Tuesday, September 4, 2012

David Olson & Stefania Fusco—Rules Versus Standards: Competing Notions of Inconsistency Robustness in Patent Law

Why do the Federal Circuit and the Supreme Court repeatedly diverge on the adoption of rules versus standards in patent law? In Rules Versus Standards: Competing Notions of Inconsistency Robustness in Patent Law, Alabama Law Review (forthcoming 2012), Professors David Olson (Boston College Law School) and Stefania Fusco (DePaul College of Law) apply the inconsistency robustness (“IR”) paradigm that is maturing in the computer science field to analyze the Federal Circuit and Supreme Court’s crafting of patent law rules and standards. This article highlights areas of patent law where the Supreme Court and Federal Circuit diverge on the implementation of rules versus standards, demonstrates how this pattern can be explained through the IR paradigm, and shows that the courts may be able to more adeptly craft an optimal patent law through a holistic view of IR.

IR is a developing paradigm in computer science that recognizes that modern, complex information systems must perform notwithstanding persistent and continuous inconsistencies. IR encourages system designers to accept the reality of persistent inconsistency and “reminds” designers that the ultimate goal is to efficiently manage inconsistencies, rather than eliminate them. Consequently, a designer working with systems characterized by pervasive inconsistencies may ultimately be able to improve the system’s performance through analysis from the IR paradigm.

Professors Olson and Fusco contend that IR’s applicability can extend to various complex systems, including the American legal system. Correcting errors and ensuring equality before the law are critical to the promotion of justice within any legal system. The court system does not attempt to completely eliminate errors in lower courts, nor does it strive for absolute equality across different courts. In fact, the American legal system is designed to efficiently correct some, but not all, errors and inconsistencies. Legal systems must be inconsistency robust to function. Olson and Fusco discuss two types of inconsistency present in the judicial system: horizontal and vertical inconsistency. Horizontal inconsistency results when courts of the same level decide cases differently. Similarly, different decisions among higher and lower courts result in vertical inconsistency.

Professors Olson and Fusco focus their analysis on the repeated pattern of disagreement between the Supreme Court and Federal Circuit as to the appropriateness of bright-line rules in patent cases. The article gives five examples of this pattern of disagreement in patent law: obviousness, doctrine of equivalents, standing for declaratory judgment actions, the standard for granting injunctions, and patentable subject matter. They contend that the IR paradigm gives important insight into the reasons for this recurring pattern of disagreement. Specifically, they argue that the courts’ roles at different levels within the system provide the best explanation for the Supreme Court’s systematic replacement of rules with standards in patent law.

The Supreme Court has frequently set forth patent standards that may be better at avoiding error in each case. The Federal Circuit, in contrast, as a specialist court with extensive and constant contact with patent cases and patent owners and defendants, has made greater use of bright-line rules in patent cases. The Supreme Court knows that standards are harder to administer, but the Court does not seem to take into account the effects of uncertainty and inconsistency in business and for administrators to the same extent that the Federal Circuit does. Olson and Fusco believe that the Supreme Court’s preference for error reduction over inconsistency reduction is due, in part, to the fact that the Court, through its discretionary review, cannot fully appreciate the costs associated with the adoption of standards. On the other hand, the Federal Circuit must review every appeal filed and, thus, bear much more of those costs.

Differences in methodology and the application of rules versus standards between the courts have been identified and discussed with some frequency. See, e.g., Peter Lee, Patent Law and the Two Cultures, 120 Yale L.J. 2 (2010); Tun-Jen Chiang, The Rules Versus Standards of Patentable Subject Matter, 2011 Wisc. L. Rev. 1353 (2011). In this article, however, Professors Olson and Fusco identify two benefits from understanding the courts’ differing vantage points as patent system administrators. First, the IR paradigm helps us understand the repeated divergence of rules versus standards that has characterized the relationship between the two courts. Second, the courts, and especially the Supreme Court, can build a more robust patent system by considering the system as a whole—as both a legal and business system—and crafting inconsistency robust legal rules that makes the optimal tradeoffs for the entire system.

Drafted by Derik Sanders (dtsanders@smu.edu), a 2014 Juris Doctor Candidate at SMU Dedman School of Law and research assistant to Professor Sarah Tran.