Patent inflation

Yale Law Journal

Volumn 121, Issue 3, 2011, Pages 470-532

  Masur, Jonathan ^a  

^a UNIVERSITY OF CHICAGO LAW SCHOOL   (United States)

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EID: 82955201762     PISSN: 00440094     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (499)

1. In 2011, Congress passed and the President signed the America Invents Act, Pub. L. No. 112-29, § 10(a)(1), 125 Stat. 284, 316(2011) (to be codified in scattered sections of 35 U.S.C.), the first significant change to substantive patent law since 1952.
2. In 1994, Congress altered the patent term in order to comply with the Uruguay Agreements, but these changes did not otherwise affect the substantive content of the law.
3. Uruguay Round Agreements Act, Pub. L. No. 103-465, § 532(a), 108 Stat. 4809, 4983 (1994) (codified as amended at 35 U.S.C. § 154(a)(2) (2006)).
4. The Supreme Court has expressed an "increased interest in patent cases" in recent years.
5. Timothy B. Dyk, Foreword: Does the Supreme Court Still Matter?, 57 AM. U. L. REV. 763, 764 (2008).
6. However, for most of the two-decade perisince the Federal Circuit was formed, the Supreme Court has devoted "barely enough attention to exert any real influence on patent jurisprudence."
7. Rochelle Cooper Dreyfuss, In Search of an Institutional Identity: The Federal Circuit Comes of Age, 23 BERKELEY TECH. L.J. 787, 806-07 (2008).
8. See 28 U.S.C. § 1295
9. granting the Federal Circuit exclusive jurisdiction over appeals from district courts and the PTO arising under the Patent Act
10. cf. Act of July 19, 1952, ch. 950, 66 Stat. 792 (codified as amended at 35 U.S.C. §§ 1-293) [hereinafter "the Patent Act"].
11. See Koninklijke Philips Elec. N.V. v. Cardiac Sci. Operating Co., 590 F.3d 1326, 1337 (Fed. Cir. 2010) ("We remind the district court and the [Board of Patent Appeals and Interferences] that they must follow judicial precedent")
12. Megan E. Lyman, Judicial Fitness for Review of Complex Biotechnology Issues in Patent Litigation: Technical Claim Interpretation, 23 J. NAT'L ASS'N ADMIN. L. JUDGES 503, 509 (2003) ("The PTO is bound by the decisions handed down by the Federal Circuit and the Supreme Court.")
13. Craig Allen Nard, Deference, Defiance, and the Useful Arts, 56 OHIO ST. L.J. 1415, 1420-21 (1995)
14. explaining the legal relationship between the PTO and Federal Circuit.
15. ADAM B. JAFFE & JOSH LERNER, INNOVATION AND ITS DISCONTENTS 34-35 (2004)
16. Michael A. Heller & Rebecca S. Eisenberg, Can Patents Deter Innovation? The Anticommons in Biomedical Research, 280 SCI. 698 (1998) (analyzing the negative effects of a crowded patent field on innovation and market entrance)
17. Mark A. Lemley, Rational Ignorance at the Patent Office, 95 NW. U. L. REV. 1495, 1495 n.1 (2001)
18. Doug Lichtman & Mark A. Lemley, Rethinking Patent Law's Presumption of Validity, 60 STAN. L. REV. 45, 47 n.5 (2007)
19. Robert P. Merges, As Many as Six Impossible Patents Before Breakfast: Property Rights for Business Concepts and Patent System Reform, 14 BERKELEY TECH. L.J. 577, 589-91 (1999)
20. Michael J. Meurer, Patent Examination Priorities, 51 WM. & MARY L. REV. 675, 676 (2009) ("[T]he PTO struggles to improve examination quality.")
21. Mark Lemley, Doug Lichtman & Bhaven Sampat, What To Do About Bad Patents?, REG., Winter 2005-2006, at 10, 10-13 (noting that "countless patents that seem reasonable to a lay audience overreach in technical fields" and describing in particular the problems generated by economically significant invalid patents).
22. FTC, TO PROMOTE INNOVATION 14 (2003), http://www.ftc.gov/os/2003/10/innovationrpt.pdf
23. JAFFE & LERNER, supra note 5, at 115-19
24. Jay Dratle, Jr., Alice in Wonderland Meets the U.S. Patent System, 38 AKRON L. REV. 299, 304 (2005). Here and throughout the text, I use the word "patentability" to describe all of the doctrines governing whether an invention is patentable. This includes whether the invention recites patentable subject matter, 35 U.S.C. § 101, whether the invention is novel, 35 U.S.C. § 102, and whether it is nonobvious, 35 U.S.C. § 103, among other requirements.
25. See infra notes 30-35 and accompanying text.
26. See infra Part I.
27. 35 U.S.C. § 141.
28. While no Code provision affirmatively states that no party may appeal when a patent is granted, this inference may be deduced from the fact that the only Code provision that mentions or allows appeal only speaks of "applicant[s]" who are "dissatisfied" with the decision of the Board of Patent Appeals and Interferences (BPAI).
29. In addition, those patents that are eventually litigated in the context of a suit for infringement will likely have neutral effects on the patent law trends described here. I discuss the issue of infringed patents in detail infra Subsection II.D.5.
30. See infra Subsection II.D.1.
31. Although the PTO could avoid appeals entirely simply by granting every patent, there are countervailing forces that prevent it from doing so.
32. See infra notes 110-122 and accompanying text.
33. Since its creation in 1982, the Federal Circuit has reversed the PTO on direct appeal approximately 15% of the time. This figure was calculated based on data taken from
34. Donald R. Dunner, J. Michael Jakes & Jeffrey D. Karceski, A Statistical Look at the Federal Circuit's Patent Decisions: 1982-1994, 5 FED. CIR. B.J. 151, 155 (1995), which found that the Federal Circuit "has affirmed the PTO's determination of unpatentability about 80% of the time,"
35. Federal Circuit's own website, Statistics, U.S. COURT OF APPEALS FOR THE FED. CIRCUIT, http://www.cafc.uscourts.gov/the-court/statistics.html (last visited Nov. 8, 2011)
36. which provides data for the years 1997-2010. Those data reveal that the Federal Circuit has reversed PTO decisions approximately 11.8% of the time in the past fourteen years. Data for 1995 and 1996 are unavailable.
37. This Article is in the tradition of other works that have posited asymmetric development of the law through selection effects and other mechanisms.
38. See Marc Galanter, Why the "Haves" Come Out Ahead: Speculations on the Limits of Legal Change, 9 LAW & SOC'Y REV. 95 (1974)
39. Gillian K. Hadfield, Bias in the Evolution of Legal Rules, 80 GEO. L.J. 583 (1992)
40. Daniel Klerman, Jurisdictional Competition and the Evolution of the Common Law, 74 U. CHI. L. REV. 1179 (2007).
41. E.g., Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 837 (1984) (challenging an EPA regulation creating a "bubble rule" for new sources of pollution).
42. E.g., Citizens To Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 419-20 (1971) (blocking the Secretary of Transportation from releasing highway construction funds).
43. E.g., Carolina Envtl. Study Grp. v. United States, 510 F.2d 796, 797 (D.C. Cir. 1975) (challenging an Atomic Energy Commission order granting permission to construct two new nuclear reactors).
44. See 42 U.S.C. § 405 (2006) (procedural rules for Supplemental Security Income/Social Security Disability Income claims). Other governmental benefits programs such as tax adjudications also involve asymmetric appeal rights.
45. 8 U.S.C. § 1252(a)(1)
46. 28 U.S.C. § 2344
47. John W. Guendelsberger, Judicial Deference to Agency Decisions in Removal Proceedings in Light of INS v. Ventura, 18 GEO. IMMIGR. L.J. 605, 616 (2005).
48. LEANDRA LEDERMAN & STEPHEN W. MAZZA, TAX CONTROVERSIES: PRACTICE AND PROCEDURE 8 (3d ed. 2009).
49. Sanabria v. United States, 437 U.S. 54, 75 (1978) ("The short answer to this question is that there is no exception permitting retrial once the defendant has been acquitted.");
50. Kate Stith, The Risk of Legal Error in Criminal Cases: Some Consequences of the Asymmetry in the Right To Appeal, 57 U. CHI. L. REV. 1, 26-27 (1990) (arguing that asymmetry in criminal appeals will deceive judges as to the characteristics of a "typical" case).
51. I thank Omri Ben-Shahar for suggesting this point.
52. 130 S. Ct. 3218 (2010).
53. James Bessen & Michael J. Meurer, PATENT FAILURE: HOW JUDGES, BUREAUCRATS, AND LAWYERS PUT INNOVATORS AT RISK (2008)
54. Dan L. Burk & Mark A. LEMLEY, THE PATENT CRISIS AND HOW THE COURTS CAN SOLVE IT (2009)
55. JAFFE & LERNER, supra note 5.
56. BURK & LEMLEY, supra note 25 (starting from the premise that a crisis exists within the patent system)
57. NAT'L ACAD. OF SCI., A PATENT SYSTEM FOR THE 21ST CENTURY (2004) (same)
58. Peter S. Menell, The Property Rights Movement's Embrace of Intellectual Property: True Love or Doomed Relationship?, 34 ECOLOGY L.Q. 713, 737 (2007) (describing "a growing patent crisis")
59. Beth Simone Noveck, "Peer to Patent": Collective Intelligence, Open Review, and Patent Reform, 20 HARV. J.L. & TECH. 123, 123 (2006) (describing a patent crisis in hightechnology fields).
60. BESSEN & MEURER, supra note 25, at 124 (arguing that biotechnology is the only field in which patents increase innovation).
61. See supra note 5 and accompanying text.
62. See supra note 6 and accompanying text.
63. JAFFE & LERNER, supra note 5, at 130-33
64. Rochelle Dreyfuss, Pathological Patenting: The PTO as Cause or Cure, 104 MICH. L. REV. 1559, 1567 (2006)
65. reviewing JAFFE & LERNER, supra note 5 ("Fee diversion has impoverished the PTO, making it difficult for the Office to search or examine prior art comprehensively.")
66. Lemley, supra note 5, at 1508-11 (noting the negative effects of funding shortages)
67. Lichtman & Lemley, supra note 5, at 53 (noting the short amount of time the PTO spends scrutinizing each patent)
68. Arti K. Rai, Growing Pains in the Administrative State: The Patent Office's Troubled Quest for Managerial Control, 157 U. PA. L. REV. 2051, 2062-63 (2009).
69. JAFFE & LERNER, supra note 5, at 133-38
70. Michael Abramowicz & John F. Duffy, Ending the Patenting Monopoly, 157 U. PA. L. REV. 1541, 1554 (2009) (noting the well-known tensions between patent examiners and PTO management)
71. Rai, supra note 30, at 2063-64.
72. Examiners receive bonuses based on how many applications they can process fully. The quickest and easiest way for them to finish processing an application is to grant the patent.
73. JAFFE & LERNER, supra note 5, at 136
74. John Bronsteen, Against Summary Judgment, 75 GEO. WASH. L. REV. 522, 540-41 (2007) (noting that judges' preferences for leisure time will incline them to grant more motions for summary judgment than would otherwise be appropriate). One suggestive study found that patent approval rates spike in September-the month in which the PTO's accounting year closes and examiners are awarded bonuses for processed applications.
75. Gajan Retnasaba, Why It Is Easier To Get a Patent in September? (May 23, 2008) (unpublished manuscript), http://www.ssrn.com/abstract_id=1121132.
76. Robert Patrick Merges & John Fitzgerald Duffy, Patent Law And Policy: Cases And Materials 299-327 (4th ed. 2007) (describing the Federal Circuit's struggles with the written description requirement)
77. Dreyfuss, supra note 30, at 1577 (noting that the PTO does not have economists and other experts on staff)
78. Mark D. Janis, On Courts Herding Cats: Contending with the "Written Description" Requirement (and Other Unruly Patent Disclosure Doctrines), 2 WASH. U. J.L. & POL'Y 55, 62-69 (2000) (describing the Federal Circuit's struggles with the written description requirement)
79. R. Polk Wagner & Lee Petherbridge, Is the Federal Circuit Succeeding? An Empirical Assessment of Judicial Performance, 152 U. PA. L. REV. 1105 (2004) (finding that the Federal Circuit has been only mildly successful in promulgating a coherent and predictable doctrine of claim construction).
80. Burk & Lemley, supra note 25, at 106-07 (arguing that the PTO is subject to capture)
81. Dreyfuss, supra note 30, at 1567
82. Clarisa Long, The PTO and the Market for Influence in Patent Law, 157 U. PA. L. REV. 1965, 1967 (2009) (suggesting that the PTO has invited capture in order to increase its own stature)
83. Meurer, supra note 5, at 699 (suggesting the influence that repeat players can have on PTO behavior)
84. John R. Thomas, Formalism at the Federal Circuit, 52 AM. U. L. REV. 771, 792-94 (2003) (suggesting that the Federal Circuit has been captured)
85. R. Polk Wagner, Understanding Patent-Quality Mechanisms, 157 U. PA. L. REV. 2135, 2153 (2009
86. John M. Golden, The Supreme Court as "Prime Percolator": A Prescription for Appellate Review of Questions in Patent Law, 56 UCLA L. REV. 657, 685-86 (2009) (dismissing arguments that the Federal Circuit has been captured).
87. BESSEN & MEURER, supra note 25, at 69 (suggesting that the Federal Circuit has been "pro-patent")
88. JAFFE & LERNER, supra note 5, at 115-19
89. WILLIAM M. LANDES & RICHARD A. POSNER, THE ECONOMIC STRUCTURE OF INTELLECTUAL PROPERTY LAW 335 (2003) (arguing that "[t]he Federal Circuit has indeed turned out to be a pro-patent court").
90. Heller & Eisenberg, supra note 5, at 698
91. Christopher R. Leslie, The Anticompetitive Effects of Unenforced Invalid Patents, 91 MINN. L. REV. 101, 113-27 (2006)
92. Suzanne Schotchmer, Standing on the Shoulders of Giants: Cumulative Research and the Patent Law, 5 J. ECON. PERSPECTIVES 29, 32 (1991) (noting that overbroad patent protection for the first mover in a market "can lead to deficient incentives to develop second generation products").
93. MERGES & DUFFY, supra note 33, at 615-16 (describing the economics of search costs
94. Ian Ayres & Gideon Parchomovsky, Tradable Patent Rights, 60 STAN. L. REV. 863, 869-76 (2007)
95. Clarisa Long, Proprietary Rights and Why Initial Allocations Matter, 49 EMORY L.J. 823, 828 (2000) ("The search costs of patent licensing should not be underestimated.")
96. Jonathan S. Masur, Patent Liability Rules as Search Rules, 78 U. CHI. L. REV. 187 (2011) (describing the impact of contributory liability rules on market entrance and search responsibilities)
97. Roger Cheng, ITC Says HTC Violating Two of Apple's Patents, CNET (July 15, 2011), http://news.cnet.com/8301-1035_3-20079905-94/itc-says-htc-violatingtwo-o f-apples-patents.
98. See FTC, supra note 6, ch. 2, at 8 ("The threat of being sued for infringement by an incumbent [patent holder]-even on a meritless claim-may scare. away venture capital financing." (internal quotation marks omitted)).
99. Leslie, supra note 36, at 125-27.
100. See Joseph Borkin, The Patent Infringement Suit-Ordeal by Trial, 17 U. CHI. L. REV. 634, 641 (1950) ("Contributory infringement. can serve as an effective side-attack to cut off the economic support of a small producer.").
101. See Bresnick v. U.S. Vitamin Corp., 139 F.2d 239, 242 (2d Cir. 1943) (describing a patent as a "scarecrow" that can deter competition by its very existence)
102. Michael J. Meurer, Controlling Opportunistic and Anti-Competitive Intellectual Property Litigation, 44 B.C. L. REV. 509, 515 (2003).
103. Spansion, Inc. v. Int'l Trade Comm'n, 629 F.3d 1331, 1344 (Fed. Cir. 2010).
104. Ayres & Parchomovsky, supra note 37, at 867
105. Donald S. Chisum et al., Principles Of Patent Law 6 (1998)
106. Merges & Duffy, supra note 33, at 253-56 (describing the incentive systems meant to drive patent law)
107. Michael Abramowicz, The Uneasy Case for Patent Races over Auctions, 60 STAN. L. REV. 803, 809-10 (2007) ("This trade-off between static and dynamic efficiency is familiar to patent scholarship.")
108. Joseph A. Franco, Note, Limiting the Anticompetitive Prerogative of Patent Owners: Predatory Standards in Patent Licensing, 92 YALE L.J. 831, 836 (1983) ("The patent system that Congress created reflects a tradeoff between dynamic and static efficiency.").
109. Gideon Parchomovsky & Peter Siegelman, Towards an Integrated Theory of Intellectual Property, 88 VA. L. REV. 1455, 1504-08 (2002) (suggesting the limits at which the losses due to static inefficiency outweigh the gains in dynamic efficiency).
110. See, e.g., America Invents Act, H.R. 1249, 112th Cong. § 22 (2011) (enacted) (ending fee diversion for the PTO)
111. America Invents Act, S. 23, 112th Cong. § 20(c) (2011) (also proposing to end fee diversion for the PTO)
112. 154 CONG. REC. S9982-93 (daily ed. Sept. 27, 2008)
113. (statement of Sen. Jon Kyl) ("Fee diversion unquestionably has a negative impact on the patent system. In recent years, it has hampered PTO's ability to hire an adequate number of examiners.")
114. Jaffe & Lerner, supra note 5, at 179-91 (proposing that the PTO expend greater funds on more rigorous examination)
115. John R. Allison & Starling D. Hunter, On the Feasibility of Improving Patent Quality One Technology at a Time: The Case of Business Methods, 21 BERKELEY TECH. L.J. 729, 734 (2006)
116. Paul R. Michel & Henry R. Nothhaft, Op-Ed, Inventing Our Way Out of Joblessness, N.Y. TIMES, Aug. 5, 2010, http://www.nytimes.com/2010/08/06/opinion/06nothhaft.html.
117. F. Scott Kieff, The Case for Registering Patents and the Law and Economics of Present Patent-Obtaining Rules, 45 B.C. L. REV. 55 (2003)
118. Adam Mossoff, Who Cares What Thomas Jefferson Thought About Patents? Reevaluating the Patent "Privilege" in Historical Context, 92 CORNELL L. REV. 953, 999, 1009 (2007)
119. (noting that the early Patent Office used what amounted in practice to a registration system for patents and suggesting that this history is relevant to modern patent policy debates).
120. Burk & Lemley, supra note 25, at 104-07
121. Lemley, supra note 5, at 1511
122. arguing that further investment in patent scrutiny, because it must be spread across hundreds of thousands of patents per year, would result in little gain in the quality of issued patents.
123. Jaffe & Lerner, supra note 5, at 184-86
124. Joseph Farrell & Robert P. Merges, Incentives To Challenge and Defend Patents: Why Litigation Won't Reliably Fix Patent Office Errors and Why Administrative Patent Review Might Help, 19 BERKELEY TECH. L.J. 943 (2004).
125. In 2010 there were 224 actions for inter partes review, an all-time high. However, 196 of them were related to already pending litigation, meaning that there were only 28 distinct inter partes review cases.
126. U.S. PATENT & TRADEMARK OFFICE, PERFORMANCE AND ACCOUNTABILITY REPORT: FISCAL YEAR 2010, at 137 tbl.13B (2010), available at http://www.uspto.gov/about/stratplan/ar/2010/USPTOFY2010PAR.pdf.
127. This was during a year in which the PTO issued 233,127 patents. Id. at 129 tbl.6. One principal reason that so few parties used inter partes review was that a challenger in an inter partes proceeding is estopped from further litigation of any issue that it raised or could have raised during the inter partes action. 35 U.S.C. § 315(c) (2006). This is too great a sacrifice for parties that might later want to litigate in federal court. The America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011), makes a number of important changes to these inter partes proceedings but includes the same estoppel provisions and thus is unlikely to be used much more widely.
128. Id. at § 325(e), 125 Stat. at 308.
129. Lemley et al., supra note 5, at 12-13
130. Kristen Osenga, Entrance Ramps, Tolls, and Express Lanes-Proposals for Decreasing Traffic Congestion in the Patent Office, 33 FLA. ST. U. L. REV. 119, 141-51 (2005).
131. Ayres & Parchomovsky, supra note 37, at 870.
132. Abramowicz & Duffy, supra note 31, at 1576 (suggesting that private patent examination firms be allowed to compete with the PTO).
133. Dreyfuss, supra note 2, at 804 ("Another idea would be to abolish the Federal Circuit and reconstitute it as a trial court.")
134. Arti K. Rai, Engaging Facts and Policy: A Multi-Institutional Approach to Patent System Reform, 103 COLUM. L. REV. 1035, 1102 (2003) ("I discuss whether the best solution would involve abolishing the Federal Circuit, and having a system of specialized trial courts reviewed by generalist appellate courts.").
135. See supra notes 30-35 and accompanying text.
136. See supra note 4.
137. To be precise, inventors whose patents were rejected by the PTO examiner may appeal to the Board of Patent Appeals and Interferences (BPAI), an administrative court located within the PTO.
138. See 35 U.S.C. § 6(b) (2006) ("The Board of Patent Appeals and Interferences shall, on written appeal of an applicant, review adverse decisions of examiners upon applications for patents.")
139. John F. Duffy, Are Administrative Patent Judges Unconstitutional?, 77 GEO. WASH. L. REV. 904, 907-08 (2009). (The America Invents Act renames the BPAI as the Patent Trial and Appeal Board (PTAB), America Invents Act, Pub. L. No. 112-29, § 135(j), 125 Stat. 284, 290 (2011), but for simplicity I will continue to refer to it as the BPAI.)
140. Applicants who do not like the result before the BPAI can then appeal to the Federal Circuit. As later sections will explain, however, the BPAI is substantially influenced by the top PTO administrators
141. See infra note 106. Because these administrators control all significant decisionmakers within the agency, and in the interest of simplicity, I will refer to the PTO as if it were a unitary actor, rather than distinguishing between examiners and the BPAI.
142. Glendon Schubert, The Judicial Mind: The Attitudes And Ideologies Of Supreme Court Justices 1946-1963, at 220 (1965)
143. Jeffrey A. Segal & Albert D. Cover, Ideological Values and the Votes of U.S. Supreme Court Justices, 83 AM. POL. SCI. REV. 557 (1989) (quantifying Justices' ideological preferences).
144. Nicola Gennaioli & Andrei Shleifer, Judicial Fact Discretion, 37 J. LEGAL STUD. 1, 18-20 (2008) (employing an ideal point-based model)
145. Pauline T. Kim, Deliberation and Strategy on the United States Courts of Appeals: An Empirical Exploration of Panel Effects, 157 U. PA. L. REV. 1319, 1347 (2009) (employing an ideal point model of judging)
146. Alexander Volokh, Choosing Interpretive Methods: A Positive Theory of Judges and Everyone Else, 83 N.Y.U. L. REV. 769, 780-82 (2008) (explaining the use of ideal points in decision models).
147. Lee Epstein et al., Ideological Drift Among Supreme Court Justices: Who, When, and How Important?, 101 NW. U. L. REV. 1483, 1529-30 (2007) (describing the lines demarcating decisions between voting one way or the other on a case as cutpoints)
148. Keith Krehbiel, Committee Power, Leadership, and the Median Voter: Evidence from the Smoking Ban, 12 J.L. ECON. & ORG. 234, 252 (1996) (employing a cutpoint-based model).
149. Diamond v. Chakrabarty, 447 U.S. 303 (1980) (patentability of living organism).
150. In re Robertson, 169 F.3d 743 (Fed. Cir. 1999) (novelty).
151. E.g., KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398 (2007) (obviousness).
152. Brenner v. Manson, 383 U.S. 519 (1966) (doctrine of specific utility)
153. In re Brana, 51 F.3d 1560 (Fed. Cir. 1995) (same).
154. For instance, some judges on the Federal Circuit may be more lenient than others, and an appeal may turn on which panel of three judges is selected to hear it. I discuss this at greater length below.
155. See infra notes 78-82.
156. 35 U.S.C. § 101 (2006).
157. See id. § 102.
158. See id. § 112.
159. See id. § 101.
160. Again, "should" is meant in reference to governing Federal Circuit law. The PTO should grant all patents that are allowable according to the Federal Circuit and should deny all patents that are not.
161. The precise source of the error is not important. One possibility is that these errors could be due to simple mistakes by examiners and the difficulties inherent to accurately examining a patent.
162. This is the standard, intuitive assumption that drives all spatial models.
163. See supra notes 57-59.
164. This is relatively rare, of course. The far more common course of action is for the private party to file a series of continuation patents with the Patent Office until the examiner finally agrees to grant the patent.
165. Mark A. Lemley & Kimberly A. Moore, Ending Abuse of Patent Continuations, 84 B.U. L. REV. 63, 74-75 (2003).
166. The PTO does provide for limited inter partes review of patents, but this procedure is very rarely used because it is costly for the challenging party.
167. See supra note 49.
168. That is not to say that improperly granted patents never wind up in federal court. They do, in the context of suits for infringement. Yet they arrive there in smaller numbers-and after greater delay-than patents based on applications denied. I explore this in greater detail infra Subsection II.D.5.
169. Jonathan S. Masur, Costly Screens and Patent Examination, 2 J. LEGAL ANALYSIS 687, 700 (2010) (cataloguing the costs involved in obtaining a patent).
170. See supra note 5.
171. David L. Schwartz, Practice Makes Perfect? An Empirical Study of Claim Construction Reversal Rates in Patent Cases, 107 MICH. L. REV. 223 (2008) (finding no significant relationship between experience and the number of errors a district court judge will make in ruling on issues of patent claim construction). In addition, Federal Circuit judges may be experienced, but they are not particularly expert.
172. See supra note 33.
173. Duncan Black, On the Rationale of Group Decision-Making, 56 J. POL. ECON. 23, 29 (1948) (explaining that the median member of a decision-making body will control the outcomes of majority votes)
174. Frank B. Cross, Collegial Ideology in the Courts, 103 NW. U. L. REV. 1399, 1418-19 (2009) ("The median voter theorem states that outcomes and opinions are dictated exclusively by the ideologically median member of the panel.")
175. cf. Lee Epstein & Tonja Jacobi, Super Medians, 61 STAN. L. REV. 37, 44-49 (2008) (discussing the role of the median judge on the Supreme Court).
176. Lee Petherbridge, Patent Law Uniformity?, 22 HARV. J.L. & TECH. 421, 446-48 (2009) (finding substantial differences in outcomes amongst Federal Circuit judges).
177. John R. Allison & Mark A. Lemley, How Federal Circuit Judges Vote in Patent Validity Cases, 27 FLA. ST. U. L. REV. 745, 756 (2000).
178. Thomas J. Miles & Cass R. Sunstein, The New Legal Realism, 75 U. CHI. L. REV. 831, 835-41 (2008) (discussing "panel effects" in judging).
179. Joshua B. Fischman, Estimating Preferences of Circuit Judges: A Model of "Consensus Voting," 54 J.L. & ECON (forthcoming 2011)
180. Jaya Ramji-Nogales, Andrew I. Schoenholtz & Philip G. Schrag, Refugee Roulette: Disparities in Asylum Adjudication, 60 STAN. L. REV. 295 (2007) (finding large disparities in the treatment of immigrant asylum applicants by different asylum officers and immigration judges).
181. W. Mark C. Weidemaier, Toward a Theory of Precedent in Arbitration, 51 WM. & MARY L. REV. 1895, 1925 (2010) ("[P]recedent constrains the discretion of future decision makers to some meaningful degree.").
182. See infra notes 97-99 and accompanying text (describing the intracircuit conflict over the proper methodology of patent claim construction).
183. This approach is drawn from spatial voting models and has gained wide acceptance. See, e.g., Jonathan Bendor & Adam Meirowitz, Spatial Models of Delegation, 98 AM. POL. SCI. REV. 293 (2004) (employing a spatial model to explain delegation decisions)
184. Kim, supra note 58, at 1347 (using a spatial model to analyze judicial voting)
185. Keith T. Poole & Howard Rosenthal, A Spatial Model for Legislative Roll Call Analysis, 29 AM. J. POL. SCI. 357 (1985) (using a spatial model to explain congressional voting)
186. Erik Voeten, Legislator Preferences, Ideal Points, and the Spatial Model in the European Parliament (Ctr. on Insts. & Governance, Working Paper No. 6, 2005), http://igovberkeley.com/sites/default/files/No6_Voeten.pdf (analyzing European voting with a spatial model).
187. Daniel B. Rodriguez & Barry R. Weingast, The Paradox of Expansionist Statutory Interpretations, 101 NW. U. L. REV. 1207, 1223-30 (2007) (using a spatial model to explain judges' statutory interpretation decisions).
188. Kim, supra note 58, at 1347-50.
189. It can also vacate and remand for further consideration, but for present purposes that is operationally equivalent to reversing the PTO's decision.
190. Cf. William A. Klein, Tailor to the Emperor with No Clothes: The Supreme Court's Tax Rules for Deposits and Advance Payments, 41 UCLA L. REV. 1685, 1725 (1994) (describing the manner in which lawyers offer, and courts generally follow, arguments based on existing precedent). It is possible that repeated affirmations of existing law will effectively entrench those legal rules, making them more difficult to overturn. At the same time, it is possible that these seriatim affirmances will have zero or little effect. Yet even if the circuit's many affirmances exert some sort of inertial pull on patent law, this will only slow the rate of change, not eliminate it entirely.
191. It is well beyond the scope of this paper to elucidate an entire theory of precedent. Instead, I rely upon standard existing theories of how precedent impacts judicial behavior.
192. See, e.g., Yeon-Koo Che & Jong Goo Yi, The Role of Precedents in Repeated Litigation, 9 J.L. ECON. & ORG. 399, 404-06 (1993) (developing a model of precedent regarding commonly litigated questions)
193. Nicola Gennaioli & Andrei Shleifer, The Evolution of Common Law, 115 J. POL. ECON. 43, 53-57 (2007) (setting forth a theory of precedent and common law development)
194. Nicola Gennaioli & Andrei Shleifer, Overruling and the Instability of Law, 35 J. COMP. ECON. 309, 323-24 (2007) (arguing that overruling precedent leads to instability and prevents the common law from evolving toward efficiency)
195. Stefanie A. Lindquist & Frank B. Cross, Empirically Testing Dworkin's Chain Novel Theory: Studying the Path of Precedent, 80 N.Y.U. L. REV. 1156, 1203-06 (2005) (providing empirical data on how judges behave with respect to precedent)
196. Paul H. Rubin, Why Is the Common Law Efficient?, 6 J. LEGAL STUD. 51, 61-63 (1977) (arguing that the common law evolves toward efficiency because of rational decisions by litigants and judicial responses to those decisions)
197. Frederick Schauer, Precedent, 39 STAN. L. REV. 571, 581-98 (1987) (offering a complete theory of precedent).
198. See Schauer, supra note 90, at 591-96 (explaining that precedent will be of little value when it covers only a very narrow category of cases).
199. See id. at 592-95 (categorizing the strength of legal precedents).
200. FED CIR. R. 35, available at http://www.cafc.uscourts.gov/images/stories/rules-of-practice/rules.pdf. This is in contrast to other courts of appeals that do allow one three-judge panel to overrule another. For instance, Seventh Circuit Local Rule 40(e) states: A proposed opinion approved by a panel of this court adopting a position which would overrule a prior decision of this court or create a conflict between or among circuits shall not be published unless it is first circulated among the active members of this court and a majority of them do not vote to rehear en banc the issue of whether the position should be adopted.
201. 7TH CIR. R. 40(e), available at http://www.ca7.uscourts.gov/Rules/rules.pdf.
202. FED CIR. R. 35 ("Although only the court en banc may overrule a binding precedent.").
203. See Christopher J. Peters, Foolish Consistency: On Equality, Integrity and Justice in Stare Decisis, 105 YALE L.J. 2031, 2034 (1996) (noting that lawyers and judges "regularly display amazing ingenuity in 'distinguishing' unfavorable precedents that otherwise would be 'controlling'").
204. Compare Gregory v. Chicago, 394 U.S. 111, 111 (1969) (describing the case as "simple" and holding that there was a violation of the appellant's First Amendment rights without mentioning conflicting precedent in Feiner v. New York, 340 U.S. 315 (1951)), with Feiner v. New York, 340 U.S. 315 (1951) (finding no violation of the First Amendment in a hostile audience case).
205. See also Fredrick Schauer, Easy Cases, 58 S. CAL. L. REV. 399, 408 & n.21 (1985), which suggests that the Court was "selectively avoiding problems" by failing to mention Feiner in Gregory while calling Gregory a "simple case."
206. Schauer, supra note 90, at 589.
207. See Phillips v. AWH Corp., 415 F.3d 1303, 1312-14 (Fed. Cir. 2005) (explaining the history of the circuit's rules on claim construction).
208. One approach focused on the literal meaning of claim terms as interpreted using dictionaries.
209. See Tex. Digital Sys., Inc. v. Telegenix, Inc., 308 F.3d 1193, 1201-05 (Fed. Cir. 2002). The other employed a more holistic approach.
210. See Vitronics Corp. v. Conceptronic, Inc., 90 F.3d 1576, 1582-86 (Fed. Cir. 1996).
211. Phillips, 415 F.3d at 1312 (adopting the Vitronics approach). Despite Phillips, intra-circuit conflict over the proper methodology for construing claims continues. Compare Markem-Imaje Corp. v. Zipher Ltd., 657 F.3d 1293, 1301 (Fed. Cir. 2011) ("That a device will only operate if certain elements are included is not grounds to incorporate those elements into the construction of the claims."), with Retractable Technologies, Inc. v. Becton, Dickinson & Co., 653 F.3d 1296, 1305 (Fed. Cir. 2011) ("In reviewing the intrinsic record to construe the claims, we strive to capture the scope of the actual invention, rather than strictly limit the scope of claims to disclosed embodiments or allow the claim language to become divorced from what the specification conveys is the invention.").
212. See Christopher A. Cotropia, Determining Uniformity Within the Federal Circuit by Measuring
213. Dissent and En Banc Review, 43 LOY. L.A. L. REV. 801, 817 (2010) (observing that the Federal
214. Circuit goes en banc in a smaller proportion of cases than most other circuits)
215. Ryan G. Vacca, Acting like an Administrative Agency: The Federal Circuit En Banc, 76 MO. L. REV. (forthcoming 2011), available at http://www.ssrn.com/abstract_id=1781277.
216. See, e.g., Markman v. Westview Instruments, Inc., 517 U.S. 370, 384 n.10 (1996) (expressing a reluctance to decide cases on any broader or more difficult ground than absolutely necessary)
217. Michael J. Gerhardt, Constitutional Humility, 76 U. CIN. L. REV. 23, 26 (2007) (describing how influential judges have advocated for this type of narrow approach)
218. Jonathan T. Molot, Principled Minimalism: Restriking the Balance Between Judicial Minimalism and Neutral Principles, 90 VA. L. REV. 1753, 1788-91 (2004) (explaining that the need to muster a majority on panels and the desire to avoid criticism limit judges to the narrowest grounds necessary to reach a decision)
219. Cass R. Sunstein, Beyond Judicial Minimalism, 43 TULSA L. REV. 825, 836 (2008) (pointing out that institutional realities and implications for future decisions both make narrow decisions the sensible choice).
220. Cf. Anna M. Michalak, Environmental Contamination with Multiple Potential Sources and the Common Law: Current Approaches and Emerging Opportunities, 14 FORDHAM ENVTL. L. REV. 147, 160 (2002) ("[C]ommon law is statistical or stochastic in nature, because it deals directly with the uncertainty associated with estimates.")
221. Charles Yablon, The Meaning of Probability Judgments: An Essay on the Use and Misuse of Behavioral Economics, 2004 U. ILL. L. REV. 899, 962-63 ("[T]here are some stochastic elements involved in the litigation process (jurors and judges are randomly assigned to cases).").
222. See supra notes 91-92 and accompanying text (observing that precedents based on errors or factual distinctions will carry less weight than those founded upon new statements of law).
223. Compare Patent Tech. Monitoring Team, U.S. Patent Statistics Chart: Calendar Years 1963-2010, PATENT & TRADEMARK OFF., http://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm (last modified May 13, 2011) (showing that the PTO granted 244,341 patents in 2010)
224. with Appeals Filed and Adjudicated, by Category, FY 2010, U.S. CT. OF APPEALS FOR THE FED. CIR., http://www.cafc.uscourts.gov/images/stories/thecourt/statistics/Caseload_ by_Category_Table_of_Data_2010.pdf (last visited Sept. 21, 2011)
225. showing that merits panels of the Federal Circuit adjudicated 220 patent cases arising from district courts in fiscal year 2010.
226. See supra note 4.
227. Again, to be precise, inventors whose applications have been denied may appeal to the BPAI, an administrative court within the PTO, before taking their cases before the Federal Circuit.
228. See 35 U.S.C. § 6(b) (2006) (establishing the BPAI)
229. supra note 56.
230. However, the BPAI is not an independent body. To the contrary, it resides under the control of senior PTO officials. The membership of the BPAI includes the PTO Director, the Deputy Commissioner, the Commissioner for Patents, and the Commissioner for Trademarks, as well as administrative patent judges. 35 U.S.C. § 6(a) (2006). These administrative patent judges are appointed by the Secretary of Commerce, "in consultation with the Director" of the PTO. Id. In effect, this means that the PTO Director controls the appointments. The judges do not have Article III tenure and salary protection. See id. In addition, the PTO Director has the authority "to designate BPAI panels that he 'hopes will render the decision
231. he desires, even upon rehearing.
232. Duffy, supra note 56, at 908 (quoting In re Alappat, 33 F.3d 1526, 1535 (Fed. Cir. 1994)).
233. Moreover, before a decision of the BPAI acquires precedential force-that is, before it can bind examiners or the BPAI itself in the future-that decision must be approved by the PTO Director. Publication of Opinions of the Board of Patent Appeals and Interferences, U.S. PATENT & TRADEMARK OFFICE (Jan. 23, 2007), http://www.uspto.gov/web/offices/com/sol/og/2007/week04/patopin.htm.
234. As a purely legal matter, it is undoubtedly the case that BPAI judges are not "alter ego[s] or agent[s]" of the PTO Commissioner. Alappat, 33 F.3d at 1535-36.
235. But senior PTO administrators exert effective control over the law that emanates from the BPAI (as well as the more quotidian activities of examiners). Accordingly, this Article's analysis will treat the interests of the agency at large as mirroring those of its senior management.
236. Again, Congress and the Supreme Court certainly play a role in the creation of patent law, albeit a small one. This role is discussed in greater detail infra Section II.F.
237. See Richard A. Posner, HOW JUDGES THINK 40-41 (2008) (describing the set of theories positing that decisionmakers prefer to decide questions in accordance with views or ideas they have constructed).
238. Presidential and congressional statements regarding nominees to head the PTO are noticeably devoid of so much as an allusion to the individual's substantive views on patent law, as opposed to his or her managerial experience
239. See, e.g., Press Release, Office of the White House Press Sec'y, President Obama Announces More Key Administration Posts (June 18, 2009), http://www.whitehouse.gov/the_press_office/President-Obama-Announces-Mor e-Key-Administration-Posts-6-18-09 (statement of President Obama regarding PTO Director David Kappos)
240. Press Release, Office of Sen. Patrick Leahy, Comment on the Designation of David J. Kappos To Be Undersecretary of Commerce for Intellectual Property and Director of the U.S. Patent and Trademark Office (June 18, 2009), http://leahy.senate.gov/press/press_releases/release/?id=40766b3c-7fa3-4 c74-986e-d4378ae4665c.
241. See William A. Niskanen Jr., Bureaucracy And Representative Government 38 (1971)
242. "Among the several variables that may enter the bureaucrat's utility function are the following: salary, perquisites of the office, public reputation, power, patronage, output of the bureau, ease of making changes, and ease of managing the bureau."
243. Daryl Levinson, Empire-Building Government in Constitutional Law, 118 HARV. L. REV. 915, 932-34 (2005) (suggesting that agency bureaucrats are interested in maximizing discretionary budgets, ideological preferences, and the goals of their constituents)
244. Michael A. Livermore, Cause or Cure? Cost-Benefit Analysis and Regulatory Gridlock, 17 N.Y.U. ENVTL. L.J. 107, 120 (2008) ("There is a wide variety of other goods that agency heads could pursue-such as prestige, nicer offices, intellectually stimulating work, leisure time, and future employment prospects.")
245. cf. Sidney A. Shapiro & Richard E. Levy, Judicial Incentives and Indeterminacy in Substantive Review of Administrative Decisions, 44 DUKE L.J. 1051, 1054 (1995) (arguing that "respect, ideological utility, and leisure" are judges' maximands).
246. See Mary K. Olson, Managing Delegation in the FDA: Reducing Delay in New-Drug Review, 29 J. HEALTH POL. POL'Y & L. 397, 401 (2004) ("FDA regulators care about their own professional reputations and the reputation of the agency because these reputations may Influence their career prospects in and out of government.").
247. Andre Blais & Stephane Dion, The Budget-Maximizing Bureaucrat: Appraisal And Evidence 6 (1991) (describing one bureaucratic strategy as "mainly, but not exclusively, targeted at budgetary increases")
248. Niskanen, supra note 110, at 38 (describing a bureaucrat's reputation as "a positive monotonic function of the total budget of the bureau during the bureaucrat's tenure in office").
249. NISKANEN, supra note 110, at 36-42.
250. Id. at 24 (describing administrators' desire to satisfy their financial sponsors)
251. Levinson, supra note 110, at 932-34 (same)
252. Long, supra note 34, at 1984-88 (suggesting that the PTO will often enlist the assistance of private parties in lobbying Congress for additional funding).
253. Long, supra note 34, at 1968 ("Since 1952, Congress has not taken much interest in amending the patent code, leaving the bulk of legal evolution to the courts.").
254. E.g., Clarisa Long, Institutions and Interest Groups in Patent and Copyright Law 10 (2007) (unpublished manuscript) (on file with author).
255. U.S. TRADEMARK & PATENT OFFICE, WORKING FOR OUR CUSTOMERS: A PATENT AND TRADEMARK OFFICE REVIEW (1994), available at http://www.uspto.gov/web/offices/com/annual/1994/pg1-5.pdf.
256. Cf. Albert A. Foer, The Politics of Antitrust in the United States: Public Choice and Public Choices, 62 U. PITT. L. REV. 475, 492 nn.42-43 (2001) (explaining that a concern for reputation may drive administrative heads to do a good job if for no other reason than to maintain superior private-practice exit options)
257. George A. Krause & James W. Douglas, Institutional Design Versus Reputational Effects on Bureaucratic Performance: Evidence from U.S. Government Macroeconomic and Fiscal Projections, 15 J. PUB. ADMIN. RES. & THEORY 281, 282 (2005) (observing that bureaucrats will seek to preserve their own reputations, and thus will avoid actions that might allow them to be "distinguished as inferior agents")
258. James P. Timony, Performance Evaluation of Federal Administrative Law Judges, 7 ADMIN. L. REV. AM. U. 629, 656 (1994) (explaining, with respect to administrative law judges, that "[j]udges generally are extremely cautious about their professional reputation. They do not like to be reversed on appeal").
259. Cf. Richard A. Posner, OVERCOMING LAW 118-19 (1995) (describing judges' aversion to reversal)
260. Timony, supra note 118, at 656
261. Justin Fox & Matthew C. Stephenson, Judicial Review and Democratic Failure 6-10 (Harvard Law Sch. Pub. Law & Legal Theory Working Paper Series, Paper No. 09-47, 2009), http://www.ssrn.com/abstract_id=1458632 (describing the reputational harm to bureaucrats and elected leaders from judicial reversals). Of course, it is possible that being affirmed by the Federal Circuit is beneficial to the PTO's reputation. But it is unlikely to be as beneficial as being reversed is harmful. Even if being affirmed were equally important as being reversed, a risk-averse administrator would not likely choose to gamble the prospect of being reversed against an opportunity to be affirmed. And irrespective of this calculation, the PTO has an interest in avoiding appeals of any sort for financial reasons.
262. JAFFE & LERNER, supra note 5, at 11
263. Tony Dutra, Obama Signs Bill Increasing PTO Funding in FY 2010, but Experts Say Not Enough, 80 Pat. Trademark & Copyright J. (BNA) 497, 497 (2010) (noting that the PTO will be permitted to keep additional funds that it has collected and may spend the funds on "salaries and expenses")
264. Rai, supra note 30, at 2057 n.24 ("[T]he PTO is an entirely fee-funded organization.").
265. Tony Dutra, PTO Announces Spending Cutbacks; Track One Prioritized Examination a casualty, 81 Pat. Trademark & Copyright J. (BNA) 853 (2011) (noting that the PTO will be forced to implement numerous cutbacks because Congress declined to release to it all of the fees it collected)
266. Richard S. Markovits, On the Economic Efficiency of Using Law To Increase Research and Development: A Critique of Various Tax, Antitrust, Intellectual Property, and Tort Law Rules and Policy Proposals, 39 HARV. J. ON LEGIS. 63, 106 (2002) (explaining managers' tendency to spend money on perks such as "nicer offices" when they cannot keep the resources for themselves).
267. Arti Rai notes that the PTO "has not always been able to keep all of the fees that it collects. In the 1990s, for instance, Congress diverted hundreds of millions of dollars in fee revenues from PTO coffers."
268. Rai, supra note 30, at 2058 n.24
269. see also Figueroa v. United States, 66 Fed. Cl. 139, 143 (2005) (providing data on the percentage of fees the PTO has been allowed to keep.)
270. The newly passed America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011), explicitly reserves all PTO fees for PTO activities, and would seem on its face to end this practice of fee diversion.
271. See id. at § 22(a)(4)(2), 125 Stat. at 336 ("If fee collections by the Patent and Trademark Office for a fiscal year exceed the amount appropriated to the Office for that fiscal year, fees collected in excess of the appropriated amount shall be. made available until expended only for obligation and expenditure by the Office."). Of course, a future Congress could simply override this provision in an appropriations law, again diverting PTO fees to other parts of the government.
272. See Tony Dutra, Lobbying Groups Accept Patent Reform, but Vow To Hold Congress to PTO Funding, 82 Pat. Trademark & Copyright J. (BNA) 632 (2011). The actions of one Congress cannot impede the actions of a future Congress.
273. See Eric A. Posner & Adrian Vermeule, Essay, Legislative Entrenchment: A Reappraisal, 111 YALE L.J. 1665, 1665 (2002).
274. See supra notes 57-59 and accompanying text (describing the attitudinal model of judging, which is driven largely by judges' preferences regarding the substantive content of the law).
275. Posner, supra note 108, at 140-41
276. see also Sara C. Benesh & Malia Reddick, Overruled: An Event History Analysis of Lower Court Reaction to Supreme Court Alteration of Precedent, 64 J. POL. 534, 547 (2002) (finding that lower court judges appear to adjust their behavior depending upon the perceived likelihood of reversal).
277. Judicial Salaries Since 1968, U.S. COURTS, http://www.uscourts.gov/Viewer.aspx?doc=/uscourts/JudgesJudgeships/docs/ JudicialSalarieschart.pdf (last visited May 7, 2011) (listing salaries for federal judges and members of Congress).
278. No Federal Circuit judge has ever been appointed to the Supreme Court, or to any other significant government post. Nor has any Federal Circuit judge ever taken a substantial corporate sector job upon retirement from the Circuit, though Howard Markey did become dean of John Marshall Law School after leaving the court.
279. See History of the Federal Judiciary, FED. JUDICIAL CTR., http://www.fjc.gov/history/home.nsf/page/research_categories.html (last visited Sept. 21, 2011) (providing full biographies of all retired judges).
280. Posner, supra note 108, at 33, 36 (describing judicial preferences for good relations with colleagues and for leisure time). There are actually more dissents in the Federal Circuit than on the average federal court of appeals, but dissents still occur in only 3.51% of cases.
281. Cotropia, supra note 100, at 816.
282. See supra Section II.C.
283. See Petherbridge, supra note 79, 445-49 (explaining this effect with respect to the Federal Circuit).
284. This analysis assumes that Federal Circuit judges vote "honestly"-that is, they vote their actual policy preferences, modified only by respect for precedent, desire to avoid dissenting, and fear of reversal from the Supreme Court. This is the most realistic description of the actual behavior of Federal Circuit judges, and it comports with how their behavior is generally understood.
285. See Christopher R. Drahozal, Judicial Incentives and the Appeals Process, 51 SMU L. REV. 469, 474-77 (1998)
286. see also POSNER, supra note 108, at 207 ("The judge is wont to ask himself in such a case what outcome would be the more reasonable, the more sensible, bearing in mind the range of admissible considerations in deciding a case, which include but are not exhausted by statutory language, precedents, and the other conventional materials of judicial decision making, but also include common sense, policy preferences, and often much else besides."). Nonetheless, a later Section will abstract away from even this assumption.
287. See infra Section II.E.
288. For a description of the heterogeneity of Federal Circuit judges
289. see supra note 80 and accompanying text.
290. Fischman, supra note 82, at 17, demonstrates this effect empirically for immigration cases in the Ninth Circuit.
291. The solution to this three-party game is effectively arrived at by backwards induction: the PTO reacts to how the Federal Circuit will behave, and private parties react to how both the PTO and the Federal Circuit will behave. This approach should be clear from the analysis. The behavior of the relevant parties is described in this order merely for ease of exposition and understanding.
292. Administrative Procedure Act § 10(e), 5 U.S.C. § 706 (2006) (setting forth the rules for judicial review of agency action).
293. Christina L. Boyd & James F. Spriggs II, An Examination of Strategic Anticipation of Appellate Court Preferences by Federal District Court Judges, 29 WASH. U. J.L. & POL'Y 37, 58-62 (2009) (explaining the constraining force exerted by the threat of reversal by a higher court and the way in which this pull depends upon precedent).
294. See Daniel B. Rodriguez, The Positive Political Dimensions of Regulatory Reform, 72 WASH. U. L.Q. 1, 98 (1994) ("The judge may also feel constrained by other factors, such as her belief that the intent of the framers of the statute must be implemented, or her belief in precedent.")
295. Schauer, supra note 90, at 596 (describing the pull exerted by precedent).
296. See 5 U.S.C. § 706
297. Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (establishing rules of standing that govern private challenges to administrative actions).
298. See Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 247 (1975) (describing the "American Rule" in which each party typically bears its own costs).
299. For a partial list, see supra notes 19-23.
300. John R. Allison & Mark A. Lemley, Empirical Evidence on the Validity of Litigated Patents, 26 AIPLA Q.J. 185, 234-40 (1998)
301. see also John R. Allison et al., Valuable Patents, 92 GEO. L.J. 435, 477 (2004) (providing similar data).
302. Allison & Lemley, supra note 139, at 194.
303. There have been six PTO Commissioners since 1993, none of whom has held the job for more than five years. See List of Persons Who Have Headed the United States Patent Office, WIKIPEDIA, http://en.wikipedia.org/wiki/List_of_persons_who_have_headed_the_United_ States_Patent_Office (last visited Sept. 5, 2011).
304. Generally speaking, very few government employees remain in their jobs longer than eight years. However, precise information regarding lower-level employees at the PTO is difficult to acquire.
305. See Mark A. Lemley & Bhaven Sampat, Examiner Characteristics and Patent Office Outcomes 22 (Jan. 1, 2009) (unpublished manuscript), http://ssrn.com/abstract=1329091 ("A first problem is data: we lack direct information about whether examiners are tenured or untenured.").
306. See supra Subsection II.D.1.
307. Cf. Christopher S. Yoo, Network Neutrality, Consumers, and Innovation, 2008 U. CHI. LEGAL F. 179, 217 ("The production of most goods and services requires the incurrence of two types of costs: fixed costs and variable costs.").
308. Cf. Einer Elhauge, Why Above-Cost Price Cuts To Drive Out Entrants Are Not Predatory-and the Implications for Defining Costs and Market Power, 112 YALE L.J. 681, 690 n.19 (2003) ("A fixed cost is a cost that does not vary with output levels. A variable cost is a cost that varies with output levels. Total costs are the sum of fixed and variable costs.").
309. See Rai, supra note 30, at 2057 n.24. It is reasonable to assume that PTO fees are greater than
310. the PTO's variable costs, or else the agency would have already gone broke.
311. See supra notes 121-122 and accompanying text.
312. See Arti Rai, Addressing the Patent Gold Rush: The Role of Deference to PTO Patent Denials, 2 WASH. U. J.L. & POL'Y 199, 206 n.20, 213, 220 (2000) (listing cases in which the Federal
313. Circuit has overturned a PTO patent denial without even purporting to afford it deference)
314. Arti K. Rai, Allocating Power over Fact-Finding in the Patent System, 19 BERKELEY TECH. L.J. 907, 913 (2004) ("[O]ne key problem has been the Federal Circuit's failure to recognize that the USPTO can, and should, be allowed to insert its knowledge of the art into the patent examination process.").
315. This is despite the fact that the Supreme Court has held that the Federal Circuit should overturn PTO findings only if they are "arbitrary, capricious, an abuse of discretion, or. unsupported by substantial evidence." Dickinson v. Zurko, 527 U.S. 150, 152 (1999) (quoting 5 U.S.C. § 706 (1994)).
316. The PTO may already be nearing this limit. See supra note 5 and accompanying text.
317. See Heller & Eisenberg, supra note 5
318. Leslie, supra note 36.
319. PTO administrators might be forced to internalize these costs if private parties complained about excessive patenting to political leaders, who then took action or asserted pressure against the Patent Office. However, as noted above, private interests are arrayed roughly evenly in favor of and against broader patent rights. See Long, supra note 116, at 15. More to the point, in many industries a particular firm might both own and be accused of violating patents that would be invalid under a strict interpretation of Federal Circuit precedent. There is thus no natural constituency positioned to oppose excessive patent grants by the PTO.
320. The BPAI decides several thousand appeals per year.
321. See BPAI Receipts and Dispositions by Technology Center, U.S. PATENT & TRADEMARK OFFICE, http://www.uspto.gov/web/offices/dcom/bpai/docs/receipts/ (last visited Sept. 5, 2011).
322. Of course, they have even stronger incentives to file for valid patents, as there is every expectation that such patents will be granted.
323. Cf. Gregory Mandel, The Non-Obvious Problem: How the Indeterminate Nonobviousness Standard Produces Excessive Patent Grants, 42 U.C. DAVIS L. REV. 57, 105-09 (2008) (arguing that indeterminacy in the nonobviousness standard will cause patentees to file applications on unpatentable inventions, leading to some obvious patents which then further muddy the legal standard and cause the cycle to repeat).
324. See supra note 14. The PTO typically reports that its examiners are highly accurate, based on a random sample of reviewed examiner actions.
325. See Patent Examination Quality, U.S. PATENT & TRADEMARK OFFICE, http://www.uspto.gov/dashboards/patents/main.dashxml (last visited Sept. 5, 2011). However, there is no way to know the standard by which the PTO is actually judging accuracy. The suggestion here is that the cutpoint against which these examiners are being measured is actually to the right of the Federal Circuit's cutpoint. The PTO is successful at adhering to its own standards of patentability, which are not necessarily the court's.
326. Kevin M. Clermont, Litigation Realities Redux, 84 NOTRE DAME L. REV. 1919, 1970 (2009)
327. see also Kevin M. Clermont & Theodore Eisenberg, Appeal from Jury or Judge Trial: Defendants' Advantage, 3 AM. L. & ECON. REV. 125, 130-34 (2001)
328. Kevin M. Clermont & Theodore Eisenberg, Plaintiphobia in the Appellate Courts: Civil Rights Really Do Differ from Negotiable Instruments, 2002 U. ILL. L. REV. 947, 968-71 (2002).
329. See supra Subsection II.D.3.
330. See supra Subsection II.D.3.
331. See sources cited supra note 5.
332. See sources cited supra notes 5 & 36-42 (describing the proliferation of invalid patents and their costs).
333. Again, to be specific, there are two mechanisms by which the question of patent validity could present itself to the Federal Circuit. True and false negatives may be appealed directly to the court; true and false positives might find their way before the court if they are involved in suits for infringement. This second mode is discussed further below.
334. See infra Subsection II.D.5.
335. In Figure 10, no PTO denials fall to the left of the Federal Circuit's cutpoint. Of course, this is merely a graphical representation, and occasionally the PTO may deny a patent to the left of the circuit's cutpoint. The point is simply that PTO denials will be heavily biased to the right of the Federal Circuit's cutpoint. Even if a few fall to the left, they will be well outweighed by the many denials on the other side.
336. See supra note 89 and accompanying text.
337. Again, there is substantial evidence that some Federal Circuit judges are very favorably inclined towards patents in general while others are substantially more skeptical.
338. See supra note 80 and accompanying text. This is also the reason that this Article has described patent inflation as a phenomenon that particularly characterizes the relationship between the PTO and the Federal Circuit. The Court of Customs and Patent Appeals (CCPA), the predecessor court to the Federal Circuit, only sat en banc.
339. Jeffrey A. Lefstin, The Constitution of Patent Law: The Court of Customs and Patent Appeals and the Shape of the Federal Circuit's Jurisprudence, 43 LOY. L.A. L. REV. 843, 850 (2010). There was no opportunity for a favorable panel to issue a boundary-stretching decision, and thus much less inflationary pressure on the law.
340. This should occur regardless of whether a given legal requirement for patentability involves "continuous" or "lumpy" variables-that is, whether there can be small incremental changes or only slightly larger, quantized ones.
341. Cf. Lee Ann Fennell, Revealing Options, 118 HARV. L. REV. 1399, 1420-21 n.88 (2005) (discussing the difference between perfectly divisible and lumpy quantities). Even if a requirement is lumpy, movements between those nodes will be possible so long as the "lumps" are not spaced too far apart-and Part III provides evidence that they are not in at least one domain. I thank Lee Fennell for raising this point.
342. See supra note 6 and accompanying text.
343. See infra Section II.F.
344. See supra note 78 and accompanying text.
345. It is worth noting that the composition of the court will change over time, and entering members may hold more (or less) permissive views than departing ones. For instance, members of the patent bar who were educated in the 1990s may have more expansive visions of the law than members who were educated in the 1970s, simply because the law had become more expansive by that point and they had been taught that such an expansive version of the law was appropriate. If this were the case, and older judges with more restrictive views were continually replaced by younger judges with more expansive views, the law could continue to inflate over time because of the court's changing membership. However, this is only speculative; it is difficult to determine whether these effects are occurring.
346. George L. Priest & Benjamin Klein, The Selection of Disputes for Litigation, 13 J. LEGAL STUD. 1, 6-17 (1984).
347. See William M. Landes, An Economic Analysis of the Courts, 14 J.L. & ECON. 61, 101-02 (1971)
348. Richard A. Posner, An Economic Approach to Legal Procedure and Judicial Administration, 2 J. LEGAL STUD. 399, 417-20 (1973). The reason for this phenomenon is the transaction costs involved in litigation. If the parties can agree regarding what a judge and jury will do, there is no reason for them to incur the transaction costs of actually undergoing a trial just to reach that outcome.
349. See Landes, supra, at 101-02
350. Posner, supra, at 417-20
351. see also John Bronsteen, Christopher Buccafusco & Jonathan S. Masur, Hedonic Adaptation and the Settlement of Civil Lawsuits, 108 COLUM. L. REV. 1516, 1520-22 (2008) (explaining this point).
352. See John P. Gould, The Economics of Legal Conflicts, 2 J. LEGAL STUD. 279, 296-97 (1973) (seeking to show why a larger percentage of lawsuits are settled out of court than in court).
353. Cf. id. at 285 (describing the types of cases that should reach trial under the author's model).
354. Interestingly, Allison and Lemley found that all courts, both district and circuit, hold patents valid 54% of the time.
355. Allison & Lemley, supra note 139, at 205.
356. This is not far from the 52% figure that Allison and Lemley report for Federal Circuit cases alone, and thus it may be that the appellate process is not winnowing the cases significantly.
357. See id. at 241.
358. Regardless, these data indicate that cases are quite evenly divided around the Federal Circuit's cutpoint
359. Cf. Priest & Klein, supra note 169, at 4-5 (proposing that this symmetry in uncertainty will lead to symmetric results at trial, with plaintiffs and defendants each winning approximately 50% of cases).
360. If anything, cases to the right of the cutpoint-those involving patents that push the frontiers of the law-should be more uncertain.
361. See supra Subsection II.D.1.
362. It is of course possible that relatively well-established patentability questions will reach the Federal Circuit as companions to less certain infringement issues within a single lawsuit. Yet these will not likely provide a source of much movement in the law. Lawyers for the defendant will be unlikely to push the issue of validity, and courts will most commonly opt to decide the case on the easier (infringement) grounds.
363. Cf. Adam B. Cox & Thomas J. Miles, Judicial Ideology and the Transformation of Voting Rights Jurisprudence, 75 U. CHI. L. REV. 1493, 1509 (2008) (demonstrating that judges will decide cases on factual or procedural grounds that involve less contravention of precedent and possibility of reversal whenever such grounds are available to them).
364. Allison & Lemley, supra note 139, at 241.
365. A later study of the same data revealed that 54% of the votes cast by Federal Circuit judges were to uphold the patent at suit as valid, and 46% of those votes were to invalidate the patent. Allison & Lemley, supra note 80, at 755. Patent law has never satisfied the strong form of the Priest-Klein hypothesis, which predicts that plaintiffs and defendants will each win approximately 50% of their lawsuits. Instead, patent plaintiffs win barely a quarter of the cases they file.
366. Mark A. Lemley, Fractioning in Patent Law 3 (Stanford Pub. Law Working Paper No. 1895681, 2011), http://ssrn.com/abstract=1895681.
367. This is a significant finding, but for the argument here the only important question is how the patents that reach the Federal Circuit in infringement lawsuits are distributed with respect to that circuit's cutpoint. The 52% figure noted in the text suggests that those patents are approximately equivalently distributed around the circuit's cutpoint, just as the theory presented above would predict. The fact that patent plaintiffs have such a low win rate overall is not to the contrary.
368. In fact, there might even be a slight bias toward expansion within infringement suits. When the PTO grants a patent, it is presumed valid and will only be invalidated by a court upon a showing of clear and convincing evidence. Microsoft Corp. v. i4i Ltd. P'ship, 131 S. Ct. 2238, 2242 (2011)
369. Spansion, Inc. v. Int'l Trade Comm'n, 629 F.3d 1331, 1344 (Fed. Cir. 2010).
370. Thus, all else being equal, the courts are more likely to affirm false positive patents than they are to overturn false negatives. Because affirmations of false positives lead to expansion in the law, the overall trend from these cases might be slightly inflationary. On the other hand, it is conceivable that courts would not treat affirmances and reversals of the PTO in symmetric fashion. Perhaps the Federal Circuit is more likely to break new ground when it reverses the PTO than when it affirms it, simply due to the revisionary nature of reversals. If this were true, reversals of false positives (in the course of suits for infringement) might have a greater effect on the law than affirmances of false negatives (on direct appeal from the PTO). This is of course possible, but it seems unlikely. When the Federal Circuit creates law, it is creating that law with reference to existing precedent. The extent to which the court will rely upon or argue against that existing precedent depends upon how far its new decision deviates from that precedent, not whether the decision is handed down as an affirmance or a reversal. After all, any court of appeals is concerned with how its latest decisions interact with its existing jurisprudence, not how they interact with decisions by an inferior body-much less a nonjudicial agency. Accordingly, we should expect that the Federal Circuit will treat affirmances and reversals symmetrically, subject only to the caveat in the preceding paragraph regarding the presumption of validity.
371. This is of course not to say that the law will always move exclusively in the direction of more lenient standards of patentability. The effect is an overall one-on balance, the law will expand the boundaries outward. Along the way, however, it will presumably move in fits and starts.
372. See sources cited supra note 5-6.
373. See, e.g., In re Seagate Tech. L.L.C., 497 F.3d 1360 (Fed. Cir. 2007) (making it more difficult for patent holders to collect heightened damages for willful infringement)
374. Lee Petherbridge, On the Decline of the Doctrine of Equivalents, 31 CARDOZO L. REV. 1371, 1384 (2010) (showing that the narrowed scope of the doctrine of equivalents has led to fewer successful infringement claims in recent years).
375. Cf. Schauer, supra note 90, at 589 (showing that judges make decisions anticipating their effect on future cases).
376. Cf. A Conversation with Chief Judge Paul Michel, THE IP COLLOQUIUM (Jan. 5 2009), http://www.ipcolloquium.com/Programs/4.html.
377. See Press Release, IFI CLAIMS Announces Top Global Companies Ranked By 2010 U.S. Patents (Jan. 10, 2011), http://www.ificlaims.com/news/top-patents.html (listing the firms that obtained the most U.S. patents in 2010).
378. Cf. Galanter, supra note 15, at 97-99 (describing repeat legal players and their incentives).
379. See supra note 80 and accompanying text (describing the variability in Federal Circuit attitudes towards patent validity). I thank Michael Gilbert and others for suggesting this possibility. The Federal Circuit only announces which judges will be hearing any given case on the day that case is argued.
380. Samuel P. Jordan, Early Panel Announcement, Settlement, and Adjudication, 2007 BYU L. REV. 55, 60. But this should not pose any impediment to the strategy described above. Applicants will simply wait until after the oral argument-by which point they may have a great deal of information regarding the judges' intentions-before deciding whether or not to drop the case.
381. This prediction is thus somewhat counterintuitive precisely because the Federal Circuit only announces panels on the day of oral argument.
382. See Jordan, supra note 185, at 60.
383. By that point, it should be nearly costless for the applicant to proceed with the case-all of the work has been done. Accordingly, the decision to drop the appeal must rest upon an assessment of its impact on future cases, as the applicant has nothing to lose in the present case.
384. See supra note 6 and accompanying text.
385. See sources cited supra note 34.
386. I thank Peter Menell for suggesting this conceptual approach.
387. See Long, supra note 34, at 1968.
388. See Mark D. Janis, Patent Law in the Age of the Invisible Supreme Court, 2001 U. ILL. L. REV. 387, 387-89 (noting the Supreme Court's withdrawal from patent law since the creation of the Federal Circuit).
389. See Microsoft Corp. v. i4i Ltd. P'ship, 131 S. Ct. 2238 (2011)
390. Bd. of Trs. of Leland Stanford Jr. Univ. v. Roche, 131 S. Ct. 2188 (2011)
391. Bilski v. Kappos, 130 S. Ct. 3218 (2010)
392. Quanta Computer, Inc. v. LG Elecs., Inc., 553 U.S. 617 (2008)
393. KSR Int'l Co. v. Teleflex Inc., 550 U.S. 398 (2007)
394. Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007)
395. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007)
396. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006)
397. Merck KGaA v. Integra Lifesciences I, Ltd., 545 U.S. 193 (2005)
398. see also Golden, supra note 34, at 658 ("[T]he Supreme Court has, in the past six years, asserted its dominion over patent law with frequency and force.").
399. See, e.g., Peter Lee, Patent Law and the Two Cultures, 120 YALE L.J. 2, 44 (2010) (noting that "[f]or most observers, the Court's aggressiveness reflects an attempt to rein in patent rights that had become too expansive under Federal Circuit jurisprudence").
400. I thank Arti Rai for suggesting this possibility.
401. See Rai, supra note 53, at 1131-32.
402. See, e.g., Edward Lee, Introduction: The Future of Patent Reform, 4 ISJLP 1, 2 (2008) (stating that "[a]fter the [FTC] report, both Congress and the United States Supreme Court suddenly turned their attention to patent law reform").
403. The current PTO Director, David Kappos, has on occasion described improved patent quality as a priority and announced various initiatives toward that end.
404. See, e.g., David Kappos, Taking Steps To Improve Patent Quality, U.S. PATENT & TRADEMARK OFFICE (Oct. 19, 2010, 3:50 PM), http://www.uspto.gov/blog/director/entry/taking_steps_to_improve_patent. Of course, the PTO Director has little to lose from verbally expressing a commitment to patent quality, and it is hard to know what to make of the PTO's examination standards without knowing precisely how the agency evaluates whether a patent was properly granted. Nonetheless, there is cause for at least mild optimism.
405. For instance, Congress could convene an advisory panel of patent experts to evaluate the quality of a random sample of issued patents. Another more radical solution would be to grant the PTO substantive rulemaking authority.
406. See Jonathan S. Masur, Regulating Patents, 2010 SUP. CT. REV. 275, 279 (2011).
407. See, e.g., JAFFE & LERNER, supra note 5, at 184-86 (proposing a system of post-grant inter partes review)
408. Farrell & Merges, supra note 48, at 964-69 (same)
409. Lichtman & Lemley, supra note 5, at 63-65 (favoring such a system).
410. The defects of the current system that prevent parties from taking full advantage of it are described
411. supra note 49.
412. This system would not likely result in perfect symmetry because outside parties might not appeal patent grants in the same numbers that disappointed applicants appealed patent denials. Nonetheless, the numbers of each type of appeal would be much closer than they are under the current administrative arrangement.
413. America Invents Act, Pub. L. No. 112-29, §329, 125 Stat. 284, 311 (2011)
414. Patent and Trademark Office Authorization Act of 2002, 35 U.S.C. § 315 (2006).
415. See supra note 49 (describing the very low usage rates of inter partes review and suggesting reasons that it is rarely utilized).
416. 130 S. Ct. 3218 (2010), aff'g In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc).
417. See, e.g., Robert Patrick Merges & John Fitzgerald Duffy, Patent Law & Policy: 2009-10 Supplement 3 (2009).
418. Diamond v. Diehr, 450 U.S. 175 (1981).
419. MERGES & DUFFY, supra note 33, at 154 (describing the "floodgates" of software patents opening in the mid-1990s)
420. Justin M. Lee, Note, The Board Bites Back: Bilski and the B.P.A.I., 24 BERKELEY TECH. L.J. 49, 49 (2009) (describing the late 1990s as a "period of considerable expansion in subject-matter eligibility").
421. In re Prater, 415 F.2d 1378 (C.C.P.A. 1968) (adjudicating the validity of software patents for the first time), aff'd in part, rev'd in part, 415 F.2d 1393 (C.C.P.A. 1969).
422. See, e.g., In re Beauregard, 53 F.3d 1583 (Fed. Cir. 1995) (allowing software patent)
423. In re Alappat, 33 F.3d 1526, 1544 (Fed. Cir. 1994) (en banc) (same).
424. Scholars and courts have struggled to define a "business method" (as distinct from any other type of patentable process). Nonetheless, they have managed to coalesce around a general understanding: a business method is a means of doing business and turning a profit that is typically unconnected from the production of any tangible good.
425. See, e.g., Keith E. Maskus & Eina Vivian Wong, Searching for Economic Balance in Business Method Patents, 8 WASH. U. J.L. & POL'Y 289, 289 (2002) ("Business method patents (BMPs) award exclusive rights to inventors for novel techniques that perform commercial functions not embodied in specific physical inventions.")
426. cf. Allison & Hunter, supra note 45 (generally using a definition consistent with this idea)
427. Included in this definition are methods for reducing the amount of taxes an individual must pay, methods for creating and selling financial products, and methods for structuring transactions between a business and a customer.
428. See, e.g., U.S. Patent No. 5,960,411 (filed Sept. 12, 1997) (method for placing an order to purchase an item via the Internet)
429. see also Amazon One-Click Patent Slides Through Reexamination, PATENTLY-O (Mar. 10, 2010, 3:06 AM), http://www.patentlyo.com/patent/2010/03/amazon-one-click-patent-slides-t hrough-reexamination.html. Included also are methods for reducing risk or creating other advantageous business conditions.
430. See, e.g., U.S. Patent Application No. 08/833,892, at A-5 (filed Apr. 10, 1997), available at http://www.uspto.gov/go/com/sol/2007-1130bilski_joint_appendix.pdf.
431. U.S. Patent No. 5,136,502 (filed Oct. 2, 1991).
432. U.S. Patent No. 5,001,630 (filed Dec. 20, 1988).
433. U.S. Patent No. 5,752,236 (filed Sept. 2, 1994).
434. U.S. Patent No. 5,256,863 (filed Nov. 5, 1991).
435. See, e.g., U.S. Patent No. 5,568,541 (filed June 21, 1994) (method for identifying and billing phone surcharges)
436. U.S. Patent No. 5,253,166 (filed Mar. 29. 1991) (system for sharing airline itineraries with corporate clients)
437. U.S. Patent No. 5,220,500 (filed Sept. 19, 1980) (program to assist with investment strategies)
438. See Alan L. Durham, "Useful Arts" in the Information Age, 1999 BYU L. REV. 1419, 1515
439. Michael J. Meurer, Business Method Patents and Patent Floods, 8 WASH. U. J.L. & POL'Y 309, 334 (2002)
440. Leo J. Raskind, The State Street Bank Decision: The Bad Business of Unlimited Patent Protection for Methods of Doing Business, 10 FORDHAM INTELL. PROP. MEDIA & ENT. L.J. 61, 84-85 (1999).
441. Jonathan M. Barnett, Property as Process: How Innovation Markets Select Innovation Regimes, 119 YALE L.J. 384, 416 (2009) (explaining that a "change in 1996 PTO examination guidelines" opened the door to substantial numbers of business method patents in advance of the Federal Circuit's decision in State Street Bank).
442. 149 F.3d 1368 (1998).
443. Id. at 1370-71.
444. Id. at 1371-72 (referencing U.S. Patent No. 5,193,056 (filed Mar. 11)).
445. Douglas L Price, Assessing the Patentability of Financial Services and Products, 3 J. HIGH TECH. L. 141, 153 (2004).
446. 545 F.3d 943 (Fed. Cir. 2008) (en banc), rev'd, Bilski v. Kappos, 130 S. Ct. 3218 (2010). It is worth noting that while State Street Bank reached the Federal Circuit in the course of litigation, Bilski arrived on appeal from the PTO's denial of Bilski's patent.
447. U.S. Patent Application No. 08/833,892, supra note 209, at A-6.
448. see also Bilski, 545 F.3d at 949.
449. Bilski, 545 F.3d at 949 ("In essence, the claim is for a method of hedging risk in the field of commodities trading.").
450. Mark D. West, Private Ordering at the World's First Futures Exchange, 98 MICH. L. REV. 2574 (2000) (describing a seventeenth-century Japanese futures exchange used by traders to hedge against price fluctuations).
451. State St. Bank & Trust Co. v. Signature Fin. Grp., Inc., 149 F.3d 1368, 1371 (Fed. Cir. 1998).
452. Bilski's "invention" was also far more tenuous than the sorts of business method patents that have been approved in cases such as AT&T Corp. v. Excel Commc'ns, Inc., 172 F.3d 1352 (Fed. Cir. 1999), which upheld a patent on a telephone service provider's system for logging telephone calls over various networks.
453. U.S. Patent Application No. 08/833,892, supra note 209.
454. David S. Olson, Taking the Utilitarian Basis for Patent Law Seriously: The Case for Restricting Patentable Subject Matter, 82 TEMP. L. REV. 181, 235 n.242 (2009) (describing Bilski's business method as "obvious")
455. Dennis Crouch, Bilski: Full CAFC To Reexamine the Scope of Subject Matter Patentability, PATENTLY-O (Feb. 15, 2008, 11:55 PM), http://www.patentlyo.com/patent/2008/02/bilski-full-caf.html ("[T]his case looks problematic because of serious obviousness problems.").
456. Cf. In re Comiskey, 499 F.3d 1365 (Fed. Cir. 2007) (holding that the PTO must consider patentable subject matter questions under Section 101 before turning to other issues).
457. In re Bilski, 545 F.3d 943, 963 (Fed. Cir. 2008) (en banc), rev'd sub nom. Bilski v. Kappos, 130 S. Ct. 3218 (2010)
458. Id. at 956 (quoting Parker v. Flook, 437 U.S. 584, 589 n.9 (1978)).
459. Id. at 964-65.
460. State St. Bank & Trust Co. v. Signature Fin. Grp., Inc., 149 F.3d 1368, 1371-72 (Fed. Cir. 1998) (referencing U.S. Patent No. 5,193,056 (filed Mar. 1, 1991)). It is in this sense that Bilski represents, at minimum, a continuation of the State Street Bank regime.
461. See supra note 228 and text following. It is worth noting that when Bilski reached the Supreme Court, the government argued that upholding the Federal Circuit's ruling would not call State Street Bank into question. In the government's view, there was no doubt that the State Street Bank invention would be patentable under the Federal Circuit's machine-or -transformation test.
462. See Transcript of Oral Argument at 41-42
463. Bilski v. Kappos, 130 S. Ct. 3218 (2010) (No. 08-964), available at http://www.supremecourt.gov/oral_arguments/argument_transcripts/08-964.p df.
464. See Bilski, 545 F.3d at 949
465. U.S. Patent Application No. 08/833,892, supra note 209.
466. See supra note 237.
467. See, e.g., Jason Pill, Note, What's So Great About SOGRAT?: An Analysis of the Ethical Issues Created by Tax Patents and a Patently Strict Dilemma, 20 U. FLA. J.L. & PUB. POL'Y 147, 160 (2009) ("The complex permutations and calculations claimed in many tax patents rel[y] on quick and accurate calculations that only modern computers can perform.")
468. Matthew Moore, iBrief, In re Bilski and the "Machine-or-Transformation" Test: Receding Boundaries for Patent-Eligible Subject Matter, 2010 DUKE L. & TECH. REV. 005, ¶ 30 ("After all, many business methods are inextricably intertwined with computers and software.").
469. It is worth noting again that the patent in State Street Bank would likely have been valid under either interpretation. That patent claimed a relatively specific sort of computer with structures oriented particularly toward the invention's purpose. State St. Bank, 149 F.3d at 1370-72 (describing the patent claims).
470. Ex parte Langemyr, No. 2008-1495, 2008 WL 5206740, at *13 (B.P.A.I. May 28, 2008), available at http://www.uspto.gov/ip/boards/bpai/decisions/inform/fd081495.pdf.
471. Id. at *11
472. see also Ex parte Wasynczuk, No. 2008-1496, 2008 WL 2262377, at *12 (B.P.A.I. June 8, 2008), available at http://www.uspto.gov/ip/boards/bpai/decisions/inform/fd081496.pdf
473. MERGES & DUFFY, supra note 204, at 43.
474. See sources cited supra note 243
475. see also Ex parte Cornea-Hasegan, No. 2008-4742, 2009 WL 86725 (B.P.A.I. Jan. 13, 2009), available at http://des.uspto.gov/Foia/ReterivePdf?system=BPAI&flNm=fd20084742-01 -13-2009-1 (refusing to grant a patent on similar grounds).
476. The PTO's shift might have been due in part to the fact that the Supreme Court granted certiorari in Bilski the previous month.
477. See Bilski v. Doll, 129 S. Ct. 2735 (2009) (mem.). At the time, it seemed highly unlikely that the Supreme Court would hold that Bilski's invention involved patentable subject matter, and indeed the Court affirmed the Federal Circuit on that point.
478. Bilski v. Kappos, 130 S. Ct. 3218, 3226-28 (2010). But the mere fact of the grant of certiorari might have introduced enough uncertainty to persuade the PTO to err on the side of caution.
479. No. 2009-001172, 2009 WL 2007184, at *1 (B.P.A.I. July 9, 2009), available at http://des.uspto.gov/Foia/ReterivePdf?system=BPAI&flNm=fd2009001172- 07-09-2009-1.
480. Id. at 8
481. see also MERGES & DUFFY, supra note 204, at 44.
482. Dickerson, 2009 WL 2007184, at *4.
483. Tony Dutra, Chief Judge Michel Says Commentary Reading Too Much into Bilski Opinion, 78 Pat. Trademark & Copyright J. (BNA) 373 (2009)
484. see also MERGES & DUFFY, supra note 204, at 44.
485. See Dickerson, 2009 WL 2007184, at *6.
486. Bilski v. Doll, 129 S. Ct. 2735 (2009).
487. Bilski v. Kappos, 130 S. Ct. 3218, 3226-28 (2010).
488. Id. at 3227.
489. Id. at 3225
490. quoting Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980)(enumerating types of unpatentable subject matter).
491. This is not even to speak of the jurisprudence on patenting isolated molecules and other products derived from nature. That is an entirely separate strand of law, and one beyond the scope of the short case study presented here.
492. See Ass'n for Molecular Pathology v. U.S. PTO, 653 F.3d 1329 (Fed. Cir. 2011) (upholding a patent on a purified DNA sequence).
493. That process has already begun, in halting, conflicted fashion. Compare Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323 (Fed. Cir. 2011) (holding that a particular method of internet advertising involving only general purpose computers, software, and the internet constitutes patentable subject matter), with Cybersource Corp. v. Retail Decisions, Inc., 654 F.3d 1366 (Fed. Cir. 2011) (holding that a particular method for verifying internet credit card transactions involving software, the internet, and a "computer readable medium" did not constitute patentable subject matter).
494. See supra notes 16-22 and accompanying text.
495. For instance, there is evidence that the administrative law judges charged with adjudicating Social Security disability claims have become more and more permissive over time.
496. See generally Richard J. Pierce Jr., What Should We Do About Administrative Law Judge Disability Decisionmaking? 5 (unpublished manuscript 2011), http://ssrn.com/abstract=1890770 ("Both the average [Administrative Law Judge] grant rate and the distribution of [Administrative Law Judge] grant rates have increased dramatically over the last three decades."). This development could be attributable, at least in part, to the asymmetric nature of appeals from Administrative Law Judges' Social Security decisions.
497. See supra note 19. I take no position on whether this is a beneficial or harmful development.
498. See Eduardo M. Peñalver & Lior Jacob Strahilevitz, Judicial Takings or Due Process?, 97 CORNELL L. REV. (forthcoming 2012), available at http://ssrn.com/abstract=1791849 (describing such a mechanism in property law).
499. See Stephen H. Legomsky, Restructuring Immigration Adjudication, 59 DUKE L.J. 1635, 1665-75 (2010) (describing the increasing politicization of Immigration Judges within the Executive Office for Immigration Review).