By Professor Robert Merges
When no less an authority than Hal Wegner of Foley and Lardner starts worrying about the current direction of the Supreme Court on patent issues, it’s time to sit up and take notice. I have heard some of these concerns in the past few years, especially in the wake of the eBay injunction case. But when Hal sent around his widely-read “top 10 cases” email recently, I could see that his outlook had taken a serious turn for the worse. Here are some quotes from the recent Wegnerian missive:
“eBay philosophically piggybacks off an anti-exclusionary right climate in the electronics/software/manufacturing industries that has had a constant, anti-patent drumbeat in the academic and business communities and in the mainstream press. The Court has listened. . . .
[A] decidedly anti-patent core nucleus from the Douglas era is reforming at the Court that - save for Justice Stevens - had disappeared in the wake of the 1980 Chakrabarty and 1981 Diehr decisions . . . .
I believe this is a fairly mainstream view, at least among some chem/biotech/pharma practitioners. And despite how much Hal knows about all things patent (things he has generously shared with me and other academics over the years), I have to disagree with his assessment. Even more, though, I am worried about the larger implications of these views. The wedge between the pharma/biotech/manufacturing and the software/electronics views of the patent world is on one level just a normal development in a vibrant and growing field. But beyond a certain point, it is not a good sign. This is especially true when it is combined with the view that the current Supreme Court is anti-patent. Taken together, this attitude reminds me of the bad old days, the days whose shadow we in this field have only recently emerged from: the days when patent lawyers huddled together, defensively, while a hostile world seemingly bent on the destruction of this area of law (and these incentives for inventors) lobbed random attacks their way.
I think this period, which the field survived (some would say, just barely), casts a long shadow over today’s developments. But in my view at least, there is much more sunlight today than in the bad old days of the Douglas-Black anti-patent jihad. We have not seen, in any of the Court’s recent opinions, discussion of patents as “monopolies,” along the lines of Justice Douglas’ concurrence in Great Atlantic & Pacific Tea Co. v. Supermarket Equipment Corporation: “Every patent is the grant of a privilege of exacting tolls from the public. The Framers plainly did not want those monopolies freely granted.” Compare this with a statement from the unanimous opinion in one of the “new wave” of Supreme Court patent cases, the Festo case from 2002:
Each time the Court has considered the doctrine [of equivalents], it has acknowledged this uncertainty [over effective claim scope] as the price of ensuring the appropriate incentives for innovation, and it has affirmed the doctrine over dissents that urged a more certain rule.
In my view, it makes no sense to equate Douglas’ fifty year old dictum in a concurrence with this recent statement from a unanimous Court opinion. To reiterate: the recent statement of binding law talks of preserving “incentives for innovation,” and not hunting down spurious monopolies.
If there is an “Exhibit A” in Hal’s alarmist argument, it is the recent eBay opinion. Indeed, eBay seems to be the driving force behind most of the anxiety over the current direction of the Supreme Court. On one level, this is perplexing; after all, an opinion extolling “traditional principles of equity – the heart of the Court’s holding in eBay – hardly seems like a radical, “anti-property” legal ruling. But I think that the concerns Hal expresses have a deeper cause: the divergence in interests, and growing split, between pharma/biotech and electronics/software industries. I will return to this theme momentarily. But first, a few words about the post eBay environment are in order.
Recent cases show that for the most part the fears of the patent bar in the immediate aftermath of eBay are not being realized. (Joe Scott Miller's running web page tally of post-eBay cases shows this. As Professor Miller’s data show, district courts have granted plenty of preliminary and permanent injunctions following eBay. Injunctions have been denied in cases weak on the merits, which of course is nothing new; and in a few cases where patents provide disproportionate leverage or are asserted by entities that do not contribute in any appreciable way to innovation: exactly the result intended in the eBay opinion, in my view. And note to Hal: since pharma/biotech firms are real innovators, they have nothing to fear from eBay.) For the most part, people in the patent world recognize this: how can one rationally complain about the continued increase in patent applications while arguing that eBay has significantly undermined the value of all patents? If that latter argument were true, application volume would be dropping, not rising. The opinions in Warner-Jenkinson and Festo, other opinions, and even the remarks about the need not to upset the apple-cart in the oral argument in KSR show a concern with balance that belies a wild-eyed anti-patent bias.
My reading of the evidence – including eBay and its aftermath – is that this is a pro-business Court. I think the Supreme Court has created, overall, a very moderate body of patent law in recent years. (Examples: taking claim construction from juries; preserving the doctrine of equivalents, first from a frontal attack, and then by preventing prosecution history estoppel from swallowing it; trying to draw a reasonable line in the on-sale bar area; etc.) It has absolutely not shown itself to be systematically “anti-patent.” What it has done is to try to keep order and balance in a fast-paced field, weighing the interests of various branches of industry and various users of the patent system. This is, by all assessments, a pro-business Court. It would be shocking if the Court had deviated from this baseline commitment in one important branch of business cases, those involving patents. In my view, it has not.
The Supreme Court’s Real Concern: The Federal Circuit
Later in his letter, Hal has this to say:
[T]he passage of a generation and an open and some would say deserved hostility of the academic community toward the Federal Circuit has transformed this Court of Appeals into just that, an intermediate appellate court where the Supreme Court now pays perhaps closer attention to its jurisprudence than any regional circuit, except possibly the Ninth Circuit.
Here Hal is onto something significant. The real target of the Supreme Court’s caselaw seems to be, not the patent system generally, but the jurisprudence of the Federal Circuit. It is crucial to keep this in mind: whatever one thinks of the Federal Circuit, or of how much its caselaw needs “correcting,” targeting that Circuit is not the same as targeting patents or patent law generally. This is a vital distinction between the “bad old days” of the Douglas/Black era and today.
The Federal Circuit may well be the “new Ninth Circuit.” Despite the Federal Circuit’s overall success in stabilizing patent law, and setting it on a more coherent course, in my opinion the legal rulings of that Circuit often cause unnecessary confusion. Vacillation and variation are well-recognized in a number of important areas: claim construction, the “written description” requirement, means-plus-function claims, inherency, and product-by-process claims, just to name a few. There may be good reasons for some of this variation. They may be structural, having to do with the difficulty of the subject matter, or the absence of competing ideas and different perspectives caused by being the only appellate court in the area. (For some original analysis of these issues, and a sure-to-be-provocative proposal, see Craig Alan Nard and John Duffy’s recent working paper calling for patent issues to be spread among two or more appellate circuits: “Rethinking Patent Law's Uniformity Principle.”) Perhaps the Federal Circuit’s problems are more idiosyncratic, having to do with the composition or workings of this particular group of judges. Whatever the cause, the Supreme Court, in stepping up the scrutiny on that Circuit, is just doing its job of supervising and tending the overall functioning of the federal court system.
So in my view it makes no sense to criticize the Supreme Court, which is trying to steer the Federal Circuit in the right direction. It is especially perplexing to hear some of the same voices complain about the Supreme Court as also complain about the variations in Federal Circuit cases. These dual complaints (“the Federal Circuit needs a lot of work” and “The Supreme Court is anti-patent”) make the patent community sound incredibly negative. It reminds me of the old 
Woody Allen joke about the food at summer camp: “The food was awful. And the portions were small too.” The Supreme Court is the only force actively working to steer the Federal Circuit onto a reasonable course. For those of us who believe patent law is an important and worthy field of law, we ought to be grateful for the attention.
To summarize: I believe the Court looks at patent cases from a centrist, inclusive, business-oriented perspective, which is a far cry from saying they are anti-patent. Criticism of individual patents, as in the KSR oral argument, or the dissent from the dismissal of certiorari in Metabolite does not in my mind reveal an underlying anti-patent bias. It does reveal a concern with the quality of some individual patents – which is a different concern.
But of course, in this the Court is not alone. Although it is tempting to say that those who are “anti-bad patents” are really in some sense “anti-patent,” I would disagree. As this is the core of the contentious divergence between pharma and electronics mentioned earlier, I turn to that issue now.
Looking at the Bigger Picture: When Molecules and Electrons Collide
It is no secret that the pharmaceutical and biotechnology industries have very different interests than those of electronics and software. Pharma products are typically covered by one or at most a handful of patents; the “billion dollar molecule” means that in pharma, there is such a thing as “the billion dollar patent.” Not so in electronics and software. Hundreds or thousands of patents may read on individual features of a complex microprocessor, consumer electronics device, or software product.
Because the Supreme Court’s cases have in recent years tried to strike a balance between various aspects of the patent system, they have of necessity waded into this area of contention. In many ways, concerns about the Supreme Court are really only part of a larger set of concerns on the part of pharma/biotech. The people who make their livelihood from these industries appear to me to be worried that the newfound efforts at “balance” are coming directly at their expense – that whatever balance the system as a whole may be gaining is coming at the cost of certainty and stability in their core areas of concern.
I want to make two points about that. First, I do not think that this is a “zero sum game.” I think the patent system can be tweaked and adjusted so as to address the concerns of the electronic/software industries, without undermining the economic position of pharma/biotech to any appreciable extent. Second, I believe that this “us against them” mentality could have some serious negative consequences. (This mentality is on prominent display in a recent brief filed by Eli Lilly in the Microsoft v. AT&T case in the Supreme Court – a frontal assault on the patentability of software, by a large pharmaceutical firm. Fortunately, it is unlikely the Court will take much notice, since the case centers on a discrete section of the Patent Act relating to infringing exports, and has nothing whatsoever to do with Section 101 issues.) Whatever the strains of bringing disparate industries under “one big patent tent,” based on what we know now they are worth it, compared to the alternative.
On the first point: despite real friction in recent years, I believe both sets of industries can be accommodated in a reasonable patent system. The key point is for the pharma/biotech industries to recognize that the software and electronics industries are not anti-patent, they are anti-bad patent. There is a world of difference between these two. (If you don’t believe that, look in on the debates between rabid open source and “free software” advocates and those trying to defend the value of patents in the software and other industries. It is maddening for software industry people that they are attacked as club-wielding monopolists by those who attack patents from within the software industry, and then accused by pharma of being latter-day acolytes of the Douglas/Black anti-patent school!)
On the other side, those in the electronics/software industries need to put themselves in the shoes of pharma/biotech. As carefully as “patent trolls” strategize to acquire patents that aim directly at the Achilles heels of an electronic or software product, so do generic drug companies take aim at the patents of pharma/biotech. Any tool designed to “weed out” weak patents from the hands of trolls can and will be turned around and used against pharma/biotech patents, by generic drug firms only too happy to swoop in after all the hard (and expensive!) work is done and cash in on a pharmaceutical product or therapy. And unlike in the electronics/software industries, this cut-throat competitive game goes on in pharma/biotech in an industry that comes under intense public scrutiny concerning drug pricing, marketing and safety. Sometimes it seems as if the press and other observers are doing their best to turn Big Pharma into the next tobacco or asbestos industry – ironic when you realize that pharma/biotech is at heart all about saving and extending lives, not endangering them. Against this backdrop, it is easy to see why the pharma/biotech industries are concerned. Patent law is one of the last bastions against a fairly hostile onslaught. Of course they are worried about any weakening along this front.
One “solution” that might seem commonsensical is to split the patent system. Although it is tempting to do so, to “send the combatants to opposite corners of the ring,” in my mind we don’t yet know enough about how this would work to advocate it seriously. There are too many open questions: would the patent office issue two separate types of patents? How would the borderline between them be policed? Would they be enforced differently? What standards of validity and infringement would apply to each? And on and on. These issues will have to be studied very carefully before one can confidently advocate a truly split patent system. Maybe something along these lines will make sense someday. In the meantime, piecemeal, careful reform of individual patent doctrines and procedures seems a far more sensible course.
Because of this uncertainty, it seems to me divisive and dangerous for pharma/biotech to alienate potential allies. The electronics and software industries are after all huge players in the economy, and they have earned a substantial place at the bargaining table over patent issues. This new reality is being felt in the patent world, and will continue to be felt. The old days of the large east coast law firms and a few dominant (mostly east coast) companies setting patent policy are over. This is a sign of success: our economy is growing and changing, and patents continue to be important in many sectors. Public policy will and should change accordingly. That’s the way the system is supposed to work.
The downside of divisiveness is also worth considering. Do the pharma/biotech industries want to drive electronics/software companies into a political alliance with generic companies? Do pharma/biotech firms want to embrace the “patent trolls,” and risk associating themselves with entities seen as interested only in exploiting weaknesses in the system to make money than in actually pushing ahead with useful new technologies? (The lessons of the tort reform movement are relevant here: it may take too much time, but eventually those who use the legal system only to extort money from productive sectors of society will be shut down. Why would you want to ally yourself with players operating under a surefire expiration date?) These kinds of political bedfellows pose serious risks all around, in my view. Better to compromise over the details of patent reform than risk open warfare of this sort. That could be bad for everyone who believes the patent system is a fundamentally worthwhile institution.
Going Forward
To summarize: What worries me about Hal’s views is that they overemphasize the shadows currently cast over the patent system, and invite comparisons with an era that I think was very different. And to the extent Hal’s views exacerbate a split between powerful industry groups with interests in the patent system, they point us in a dangerous direction n.
I may not agree with my old friend Hal in this matter. But the point is that we do (I think) both share an important fundamental belief in the viability and continuing potential of the patent system. (That’s one of the many things he passed along to me in my early days in this field.) In my view, the Supreme Court shares this view too. We need to continue to work with the Court, and with each other, in the good faith belief that we are all engaged in a worthy common enterprise. What do you say, Hal?
Note: Robert Merges is the Wilson Sonsini Goodrich & Rosati Professor of Law and Technology and Director or the Berkeley Center for Law & Technology.
