the administrator of the Patent Act. It’s unusual to have no agency interpreting, and the Fed. Cir. has filled the gap.  Judge Rich also shaped the change from the CCPA, which used to be very deferential to the PTO.  Separation of powers issues?

Is this a stable model?  No.  Not because it wasn’t working before, not because it couldn’t work in an ideal universe, but it’s because of the tension between Congress and the Supreme Court.  Congress wanted a strong court with the power to unify patent law; even though PTO gets new powers under AIA, Federal Circuit is still the check.  But the Supreme Court is fighting back: they want to unify administrative law.  No reason to treat tax cases differently just because they’re tax; IRS gets Chevron; no exceptionalism in administrative law.  This would prevent Fed. Cir. from being one-stop shop for unifying patent law.

SCt is also uneasy with bright-line rules.

Prof. Daryl Lim, John Marshall Law School

Deconstructing Patent Misuse

Gorillas in our midst: people miss the gorilla that walks across the screen because they’re paying attention to something else.  We can miss the obvious and unaware that we’re missing it.

Two kinds of misuse: harm to patent system and harm to competition.  SCt today may be more sympathetic to older arguments since the inception of the Federal Circuit; thus it may be willing to make misuse more broadly applicable. TM and copyright cases percolate up through various circuits, but the SCt may be concerned that doctrinal checks should be stronger where institutional checks are weaker.  Antitrust people are very worried about patents—big entities are letting trolls assert patents and sharing the bounties; also concerns with drugs.

Harm to innovation and harm to competition are different.  Fed. Cir. may understand innovation better, but if it doesn’t pay attention to competition, another decisionmaker will start doing so.

Dr. Nahoko Ono, Visiting Scholar, Columbia University School of Law (Japan)

Bridging the Divide Between IP Law and Commercial Law in Light of Secured Transaction

Importance of IP, particularly through bundled rights worth billions.  Secured transactions: UCC art. 9 is supposed to cover all personal property including general intangibles.  Functional approach: substance over form.  But there is case law confusion about where to file. At the copyright office? Some cases say yes, others say it should be a state filing, as do cases involving TM and patent.  Which would produce a better, more predictable rule?  Divide between IP and commercial law, but also a divide between copyright and patent/TM.

Reform efforts got some support from the ABA to make a uniform IP perfection system, but nothing really happened.  Motion picture/copyright lobbies didn’t like it.

Economists and federal government want track records; state gov’t wants a source of revenue; lenders want a one-stop registry; IP owners want an IP one-stop registry.  But what would one-stop look like?  All personal property?  All IP?  Just maintain office-based recordation systems, Copyright and USPTO together

UCC article 9 deals with federal statutes governing the rights of parties to and third parties affected by transactions—a copyright preemption provision.  Issues still remain, for example perfection of security interest in an unregistered copyright.  Is there an indirect conflict with the Berne Convention, which precludes formalities?

Even if we revised patent & TM law, nonfederal protected IP exists, such as common law copyright and state TMs. ?  (I wonder how the right of publicity fits in.)  In addition, federal statutes are still asset-based, as opposed to modern secured transactions based on cash flow from underlying assets.  Possibly an international registry is the answer.

Prof. Jason Rantanen, University of Iowa College of Law

In Memoriam Best Mode

Best mode has been criticized: e.g., disadvantages foreign applicants; can be unimportant when patent expires and tech has moved on over 17 years.  AIA stripped courts of power to invalidate for failure to provide best mode. Still technically in the law but effectively eliminated.

Withholding best mode can reduce the public domain defining benefit of the patent—makes the boundaries of the patent less clear.  Inventions that are more completely disclosed—more than bare bones, but also best mode—provide higher quality prior art.  Any example is better to think with, and thus better at creating a public domain, than an abstract description.

Prof. Karen E. Sandrik, Florida State University College of Law

Reframing Patent Remedies

Property/trespass rules make the most sense for patents.  When a tech is very important to lots of other people (losing our iPhones), we should have a small exception denying injunctive relief and rewarding damages.  What about the problems where a big product uses a tiny patented component? Very hard to get injunctive relief for those patentees.  Microsoft tried to make i4i’s software obsolete—seems willful.  But other people would lose millions from taking Word off the market—so do we allow a willful infringer to keep infringing and just award punitive damages?  With a liability structure after eBay, we will see more and more of these big companies that can’t be forced to the bargaining table.  Should incentivize small companies to invest with a property rule.  We can keep Microsoft without creating bad incentives by having very limited exceptions to the property rule.  eBay had publicly announced that it had a design-around, and yet the district court went ahead and allowed it to continue.  Other cases, including i4i, had similar facts.  Injunctions lead them to sit down at the bargaining table; can also stay the injunction for a transition to the design-around.

Holdouts who try to extract far more than their component is worth: can issue an incomplete privilege, finding infringement and awarding liability damages until there’s a design around.  Majorities of patentees would still have the property rule structure.

Prof. Christopher B. Seaman, Chicago-Kent College of Law

The Presumption of Validity in Patent Litigation: An Experimental Study (with Prof. David Schwartz, Chicago-Kent College of Law)

What is the proper burden of proof for invalidity?  Preponderance, at least when PTO didn’t consider the prior art at issue?  SCt held that the standard was clear & convincing evidence, but jury could hear that it was hearing evidence the PTO had no opportunity to hear in its own examination.

Would eliminating clear & convincing burden result in different jury outcomes? There haven’t been many civil jury studies on the burden of proof.

External validity: short fact pattern v. detailed evidence at trial; reading v. live witnesses; this study asks for individual decisions rather than deliberation, but hope to change that in future studies.  Inattention to fact pattern is also a risk, though attempted to control for that with validation questions.

Fact pattern based on actual golf ball case, with a piece of prior art not disclosed to the PTO.  3 conditions: Given clear & convincing standard, c&c with instruction stating the burden is more easily satisfied when the prior art wasn’t considered by the examiner, and preponderance.  Used Mechanical Turk, group broadly representative of US population.

Asked the Q: did the accused infringer prove by C&C/preponderance that the patent was obvious.  C&C was lower (27.1%) and preponderance higher (38.3%). But the C&C plus i4i percentage of those concluding that the patent was obvious was actually higher (43.6%) than for preponderance.  Possible demand effect?  Addition of instruction may give cues about what constitutes appropriate decisionmaking.  “Is” easier to satisfy v. “may be” easier to satisfy D’s burden.  “In this case” may also serve as a signal.  Tested different formulations.  No satistically significant differences between three varieties, including may/is, though close to statistical significance.

Q for Sandrik: trespass seems difficult in cases of independent invention.

Sandrik: yes, thinking of dropping the trespass part because it bites off a bigger debate.

Q for Ono: consider issues about unfinished works that are used as collateral while unfinished (e.g., films).

Ono: Wants a user-friendly regime.  If we think about international system, a title-based recordation system isn’t universal.  Cash-flow basis would be a better way to look at it.