Patent Law Outline
Patentability
I. Why study patents?
A. Important component of national economic policy
i. People think this but no one knows for sure if they are actually beneficial in all industries
ii. Political interests
B. Span the economy
i. Temporally
a. Even prior to the US becoming a nation
b. Basic rules behind the system haven’t really changed
c. Technology changes, but patent law remains the same
1. Either indicates that the laws are impressively adaptable or a mess
ii. Horizontally
a. Innovative incentive for pharmaceuticals
1. Requires money to back up the development of the compounds
2. Justifies the money spent on R&D and then able to protect against others creating it as well
b. Especially for certain industries
1. Pharmaceuticals
2. Information Technologies
3. Biotechnology
4. Software
5. Financial Products
α. HYPO: Tax patents – new way of doing a deal that’s really tax advantageous to the parties and obtain a patent. Are we concerned about that?
I. The tax lawyer without the patent may lose business if unable to use such a method
II. It is now public information and a taxpayer can do it without the assistance of an attorney
III. If the IRS now issues something that says that this is an illegal method
A. These strategies are now revealed to the public and the IRS can now see what everyone is doing and doesn’t like it
iii. Not a lot of patents in the artistic realm
a. Fashion and art are quickly evolving
II. Policy Changes in the Patent System
A. Development of the Federal Circuit
i. In response to the high unemployment rate in 1970s
a. Scientists and manufacturers were being innovative, but having a hard time monetizing their innovations
b. Attempt to fix the patent system to help with economic problems
ii. Exclusive appellate court for patent law issues
iii. Created some uniformity and certainty
a. This could make it hard to enforce, but know what the law is and how the court will treat your patent
B. There has been a substantial increase in patenting
i. Filing has increased at a rate greater than issued
a. Pending applications have increased the most
1. Could lead to a loss of faith and abandoning the patent
2. If the pendency is due to rejections then this leads to increased costs for obtaining an issued patent
α. Negative consequences of this
1. Patents may be issued due to pressure from patent community (they are political appointees) rather than substance of the patent applications
b. Patents per billions of dollars of R&D have significantly increased
1. Theories to why
α. Each patent is a smaller component within a larger invention
ß. Increase of number of applications leads to a direct increase in number issued
∂. Business techniques have changed; defensive purposes of having more patents
ø. The patents are for techniques less than the development themselves
π. Underlying changes in technology and research is less costly
C. There has been a substantial increase in patent enforcement
i. Theories why
a. More people are asserting their rights for their patents
b. Patents are becoming more important
c. Easier to get patents on a broader scope
d. Courts may be ruling more favorably for the patent holder
1. Gives people hopes of a more successful outcome
ii. Enforcement per in-force patents have risen
iii. Intensity of litigation has also risen
a. More suits filed for patent R&D that has stayed the same
b. But less than 1% of patents are litigated
1. Litigation costs: average 5.0 million per side where 25 million+ is at stake
α. About 2.5 million per side for smaller stakes
2. Conventional estimates make patents “upside-down” investments; they are worth less than zero dollars
α. Why patent if it is not worth it?
I. Lottery ticket theory
II. Protect against others
A. Perhaps without patent would lose opportunity to make and use invention
III. Having multiple patents around the same thing increases others’ value
iv. However, enforcement still lags behind other IP enforcement
III. Does the patent system work?
A. Patents have become a high profile public policy subject
i. Literature has been written on the topic
ii. Recent patent reforms indicate that there were problems
B. Justification of patent law
i. Labor theory (John Locke)
a. Normative approach
b. Own property in your labor because it comes from your body, which you inherently own
1. If you create something then your rights are better than anyone else’s in that thing
2. Should be compensated for your ideas
3. Is a limit: must be as much as and as good left for others
ii. Utilitarianism (Jeremy Bentham)
a. What’s good for the greatest number is good for all
1. Individual level is irrelevant
b. Main justification for the patent system
iii. Constitution, Article 1, § 8, cl. 8: “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries
a. Authorizes copyrights and patents
b. Awarding exclusive rights helps increase to optimal level of innovation
iv. Patents and Economics
a. Public goods
1. Non-excludable
α. Cannot say only certain people can benefit from the good
2. Non-rivalrous
α. Use by one does diminish the use of the good by another
3. Thought generally to be under-produced
α. People can free ride on these and so will not spend the money to make them since they won’t make money
ß. We think innovation is at a lower than optimal rate because it is a public good
4. Cannot meter the usage and charge for it
α. Overcome this problem with taxes and privatization (patents)
b. Patent system is one of incentives to overcome the public good problem
1. Incentives to Invent
α. Want people to come up with new ideas
2. Incentives to Disclose
α. To describe the invention so that anyone else can use it too
ß. Want to give the world technical information
∂. Can’t disclose it without protection and won’t pay before it is disclosed
I. Framework around contracts that otherwise would not work
3. Incentives to Commercialize (Incentive to Innovate)
α. To create the finished product to sell on the market
4. Incentives to Design Around
α. To improve on existing ideas
5. Incentives to Invest in R&D
α. If take some risk capital then can take the benefits of getting a patent
I. Risks you might not take otherwise
6. No one has any idea if the problem has been solved by the patent system
α. But these remain important analytical frameworks
ß. Patents act as a means to an end
I. Means is the property system/rights
II. Ends are progress, information and incentives
c. Three principle secondary economic problems
1. Monopoly
α. Can raise the prices/have market power
I. Can price a good at whatever they want and there is no substitute
ß. In a perfectly competitive market basically making no profit
∂. Monopolist has no substitute to pull them back to marginal cost
I. However, there are less people buying and consuming the product
A. Creates a deadweight or efficiency loss in the market
ø. In reality, this is rare and usually tends to hover around the equilibrium point
π. Patent law helps with this problem
I. Claims cannot be so broad to claim greater than the scope of what was actually made
A. Leaves room for competitors to design around and come up with ideas that work within the marketplace
B. Doctrine of Equivalents
C. Improvement/Blocking Patents
D. Patent Misuse and Antitrust
E. Novelty, utility and nonobviousness requirements
II. Temporary and will come to an end
A. Term limits
B. Double Patenting
2. Rent-seeking
α. General economic legal term: actions that people take to get profits
I. Anything you would do to price above marginal cost
II. Any investment you would make to try to make money on your products
III. EG paying lobbyists; drafting and filing a patent application to get a competitive advantage
ß. All companies are competing to come up with the same invention, therefore decisions to obtain R&D is rent-seeking
I. At the end of the day, winner takes all
∂. Patent law helps with this problem
I. NOTE: rent seeking is not too bad; can use knowledge and skills even if patent is not obtained
II. By limiting the scope
III. Publication of patent/disclosure
A. Once competitors know that there is an application then can make judgments about how to continue the research or stop research altogether
IV. Priority rules encourage early filing and thus early issuance
3. Inhibition of Future Innovation
α. Right to exclude others from making and using your invention
I. Can make future work more expensive
A. Methods of research may be patented and you will have to license it then
ß. Patent law helps
I. Can reduce your risk a bit because can perhaps appropriate more in the end
II. Cannot patent really trivial advances so maybe clears out the possibility of some patents being issued
A. Novelty and nonobviousness
III. Disclosure rules
A. Publication helps with future innovation
IV. Rules that help make boundaries clear
4. Blocking patents
α. Incentivizes cross licensing
ß. Huge part of the philosophy of the patent system
∂. Force people to transact and help overcome some of these concerns
IV. Other Issues
A. Patent Trolls (Non-practicing Entities)
i. Buy up cheap patents and try to enforce them against others for profit
ii. Not engaged in any business of using patents, just enforcing them through the courts
iii. Benefit: may pay innovators when they otherwise would have made no money on the patent
B. Universities
i. Perform research and come up with patentable inventions and then the universities do not personally make those devices
C. Small Inventors
i. Same idea as Universities
ii. Some believe that small inventors are considered to be more innovative than larger counterparts
iii. Are at the most risk with limited resources
V. Proper Disclosure § 112
A. “Specification. The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention….”
i. Includes an enablement requirement, a written description requirement, and a best mode requirement
ii. Why have a disclosure doctrine at all?
a. Helps encourage progress
b. Gives notice to potential infringers
c. Limits duplicative work; limits rent-seeking behavior
d. Trying to define the nature and quantity of the disclosure of the patent
iii. Want the right type and amount of disclosure
a. Don’t want to over disclose because transaction costs would be astronomical
b. Too little disclosure would not be able to avoid or make substitute products
B. Enablement
i. “…and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same…”
ii. Statutory standard
a. Language of the statute + no undue experimentation
1. Judicially engraphed from Incandescent Lamp
2. The disclosure in the Specification must enable a person of ordinary skill in the art to make and use the claimed invention without undue experimentation
α. Doesn’t matter if the inventor has or cannot make
iii. Question of law
a. Creates consistency
b. Can review appeals de novo
c. It’s an interpretation of a statute; we do not leave such interpretation up to juries
iv. The disclosure must support the claims for them to be valid
a. Must enable all concepts claimed
1. If the scope of the claim is such that it covers two concepts and one is not enabled, then you do not have any protection over the other one that is enabled (ATI, Inc. v. BMW)
v. Enablement fundamentals
a. Scope of the disclosure ≈ Scope of claims
1. Can claim more broadly than you disclose if there is a particular characteristic that allows you to claim an entire genus (Incandescent Lamp)
2. Cannot claim more broadly than you disclose if look at it as the disclosure is actually giving breadth of what you claim and the disclosure you’ve made is pretty informative
b. Amount of disclosure depends on the predictability of the art
1. Compare Cedarapids to ATI
c. Disclosure if measured at the filing date
1. If a claim is enabled at the time of filing, it is forever enabled regardless of developments
2. Patents may cover later developed technologies
α. If the general qualities disclosed in the first enabling disclosure and someone else finds species that didn’t know about until later
ß. EG Patent claims a fastener and wd contains “nails, screw, glue” but later Velcro is discovered; may arguably already be covered by the earlier patent