Monday, December 5, 2011

David L. Schwartz: Prospectivity and Retroactivity in Patent Law

Should the Federal Circuit issue a higher proportion of non-precedential opinions? In Prospectivity and Retroactivity in Patent Law, Professor David Schwartz of the Chicago-Kent College of Law writes a draft article that raises this and many other fascinating questions.

Reflecting on the role Federal Circuit precedent plays on patent rights, Schwartz uses his piece to illustrate that, while many Federal Circuit opinions have significant retroactive effects on pre-existing patents, most of these opinions have few (if any) prospective effects on future patents. His point, essentially, is that patents, once issued, are very rarely capable of meaningful amendment or modification, so court opinions that limit (or enhance) the value of pre-existing patents will have a meaningful impact on those pre-existing patents; in many cases, the court opinions will contract a patentee’s rights, and there is nothing that the patentee will be able to do about it. At the same time, however, court opinions will often have little to no impact on future patents, as savvy patent prosecutors will usually find ways to “draft around” a court’s newly established patent rules.

To make his point, Schwartz brings out how these retroactive effects have occurred in several patent contexts. For example, means-plus-function claims, which once conferred broad patent rights to a wide range of structures that performed a particular function, were limited by Valmont Industries such that patentees could only claim structures that were precisely defined in the patent. This ruling limited the scope of pre-existing patents that had contained means-plus-function claims, and as a result future patents incorporated means-plus-function claims far more selectively. Schwartz also discusses the written description requirement, noting that Gentry Gallery v. Berkline Corp. limited the scope of a patent’s claims based on objectives of the invention articulated in the written description. This decision, too, impacted existing patents that had previously had clear, detailed specifications. Unsurprisingly, patent prosecutors now disclose as a little as possible about the objectives of inventions in the specification to get around Gentry Gallery. Schwartz also provides examples of retroactivity in areas such as joint infringement, the definiteness requirement, and prior art disclosure requirements.

While the Supreme Court and the DOJ have acknowledged the retroactive effects of the Federal Circuit’s patent opinions, and academics have suggested that court decisions should not disrupt “stable equilibria” in the patent system, Schwartz seems worried that the Federal Circuit does not do enough—or say enough—to acknowledge the retroactive effects of its rulings. Accordingly, Schwartz recommends that the Federal Circuit have more explicit discussions of retroactivity in its opinions; this, at minimum, will ensure that the Federal Circuit has thought through any retroactive implications. As an alternative, Schwartz also suggests that the Federal Circuit may want to issue non-precedential opinions when an opinion may have a retroactive impact—it may do this by issuing an opinion marked as non-precedential or, in some instances, by simply issuing a summary affirmance or reversal. While the latter course may result in orders that do not include legal reasoning, the absence of any reasoning would do more to prevent retroactive effects because litigators will be unable to “latch on” to any language in the opinion.

Like many articles, Schwartz writes a piece that starts the conversation with regard to a practical reality of patent law that is not often discussed. While I think that it would be useful to gain more empirical insights into the retroactive effects of Federal Circuit decisions, Schwartz’s hypothesis seems reasonable on its surface. Moreover, the Federal Circuit would probably benefit from having explicit analyses of retroactivity in its most important opinions. There are also other options that Schwartz throws on the table: the Federal Circuit, for example, could exempt issued, pre-existing patents from the effects of particular holdings or provide inventors the right to amend their patents in light of a particular ruling. While Schwartz admits that this proposal could be subject to abuse, it is another idea that advances the conversation.

Ultimately, though, concerns about retroactivity boil down to concerns about predictability. Inventors, it seems, may want some certainty that their patent rights will be what they expect them to be at the time they prosecute and receive a patent from the USPTO. Thus, insofar as retroactivity has an adverse impact on a patent’s value, one wonders whether market solutions may be able to account for this problem. Schwartz notes that, while property insurance exists to ensure that homeowners obtain clear, unencumbered title, no analogous insurance exists for patent-holders to ensure that their rights will remain unencumbered. Why not? If a broader discussion about retroactivity were to occur in the IP community, and the empirics associated with retroactivity were to be better known, it would seem that a market for patent insurance could emerge, obviating the concerns about retroactivity that could adversely impact patent-holders. While such a market is by no means certain, that too should be part of the retroactivity conversation.

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