Systemic Bias in Patent Law

Abstract:     
The patent system purports to induce optimal rates of innovation in a vast array of industries. It fails. Due to its ostensible one-size-fits-all constitution, inventors’ disparate incentive characteristics, information asymmetries, and the cost of administrative and legal processes, the law cannot tailor property rights to the traits of individual innovators. The patent system therefore operates imperfectly, and so it may be unsurprising that criticism abounds. Although the patent regime may operate effectively - though not flawlessly - with respect to pharmaceuticals, chemicals, and mechanical devices, many believe that it suffocates innovation in information technology, business methods, computer software, and biotechnology (in particular, DNA sequencing, gene therapy, and medical-diagnostic techniques).

Certain features of the patent system are more controversial than others. Some contend that the sphere of patentable subject matter is too broad; others charge that patentees can too often obtain monopoly rights that extend beyond the functional characteristics of their actual inventions. Critics argue that the system overcompensates patentees, especially through its use of the entire-market-value rule in calculating damages and by its proclivity to award injunctive relief. Numerous academics have criticized the Federal Circuit’s common-law rule that one can invalidate a patent only by establishing such invalidity with clear-and-convincing evidence. Many commentators have assailed the courts’ failure to condemn “pay-for-delay” agreements in the pharmaceutical industry.

At a theoretical level, these and other criticized tenets of the patent regime need not produce inefficient results. Although examiners, judges, and juries commonly err - whether in determining patentability, engaging in claim construction, finding infringement, or in calculating damages - such mistakes are consistent with an effective patent system. This counter-intuitive result follows from the fact that one should generally measure the efficacy of patent law’s incentive-to-invent rationale ex ante, when the system imparts the relevant inducement to innovate. The fact of ex post error need not skew the expected value of pursuing a patent-protected course of innovation as long as courts are as likely to misstep in one direction as the other.

This Article articulates a novel framework within which to construe commonly criticized tenets of the patent system. Instead of asking whether a particular feature of the patent regime is capable of misapplication, or is apt to benefit one industry at the expense of another, one might instead determine whether the relevant facet of the system is apt to generate a significant systemic bias. To the extent one can expect a doctrine to lead courts to err systemically in one direction, one should subject that feature of the law to considerable scrutiny. Exploring controversial aspects of the contemporary patent system in this light suggests that certain facets of the law are in need of revision.

Number of Pages in PDF File: 70

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