The US patent system is a load-bearing feature of the innovation ecosystem and American industrial policy. It’s not always the right tool for the job, but in an economic system which is built on decentralization, tinkering, and rewarding risk-takers, it works quite well. Patents, as public franchises, use the logic of private property to achieve a specific policy end.
The lack of romance in my view of patents shouldn’t imply that I do not believe they aren’t a valuable institution. Public franchises are “means to carry out public ends…originat[ing] with the state rather than the individual…trusts of civil power to be exercised for the public benefit” in the words of Caleb Nelson, and if such “trust of civil power” are built on valuable inventions they provide incentives to create markets, transfer technology to those who would make good use of it, and signal quality.
But that’s a big if. Because patents are structured as a form of market exclusivity, they functionally create a tax to finance the benefits of patents paid by all. If you’re a consumer, you pay a tax in the form of prices exceeding those of a market with free entry. Licensees pay a fee to use a patented technology, of course. And would-be competitors pay a regulatory tax in the form of limits placed on what they can produce using their own capital. This last point is particularly important for those who care about private property (myself included). As my colleague David Bookbinder and I wrote in our amicus brief in United States v. Arthrex:
Immersed as we are every day in a sea of patented items, it is easy to forget that each one of those items represents a denial of the most fundamental of all property rights: to do whatever we want with the things we own. If Smith invents a widget and sells it to Jones, it now belongs to Jones and, like anything else she owns, she has the right to do whatever she wishes with it, including making and selling as many identical widgets as she wants. But if Smith patents that widget, then Jones may not also make or sell those widgets. Thus, by definition, patents eliminate peoples’ fundamental right to do whatever they want with their own property. [Emphasis in original]
This logic shouldn’t be extended too far, as all property creates limitations on private conduct in some form. As the old saying goes, my right to swing my fists ends where your teeth begin. And if a time-limited grant of regulatory exclusivity expands the frontiers of technology (i.e. what people can create with their property), it’s a deal well worth making.
But this makes patent quality all the more important. “[W]hen the U.S. Patent and Trademark Office (USPTO) improperly grants Smith a patent for his widget,” Bookbinder and I wrote, “it eliminates Jones’ inherent right to do what she wants with that widget, but without the corresponding public policy benefit.” An institution as important as the US patent system deserves special care to ensure it’s fulfilling the role assigned to it by the Constitution. If an invention described in a patent does not “promote the progress of…the useful arts” then we can say that it is not fulfilling its constitutional role.
Giving patents “the attributes of personal property” is a useful legal construct to make the adjudication of disputes within the patent system easier. But the treatment of patents as property in policy debates, where lawmakers have wide authority to determine what inventions may be eligible for a patent and the legal rights attached to it, and public discourse more broadly, where terms like “theft” are used to drum up outrage over “infringement,” has its downsides. Not only is the analogy to physical property inappropriate due to fundamental differences between physical and ideal objects, but it can easily exclude from the conversation those who have their own property rights violated through the enforcement of bad patents which, in the words of Justice Gorsuch, “sometimes…slip through.”
These harms are not hypothetical. Most people will (hopefully) not ever become the victims of a non-practicing entity with a patent portfolio looking to collect some unearned rents, but telemedicine companies, music streaming services, and even coffee shops which use WiFi can be the target of what can only be described as a shakedown. Further, if a firm or individual takes an abundance of caution by avoiding the use of technology in a patent which turns out to be invalid, they have unnecessarily limited their own ability to make use of new ideas. This has serious implications during the COVID-19 pandemic, where patents can represent a legal barrier to expanded supply and economic growth.
But beyond the parasitic existence of patent trolls generating real harm for those engaged in productive activity, the assertion of low-quality patents poses a serious issue if we want to treat them as property. Locke, in his Second Treatise of Government, clearly laid out upper limits on how much may be accumulated. “As much as any one can make use of to any advantage of life before it spoils, so much he may by his labour fix a property in: whatever is beyond this, is more than his share, and belongs to others.” Though patent trolls are certainly taking advantage of their portfolio, they are not making use of it in a productive sense–by either using the technology in question to manufacture or transferring it to a firm which would use it. Asserting low-quality or invalid patents adds excess on top of excess.
I hope I have made clear that I am by no means “anti-patent,” a calumny used against those who generally appreciate the value of the patent system but have concerns about incentives turning into excess through a focus on quantity over quality in patents. Even if you believe narratives about non-practicing patent assertion entities or “patent trolls” are hyperbolic (and, in the interest of fairness, the role of non-practicing entities is a complicated one), everyone should support high quality patents. If a patent is a signal of quality that can be successfully leveraged to attract investment, then ensuring quality is essential to make sure the signal isn’t just noise.
Indeed, the grant of low-quality patents, especially in cases where the technology in question simply doesn’t exist, serves to block further invention and patenting down the line. The owner of a bad patent can assert their claim against someone who wants to actually use a technology for purposes beyond lining their pockets, of course. But a patent granted on a technology which doesn’t exist can be used as prior art against a future invention, denying that inventor the right to a patent as Professor Jorge L. Contreras pointed out in his testimony on patent quality before the Senate Intellectual Property Subcommittee. Any system that grants exclusivity over someone with mere inspiration but denies it to someone who puts in the perspiration to produce something of quality is one that deserves a second look.
The debate over the role of patent quality shouldn’t be controversial. It’s essential that patents represent real innovations and aren’t just simulacra of them. And when our patent system does its best to ensure that the patents are of the highest quality by giving patent examiners the time and funding needed to thoroughly investigate them, we are ensuring that time and energy aren’t wasted to assert a claim to something which, it turns out, doesn’t exist.
To quote Paul Clement speaking on a panel with Brink Lindsey, Charles Duan, and Wayne Brough, one thing that makes patent litigation unique relative to other types of litigation which relate to property, “you can dispute who owns Blackacre, but in the course of litigation you don’t find out that Blackacre doesn’t exist.” Patent quality ensures that innovations are built on real ground.
This post is part of Engine’s patent quality week project. For a full list of events and writing about the patent quality week, visit the Patent Quality Week webpage.
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