Supreme Court Turns Again to Patent Cases, Against the Backdrop of a Decline in American Patent Protection that Threatens Future U.S. Innovation and International Competitiveness

Alden Abbott —  22 November 2017 — Leave a comment

On November 27, the U.S. Supreme Court will turn once again to patent law, hearing cases addressing the constitutionality of Patent Trial and Appeal Board (PTAB) “inter partes” review (Oil States Energy v. Greene), and whether PTAB must issue a final written decision as to every claim challenged by the petitioner in an inter partes review (SAS Institute v. Matal).

As the Justices peruse the bench memos and amicus curiae briefs concerning these cases, their minds will, of course, be focused on legal questions of statutory and constitutional interpretation.  Lurking in the background of these and other patent cases, however, is an overarching economic policy issue – have recent statutory changes and case law interpretations weakened U.S. patent protection in a manner that seriously threatens future American economic growth and innovation?  In a recent Heritage Foundation Legal Memorandum, I responded in the affirmative to this question, and argued that significant statutory reforms are needed to restore the American patent system to a position of global leadership that is key to U.S. economic prosperity.  (Among other things, I noted severe constitutional problems raised by PTAB’s actions, and urged that Congress consider passing legislation to reform PTAB, if the Supreme Court upholds the constitutionality of inter partes review.)

A timely opinion article published yesterday in the Wall Street Journal emphasizes that the decline in American patent protection also has profound negative consequences for American international economic competitiveness.  Journalist David Kline, author of the commentary (“Fear American Complacency, Not China”), succinctly contrasts unfortunate U.S. patent policy developments with the recent strengthening of the Chinese patent system (a matter of high priority to the Chinese Government):

China’s entrepreneurs have been fueled by reforms in recent years that strengthened intellectual property rights—ironic for a country long accused of stealing trade secrets and ignoring IP protections. Today Chinese companies are filing for more patents than American ones. The patent application and examination process has been streamlined, and China has established specialized intellectual property courts and tribunals to adjudicate lawsuits and issue injunctions against infringers. “IP infringers will pay a heavy price,” President Xi Jinping warned this summer. . . .

In the U.S., by contrast, a series of legislative actions and Supreme Court rulings have weakened patent rights, especially for startups. A new way of challenging patents called “inter partes review” results in at least one patent claim being thrown out in roughly 80% of cases, according to an analysis by Adam Mossoff, a law professor at George Mason University. Unsurprisingly, many of these cases were brought by defendants facing patent infringement lawsuits in federal court.

This does not bode well for America’s global competitiveness. The U.S. used to rank first among nations in the strength of its intellectual property rights. But the 2017 edition of the Global IP Index places the U.S. 10th—tied with Hungary.

The Supreme Court may not be able to take judicial notice of this policy reality (although strong purely legal arguments would support a holding that PTAB inter partes review is unconstitutional), but Congress certainly can take legislative notice of it.  Let us hope that Congress acts decisively to strengthen the American patent system – in the interests of a strong, innovative, and internationally competitive American economy.

Alden Abbott

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I am a Senior Legal Fellow at the Heritage Foundation. I write on antitrust, domestic and international regulatory policy, and law and economics. I am an Adjunct Faculty Member at George Mason Law School.

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