Last night, President Obama called on Congress to reform the patent system to address the growing problem of patent trolls. The House of Representatives passed legislation last month designed to do just that. The president's comments may spur the Senate to take up companion legislation.
But both the House legislation and the package of reforms the White House unveiled last summer omitted one reform that could be crucial for fixing the troll problem: reining in the court that has done more than any other institution to create the problem in the first place. The Federal Circuit Court of Appeals enjoys a monopoly over patent appeals, and it has used that power to shift patent law in a direction more favorable to patent holders, including trolls. Taking away the Federal Circuit's monopoly over patent law would be a big step toward bringing balance back to the patent system.
The Supreme Court has been struggling to bring the Federal Circuit to heel for years. Just last week, the nation's highest court overruled a decision by the court that was favorable to the interests of patent holders.
It was far from the first time the justices have done this. Indeed, the high court has overruled patent-friendly decisions from the court 10 times in as many years. In contrast (based on this list of Supreme Court patent decisions) there has been only one case since 2004 when the Supreme Court overruled a Federal Circuit decision that had gone against a patent holder or applicant.
Congress created the Federal Circuit in 1982 and gave it exclusive jurisdiction over patent cases because legislators believed patent law had become so complex that only judges who specialized in the topic could master it. But good judging doesn't just require expertise, it also requires impartiality. And the Supreme Court's repeated reversals of patent-friendly rulings suggest that the court is biased toward the interests of trolls and other patent holders.
The problem with this isn't the 10 pro-patent decisions the Supreme Court has overturned in the past decade. It's the dozens of Federal Circuit decisions the nation's highest court didn't have time to review at all during that period.
Last week's decision focused on a narrow question of patent law: Who bears the burden of proof when an accused infringer asks a court to declare it doesn't infringe a patent? By itself, that question probably doesn't matter all that much. But the Federal Circuit decides issues like this month after month, year after year. In the aggregate, these decisions have a huge effect on how easy it is to obtain and enforce patents. Over the past three decades, the court's rulings have steadily strengthened the powers of patent holders. The court has approved new, litigation-prone categories like software and business method patents. It made patents easier to obtain, harder to invalidate and easier to enforce.
The result: an explosion of patent litigation that, according to one estimate, costs the nation $29 billion a year. The Supreme Court's rulings have checked the Federal Circuit's pro-patent bias to some extent, but it simply doesn't have time to review every ruling from the lower court.
Why does the Federal Circuit have a pro-patent bias? Its status as the nation's patent court is probably a major factor. Federal Circuit judges live and breathe patent law. They don't just hear patent lawyers' arguments in their courtrooms, they also mingle with them at conferences and social events. Moreover, the prestige of the court is tied to the importance of the patent system to the nation's economy. The stronger patents are, the more important the patent system, and by implication, the court that oversees that system, becomes. Little wonder that the Federal Circuit has, from its inception, been a cheerleader for patent rights.
It doesn't have to be this way. Responsibility over most other areas of law are divided among the nation's 12 regional appeals courts. If two different appeals courts reach opposite results on a legal question, that acts as a signal for the Supreme Court to step in and resolve the disagreement. This peer-review process helps the Supreme Court to focus on those decisions where its attention is most needed. And it gives regional appeals courts, who hate having their rulings overruled, a stronger incentive to stay within the lines Congress and the Supreme Court have established.
Patent law could work this way too. In fact, it did work this way before Congress created the Federal Circuit. An influential 2006 paper by Craig Nard and John Duffy concluded that Congress made a mistake when it gave the Federal Circuit exclusive power to hear patent appeals. While they don't advocate a return to the fully decentralized system that existed before 1982, they argue that a few more courts should be given jurisdiction over some patent lawsuits. Because those rival courts would only rule on patent issues occasionally, they would be less prone to co-option by the patent bar.
Until the Federal Circuit's work gets some scrutiny from rival appeals courts, other efforts to reform patent law are likely to fall flat. On paper, the appeals court is subservient to both the Supreme Court and Congress. But in practice, those institutions' decisions are put into practice by the Federal Circuit, which decides how lower courts will interpret Supreme Court opinions and congressional statutes. As long as the court has exclusive power to review patent decisions of the trial courts, it's likely to put its thumb on scales in favor of patent holders.