Sunday, August 20, 2017

Gugliuzza & Lemley on Rule 36 Patentable-Subject-Matter Decisions

Paul Gugliuzza (BU) and Mark Lemley (Stanford) have posted Can a Court Change the Law by Saying Nothing? on the Federal Circuit's many affirmances without opinion in patentable subject matter cases. They note a remarkable discrepancy: "Although the court has issued over fifty Rule 36 affirmances finding the asserted patent to be invalid, it has not issued a single Rule 36 affirmance when finding in favor of a patentee. Rather, it has written an opinion in every one of those cases. As a result, the Federal Circuit’s precedential opinions provide an inaccurate picture of how disputes over patentable subject matter are actually resolved."

Of course, this finding alone does not prove that the Federal Circuit's Rule 36 practice is changing substantive law. The real question isn't how many cases fall on each side of the line, but where that line is. As the authors note, the skewed use of opinions might simply be responding to the demand from patent applicants, litigants, judges, and patent examiners for examples of inventions that remain eligible post-Alice. And the set of cases reaching a Federal Circuit disposition tells us little about cases that settle or aren't appealed or in which subject-matter issues aren't raised. But their data certainly show that patentees have done worse at the Federal Circuit than it appears from counting opinions.

Perhaps most troublingly, Gugliuzza and Lemley find some suggestive evidence that Federal Circuit judges' substantive preferences on patent eligibility are affecting their choice of whether to use Rule 36: Judges who are more likely to find patents valid against § 101 challenges are also more likely to cast invalidity votes via Rule 36. When both active and senior judges are included, this correlation is significant at the five-percent level. The judges on either extreme are Judge Newman (most likely to favor validity, and most likely to cast invalidity votes via Rule 36) and Chief Judge Prost (among least likely to favor validity, and least likely to cast invalidity vote via Rule 36), who also happen to be the two judges who are most likely to preside on the panels they sit. Daniel Hemel and Kyle Rozema recently posted an article on the importance of the assignment power across the 13 federal circuits; this may be one concrete example of that power in practice.

Gugliuzza and Lemley do not call for precedential opinions in all cases, but they do argue for more transparency, such as using short, nonprecedential opinions to at least list the arguments raised by the appellant. For lawyers without the time and money to find the dockets and briefs of Rule 36 cases, this practice would certainly provide a richer picture of how the Federal Circuit disposes of subject-matter issues.

Monday, August 14, 2017

Research Handbook on the Economics of IP (Depoorter, Menell & Schwartz)

Many IP professors have posted chapters of the forthcoming Research Handbook on the Economics of Intellectual Property Law. As described in a 2015 conference for the project, it "draws together leading economics, legal, and empirical scholars to codify and synthesize research on the economics of intellectual property law." This should be a terrific starting point for those new to these fields. I'll link to new chapters as they become available, so if you are interested in this project, you might want to bookmark this post. (If I've missed one, let me know!)

Volume I – Theory (Ben Depoorter & Peter Menell eds.)


Volume II – Analytical Methods (Peter Menell & David Schwartz eds.)

Patents

Wednesday, August 2, 2017

Kevin Collins on Patent Law's Authorship Screen

Numerous scholars have examined the various functionality screens that are used to prevent non-utility-patent areas of IP from usurping what is properly the domain of utility patent law (see, e.g., the terrific recent articles by Chris Buccafusco and Mark Lemley and by Mark McKenna and Chris Sprigman). But hardly anyone has asked the inverse question: How should utility patent law screen out things that should be protected by non-patent IP? In Patent Law's Authorship Screen (forthcoming U. Chi. L. Rev.), Kevin Collins focuses on the patent/copyright boundary, and he coins the term "authorship screen" as the mirror image of copyright's functionality screen. As with pretty much everything Collins writes, it is thought provoking and well worth reading.

Wednesday, July 26, 2017

Kuhn & Thompson on Measuring Patent Scope by Word Count

I've seen a number of recent papers that attempt to algorithmically measure patent scope by counting the number of words in the patent's first claim and comparing to other patents in the same technological field (with longer claims → more details → narrower scope). In their new paper, The Ways We've Been Measuring Patent Scope are Wrong: How to Measure and Draw Causal Inferences with Patent Scope, Jeffrey Kuhn (UNC) and Neil Thompson (MIT Sloan) argue that this measure is superior to prior scope measures.

They validate the word-count measure by comparing with survey responses from seven patent attorneys (below). In comparison, they find that previous measures of patent scope—the number of classes, the number of citations by future patents, and the number of claims—are uncorrelated or negatively correlated with their attorneys' subjective responses.


Of course, there are lots of reasons that word count is an imperfect measure, and additional validation would be helpful. (It would also be good to confirm that the attorneys in this study were blinded to the study design.) Those planning empirical patent studies should approach this variable with caution (and with good advice from patent law experts), but it is a potential scope measure that patent empiricists should at least have on their radar screens.

Wednesday, July 19, 2017

Liscow & Karpilow on Innovation Snowballing and Climate Law

Patent scholars are often skeptical of the government "picking winners," but in Innovation Snowballing and Climate Law, Zach Liscow and Quentin Karpilow (Yale Law) argue that the government should target specific technologies to address social harms like climate change.

It is well known that green technologies present a double externality problem. Both innovation and environmentally friendly goods have significant positive spillovers (and thus will be undersupplied absent government intervention), and the problem is magnified for environmentally friendly innovations. The standard policy solution is to correct each externality, such as through carbon taxes (or cap and trade) and innovation subsidies (e.g., patents, grants, and R&D tax incentives).

Liscow and Karpilow argue that this approach misses the dynamics of cumulative innovation. We know that innovators stand on the shoulders of giants, but Innovation Snowballing describes recent research on how innovators "prefer to stand on the tallest shoulders in order to get the quickest, largest financial returns." Specific "clean" technologies (like solar) thus need a big push to snowball past "dirty" technologies (like fossil fuels):

Thursday, July 13, 2017

Judge Dyk on the Supreme Court and Patent Law, with Responses

Judge Timothy Dyk of the Federal Circuit has long welcomed the Supreme Court's involvement in patent law—see, e.g., essays in 2008 and 2014. In a new Chicago-Kent symposium essay, he states that he "continue[s] to believe that Supreme Court review of our patent cases has been critical to the development of patent law and likewise beneficial to our court," such as by "reconciling [Federal Circuit] jurisprudence with jurisprudence in other areas."

Four pieces were published in response to Judge Dyk, and while Michael previously noted Greg Reilly's argument that the Supreme Court does understand patent law, the others are also worth a quick read. Tim Holbrook (Emory) argues that some of the Court's interest reflects "suspicion about the Federal Circuit as an institution" but that the result is "a mixed bags" (with some interventions having "gone off the rails"). Don Dunner (Finnegan) is even more critical of the Supreme Court's involvement, arguing that "it has created uncertainty and a lack of predictability in corporate boardrooms, the very conditions that led to the Federal Circuit's creation." And Paul Gugliuzza (BU) argues that "the Supreme Court's effect on patent law has actually been more limited" because its decisions "have rarely involved the fundamental legal doctrines that directly ensure the inventiveness of patents and regulate their scope" and because its "minimalist approach to opinion writing in patent cases frequently enables the Federal Circuit to ignore the Court's changes to governing doctrine."

Monday, July 3, 2017

USPTO Economists on Patent Litigation Predictors

Alan Marco (USPTO Chief Economist) and Richard Miller (USPTO Senior Economist) have recently posted Patent Examination Quality and Litigation: Is There a Link?, which compares the characteristics of litigated patents with various matched controls. The litigation data was from RPX, the patent data was from various USPTO datasets, and the controls were either chosen randomly from the same art unit and grant year or were chosen with propensity score matching based on various observable characteristics. They are interested in whether examination-related variables that can be controlled by the USPTO are related to later litigation, and they conclude that "some examination characteristics predict litigation, but that the bulk of the predictive power in the model comes from filing characteristics."

Marco and Miller report that patents filed by small entities are more than twice as likely to be litigated than those filed by large entities, and patents with longer continuation histories and application pendency are also more likely to be litigated. Government-interest patents and foreign-priority patents are much less likely to be litigated than other similar patents. Other characteristics that indicate higher probability of subsequent litigation include having more independent claims and shorter independent claims (proxies for broader patents), being allowed by examiners with signatory authority, not being allowed on first action, having more IDS filings or examiner interviews.

Monday, June 26, 2017

Gugliuzza & Lichtman on the Timing of Patent Litigation

Are patent cases being litigated too quickly or too slowly? Two recently posted articles tackle this problem from different angles:

Paul Gugliuzza's Quick Decisions in Patent Cases argues that patent litigation is "notoriously expensive and time consuming," but that there is a beneficial trend toward quicker decisions through practices such as pleadings-stage dismissals on patent eligibility grounds, post-grant revocation at the PTO, and heightened pleading requirements. These changes have been controversial, and Gugliuzza discusses ways each development might be further improved in terms of the overall tradeoff between accuracy and cost. But overall, Gugliuzza argues that the benefits of faster litigation resolution probably outweigh the downsides.

On the other hand, Doug Lichtman's Patient Patents begins with the provocative claim that "a large number of patent cases are today being litigated too quickly." His basic argument is straightforward: Delay is most costly in cases that potentially involve injunctions, but post-eBay, many patent plaintiffs are denied injunctive relief. In these cases, "delay takes a day for which the accused infringer would have been paying a court-ordered ongoing royalty and transforms it into a day for which the accused infringer will instead pay court-ordered backward-looking damages." Thus, these cases "are the ideal candidates for which to consider tailored, accuracy-enhancing litigation delay." This is not to say that delay is costless; perhaps most importantly, as Lichtman acknowledges, it "increases the duration of patent uncertainty." His point is simply that the optimal balance has been shifted by the increased prevalence of damages over injunctions.

Although these two articles might initially seem contradictory, they are really focused on different aspects of the cost-benefit analysis of litigation timing. Indeed, Gugliuzza notes and does not dispute Licthman's argument, but contends that it does not affect the majority of cases because "nearly seventy-five percent of successful patentees still obtain permanent injunctions, and that figure increases to eighty percent when PAEs are excluded." I think both are worth a read.

Tuesday, June 20, 2017

More Classic Patent Scholarship

It has been a while since the last update to my Classic Patent Scholarship, so I thought I would add some works that I view as "classics" but that haven't made it onto the list yet.

First, while the body of "Beyond IP" scholarship is blossoming (see, e.g., the two Yale ISP conferences, where I got to present work with Daniel Hemel), there is a long history of work on innovation incentives beyond patents. For example, Machlup and Penrose (already on the list of classics) describe how the patents-vs-prizes debate dates back to at least the 19th century. Here are two works I would add to the classics list:
Other important works in this genre, which don't quite fit under my pre-2000 "classic" bar, include Frischmann 2000, Shavell & van Ypersele 2001, Gallini & Scotchmer 2002, and Abramowicz 2003.

As a former grant-funded university researcher (during my physics grad school days), I'm particularly interested in the role of grants and other direct funding as a non-patent incentive, and their overlap with patents through the Bayh–Dole Act. Here are some additional classics in this area:

Finally, there is now a long strand of literature on the Federal Circuit as an institution and the value of specialized patent adjudication; anyone interested in this area should start with the work of Rochelle Dreyfuss:

For other classics—including more extended commentary on them by prominent patent law professors—see the Classic Patent Scholarship page. And if you have suggestions of other pre-2000 works that should be on the list, please add them to the comments on send me an email!

Monday, June 12, 2017

Jeanne Fromer: Should We Regulate Certification Marks?

Teaching trademark law for the first time this spring, I fielded several questions from students on a lesser known corner of trademark law: certification marks. For those who have not encountered certifications marks, they are a special type of trademark, whose role is to certify that goods or services comply with a particular standard. Precisely how are certification marks obtained, students asked, and how closely does the PTO scrutinize the chosen standard? What if a company wants to certify its goods, and the mark owner refuses out of an arbitrary dislike for the seller rather than the contents or quality of its offerings? So it was a fortuitous event that I came across Jeanne Fromer's article The Unregulated Certification Mark(et)published in January in the Stanford Law Review.  Former's paper answers these questions and much more.

Wednesday, June 7, 2017

More Impressions About Patent Exhaustion

Daniel Hemel and Lisa Larrimore Ouellette
Cross-posted at Whatever Source Derived

As we explained last week, the full impact of the Supreme Court’s decision in Impression Products v. Lexmark will depend on whether courts are willing to view creative patent transactions as licenses (which do not exhaust the patentee’s rights) rather than sales (which, after Impression, now do). While it is too early to answer that question, we can already anticipate answers to two related questions regarding Impression’s impact: (1) What does the decision mean for pharmaceutical prices in the United States and abroad?; and (2) How will Impression affect information costs in markets for patented products? With respect to the first question, we expect that Impression will put upward pressure on pharmaceutical prices in developing countries—and downward pressure on prices in the United States—notwithstanding the fact that the importation of drugs from abroad will remain illegal under most circumstances. As for the second question, we are skeptical that Impression will have a substantial effect on information costs in markets for patented products, notwithstanding some of the enthusiastic commentary in the technology press immediately after the decision.

Below, we explain both of these conclusions in more detail.

Wednesday, May 31, 2017

Licensing in the Shadow of Impression Products

Daniel Hemel and Lisa Larrimore Ouellette
Cross-posted at Whatever Source Derived

Judging by the media coverage, the Supreme Court’s decision today in Impression Products, Inc. v. Lexmark Inc. will have dramatic implications for producers and consumers of patented products around the world. The decision places “sharp limits on how much control patent holders have over how their products are used after they are sold,” says the New York Times’s Adam Liptak. The ruling is a “sure-to-be-landmark decision,” reports Ronald Mann at SCOTUSblog. It “takes away an important tool used by companies to control the marketplace,” according to Bloomberg.

Well, maybe. But the Court’s opinion, authored by Chief Justice Roberts, also opens the door for creative contract lawyers to draft licensing agreements that severely restrict resale of patented products. The full impact of the Supreme Court’s decision won’t be known for years, but much will depend on how courts view the newfangled licensing agreements that are almost certain to follow in the wake of Impression Products.

To see why, let’s start with a hypothetical: Suppose your firm, Company A, holds a U.S. patent covering a certain widget. You manufacture one such widget and sell it to B on the condition that B not resell the widget to anyone else. In violation of that condition, B resells the widget to C, who then uses the widget. Can you sue B and/or C for patent infringement?

Prior to today, the answer under Federal Circuit precedent was yes: A could sue both B and C. Today’s decision changes that. The Court holds that “a patentee’s decision to sell a product exhausts all of its patent rights in that item, regardless of any restrictions the patentee purports to impose.” This is true even if A’s sale to B occurs outside the United States. Thus, Company A now cannot sue B or C for patent infringement, though it still might be able to sue B for breach of contract.

But now reconsider the above scenario with the following modification: Company A—instead of selling the widget to B—licenses the widget to B with the proviso that B can do whatever she wants with the widget except resell it. If B violates the terms of the license and resells the widget to C, who then uses it, can Company A sue B and/or C for patent infringement?

Friday, April 28, 2017

Major Issues in Trade Secret Law: Part 1

I was thrilled to attend The New Era of Trade Secret Law: The DTSA and other Developments, hosted by the IP Institute at Mitchell/Hamline School of Law and its Director, Sharon Sandeen, Robins Kaplan Distinguished Professor of Law.  The conference featured presentations by esteemed scholars of trade secret law discussing works in progress regarding trade secret law in the wake of federalization. In this post and in a subsequent post, I will provide brief summaries of some of these fascinating and important works in progress and what they say about the new federal trade secret law.

Wednesday, April 26, 2017

Biosimilars at the Supreme Court: Argument Preview

This is a guest post by Katie Mladinich, a J.D. student at Stanford Law School. She received her Ph.D. in microbiology from the University of Wisconsin–Madison.

The Supreme Court will hear arguments this morning in its first cases involving the Biologics Price Competition and Innovation Act (BPCIA), Amgen v. Sandoz and Sandoz v. Amgen. Passed as part of the Affordable Care Act in 2010, the BPCIA was intended to create an FDA approval pathway for generic versions of complex biologic drugs, biosimilars, much as the 1984 Hatch-Waxman Act has facilitated generic approvals for small-molecule drugs. The BPCIA was a hard-fought legislative compromise between those favoring stronger incentives for biologic pioneers and those seeking to rein in spiraling healthcare costs with more affordable generic drugs. The statute resolved a number of key issues, such as setting a twelve-year data exclusivity period before a biosimilar may be approved, but the policy battle over many smaller details has now moved to the courts. Amgen filed suit against Sandoz for seeking approval of a biosimilar of Amgen’s filgrastim drug, Neupogen, based on two sections of the BPCIA. Amgen claims (1) that Sandoz failed to provide Amgen a copy of its abbreviated Biologics License Application (aBLA) as required to begin the BPCIA “patent dance” under § 262(l)(2)(A), and (2) that Sandoz did not grant Amgen the required 180-day notice of commercial marketing by providing notice prior to FDA approval as required by § 262(l)(8)(A). The Northern District of California ruled in Sandoz’s favor on both issues, but the Federal Circuit overturned the district court on the second issue—while quoting Churchill in describing the statute as “a riddle wrapped in a mystery inside an enigma.” The Supreme Court is now faced with unraveling this riddle.

Sunday, April 2, 2017

Yelderman on Accuracy in the Patent System

When the USPTO is faced with a patent application of uncertain validity, which way should it err? How do the costs of erroneous patent grants compare with the costs of erroneous patent denials? Steve Yelderman provides an insightful new take on these questions in The Value of Accuracy in the Patent System (forthcoming in the University of Chicago Law Review). In short, he concludes that erroneous patent grants are more harmful than previously assumed, but only when "the unsatisfied patentability requirement is one that seeks to influence a mutually exclusive choice"—i.e., whether it incentivizes invention over non-invention, disclosure over non-disclosure, licensing over reinvention, etc.

Under the conventional account, if one assumes that the legal criteria of patentability are set correctly (an important caveat!), then social welfare is maximized by awarding patents to patentable inventions (true positives) and denying patents to unpatentable inventions (true negatives). Erroneous denials (false negatives) create a cost of decreased ex ante incentives for other inventors (IFN), while erroneous grants (false positives) and correct grants create ex post costs like deadweight loss (C). If the probability that a given application is patentable is q, then it should only be granted at the threshold q > C/IFN. (Note that it doesn't matter whether IFN is included as a cost for false negatives or a benefit for true positives; you get to the same result.) If the ex post costs of patents are low relative to their incentive benefits, they should be granted even for inventions that are unlikely to meet patentability standards, and as the relative weight of these factors reverses, patents should only be awarded when it seems quite likely that they are deserved.

Yelderman's key insight is that this analysis ignores another important cost of erroneous grants: false positives also reduce ex ante incentives because they often narrow the expected difference between inventing and not inventing. This framework can be illustrated as follows, with IFP shown in blue: