Guest Post: The Quality and Attributes of Patents as Property

David Jones is the Executive Director of the High Tech Inventors Alliance, an association that advocates for balanced reforms in the Patent and Trademark Office, the courts, and Congress that address the root causes of these problems while advancing a patent system that promotes investment in new technologies and American jobs.

Over the past decade, Congress and the courts have made changes that have improved the patent system and encouraged American leadership in innovation. With our nation in a period of economic recovery, now is not the time to threaten that important progress.

Expansionists who claim that the U.S. needs more and stronger intellectual property are fond of arguing that patents convey constitutionally protected property that must receive treatment equal to that of tangible property. This has become a favorite talking point in their efforts to undo the positive changes made over the last decade by Congress and the Supreme Court. However, patents are not of the same quality and don’t have the same attributes as traditional property.

Adherents of this view equate patents with the deeds that convey ownership of real property. Just as a deed describes the boundaries of a parcel of land and transfers rights to the landowner, they argue that a patent defines the metes and bounds of an invention and grants ownership rights to the inventor or the inventor’s assignee. This “property equivalence” argument has been at the heart of dozens of petitions to the Supreme Court seeking to challenge the inter partes review (IPR) process, which allows the Patent Office to review patents to determine whether they should have been issued. The expansionist view is that patent rights should be held inviolate and that – like landowners – patent holders deserve to enjoy “quiet title” to their inventions.

This argument is intuitively appealing and entirely wrong. As explained by former U.S. Solicitor General Paul Clement, this argument represents a “deeply misguided” revisionist attempt to “invoke the rhetoric of natural rights to recast patents as forms of traditional property, and to insist that the government has a moral obligation to grant them freely and to protect them at whatever cost.” The Supreme Court has rejected this “property equivalence” argument and the related contention that patents convey sacrosanct private rights that cannot be reviewed by the Patent Office, holding that “the decision to grant a patent is a matter involving public rights—specifically, the grant of a public franchise.”

Patents lack the quality and essential attributes of property

The failure of the property equivalence argument to gain traction in the courts is in part because it is impossible to square the practical realities of the patent system with any reasonable conception of a property regime. For a working property system, you need to be able to figure out what is owned and who owns it. Property must have a well-defined scope of rights, such that both owners and members of the public know precisely what the property boundaries are. If the boundaries are definite, the owner has an enforceable right to exclude others.

I’m very much in favor of having strong traditional property rights, but the patent system doesn’t remotely resemble a property regime. Academic analysis suggests that around a third of the patents issued by the U.S. Patent and Trademark Office (USPTO) are at least partially invalid, meaning that more than 1 million improperly granted, invalid U.S. patents are currently in force. This is perhaps not surprising, given that the USPTO on average spends only 19 hours examining an application. And because the validity of any particular patent is typically not known until it is litigated in court or tested in an IPR, this high invalidity rate defeats the ability to determine whether something is owned ex ante. And the meaning of patent claims – which define the boundaries of the right – often cannot be known until they are authoritatively construed by a court, making it impossible to know in advance what it is that is owned. Finally, patent owners are not required to record or publicly disclose the assignment of patents, which often prevents a determination of who even owns the patent.

In addition to often being ambiguous, the boundaries of the patent right can be repeatedly redrawn by rewriting the patent claims even after the patent has been granted. This can be done through a reissue, by substituting new claims in an ex parte reexamination or inter partes review proceeding, or through continuation practice. Continuation practice has become a particularly popular tactic. It allows applicants to write new claims many years after an initial application and is frequently used to draft claims that encompass products that didn’t even exist when the initial application was filed. Continuations have tripled in roughly a decade and now represent nearly a quarter of the applications being filed at the USPTO.

These are not attributes of a functional property regime. In fact, it’s hard to believe that something like the patent system would be allowed to exist if it were responsible for allocating rights to tangible instead of intellectual property. Nevertheless, patent expansionists go further than merely claiming that if we just treated patents like property this regime would provide clear ownership and stable, reliable property rights. They contend that the proper response to the flood of defective patent grants is not to prevent invalid patents from being issued, but rather to “treat patents like property” by shielding them from administrative review to give their owners “quiet title.” Contrary to the property rhetoric employed by proponents, this solution would not apply real property principles to patent rights. It would merely allow invalid rights to be successfully enforced and would do nothing to produce more reliable property rights or “stronger” patents. Allowing the successful enforcement of patents irrespective of their validity and without regard to whether they are asserted by their rightful owner doesn’t protect property rights; it undermines them by allowing someone other than the owner to exercise the right to exclude in derogation of the true owner’s rights.

Treating patents like property – for real

For the equivalent rights argument to have any credibility, the patent system would need to operate a lot more like the real property regime. For starters, patent rights would need to be made truly exclusive by ensuring that there is a clear owner and by precluding the enforcement of conflicting or overlapping patent rights. This is how “quiet title” actually works. Quiet title isn’t something that owners of real property are endowed with by virtue of claiming to own the property. It requires a legal action that establishes ownership and precludes competing claims to the same property. Preventing challenges to the validity of overlapping or conflicting patent rights produces the opposite result by allowing conflicting rights to remain in force and precluding clear ownership by a single party.

To ensure clear boundaries, the written description requirement would need to be strictly enforced by USPTO. To prevent patentees from redrawing the boundaries of their property, patent prosecution would also need to be reformed to limit continuation practice and to bring a reliable, finite end point to the patenting process.

Patent quality would also need to be substantially improved. An effective property regime doesn’t require that every grant of rights be valid, but it does require a vastly lower invalidity rate than that of the current system. This would require increasing fees, devoting substantially more than 19 hours for examination, and applying significantly more stringent standards to ensure the boundary lines are clear.

There would also be a need to create an effective means of identifying ownership interests – similar to the recordation system for real property – that requires assignments and perhaps FRAND licensing obligations (which are like liens) to be recorded and made publicly available. A host of other real property doctrines – from nuisance to adverse possession to trespass by necessity – would also need to be incorporated into this system.

The resulting regime is what treating patents “like real property” would actually look like. I suspect that patent expansionists would find such a regime highly disadvantageous and supremely objectionable, but I’d be happy to be proved wrong. Either way, if they want their arguments to hold any water, those who claim patents should be treated like real property should be championing reforms to make the patent system work a lot more like a property system – and right now, they aren’t.