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July 01, 2014

From the Bench: The Patent Cases Pilot Program

Many claim a crisis is roiling the U.S. patent system, but a judge argues that the program created to address it is too small to make a difference.

Hon. Matthew F. Kennelly

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There’s a crisis in the U.S. patent system—at least that’s what we are told. Depending on who’s talking, the crisis stems from some or all of the following: the issuance of too many patents, inadequate funding of the Patent Office, litigation brought by so-called patent trolls, case law permitting easy patentability of software, extraordinarily high litigation expenses, runaway juries, legal standards that authorize excessive damages, and federal district judges who are in over their heads dealing with this complex subject matter. Allegedly, this crisis hurts innovation and risks our country’s competitive advantage abroad. We’re told that it’s time for a change.

The Patent Cases Pilot Program, adopted by Congress in 2011, is an effort to address one of the supposed problems—judges who do not want to preside over these cases. The legislation authorizes federal courts in certain districts to reassign patent cases from judges who opt not to keep them on their docket to other judges who are willing to tackle them. In other words, the program modifies the current random assignment of cases. In fact, it appears to be the only exception to random assignment provided for by congressional enactment.

When this legislation was adopted, the initial assumption of most patent lawyers with whom I spoke was that in the authorized districts, only certain judges—presumably those with interest and expertise—would hear and decide patent cases. Patent lawyers tended to think this was a good thing. That, however, is not how the pilot program works. To understand how it actually operates requires a brief sketch of the legislation and its goals, and an analysis of whether those goals are actually being met.


The Legislation and Goals

The patent pilot program was authorized by legislation adopted in January 2011, see 28 U.S.C. § 137 note (Pub. L. No. 111-349), with the stated goal of increasing district judges’ expertise in patent law and, thereby, improving the quality of decision making. Representative Darrell Issa, one of the principal sponsors of the legislation and a patent holder himself, wrote in a 2007 article that “[t]he core intent of this pilot is to steer patent cases to judges that have the desire and aptitude to hear patent cases.” In an effort to bolster support for the program, Rep. Issa, also a litigant, cited the Federal Circuit’s 35 percent reversal rate of district judges’ claim construction rulings and referenced his own experiences with district court judges who repeatedly delayed resolution in his cases and made “glaring mistakes.” Darrell Issa, “Why I’m Pushing for the Patent Pilot Program,” Law360, A review of the congressional hearing record reveals similar sentiments expressed on the floor of the House of Representatives when the legislation was passed.

The authorizing legislation directed the Administrative Office of the U.S. Courts (AO) to designate at least six district courts from at least three circuits to carry out a program in which a district judge would be authorized to opt out of any patent case assigned to his or her docket, if the judge so desired. The case would then be reassigned to a judge who had volunteered to take patent cases. In June 2011, the director of the AO selected 14 districts to participate in the program. The district where I sit, the Northern District of Illinois, is one of them.

The program was originally authorized for a 10-year period, although pending legislation would extend this to 20 years. During this time, the AO and the Federal Judicial Center (FJC) are required to submit two formal reports—one after 5 years and another after 10 years—analyzing “the extent to which the program has succeeded in developing expertise in patent . . . cases” among the volunteer judges, “the extent to which the program has improved the efficiency of the courts involved by reason of such expertise,” the interval between filing and trial or summary judgment, a comparison between volunteering and non-volunteering judges on their appellate reversal rates, and “any evidence indicating that litigants select certain of the judicial districts” designated under the program “in an attempt to ensure a given outcome.” 28 U.S.C. § 137 note, § 1(e)(1)(A)–(D). The AO and the FJC are also charged with assessing whether the pilot program should be extended to other courts or should be made permanent and apply to all district courts. Id. § 1(e)(1)(E).

The pilot features result in four categories of judges: those who opt out of all patent cases; those who opt out of some, but not all, patent cases; those who have agreed to accept reassigned patent cases; and those who do not opt out of any patent cases but have not agreed to take on extras. The first two categories—judges who opt out of all or some patent cases—have turned out to be rather small in my district; the last two—the “volunteering for more” and the “stand pat” judges—are bigger. Therefore, even though the Northern District of Illinois is typically among the top five or six districts nationally for patent case filings, the pilot has not had a significant effect on case assignments. In fact, in the two-plus years the program has been in effect, I’ve only received eleven patent cases through reassignment, and four of these cases came from senior judges who are permitted by law to opt out of individual cases anyway. Thus, I can really attribute only seven cases to the patent pilot program. In short, not much reshuffling of cases has actually happened. Plenty of judges in my district like patent cases or at least find them interesting. As a result, very few judges have opted out, and quite a few have signed up to take on extra cases. So, although some cases are reassigned through the program, they are spread fairly thin.

The ultimate question remains: Has the pilot program done anything to increase my level of expertise in patent cases? Not really. I’ve received only a few cases by reassignment, and nearly all of them settled, as is true with the overwhelming majority of civil cases. And the settlements all occurred before I conducted any patent claim interpretation or made other substantive patent-law rulings. Given this reality, it is hard to see how the pilot program could have any significant effect on any given judge’s level of expertise in patent law or practice. For my district at least, I think it’s going to be difficult to tell whether the pilot has accomplished what the legislation’s sponsors hoped. Although I do not have direct knowledge of how the program has operated in the other 13 districts, I suspect the same is true in most of them. In several of the districts involved, a third to a half, or more, of the district’s judges have volunteered to take on extra patent cases. Depending on how many patent case filings each district starts with and how many judges opt out of patent cases, not all that many cases likely are being transferred in those districts either.

An Invalid Premise?

On a broader level, I question the program’s basic premise. It is difficult to imagine how a marginal increase in assignments of any particular type of case to a federal district judge’s docket would be likely to improve, in any material way, the quality of the judge’s decision making on that type of case. Don’t get me wrong—I certainly think that I was better at patent law after my 10th patent case than when working on my first. But federal district judges are generalists who handle all types of cases. Thus, it’s difficult to become a true “expert” in any one area of substantive law—unless, of course, one gets a lot of cases in that particular area. For example, judges in the Eastern District of Texas and the District of Delaware, where each judge has scores of patent cases at any one time, are likely to develop an intimate familiarity with patent law. For most of the rest of us—not so much. Adding a handful of cases to a given judge’s docket won’t change that.

Although a key factor cited by the legislation’s sponsors was the district court judges’ reversal rate on claim construction, the fact that Congress opted for the pilot program rather than a permanent change to the court system suggests some uncertainty about whether practice makes perfect for district judges. In fact, there is reason to doubt the legislation’s underlying thesis that redirecting more patent cases to a subset of district judges will result in fewer appellate reversals. Those who have looked at this question have come to varying conclusions. One extensive study, which focused on appeals regarding patent interpretation (the main factor Congress cited), came to the conclusion that practice in this area does not, in fact, make perfect and that appellate reversal rates in that area don’t decrease with a judge’s experience. See David Schwartz, “Practice Makes Perfect? An Empirical Study of Claim Construction Reversal Rates in Patent Cases,” 107 Mich. L. Rev. 223 (2008). Another study, which looked at patent appeals generally and not just patent interpretation cases, came to the opposite conclusion. See Adam Shartzer, “Patent Litigation 101: Empirical Support for the Patent Pilot Program’s Solution to Increase Judicial Experience in Patent Law,” 18 Fed. Cir. B.J. 191 (2009).

It may be that, despite the equivocal evidence, members of Congress (or at least the legislation’s sponsors) were already convinced that greater aptitude for and interest in patent cases will have a positive effect on a judge’s appellate reversal rate. If that is so, the patent pilot project certainly is not designed in a way that will actually capitalize on this putative cause-and-effect relationship, nor will it demonstrate it to the public. First of all, the sponsors’ original intention was to provide technical assistance to pilot program courts—specifically, funding for patent-oriented law clerk positions that would be staffed with lawyers with technical backgrounds or experience in practicing patent law. Whether that would have helped or not doesn’t matter—the funding was eliminated before the legislation was adopted. All that remains is the promise of additional training in patent law and case management from the FJC. I’m a big fan of the FJC, which does an outstanding job of judicial education, but it has a limited budget and can only train so many judges in any particular specialized subject. In any case, it is difficult to see how a few lecture sessions can confer patent law expertise on district court judges or insulate them from appellate reversal.

That aside, if one is convinced that handling more patent cases makes for fewer appellate reversals, then it would have made more sense to limit the number of judges who could be designated in each participating district to handle all patent cases. This would concentrate the assignment of those cases to a smaller handful of judges who would, in fact, end up becoming more specialized. Alternatively, if Congress was truly convinced that practice makes perfect, then it could have just taken the leap of faith and put all patent cases into specialized courts. That would “solve” the purported expertise deficit.

Now, don’t get me wrong; I do not advocate either of these alternatives. Frankly, it’s questionable whether creating specialized courts would affect the appellate reversal rate. Two recent articles studied Federal Circuit reversal rates on patent interpretation and other decisions in patent cases by administrative judges at the International Trade Commission who handle large numbers of patent disputes and thus, presumably, have developed significant patent law familiarity. Those judges are, however, reversed by the Federal Circuit just as often as federal district judges. See David L. Schwartz, “Courting Specialization: An Empirical Study of Claim Construction Comparing Patent Litigation Before Federal District Courts and the International Trade Commission,” 50 Wm. & Mary L. Rev. 1699 (2009); Holly Lance, “Not So Technical: An Analysis of Federal Circuit Patent Decisions Appealed from the ITC,” 17 Mich. Telecomm. & Tech. L. Rev. 243 (2010). So perhaps practice doesn’t actually make perfect. But that’s not really my point. My point is that given the way the pilot program is set up, it is no more than a small-bore remedy for the problem perceived by the law’s sponsors, one that is unlikely to have any material impact on judicial expertise.

Reasons for Appellate Reversal

All of this aside, in my humble opinion, the appellate reversal rate on decisions interpreting patents does not have a whole lot to do with the lack of patent case expertise or judicial dislike of these cases. Rather, it is a function of other factors. First, any skill set one develops in interpreting words in a particular patent, let’s say a pharmaceutical patent, doesn’t really translate into interpreting words in a different patent—for example, a software patent. In addition, a lot of the errors found in appellate reversals derive from vagaries inherent in the decisions governing that subject. I will avoid discussing the tensions among competing doctrines of patent interpretation because that’s an entire article by itself. But a contributing factor to this dilemma is that the Federal Circuit has consistently held that it will review patent interpretation decisions de novo; in other words, from scratch. Not to be flip about it, but when some amount of deference is given on appeal to a trial judge’s ruling, the reversal rate is lower. In our legal system, the degree of deference ordinarily turns on whether and to what extent the trial judge’s decision involves, on the one hand, factual determinations, evidentiary rulings, or procedural determinations, or on the other hand, determinations of law. That general rule has, in my view, been disregarded in this area. The standard for determining the meaning of a particular term in a patent is how a person with an average level of skill in the relevant field (e.g., chemistry, mechanical engineering, or, increasingly, software) would have understood the term as it was used in the patent. It doesn’t take a legal genius to figure out that this involves, to a significant extent, a factual inquiry. To take an example from a case I recently addressed: How would an average computer programmer have understood the term “documentation” as it relates to software? Despite this fundamentally factual inquiry, the Federal Circuit has ruled that the interpretation of a patent is a question of law that it will decide de novo (though, to be fair, at the time of this writing, it has this issue under en banc review).

Few judges, whether on the district court or the court of appeals, have expertise in the underlying subject matter involved in the patent. We are all trying to figure out how others who actually have such expertise would have understood the patent. As long as we have nonexpert judges conducting de novo review of patent interpretation rulings by other nonexpert judges, it is likely that the reversal rate will remain high. The pilot program is unlikely to have any real effect on this.

Given these factors, I suspect that the only meaningful effect of the pilot program will be that judges who do not want patent cases, certain types of patent cases, or particular patent cases will be able to avoid them, and those cases will be handled by other judges who are more interested in taking them. The patent bar and the public should not expect from this an improvement (if that’s what an increase in appellate affirmances means) in district judges’ rulings in patent cases. Simply put, there’s no evidence out there that a judge’s like or dislike of a particular type of case has any material impact on the quality of the judge’s substantive rulings as measured by appellate reversal rates. That said, I acknowledge that Rep. Issa has a point when he says that if a judge has a distaste for a particular type of case, he or she may be more likely to put it on the back burner, either just to put it off for another day or in the hope that it will go away on its own. I certainly observed this when I was on the other side of the bench practicing law. A judge who is more engaged is, well, more engaged. I think that most lawyers would agree that, all else being equal, it’s better to keep cases moving than to let them stagnate. If the pilot project contributes to improving this, then it will accomplish something of value, albeit minimal value given the factors I cite above. Maybe this modest adjustment is enough to justify the patent pilot (though one wonders why, then, would Congress not extend it to other types of cases).

A lingering question still underlies this entire conversation. Is there, in fact, a downside to the limited degree of specialization among federal district judges that is somehow promoted by the Patent Cases Pilot Program? Reasonable minds could differ, but in my opinion, this type of pilot program is not a good idea. First of all, when the pilot ends, if changes to the case assignment system are not made permanent, judges who opted out of patent cases are going to find themselves handling them again, with a 10-year experience gap. That won’t be beneficial to anyone. On a broader and more philosophical level, I think that having generalist judges preside over non-specialized dockets is one of the great strengths of our federal court system. There are good arguments to be made on both sides of this debate, but I can’t put the argument in favor of generalist judges better than Judge Diane Wood has:

[P]owerful arguments against fundamentally changing the role of the Article III judge also exist. In my view, the strongest one relates to the accountability of the courts to the rest of society. Generalist judges cannot become technocrats; they cannot hide behind specialized vocabulary and “insider” concerns. The need to explain even the most complex area to the generalist judge (and often to a jury as well) forces the bar to demystify legal doctrine and to make the law comprehensible.

Diane P. Wood, “Generalist Judges in a Specialized World,” 50 SMU L. Rev. 1755 (1997).

As Judge Wood further points out, other advantages come with generalization, including avoiding “regulatory capture” of the specialized judge, ensuring that the law in a particular field is consistent with the broader goals that lie behind that area of law, and enabling cross-fertilization of ideas. And there are plenty of tasks that trial judges do that don’t vary by the type of case the judge is considering. Generalist judges, as Judge Wood notes, “are specialists in judging”—marshaling the facts, identifying the key legal arguments, and coming to a conclusion. I mean no slight to my more specialized colleagues, but a broader perspective contributes to a judge’s development of these critical skills.

So if the pilot program is a harbinger of future efforts toward specialization, there’s reason to be concerned. In the meantime, however, I’m willing to play out the string and see how the experiment works. But no one should harbor the illusion that the Patent Cases Pilot Program will cure much of what allegedly ails patent law.

Hon. Matthew F. Kennelly

The author is a district judge in the U.S. District Court for the Northern District of Illinois, Chicago.