A History of Changes
Some historical perspective on the swings: One of the earliest and most significant changes that occurred during my career was the formation of the Federal Circuit in 1982. The birth of the Federal Circuit—with its nationwide, exclusive jurisdiction over patent appeals regardless of the originating district—was not an easy one. It was hotly debated and not just by patent attorneys. Some argued that it would place too much power in a single court, that the development and refinement of the law through the various circuits “talking” among themselves would be lost, and that the Supreme Court would have only a single lower court’s voice to consider when facing a patent law question. These were strongly held and voiced views.
They obviously did not win out. To understand why, one needs to recall events in the U.S. marketplace leading up to that time. Sony and other Japanese-manufactured electronic products were making significant inroads, as were Japanese cars and motorcycles. For example, in 1981, domestic automakers and the auto workers’ unions sought and obtained limits on the number of Japanese cars that could be imported. There was publicly expressed concern about whether America was losing its “technological advantage” over the rest of the world and how devastating that would be to our way of life if it continued unabated. Why was this happening, and how to fix it? Commissions were formed and congressional hearings held.
Some claimed our patent law was broken. There was a perceived anti-patent bias in at least some circuits. It was generally believed that forum shopping had become a patent litigator’s gotta-have skill and that patent litigation results were too often preordained based on where the case was brought. And this was getting national attention in the media.
Around this same time, technology was moving forward by leaps and bounds. Computing and the use of personal computers were spreading like wildfire, and computer networks and the Internet followed shortly thereafter. The digital age was upon us. Compact discs were introduced and MS-DOS licensed. With new technologies came new issues as to what was and was not patentable, or should be patentable.
This perfect storm led to the formation of the Federal Circuit, whose task was to “fix” the patent system and address the fast-moving technological advancements. Its initial decisions were more pro-patent than less. And in keeping with its raison d’être, and perhaps recognizing that the tech world was changing dramatically and wanting to support innovation, the Federal Circuit later decided what turned out to be a hugely important case. Judge Rich, considered by many as worthy of the Mount Rushmore of patent jurists, penned the decision in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), which held that mathematical algorithms that produced a “useful, concrete and tangible result” were patentable. The business method patent was born. Not even Judge Rich, however, could have seen where that would lead.
The combination of State Street and the mushrooming computer age created the environment that led to the modern-day patent acquisition entity—the PAE, or to some, the “patent troll.” Applications for patents on computer networking devices, computer-implemented programs, and Internet-based methods of doing business poured into the Patent Office—so many that a new division was formed just to handle them. And in keeping with State Street, the applications were issuing as patents. Now entire industries—rather than one or two potential infringers (being mainly competitors of the patent owner)—could be sued for infringement of a single patent. The economics panned out well for the PAEs and not so well for the accused infringers. A low-six-figure settlement of even a dubious patent claim was often preferable to defending the case at a potentially much higher cost. These cases proliferated.
But, eventually, the hue and cry against these tactics gained ground, until it has reached what some commentators view as an “anti-troll frenzy.” The courts and the politicians took notice, and they took action. The pendulum has clearly swung the other way, and hard.
For instance, in 2011, Congress made fundamental changes to the patent laws with the Leahy-Smith America Invents Act, Pub. L. No. 112-29, which was generally perceived as largely anti-troll. And more legislation is being proposed. Even state legislators and state attorneys general are getting into the act, proposing and taking additional “anti-troll” steps.
The Supreme Court has also taken keen interest, deciding nearly 20 patent cases in just the past five years. To put it in perspective, this is roughly double (or more) the number in most prior decades. Most of the recent cases have been viewed as being anti-patent. The Supreme Court’s Alice decision has been a true game changer. See Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 134 S. Ct. 2347 (2014). The Federal Circuit has followed suit, and the district courts are also again finding patents invalid at historically high rates, with over 70 percent of Alice-based motions to invalidate granted in the year following the decision. In fact, this phenomenon has earned its own hashtag: #alicestorm.
There are some signs now, however, that the law of unintended consequences, which always accompanies any major shift in the law, may be rearing its head. How the pendulum swings from here cannot be predicted. In this state of flux, here are five top things that lawyers should know about the current state of patent law:
- Don’t trust what you think you know about patent law. All of us gain a certain familiarity with the law in areas outside our core practice through osmosis and experience. The changes in patent law have been so fundamental and recent, however, that unless you are staying abreast of them, don’t rely on what you think you know.
- It is now a race to the Patent Office. The first to file wins. If there are competing claims to the same invention, until recently the person who was the “first inventor” was accorded the patent. Not so now. Subject to only a few narrow exceptions, the patent will be awarded to the first to file.
- File the patent application before there is any offer to sell, sale, or “public” disclosure of the invention. While this has always been advisable, it is critical now. The one-year grace period that applied in the past no longer exists, and the effective filing date now controls (subject to a few limited exceptions).
- There are new trial-like proceedings within the Patent Office in which patents are increasingly challenged. Inter partes review (IPR), created by the America Invents Act, allows one to challenge issued patents before administrative law judges. The number of filed IPRs has increased dramatically and quickly, and the published statistics on decisions have shown that a fairly high percentage of patents are being declared invalid.
- What is now patentable subject matter under the recent Supreme Court decisions is at best unclear. These decisions have confirmed that abstract ideas, laws of nature, and natural phenomena are not patentable, and that if the invention substantially involves such a concept, it must also include an “inventive concept” that is significantly more than the ineligible concept. What does that mean? Patent lawyers and the judiciary alike bemoan the lack of clarity, with some saying that this test is evocative of Justice Stewart’s most famous phrase, “I know it when I see it,” as a way of identifying something less technical but perhaps a bit more provocative.
Stay tuned. One thing for sure is that more changes in patent law are on their way.