A couple months ago this blog highlighted an intriguing recent article by Jonathan Masur titled Patent Inflation (original post) that presented a model for what the author has observed as a trend of expanding boundaries of patentability. Since that time, Professor Masur’s model of patent inflation has become a hot topic in patent law that has stimulated a hearty debate among three notable patent scholars. Masur’s original article has spawned two thought-provoking responses and a sur-reply. This post summarizes this captivating debate as it is unfolding at the The Yale Law Journal Online.
Masur’s Patent Inflation
In Professor Masur’s article, Patent Inflation, which was featured in the December 2011 Issue of the Yale Law Journal, Masur argued that the asymmetry in Federal Circuit review of PTO decisions creates inflation in the boundaries of patentability (over time the patentability standard will be gradually expanded to include things beyond the prior scope). Masur further argued that this unique administrative pressure is at the root of many common criticisms of the PTO and suggests that the remedy may also be administrative (i.e. bolstering the procedure for symmetric review of PTO decisions though a workable system of inter partes review). This remedy (and the ensuing debate) is especially timely given the recent Congressional action on point.
First Response – Arti Rai’s Qualitative Contribution
In December, Professor Arti Rai, a law professor at Duke and former Administrator of the Office of External Affairs at the PTO, submitted a response to Masur’s article in the Yale Journal Online. Although Professor Rai agrees with some aspects of Masur’s argument (such as the asymmetrical nature of patent reviews and the PTO’s inherent weakness as an agency), she ultimately suggests that Masur “overestimates the extent” to which the PTO is concerned with Federal Circuit reversals (a key assumption in Masur’s theory). Professor Rai also argues that Masur overlooked sources of natural deflationary pressure that would frustrate the inflationary model. The PTO, as Professor Rai points out, occasionally takes a static or even deflationary position in response to pressure by third parties (including the executive branch) and the Supreme Court.
Professor Rai’s response does not dispute or discredit Masur’s theory but rather attempts to supplement and rein it in. Professor Rai’s examples and analysis point to a conclusion that the trend of patent inflation predicted by Masur may not be as extreme as advertised. The response argues that there are variables, overlooked by Masur’s theory, that operate to prevent widespread expansion of the boundaries of patentability. The response seems to suggest that Masur’s theory, while elegant in its simplicity, may be too simple.
Second Response – Lisa Larrimore Ouellette’s Quantitative Contribution
The second response to Patent Inflation came from Lisa Larrimore Ouellette. Although Ouellette finds Masur’s model “appealing,” she concludes that it “does not accurately capture the development of patent doctrine.” First, Ouellette argues that the asymmetry central to Masur’s theory was not created with the Federal Circuit in 1982. Rather, the asymmetry was prevalent (and even more extreme) in the CCPA, the predecessor to the Federal Circuit. Ouellette argues that this fact frustrates Masur’s suggestion that patent inflation increased dramatically when the Federal Circuit acquired stewardship over patent appeals. Second, Ouellette argues that Masur’s model requires that “doctrinal shifts in patentability standards [] be driven by Federal Circuit reversals of PTO patent rejections.” Ouellette uses data from all Federal Circuit cases issued during a five year period to exemplify how most of the data does not support Masur’s model and how the few cited cases that do support Masur’s theory are relatively unimportant based on her methodology.
Ouellette suggests that there are alternative sources of patent inflation, overlooked by Masur’s model. For example, Ouellette argues that patent infringement litigation can have an impact on the boundaries of patentability because of the heightened standard of review in such cases and expenditure discrepancy between patentees and alleged infringers. Additionally, Ouellette argues that the administrative pressure is not as extreme as Masur predicts because the Supreme Court has a significant role in “resetting the boundaries of patentability.” Ouellette concludes that “[t]he phenomenon of patent inflation is far more complicated than Masur’s elegant, but ultimately incomplete, model can capture.”
Masur’s Sur-Reply
Recently, Professor Masur submitted a reply to the two responses to Patent Inflation, primarily suggesting that the evidence presented in the two responses bolster, rather than discredit, his theory. Professor Masur argues that most of Professor Rai’s quantitative evidence and Lisa Larrimore Ouellette’s qualitative evidence are “consistent with, and even supportive of” his theory. By discussing the consistencies in the three perspectives (rather than contesting the findings of the responders), Masur clarifies his theory and adds to its appeal.
In his sur-reply, Masur concludes that Professor Rai’s analysis is “entirely consistent with the theory enunciated in Patent Inflation” by simply reining-in Rai’s interpretation of the Patent Inflation theory. To demonstrate this, Masur points to two areas of patent law highlighted in Rai’s response: genetic and software patents. Rai and Masur essentially agree that in these areas (at least) Federal Circuit reversals of PTO denials on boundary-pushing patents have shaped the doctrine and inflated the boundaries governing what can be patented—which is exactly what Patent Inflation predicts. Rai, however, suggests that repeated PTO challenges to Federal Circuit authority (exemplified in four cases, two examples for gene patents and two for software patents) indicates that there are more important considerations guiding PTO decisions than the agency’s desire to avoid harm to its reputation through reversal. Masur responds by emphasizing that his theory represents a trend over time and that patent inflation via his model will be “slow and stochastic.” Therefore, Professor Rai’s examples of two PTO cases do not necessarily discredit the model or the trend, and could simply be due to error in adjusting to the new standard. Further, Masur points to examples of genetic and software patents granted during the same time period as Rai’s counter examples that accept and follow the Federal Circuit standard. Masur argues that inherent randomness, not conscious disregard, guided the few counter examples cited by Rai and thus the theory remains intact. Additionally, Masur details how Rai’s analysis of outside pressures that could have deflationary effects on patent doctrine is consistent with, and even expected by, the model in Patent Inflation. The same PTO “reputational concerns” that lead to patent inflation can also compel the agency to take a restrictive approach occasionally. Masur points out that these pressures are not significant enough to counterbalance inflationary pressure because they are small in number (i.e. PTO involvement in Supreme Court cases) and can often represent mere lip service, rather than true doctrinal shift (i.e. PTO reaction to industry complaints).
Additionally, Masur disagrees with some of the methodologies and analysis found in Ouellette’s “valuable and technically impressive” response. Specifically, Masur argues that the small number of Federal Circuit appeals of PTO cases (the type of which he suggests inflate patent law) is predicted by his theory. The rarity of such boundary-pushing cases is precisely the reason that the PTO acts in such an inflationary manner and a reason why the process of patent inflation is slow. Masur also suggests that Ouellette’s quantitative analysis of the inflation cases (by their tracking their appearance in an IP casebook) fails to show that the cases are insignificant. To the contrary, Masur demonstrates that, statistically, Federal Circuit reversals appear in the leading IP casebook at nearly twice the rate that they appear in Ouellette’s general sample, and thus they are “nearly twice as likely to be significant as the typical case.” Further, Masur states that Ouellette’s analysis conflicts with the trend in genetic and software patents observed and endorsed by both Masur and Rai. Masur adds that Ouellette’s “litigation-driven” alternative source of patent inflation based on heightened review and inequality of resources is doubtful (citing cases in which courts rely on a decision based on a different standard of review and a study that appellate courts often disregard differences in review standards), but even if it is accurate, it is entirely consistent with the theory in Patent Inflation (“inflation via asymmetry in PTO appeals and inflation via the presumption of validity could coexist happily”). Essentially, Masur argues that Ouellette’s statistical approach is limited by the few years tabulated and its ability (or lack thereof) to show actual substantive changes in patent doctrine.
In conclusion, Masur adds that his theory in Patent Inflation contains a falsifiable prediction (that he suggests would be a more effective method of testing his theory than those proposed by Rai and Ouellette). According to Masur, Patent Inflation predicts that “there will be greater inflation with respect to the legal doctrines that determine patentability—patentable subject matter, obviousness, and the like—than with respect to legal doctrines that arise only in the course of suits for infringement, such as inequitable conduct and willful infringement.” He notes that this occurs because, “the former are subject to institutional inflation because of the asymmetry in appeals . . . while the latter are not.” Whether this “falsifiable prediction” will be effective at substantiating the model or even relevant to the debate remains to be tested.
Conclusion
Professor Masur’s original contribution, Patent Inflation, has already had a significant impact on patent law scholarship—it has provoked equally thoughtful and well-researched responses from two notable patent law scholars. For readers and practitioners, the real value of this debate (and all four contributions) lies not in proving or disproving Masur’s theory, but rather the cumulative research and analysis these three talented authors have contributed. Masur presented a new way to conceptualize a trend in patent doctrine; the responses presented additional evidence and perspectives. Arti Rai’s response offers several different perspectives and alternatives that were not highlighted in the original theory and suggests limitations with the original theory. Lisa Larrimore Ouellette’s response seeks hard evidence for Masur’s theory via an elaborate quantitative analysis of case law that is powerful in its technical sophistication. Upon finding empirical evidence and specific examples lacking, Ouellette proposed alternative perspectives.
All three authors have made extremely valuable contributions to our understanding of patent doctrine. This is an important debate highlighting a significant trend in patent doctrine. Although the responses cast some doubt on Masur’s original theory, the lack of consensus or “answer” is to be expected for a novel, profound theory that can only be truly realized over time. Hopefully, these valuable contributions will spur further research as several questions remain open, including: (1) does Masur’s “falsifiable prediction” offer any useful insight; (2) if Ouellette’s empirical analysis was expanded, would it still be consistent with her theory; (3) are there other areas of patent law (other than genetic and software patents, as relied on by Rai and Masur) that support the inflation model; and (4) how will the Leahy-Smith America Invents Act affect the application of these theories? As this debate continues (which it surely will), readers can look forward to further insight and hope that future contributions to this debate are as well-conceived as those presented here.
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Posted by Craig Carpenter (cccarpente@smu.edu), a third-year student at SMU Dedman School of Law and research assistant to Sarah Tran. His primary scholarship interests are intellectual property, biotechnology, food and drug law, and administrative law. He has recently published a case note in The International Lawyer on European biotechnology patent law.
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