Are Patents Just Getting Worse?
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The patent system is under attack. This is acknowledged no matter which side of the issue you ask. Those who favor more expansive patent rights claim that America’s current legal regime allows infringers to run rampant and turns valuable inventions into public property willy-nilly, at the snap of a judge or bureaucrat’s fingers. Those who favor rolling back the existing system of patent protections argue that malicious actors are profiting from incorrectly granted patents and holding up actual innovation by insisting on settlement fees and lengthy court fights.

One of the major current inflection points for this continuing battle is the landmark Supreme Court case Alice v. CLS Bank. In a unanimous decision written by Justice Clarence Thomas, Alice clarified arguably one of the most important elements of patent law: how to tell when a patent covers a legitimate invention instead of simply an abstract idea existing in the ether. Justice Thomas described a two-part test for this question: First, did the patent cover an abstract idea to begin with, and second, if it did, did it apply that abstract idea in a sufficiently new and useful (i.e. non-obvious) way to deserve intellectual property protection?

This simple test has spooked the trial bar for entirely understandable reasons. It has made whole hosts of patents that could otherwise provide grounds for litigation suddenly vulnerable to being struck down under the Alice test at a moment’s notice. Their argument about why this is bad, which is obviously self-interested but not prima facie unreasonable, is that Alice has cut too deep and rendered all sorts of useful inventions unpatentable.

This complaint is not merely academic. It is at the root of the effort currently underway to modify the century-plus-old Patent Act and change the definition of “useful” to permit much broader categories of “inventions” (including even natural phenomena) to be patentable.

The trial bar’s argument for why this radical step is necessary is that Alice lowered the scope of what is patentable too far, and the new language would overturn it in favor of the status quo ante. Their argument against Alice may be flawed in any number of ways, but one has to admit that when they can throw around factoids like “patent invalidations have increased 1,000 percent since Alice,” it’s understandable where otherwise uninterested people would wonder if there might be cause for alarm.

Even that statistic, however, raises a glaring question: Are those patent invalidations a result of Alice being too strict, or are they the result of the quality of patents getting worse? Alice’s opponents don’t want you to ask this question, but you should, and for reasons that have nothing to do with hatred of the patent system and everything to do with understanding both economics and the incompetence of Washington.

Let’s get a couple of facts out there. First, the number of utility patent applications at the U.S. Patent and Trademark Office has more than doubled since 2000. The number of patents issued has kept pace. Behind those two innocuous facts lurks a big problem: that the number of new patent applications has entirely overwhelmed the USPTO patent examiners, to the point that there is now a massive patent backlog, with no clear solution to the issue. Combine this with the fact that there is no incentive to deny a fraudulent patent application at the USPTO but every incentive to simply rubber-stamp patent applications in order to try to cut into the backlog. It is commonsensical, then, that patent quality would decrease in recent years as more and more junk patents get approved by overworked examiners, many of whom don’t even take their duties all that seriously when they are at work and so might not even care whether they are approving junk or not.

When you combine that with a strict test for patent eligibility of the kind outlined in Alice, it’s no wonder that huge numbers of patents are being struck down relative to the recent past. Did Alice speed up the process? Probably. But if the patents are likely to be bad already, then why is it so terrible that a Supreme Court decision made it easier to take out the trash?

But surely, you protest, there must be more to the argument. What about patents that were unfairly struck down using the Alice test?

What about them? In the world of Alice criticism, there is a curious absence of references to unfairly struck down patents. Rather, the main objection tends to be to the mere fact of patents being invalidated, with little to no reference to their quality at all. Whether this is the result of the wrong case not arriving yet or of the people involved being transparently tendentious is a matter for the reader to decide. It is worth noting, however, that, even by the admission of the Alice critics, the number of patents being invalidated by courts has steadily decreased in recent years, and the number of patent applications, at least as of last year, appears to have started to decrease. Perhaps rather than a sustained attack on property rights, we are really looking at a process that is as good for “science and the useful arts” as the Founders intended: the separation of quantity from quality.

What a shame it would be if the fruits of that separation of the chaff from the wheat were to be buried because a few lawyers want to sue for the rights of the chaff.

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