Rules for Patents

William & Mary Law Review Volume 52 | Issue 6 Rules for Patents Michael J. Burstein Repository Citation Michael J. Burstein, Rules for Patents, 52 Wm. & Mary L. Rev. 1747 (2011), https://scholarship.law.wm.edu/wmlr/vol52/iss6/2 Copyright c 2011 by the authors. This article is brought to you by the William & Mary Law School Scholarship Repository. https://scholarship.law.wm.edu/wmlr Article 2 William and Mary Law Review VOLUME 52 NO. 6, 2011 RULES FOR PATENTS MICHAEL J. BURSTEIN* ABSTRACT There is widespread agreement that the patent system in the United States is in need of reform. Most of the proposals for patent reform that have proliferated in recent years share two common assumptions: first, that patent policy is best made through case-bycase adjudication of the validity of individual patents; and, second, that the existing allocation of authority over patent policy, in which the courts are primarily responsible for interpreting and applying the broad language of the Patent Act, ought not to be disturbed. This Article challenges both assumptions. I approach the problem of patent reform primarily as a problem of sound administration rather than innovation policy and argue that Congress should grant the Patent and Trademark Office (PTO) substantive rule-making authority. The administrative structure of the patent system has been largely unchanged since 1836. But the administrative tasks that a wellperforming patent system must carry out have changed markedly * Climenko Fellow and Lecturer on Law, Harvard Law School. I thank Yochai Benkler, Daryl Levinson, Rachel Barkow, Terry Fisher, Ben Roin, Susannah Tobin, Nicholas Bagley, Kristina Daugirdas, and participants in the 2010 IP Scholars Conference for helpful feedback and discussions. Rachel Sachs and James Dorer provided outstanding research assistance. 1747 1748 WILLIAM AND MARY LAW REVIEW [Vol. 52:1747 since that time. Most importantly, technology in the early- to midnineteenth century was relatively uniform. Today, by contrast, the process of innovation varies widely among different technologies and different industries. If the patent system is to meet its goal of providing incentives for innovation, it must self-consciously tailor the elements of patentability—both rules and standards—to those diverse circumstances. Optimal patent policymaking requires forward-looking deliberation and cost-benefit analysis based on technological and economic expertise; clarity and predictability so that entities making investment choices based on the property-like aspects of patents can be confident in the legal regime governing those rights; and transparency and accountability to ensure that the public interest—which is often distinct from the interests of patent holders—is taken into account. Unlike courts, agencies acting through rulemaking can gather and expertly analyze all of the relevant information to make express policy judgments based on costs and benefits, can decide issues prospectively and avoid piecemeal decision making, and can systematically engage the public in the policy-making process. Although agencies are subject to certain well-understood institutional pathologies, such as capture by powerful interests, on balance they are more likely to make effective patent policy than courts. Granting the PTO substantive rule-making authority would require significant changes to the structure and function of that agency, and to the role of the courts. The PTO would require the addition of a policy-making capacity separate but capable of drawing insights from the examination process. The courts in turn would play a constructive secondary role by surfacing issues that require attention in the interstices of agency rules and engaging in judicial review of those rules under traditional standards of administrative law. 2011] RULES FOR PATENTS 1749 TABLE OF CONTENTS INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. THE CHANGING TASKS OF PATENT ADMINISTRATION . . . . . . A. Patent Administration in Historical Perspective . . . . . . B. Administrative Tasks Confronting the Modern Patent System . . . . . . . . . . . . . . . . . . . . . . . . . . . II. WHY PATENT POLICY SHOULD BE MADE THROUGH AGENCY RULEMAKING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A. A Normative Theory of Patent Administration . . . . . . . 1. Reasoned Decision Making and Expertise . . . . . . . . . . 2. Clarity and Predictability . . . . . . . . . . . . . . . . . . . . . . 3. Transparency and Accountability . . . . . . . . . . . . . . . . B. Allocating Policy-Making Authority . . . . . . . . . . . . . . . . 1. Reasoned Decision Making and Expertise . . . . . . . . . . 2. Clarity and Predictability . . . . . . . . . . . . . . . . . . . . . . 3. Transparency and Accountability . . . . . . . . . . . . . . . . C. Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. HOW RULEMAKING WILL CHANGE PATENT ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A. The PTO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . B. The Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Judicial Review of Agency Rulemaking . . . . . . . . . . . 2. Litigation Over Patent Validity or Application Denials . . . . . . . . . . . . . . . . . . . . . . . . . . . CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1750 1761 1762 1767 1776 1776 1777 1780 1782 1783 1785 1791 1794 1798 1800 1800 1802 1803 1804 1806 1750 WILLIAM AND MARY LAW REVIEW [Vol. 52:1747 INTRODUCTION There is widespread agreement that the patent system in the United States is broken. A flood of critical commentary argues that the system is in “crisis,”1 or that it is a “failure.”2 At the foundation of these complaints is a belief that the system established in order “[t]o promote the Progress of Science and useful Arts”3 no longer provides the optimal incentives for innovation.4 A patent provides an incentive to invest in costly invention—or, more controversially, to develop or commercialize an invention5—by providing the inventor with a mechanism by which she may potentially recoup her investment in producing otherwise freely appropriable knowledge.6 The standards for granting a patent are critical to ensuring that this incentive works. If patents are too few or too narrow, they do not provide sufficient protection for costly research and development 1. See DAN L. BURK & MARK A. LEMLEY, THE PATENT CRISIS AND HOW THE COURTS CAN SOLVE IT 1 (2009). Robert Merges leveled this charge against the patent system as early as 1999. See 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, 591 (1999). 2. See JAMES BESSEN & MICHAEL J. MEURER, PATENT FAILURE: HOW JUDGES, BUREAUCRATS, A (...truncated)