This post draws from and summarizes a forthcoming law review article from the author. The full article is available on SSRN.
A patent is a monopoly, for a certain time, on the sale of something for profit. It follows that a patent that was improperly granted unfairly denies others the right to sell something they should be allowed to sell, making the improperly-granted patent an unjust monopoly. The Founding Fathers abhorred unjust monopolies, and they strove to make sure the victims of unjust patent monopolies could seek relief in federal court. Understanding that history makes clear the need for reforms today.
America derives its patent law from England where, in the sixteenth century, and like many governmental powers, patent grants fell into abuse. As patent historian Bruce Bugbee writes in his book Genesis of American Patent and Copyright Law (1967):
In the last twenty years of the [sixteenth] century the Queen’s habit of dispensing monopolies became notorious … Public outcry arose over such monopolies … Late in November, 1601, she informed a restless Parliament that … since the abuse of many grants awarded by her had occasioned grievances to her people, she would repeal or suspend some of them. Only those, she stated, which were first tested in a court of law would be put into operation henceforth. This announcement was closely accompanied by a royal proclamation revoking some of the offending monopolies and permitting injured subjects to challenge others in the courts.
These reform principles were ultimately codified by Parliament in the Statute of Monopolies of 1624, which declared that all patents could be tested for validity in courts of law.
By the time of the American Revolution, anti-monopoly sentiments were part of the popular culture. Indeed, the Boston Tea Party of 1773 itself was a protest over the exclusive control the British East India Company exercised over tea under its royal grant of monopoly.
Monopolies tho’ in certain cases useful, ought to be granted with caution, and guarded with strictness agst. abuse.
James Madison
James Madison, the Father of the Constitution, remained a consistent critic of monopolies. He noted the need for patents, but only those that embody “benefit actually gained to the community,” as otherwise they “may produce more evil than good.” Improperly-granted patents for things that don’t meet the criteria for legitimate innovations constitute such unjust monopolies, bringing with them all the evils unjust monopolies were understood to entail.
Improper monopoly grants by the government cause immediate economic harm in and of themselves. When the government enforces an illegitimate patent, the government itself is denying others the ability to innovate they would otherwise be able to exercise freely. And so the availability of prompt appeals of potential improperly granted patents under typical standards of proof (standards akin to “preponderance of the evidence” rather than heightened standards such as “clear and convincing” evidence) is especially important.
Madison also had views on the rule of law generally that apply directly to the problems caused by improper patents that are overly-vague, or were wrongly granted. If patents are vague and cover many overlapping innovations, they end up deterring innovation when used in infringement suits to extort money from innocent people who independently and wholly innocently invented.
It will be of little avail to the people, that the laws are made by men of their own choice, if the laws [or patents] be … so incoherent that they cannot be understood … What prudent merchant [or inventor] will hazard his fortunes in any new branch of commerce when he knows not but that his plans may be rendered unlawful before they can be executed? What farmer or manufacturer [or inventor] will lay himself out for the encouragement given to any particular cultivation or establishment, when he can have no assurance that his preparatory labors and advances will not render him a victim to an inconstant government?
James Madison, Federalist No. 62
These words could be applied seamlessly to the dangers caused by improperly-granted patents, today. Manufacturers are put in exactly the sort of impossible situation Madison saw as exemplifying violations of the rule of law when they are threatened with lawsuits asserting improperly-granted patents and left without the ability to have overly-broad or improperly-granted patents invalidated by courts.
The first Congress was keenly aware of the need to allow access to federal courts to invalidate improperly-granted patents. Section 5 of the first Patent Act of 1790 allowed challenges to the validity of a patent “obtained surreptitiously by, or upon false suggestion” by anyone to a District Court, with the patent enjoying no presumption of validity. The Act allowed challengers to prevail upon showing “sufficient” evidence, and even provided that successful patent challengers would have their legal costs covered.
Thomas Jefferson, himself a famous inventor, was the first prime examiner of patents under the Patent Act of 1790, and he employed strict criteria for judging innovation. But by the early nineteenth century, amendments to the patent laws invited abuse by encouraging all manner of bogus claims of invention to be granted patents.
[Thomas] Jefferson’s stringent enforcement of [patent] criteria for noveltyA requirement for patentability, based on 35 U.S.C. § 102(a) of the Patent Act. An invention cannot have been disclosed, offered for sale, or used publicly more than a year before seeking a patent. and utilityAn invention must useful to be patentable. Very few inventions are invalidated as lacking utility. Perpetual motion machines, for example, are typically found invalid for lacking utility. had soon given way to far more liberal practices. For several decades, the patent office approved applications so routinely it functioned more as a registry than judge of noveltyA requirement for patentability, based on 35 U.S.C. § 102(a) of the Patent Act. An invention cannot have been disclosed, offered for sale, or used publicly more than a year before seeking a patent. … The mounting array of patents constituted an expanding minefield of potential lawsuits and financial liabilities.
Steven W. Usselman, Regulating Railroad Innovation: Business, Technology, and Politics in America, 1840-1920 (2002)
Things got so bad that in 1830, a report by William Thornton, the longest serving head of the patent office (first hired by Thomas Jefferson), worked its way into an official message by President Andrew Jackson, a vigorous public opponent of the type of unjust monopoly an improperly-granted patent represented. The report stated “the community at large is frequently deprived of its common right, by a monopoly of what ought to be free, unless some individual will step forward and subject himself to the risk of a vexatious lawsuit.”
That presidential message finally generated some attention in Congress, which restored the original intent of the patent laws by enacting the Patent Act of 1836. The Senate Committee Report on that legislation clearly recognized that, while the Patent Act of 1836 would create a new examination system, any such system would be fallible, and inevitably grant improper patents on occasion. As the Senate Report stated:
To prevent these evils in future is the first and most desirable object of a revision and alteration of the existing laws on this subject. The most obvious, if not the only means of effecting it, appears to be to establish a check upon the granting of patents, allowing them to issue only for such inventions as are in fact new and entitled, by the merit of originality and utilityAn invention must useful to be patentable. Very few inventions are invalidated as lacking utility. Perpetual motion machines, for example, are typically found invalid for lacking utility., to be protected by law. The difficulty encountered in effecting this, is in determining what that check shall be; in whom the power to judge of inventions before granting a patent can safely be reposed, and how its exercise can be regulated and guarded, to prevent injustice through mistake of judgment or otherwise, by which honest and meritorious inventors might suffer wrong.
The 1836 Senate report then noted that even diligent patents examiners would work under circumstances that would inevitably lead to the granting of invalid patents, warranting a robust system of judicial review.
It is obvious that the power must, in the first instance, be exercised by the department charged with this branch of the public service. But as it may not be thought proper to intrust its final exercise to the department, it is deemed advisable to provide for an occasional tribunal to which an appeal may be taken. And as a further security against any possible injustice, it is thought proper to give the applicant in certain cases, where there may be an adverse party to contest his right, an opportunity to have the decision revised in a court of law.
Senate Report on Patent Act of 1836.
The 1836 Senate report was clear that any government official charged with judging invention would be operating under limited technical knowledge, and as a result judicial review should always be available. To that end, Section 12 of the Patent Act of 1836 provided that “no opinion or decision of any board of examiners, under the provisions of this act, shall preclude any person interested in favor of or against the validity of any patent which has been or may hereafter be granted, from the right to contest the same in any judicial court in any action in which its validity may come in question.”
Congressional recognition of the unjust nature of improperly-granted patent monopolies most recently appeared in its enactment of the America Invents Act. As the Supreme Court has recognized, Congress enacted the AIAAmerica Invents Act of 2011. AIA made modest reforms, most notably moving the U.S. to a first-inventor-to-file system more aligned with foreign practice, but also including expanding prior user rights to all patent-eligible subject matter, and instituting a post-grant review proceeding. and its procedures for the “inter partes reviewAn adversarial procedure created by the AIA for challenging patents. Intended to be similar to a court proceeding, the parties argue before an Administrative Patent Judge, not a patent examiner. The challenger must show a reasonable likelihood of successfully invalidating one claim before the PTAB will agree to grant a petition for review.” of granted patents to “protect the public’s ‘paramount interest in seeing that patent monopolies … are kept within their legitimate scope’” by allowing anyone to file a petition for such review and authorizing any “party dissatisfied with [a] final written decision” of the Patent and Trademark Office to appeal the decision to the Federal CircuitSee CAFC. The committee report on the AIA follows the Founders’ original anti-monopoly understanding of the purpose of the earliest patent laws, and the Patent Act of 1836 that restored that original understanding, stating that Congress enacted the AIAAmerica Invents Act of 2011. AIA made modest reforms, most notably moving the U.S. to a first-inventor-to-file system more aligned with foreign practice, but also including expanding prior user rights to all patent-eligible subject matter, and instituting a post-grant review proceeding. in 2011 in response to a “growing sense that questionable patents are too easily obtained and are too difficult to challenge.”
Today, however, the Federal CircuitSee CAFC Court of Appeals has handed down precedents regarding the doctrine of “standing” – that is, the doctrine that a party seeking a legal remedy must show they have sufficient connection to and harm from the law or action challenged to support their participation in the case – that raise barriers to prompt patent appeals of allegedly invalid patents. One of those decisions, General Electric v. United Techs. Corp., holds that a company has to wait to be sued for infringement before it can challenge a patent as invalidly granted. Legislation in Congress called the PREVAIL Act, if enacted, and regulations proposed by the U.S. Patent and Trademark Office, if made final, would also prevent improperly granted patents from being promptly corrected and create a system that would perpetuate unjust monopolies, something the Founders would have adamantly rejected.
Requiring a patent holder to sue or threaten to sue another entity for infringement before anyone else can challenge an improperly-granted patent in court cuts directly against the Founders’ understanding of the need for broad access to federal courts for challenges to improperly-granted patents, which are unjust monopolies that cause immediate economic harm. As Bugbee writes:
There are, of course, various ways in which a patent of invention can be used to effect or assert a true monopoly, which takes from the public something which it previously had the right to enjoy. For example, the inadvertent granting of a patent … creates a monopoly which continues until the wrongly awarded patent expires, or is invalidated.
The original purpose of the patent laws was to encourage innovators, not to allow non-innovators to use improperly-granted patents to prevent others from pursuing true innovations themselves. But that is precisely what happens when challengers of improperly-granted patents are denied access to federal court, and when people lose sight of the Founders’ wisdom.
