Patent Reform

Thesis

The patent statue by design is territorial. It is designed to deal with the circumstance of unified infringement by a single actor. Changes in modern commerce though have lead to an increasing amount of cases where there is no single actor. Patents written to cover modern technologies, particularly network computing technologies, are attempting to bring the distributed acts of different users around the globe into the ambit of a single territorial legal system looking for a single infringer. A controversy has developed where two separate legal rules have been proposed as the solution to this crisis. Each of these rules has its own problems and is constrained by the language of the statute. Congress needs to reform the patent statute by creating a special category of protection for process patents that is more in line with the policy and purpose of patent law.

What is the purpose behind patent law?

Patent Law is based on a policy of balancing three different interests in order to meet one goal. Patent law is founded on the assumption that technological progress is beneficial to society and therefore desirable. First, society wants to incentivize entities to undertake research and development. It is thought that by offering a temporary monopoly in new and useful processes and products, entities will be able to make their initial investment in developing the technologies worthwhile. Second, the benefits consumers derive from an innovation are increased if competitors can imitate and improve on the innovation to ensure its availability on favorable terms. Third, without patent law entities may seek to keep their innovations secret, which may cause technology to become available much later or the innovation may die with the innovator and forever be lost to society. Patent law therefore seeks to thread the needle between these two conflicting interests in order to optimally increase the amount of technological progress.

What is a patent holder required to prove in order to pursue a patent infringement claim?

The main way that patent holders are able to enforce their claims is through lawsuits based on the theory of patent infringement. In order to be liable for direct infringement, the law requires a party to perform or use each and every step of a claimed method. Often though direct infringement is not available as a cause of action to the patent holder because there is no single unified actor that has completed each and every step of the claimed method. This often leaves the patent holder without a remedy for violations of their patent. There are two situations in which a single direct infringer may not be present. First, the patentee’s competitors may have arranged their affairs so that no one entity infringes every claim limitation or process step. Second, a patentee’s method claims may have been drafted such that different entities must perform different steps.

In response to this crisis two rules have been developed to try and solve this problem. direct infringement is not the only means available for a patent holder to pursue a claim. When a defendant participates in or encourages infringement but does not directly infringe a patent, the normal recourse under the law is for the court to apply the standards for liability under indirect infringement. This is where the controversy in the law has developed. The courts differ on what the patent holder is required to prove in order to be bring a joint infringement claim.

In BMC the court held that indirect infringement requires, as a predicate, a finding that some party amongst the accused actors has committed the entire act of direct infringement. The court held that that there was also another way to find indirect infringement. If the defendant had not committed all of the claimed steps of the patented process, you could combine his acts and the acts of others as long as they could be considered the defendants agents. The law imposes vicarious liability on a party for the acts of another in circumstances showing that the liable party controlled the conduct of the acting party.

In Akamai though, the same court reversed their previous BMC ruling and changed the rule. The court held that it was not necessary for they’re to be a single actor that directly infringed the patent and that it was also not necessary for the party to exercise agency over the other entities. Instead, the court found that if there is an inducer, a party that guides and advises the other party on how to infringer the patent, and that all of the steps of the method patent are done that the infringer can be held liable.

Problems with Both Rulings

Both rules have their own problems. BMC’s rule is ineffective because it allows parties to be able to escape liability for patent infringement. Akami’s rule has the downside of creating new problems in the system. By stating that only the inducer is liable and not the other arms length parties it creates new problems of enforcement, and new opportunities for gamesmanship and abuse and inequity.

What should be done to fix this problem?

Congress needs to reform the patent statute in order to create a special category of patents for method patents. The way that the system works now is faulty because it treats all industries in the same manner. It assumes that inventors in all industries need the same level of protection for their inventions. Some industries though are not able to protect their inventions as well as others.

For example, patents in their current form are very effective in the chemical industry. This is because comparatively clear standards can be applied to assess a chemical patent’s validity and it is easy to determine whether an allegedly infringing molecule is physically identical to a patented molecule. Process patents are on the other side of the spectrum. Process patents are very hard to protect though because of the fact that competitors to be able to infringe the patent freely by maintaining an arms length relationship with other infringing entities.

The fact that process patents in their current state are less effective is shown by the business community’s opinion of process patents. In Richard Levin’s survey of industries regarding patents it was shown that only twenty percent of industries rated process patents effectiveness at 4.0 (on a 7.0 point scale). Business tended to rate other methods such as maintaining secrecy as a better means of appropriation.

The current system goes against the policy rationales for patent. Because process patents are so ineffective industries gain less benefit when they create a new process because they will not be able to enforce the validity of the patent in court. This inability to protect their patents will cause there to be less innovation in this area, which will cause a detriment to all of society. Also when companies do create new processes they have been shown to keep them secret instead of patenting them. This is bad because it stops other parties from having access to the patent. This in turn stops imitation and improvement of the process, which causes improvements in process to be slowed. This again is to the detriment to all of society because the less people that are working on a process the less improvements will be see in that process.