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A Patent Crisis—Supreme Court Can Help America Compete Again

Sept. 25, 2020, 8:01 AM

For the last two centuries, our country was the world leader in technological innovation. Now, we are losing our ability to compete against Asia and Europe. The problem is not that Americans have become any less innovative or hard-working. Instead the problem lies in our patent system, which is under attack from within.

Our country’s founders understood that patents are critical to innovation. For that reason, the principle is enshrined in our Constitution, which grants Congress the power “to promote the Progress of Science and useful Arts” by awarding “Inventors the exclusive Right” to their discoveries. Indeed, our patent system incentivized and empowered early inventors like Thomas Edison and Alexander Graham Bell, and helped create today’s technological giants like Apple, Google, Microsoft and IBM.

This is basic economics. Patents guarantee a limited monopoly on inventions (usually 20 years), which lets inventors recoup the costs of research and development, and repay investors who help convert scientific theory into usable technology. It is no coincidence that America in the 20th century had both the strongest patent system and the most powerful economy in the world.

Alice Was Critical Turning Point

Over the last decade, however, our patent system has declined while patent systems in Europe and Asia have grown stronger. A decision by the U.S. Supreme Court released in 2014, the year I stepped down as chief judge of the U.S. Court of Appeals for the Federal Circuit, was a critical turning point for American innovation.

In Alice Corp. v. CLS Bank, the Supreme Court ruled that a computer service designed to mitigate risk in financial transactions could not be patented despite the fact that computers and software were involved because the invention related to an “abstract idea.”

In so ruling, the court undid decades of strong patent protection by throwing open the floodgates to categories of U.S. innovation that would no longer qualify for patent protection. Twenty years ago, America largely protected computer software and emerging technologies while Europe and Asia did not. Since then, patent protection in Europe and Asia has advanced, while the U.S. has taken a huge step backwards with Alice and cases that followed.

The result is that many countries are now more competitive than ours in promoting innovation.

Now the phrase “abstract idea” does not appear in any patent law that Congress enacted. Despite the fact that almost every invention starts with an abstract idea, the Supreme Court declined to define what the phrase means. It noted that it “need not labor to delimit the precise contours of the ‘abstract ideas’ category in this case.”

‘Abstract Ideas’ Ban Fell to Federal Circuit

The task of applying the ban on “abstract ideas” thus fell to the Federal Circuit, which hears all appeals in patent cases throughout the country. Suddenly, the court for which I was the chief judge was forced to make decisions on hundreds of patents that were called into question and thousands that did not reach the court of appeals followed the same path.

Many hoped the Federal Circuit would tread carefully and wield Alice as a scalpel, limiting its reach to abusers of the patent system. Instead, in dozens of baffling decisions, the Federal Circuit welded a sledgehammer. It declared that technologies in virtually every industry were too “abstract” for patenting—including not just software, but manufacturing assemblies for car axles and electric-vehicle charging stations.

With decisions like these, good luck reviving the American auto industry, or getting ahead of China on electric cars.

Efforts Stall in Congress

Last year, the Senate seemed poised to overturn the Federal Circuit’s rampage and restore sanity to our patent system. A bipartisan effort by Sens. Chris Coons (D-Del.) and Thom Tillis (R-N.C.) culminated in two weeks of hearings with 45 witnesses.

In their own words, the Senators found that the “U.S. patent system with regard to patent eligibility is broken and desperately needs to be repaired.” As a result, “investors are reluctant to pursue the innovations that propel our country forward,” including in “the development of technologies like 5G, quantum computing and artificial intelligence—innovations that not only promise to make life better for Americans, but also to protect our national security.”

American companies are now struggling to keep up with foreign competitors like Huawei and Samsung, which benefit from patent rights in their home countries that no longer exist in our own. As Senators Coons and Tillis observed, high-tech inventors “are receiving patents in Europe and China, but not in the United States. Why should we cede our competitive edge at this critical juncture?”

Despite bipartisan support, however, efforts to change the law stalled. Some might think that, in the midst of a global pandemic, Congress was right to put patent rights on the backburner. But the current crisis only highlights the need for reform. Under our current approach to patent eligibility, diagnostic tests for Covid-19 cannot be patented, so the resources and incentives to develop new tests in the U.S. were weak and unready.

Besides, after nationwide shutdowns and an uncertain path to reopening the economy, American industries could use a break.

One hope still remains: the Supreme Court, which has the power to clean up its own mess. One of the Federal Circuit’s most egregious decisions, Chamberlain Group v. Techtronic Industries, is now on appeal to the Supreme Court. In a decision that Senator Tillis called “madness,” the Federal Circuit put a garage-door opener patent under its sledgehammer. If garage-door openers are too “abstract” for patenting, what else is left? As the patent owner in the Chamberlain case put it, this is “a patent emergency.”

Restoring a strong patent system will benefit American consumers, support robust investments in research and development, and help level the playing field for U.S. industries.

With Congress stalled and our most innovative companies losing ground to foreign competition, let’s hope our judges return to the inspired words of our Constitution and the Patent Act, instead of their own abstractness.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Author Information

Randall R. Rader was appointed by President George H. W. Bush in 1990 to the U.S. Court of Appeals for the Federal Circuit, which interprets most of the nation’s patent laws. He served as chief judge from June 2010 to June 2014. He is founder of the Rader Group and has been a thought leader in intellectual property law and jurisprudence for over 25 years.