by James L. Ewing, IV *
Article I, Section 8, Clause 8 of the U.S. Constitution establishes
patents as a private property right that is necessary to promote
the progress of science and useful arts, by securing for limited
times to inventors the exclusive right to their respective discoveries.
However, what some forget is that this constitutionally authorized
property right is implemented by federal statutes that undermine,
intrude and invade the normal rule of free competition. The Supreme
Court in Graham v. John Deere, 383 U.S. 1 (1966), addressed this
inherent paradox by recognizing that Article I Section 8 is both
a power and a limitation. It recognized the need to limit the statutory
exception to instances that foster promotion of advances in the
"useful arts." Indeed, the Court noted that U.S. Patent
Law derives from the English 1623 statute of monopolies whose chief
aim was to dismantle royal monopoly grants that undermined the cause
of free competition (usually by allowing friends of the Crown the
profitable, but unpopular monopolies). But even the English statute
allowed a limited monopoly to persist in the form of 14 year grants
of "Letters Patent" for "new manufactures."
This history shows the patent / free competition balance to be
dialectical, not static. In this country, since the turn of the
century, the pendulum has cycled twice between the patent right
and free competition poles. The last free-competition era occurred
between 1930-1950. Perhaps the zenith (or nadir, depending on point
of view) was Mercoid Corp. v. Mid-Continent Inv. Co., 320 U.S. 661
(1944) where the Supreme Court held that tying sales of a non-patented
product to a patented product constituted an impermissible extension
of the patent monopoly and therefore patent misuse. Ironically,
Mercoid facts today could support loss of profits damages under
Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538 (Fed. Cir. 1995). Partially
as a reaction to certain court decisions (including the need to
overturn Mercoid), the 1952 Patent Act slowly turned the pendulum
back in a pro-patent direction. That movement accelerated full-bore
with creation in 1983 of the Court of Appeals for the Federal Circuit
to hear all appeals from trial court patent infringement decisions.
Meanwhile, the Supreme Court extended the patent right into areas
that were previously in the public domain. The bellwether was Diamond
v. Chakrabarty, 100 S. Ct. 2204 (1980) where the Court held previously
unpatentable life forms available for patent protection. The Chakrabarty
case is the structural underpinning for the massive strides in life
sciences research and developments in recent years, much of which
is already proving useful to mankind. Nevertheless, patent applications
have been filed to cover various aspects of the human genome, and
to cover genetic modification of the human embryo. In one recent
instance, the breadth of patent rights became a human rights issue
when a major biotechnology company bowed to public reaction and
discontinued its marketing of seeds featuring the patented "terminator
gene" that would prevent replanting of crops.
In the information technology field, the Court expanded the scope
of eligible patent subject matter in Diamond v. Diehr, 101 S. Ct.
1048 (1981), where it held patentable certain mathematical algorithms
previously considered to be laws of nature or mathematical laws
which were the common heritage of mankind. The Diehr case opened
the door to the now ubiquitous practice of patenting software. Should
there remain any doubt about limits on patenting automated systems,
the Federal Circuit ended the "methods of doing business"
exception to what is patentable in State Street Bank & Trust
Co. v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998),
cert. denied, 119 S. Ct. 851 (1999).
The resurgence of patent power accompanied, and perhaps precipitated,
the acceleration of technology. Around the time of the Chakrabarty
and Diehr cases in the early 1980's, Apple launched its Apple II
personal computer and IBM the IBM PC. The resulting ubiquity of
accessible microprocessor capacity, mobile telephony and the proliferation
of the Internet have changed every facet of our lives and will stimulate
more changes at an ever increasing pace. Ideas can be incorporated
into software or onto the web and thereby almost instantly generate
great wealth even today, early in this internet phase, some internet
start-up companies enjoy greater market capitalization than major
Yet the software which powers these innovations is different than
a plough. In Thomas Jefferson's time, the Patent Office could effectively
and accurately search relevant Patent Office records for earlier
plow patents in order to determine whether the plough shown in a
patent application qualified as "new" and therefore patentable.
By contrast, the software which runs a cell phone in order to effectuate
radio transmissions, telephone number memory, and interface with
the user via keypad and screen contains thousands of lines of code
corresponding to hundreds of processes, none of which can easily
be shown in a drawing or compared to other systems or processes
readily. The result is confusion and unpredictability; for instance,
there are over forty patents which purport to cover various aspects
of call forwarding. A company which plans to introduce a new product
or service finds it more difficult and less reliable every day to
search the relevant patent field and determine whether that technology
is clear of third party patent rights.
Various patent owners were quick to leverage on this confusion
by, for instance, filing multiple patent applications to acquire
hundreds of patent claims, many of which never corresponded to an
actual device or process actually carried out by the patent owner.
Such an array of patent claims, each of which must be independently
defeated, combined with the fact that the average cost of litigating
a patent case is approximately $1.2 Million, provides perverse incentives
for defendants to pay tribute rather than fight on. For instance,
many companies that use machine vision or bar code readers have
received a demand letter requiring payment of money to a foundation
that does not market bar code readers or machine vision products
but is instead in the business of owning and enforcing patent rights.
Other businesses on the receiving end of patent claims are: electronic
programming guides on cable television, interactive voice response
and one number calling functionality in telecommunications systems,
and maps for consumers on the internet. Obtaining that license does
not guarantee that other patent owners will not send the next letter
demanding more money to practice the same technology. The potential
is that existing lines of business are abandoned and new products
and services never get developed because of the patent encumbrance
on the balance sheet.
One commentator has described patents as the single most powerful
weapon the government places in the hands of an ordinary citizen.
Are these weapons out of control today? Are patents promoting the
public good, or is the patent right adversely affecting the marketplace?
Should scope, procurement or enforcement of patent rights be circumscribed
in some manner in the interest of the common good, as is not uncommon
with any property right? Should patents continue to enjoy a statutory
presumption of validity? Why should that be so where, in some fields,
the resources of the Patent Office are inadequate to do the correct
examination? Should the clear and convincing burden to overcome
the presumption of validity be changed? Should there be a compulsory
licensing system to modulate the effect of patent rights on the
free market? What say you?
* The author is a partner in the Intellectual Property section of
Kilpatrick Stockton LLP in Atlanta and serves as the Chairman of
the Patent Subcommittee of the Federalist Society's IP Practice