SCIPR: David Kappos keynote

Keynote Lecture: "Stalemate or Statesmen? What Is Needed to Move Forward Constructively with the Balancing of America's IP System"

Speaker: David Kappos, Partner, Cravath, Swaine & Moore

We’ve demonstrated ability to achieve stalemate. Not likely to change unless we step back from political fray and bring diverse but not incompatible interests together.  IP-intensive industries provide millions of jobs.  But that doesn’t mean that all is perfect in the underlying system. They said the AIA couldn’t be done, but it was—now how do we fix patent litigation?

There’s no solution to stop all aggressive litigation tactics that won’t marginalize the patent system to the point of irrelevance. One person’s abuse is another’s defense of a right. Americans have always been litigious. 

Judges can do a good job within the system: we had hot debates over things like the standard for obviousness and royalties in patent cases.  We ultimately found ourselves at an impasse, but the Court stepped in and in major decisions completely solved various problems.  KSR (obviousness); Seagate (willful infringement); eBay (injunctions); etc. Same scenario now: Court is addressing remaining challenges in litigation.  Participants in the debate naturally want more.  Some say court decisions aren’t as permanent as legislation, but permanence improves over time as judicial precedent takes shape.  But legislation is needed to address problems the courts can’t.

Topic 1: fee-shifting.  Helpful decisions have emerged since Octane Fitness.  Cal. ct. ordered a company to pay fees after it filed an unreasonable infringement suit.  Judge considered whether P’s attys should be sanctioned for filing an unreasonable suit. The better part of valor is to let the system work. Don’t act preemptively.

Topic 2: demand letters. Pending troll bill substantially addresses this issue.  One person’s aggressive demand letter is another’s defense of her property. Troll bill does what reasonably can be done.

Topic 3: discovery.  Legislative provision should be aspirational (respect separation of powers)—heighten pleading requirements where sensible but using Judicial Conference as implementation vehicle for staging, etc.  Wouldn’t be panacea but would have virtue of leaving decisionmaking authority to those best suited to react to particular circumstances in front of them. It’s true courts have had time to deal with these issues but haven’t, but it’s also true that courts are more focused on these issues than in the past. Congressional encouragement would give reason to fix it themselves. 

Topic 4: covered customer stays. Retailers, coffee shop owners etc. want to be left out of suits targeting their off the shelf tech products.  Seems logical at first that such users should be dismissed. Problem: many technologies are highly customizable and it’s difficult for a fixed statute to figure out if an infringement is inherent in an acquired IT solution, or whether the situation is caused by aftermarket user modifications, in which case the user shouldn’t be permitted to walk away. A bright line can be drawn, but customer added modifications are too complex/varied for any bright line rule.  Fortunately, courts have stepped in.  June: Nintendo and 11 retailers won a writ of mandamus from Fed. Cir. instructing dct to sever and stay claims of patent infringement against retailers while case against Nintendo proceeds.  Drew a distinction b/t manufacturer of potentially infringing game and retailers.  Demonstrates the courts generally know how to deal with customer stay petitions and law already provides for proper handling—mere retailers have succeeded in 18 of 24 motions to stay filed in the last 15 years.  A calibrated solution is in order for the limited issues with covered customer stays.

Topic 5: CLS Bank and Myriad: While fixing law, why not deal with cases where courts have stuggled with policy and tech and provide guidance in what’s plainly legislative territory? Congress has declined for over 200 years to enact limits on PSM except in most extreme cases.  SCt has heard 9 cases in last 50 years over PSM, creating a hash of decisions that can’t be reconciled.  Bilski, Prometheus, and the other 2 finally appear to be circling around the best available standard, abstractness. This isn’t objective, admittedly, and hard to charge patent examiners with it.  Currently: A coarse test that eliminates only the clearest of infractions; overreliance on §101 is dangerous to our country’s economic health. Codifying abstractness narrowly could, in one step, steer away from overreliance on §101 and reassure innovators that breaking new ground in biotech, 3D visualization, etc. is every bit as inventive as others.

Topic 6: Nautilus: Decisive action where it is needed to reenergize requirement clear disclosure of claims and specifications as part of the bargained-for exchange that is the patent system.  Codification of claim definiteness would do as much to curb abuse as any of the proposals debated this year.

Topic 7: PTO funding.  Fees should be retained. This would do more for job creation/economic growth than any other patent reform proposal currently on the table. If granted access to user fees, USPTO is in position to hire, train and retain a quality workforce granting quality patents that are defensible and not used as tools of abuse.  Make the USPTO’s own resources available to the agency, increasing speed and care.

Q: how can Chicago IP community get more involved in patent reform?

A: academics focused on data-driven research.  Study from last year, in part from Chicago-Kent, going through the so-called dramatic increase in litigation, revealed to the world that this wasn’t just trolls but was more complicated, was a breakthrough.  Raising your voice to support that.

Rebecca Eisenberg: codification of abstractness as imperfect but best we can do.  But it seems like it was the only thing the SCt could agree on because they didn’t want to adopt any new nonstatutory limits.  But if you’re going to Congress, Congress could do more than shovel computer programs into abstractness which previously was about E = MC² and the like. Why codify something so flawed?

A: The most difficult issue that faces our patent system right now.  Big regret: shouldn’t have left §101 at the beginning of the patent statute, as if it was Contracts 101.  It should be the backstop and not the first stop.  102, 103, and 112 examination is sufficient—if you pass those, 101 should be no problem. 101 is the hardest place to try to craft clear standards.  You should almost never reach it, and PTO almost never does.  Abstractness is the best courts have come up with; if we try to move to something more precise and clear, we’ll find as we did in © that we can’t anticipate the future. Our great strength is flexibility—avoid the temptation to tie things down too quickly in patent law.  Flexibility means ambiguity; we have to come to grips with that. A very generic term like abstractness or something similar is about the best we can do; need to settle the issue and keep moving.

My one comment: it's interesting that I've heard nothing about design patent here.  The cases haven't (yet) reached the Supreme Court, but when we talk reform, design patent should probably be on the agenda too.