CAFC: The Rogue Patent Court, Captured By The Patent Bar, Needs To Go Away

from the make-it-stop dept

Back in 2004, when I first read the book Innovation and Its Discontents, I was convinced that the Court of Appeals for the Federal Circuit, better known as CAFC, or the "patent appeals court" was a huge part of the problem with the patent system. It was the special court that had been set up in the early 80s to handle all patent appeals, based on the totally misplaced notion that because patent issues were so technical, regular appeals courts wouldn't be able to handle the nuances. What we got instead was a court that became "patent specialists" in that they spent much of their time with the patent bar -- who tended to be lawyers who profited handsomely from an ever expanding patent law. It didn't help that one of the original CAFC judges was Giles Rich, a former patent attorney who almost single-handedly wrote the Patent Act of 1951. Rich more or less made it his lifetime goal to expand the patent system to cover "everything under the sun made by man," and he came close to succeeding.

In fact, some important research pointed out that the structure of the court means that it's really designed to only expand what is patentable, and never to contract it.

Two years ago, Tim Lee had a fantastic expose on CAFC and how it turned patents into a megabusiness by expanding them massively (often ignoring the Supreme Court to do so) and had become way too chummy with the patent bar. It appears that others are catching on as well. Over at the Cato Institute, Eli Dourado has a good article discussing just how "the patent bar captured a court and shrank the intellectual commons." It's a good read, going back over much of the territory that Lee and others have covered previously, but doing it in a nice succinct fashion. It also has a nice empirical summary of just how broadly the CAFC expanded patent law:

The creation of the court has significantly altered the law. Using a dataset of district and appellate patent decisions for the years 1953–2002, economists Matthew Henry and John Turner find that the Federal Circuit has been significantly more permissive with respect to affirming the validity of patents. They estimate that patentees are three times more likely to win on appeal after a district court ruling of invalidity in the post-1982 era. In addition, following the precedents set by the Federal Circuit, district courts have been 50 percent less likely to find a patent invalid in the first place, and patentees have become 25 percent more likely to appeal a decision of invalidity.

With patents more likely to be upheld in the Federal Circuit era, the incentive to patent has increased. Bronwyn Hall finds a highly significant structural break in patent applications occurring between 1983 and 1984. The number of patents granted by the U.S. Patent and Trademark Office also increased, from 63,005 in 1982 to 275,966 in 2012—a quadrupling of the rate in only 30 years.

This is important, in part, because one of the suggestions that's been floated to "fix" the problems of the patent system is actually to create another specialized patent court, this time at the district court level, with the claim being that this would stop things like the rush to bring patent lawsuits in east Texas, or unsophisticated juries deciding big patent cases. Except that, as we've pointed out, this would just exacerbate the problem.

Dourado's article -- as did Lee's -- quotes the astounding blog post by patent attorney (and unabashed patent system cheerleader) Gene Quinn after the Supreme Court struck down medical diagnostic patents in the Promethus v. Mayo Labs case (a precursor to later striking down or massively limiting gene and software patents), in which Quinn happily awaits CAFC "overruling" the Supreme Court:

How long will it take the Federal Circuit to overrule this inexplicable nonsense? The novice reader may find that question to be ignorant, since the Supreme Court is the highest court of the United States. Those well acquainted with the industry know that the Supreme Court is not the final word on patentability, and while the claims at issue in this particular case are unfortunately lost, the Federal Circuit will work to moderate (and eventually overturn) this embarrassing display by the Supreme Court.

There is, of course, some hope that maybe things are actually changing. The number of cases in which the Supreme Court has smacked down the CAFC grow each year, and in some of the more recent ones the Supreme Court's impatience with CAFC and its inability to properly interpret patent law have become clear. On top of that, CAFC is under new management, due to an ethics scandal involving the former chief judge. And the most recent few decisions have suggested that, perhaps, finally, CAFC is changing and getting the message.

That said, it still makes no sense at all to have a specialized court like CAFC for patent appeals. Like nearly all other kinds of cases, patent lawsuits should go up through the circuit courts. There, those courts will be more likely to actually listen to the Supreme Court, rather than think they can "overrule" the Supreme Court -- and on difficult cases there's more likely to be a circuit split where different opinions are discussed. And, most importantly, it means that the patent bar can't so aggressively lobby just a small group of "friendly" judges that they see over and over and over again.

Filed Under: cafc, circuit splits, giles rich, judicial system, patent bar, patents

The Rogue Court That Made Patents So Destructive

from the cafc-cafc-cafc dept

We've written many, many times about the problems created by the Court of Appeals for the Federal Circuit, CAFC, who (among other things) is the appeals court that has jurisdiction over all patent appeals. It's a court that has been around for 30 years as of this week, and in the opinion of many, has been an unmitigated disaster. Of course, if you're a patent lawyer or a patent troll, you might think the opposite. As we've discussed in the past, CAFC has spent the last 30 years massively helping patent holders by expanding the definitions of what was patentable, and generally being much, much, much more favorable to patent holders than appeals courts had been back when jurisdiction was split among the 12 difference circuit appeals courts. With its 30th anniversary this week, Tim Lee has written a post detailing how it "wrecked the patent system." It's a great read, covering a number of key points.

Lee kicks it off by pointing to Adam Jaffe and Josh Lerner's seminal book, Innovation and Its Discontents, published in 2004. If you want to see a patent system defender turn bright red, just bring up this book. They go absolutely ballistic about it, insisting that it's all myths and lies made up by critics who don't understand the patent system. You see, in the world of patent lovers, the only people who are allowed to criticize the patent system, are those who are patent lawyers. Everyone else, in their book, simply doesn't understand the facts. Of course, when you suggest that perhaps it does make sense that economists might be able to highlight how bad patents harm the economy, they have no reasonable answer. Either way, you can't get past facts, and Jaffe and Lerner's facts clearly show a massive shift in favor of patents due to CAFC. From their book, here is the rate in which patents were found valid and infringed upon appeal from 1925 up through 2000. Whether or not you agree with Jaffe and Lerner, there is no denying that there's a pretty massive shift at the moment CAFC is created. Lerner and Jaffe focus their reasons why on "judicial capture," specifically fingering Judge Giles Rich, an unabashed patent system supporter and a former patent lawyer who basically wrote the 1956 Patent Act, and then got to "interpret" his own work as a CAFC judge. Of course, patent system supporters argue that Judge Rich was just one judge, and even while there were some former patent attorneys on the CAFC bench, it was never the majority of CAFC judges. Lee's piece does a really good job explaining how a variety of issues have made it such that CAFC judges almost always favor expanded patent powers:

...the heavy load of patent cases on the court's docket means that the judges of the Federal Circuit are constantly interacting with patent lawyers. In addition to hearing their arguments in the courtroom, they read the same patent law publications as the lawyers, hire young patent lawyers to clerk for them, and are invited to speak at events organized by the patent bar.

Moreover, the prestige of the Federal Circuit itself is directly tied to the prominence of patent law in the American legal system. If the Federal Circuit had followed the stricter rules in place before the court was created, patent law might have remained a legal backwater, receiving little attention from either the legal profession or the general public. That, of course, would have made the Federal Circuit a less prestigious place to work.

[....] patent appeals are exclusively heard in DC by judges who live and breathe patent law. Unsurprisingly, this leads to insular thinking. For example, when we interviewed Paul Michel, who served as the Federal Circuit's chief judge from 2004 to 2010, he didn't seem to understand the problems facing small software companies. "If software is less dependent on patents, fine then. Let software use patents less as they choose," he said, seemingly oblivious to the fact that software companies don't have the option to opt out of patent troll lawsuits.

Lee also goes into detail on how CAFC effectively "overruled" the Supreme Court on various issues related to patents, in part because, historically, the Supreme Court ignored patent issues as being petty, "commercial" disputes, unrelated the the weighty constitutional issues that it was focused on. Thankfully, over the past seven or eight years, the Supreme Court has become a lot more interested in patent issues, almost always slapping down CAFC. Even so, as Lee notes, patent lawyers know that CAFC often seems to hold itself to a different standard:

This dismissive attitude toward Supreme Court precedents apparently survives to this day among patent lawyers. In the wake of this year's decision limiting patents on the practice of medicine, patent attorney Gene Quinn wondered, "How long will it take the Federal Circuit to overrule this inexplicable nonsense?" Obviously, the Federal Circuit can't "overrule" a Supreme Court decision. But with enough persistence, it can, and often does, subvert the principles enunciated by the nation's highest court. And when it does so, it almost always works in the direction of making patents easier to obtain and enforce.

These all represent real problems and the really bizarre thing is that it makes absolutely no sense for this single court to exist. Part of the reason that we have all of the different circuits is to create differing viewpoints from different courts, which then allow the Supreme Court to consider the different opinions and to point out which is proper. But without any circuit split issues to deal with, and with that form of "judicial capture" going on in CAFC, the results are a one-way ratchet, except in the few cases where the Supreme Court decides to step in, despite a lack of circuit split. Lee points out that we could see a lot more interesting rulings if we just treated patent cases (as we used to) like most other cases, and let each circuit decide the appeals separately:

The consolidation of the patent jurisdiction in a single appeals court has also deprived the judicial system of valuable viewpoint diversity. Consider Judge Richard Posner of the Seventh Circuit Court of Appeals. This summer, he threw out the entire patent lawsuit between Apple and Motorola, arguing that the patent system had descended into "chaos." Posner was able to hear the case because he was temporarily filling in as a trial court judge, but the Federal Circuit—not his own Seventh Circuit—will hear appeals in the case.

Under the pre-1982 judicial structure, Posner and his colleagues on the Seventh Circuit Court of Appeals would have heard appeals in some of the nation's patent lawsuits. If his comments in the Apple/Motorola case are any indication, Posner would sharply disagree with some of the Federal Circuit's precedents. This kind of disagreement among appeals courts, known in legal jargon as a "circuit split," would signal the Supreme Court that it needed to step in and resolve the dispute.

Posner's skeptical view of the patent system may be explained by the fact that he's an academic as well as a judge. This background may have exposed him to academic criticisms of current patent jurisprudence that aren't as well known to other judges. Similarly, if the Ninth Circuit Court of Appeals (based in San Francisco) were allowed to hear patent appeals, some of its judges might share Silicon Valley's skeptical attitude toward software patents. Such dissenting views would provide balance to the Federal Circuit's pro-patent rulings and give the Supreme Court the raw material it needs to fashion a sensible body of patent law.

This is a pretty big problem -- and one that is much more significant and troubling that the "problem" that the government was trying to "solve" with the establishment of CAFC. The issue then was that people would "rush" to different courts to file their patent lawsuits, trying to use jurisdiction shopping to find a favorable court. Of course, switching to a single federal appeals court didn't even do anything to fix that problem. Just ask patent trolls their opinion on East Texas to see why.

All of this matters quite a lot. Beyond just the fact that CAFC's various rulings have massively expanded patent law (such as by recognizing that software and business methods could be patentable, despite most people believing neither were prior to CAFC's rulings, or by establishing much more restrictive rules on when a patent could be invalidated), it's become unfortunately common for some (including people we otherwise agree with) to think that the solution to the problems with today's patents is because judges aren't that familiar with patents, and thus it would be best to set up specialized courts or even specialized judges, who focus mainly on patent issues. But, of course, that seems to be making the exact same mistake all over again. Such courts or judges become victim to the same pressures as CAFC has, creating the same broken incentive structure that has resulted in such problems in the first place.

On this 30th anniversary of CAFC, it seems only reasonable that one step towards fixing the broken patent system is a simple one: end having all patent cases the jurisdiction of CAFC and send those cases back to the individual circuit appeals courts.

Filed Under: cafc, circuit splits, expansion, giles rich, history, judiciary capture, patents, software patents, supreme court