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Blog Post | July 13, 2021


2020 Election/TransitionIntellectual Property

The Revolving Door Project periodically publishes guest contributions that it believes represent a valuable contribution to discussions of executive branch personnel and policy. The views expressed herein are the authors’ alone.  

As of this writing, the Biden Administration has yet to announce a pick for director of the U.S. Patent and Trademark Office. As Fatou Ndiaye has pointed out, this is likely due to behind-the-scenes tension between patent hawks in the Democratic caucus, specifically Senator Chris Coons (D-DE), and the broader progressive, reformist forces in the administration that made it possible for the United States to back a waiver on obligations under the Trade-Related Aspects of Intellectual Property Rights.

This delay isn’t too unusual compared to recent administrations. Trump’s USPTO Director, Andrei Iancu, was nominated in August 2017 and sworn in the following February. David Kappos, the first director during the Obama administration, was nominated in June 2009 and assumed the role in the middle of August.

I am optimistic that the patent hawks will lose this fight, with the Biden Administration choosing someone who is less cozy with industry and recognizes that patents are a tool, not an end in themselves. While it’s entirely possible to imagine a hawkish choice for USPTO Director to appease those with heartburn over support for a TRIPS waiver, I’m not so sure. The announcement may well be the beginning of a paradigm shift in thinking about intellectual property (at least for Democrats) and I don’t anticipate a change in course.

Following the release of President Biden’s Executive Order, “Promoting Competition in the American Economy” I am incredibly optimistic. The order contains several measures discussing the need to address how the patent system inhibits competition, encourages review of policies related to licensing, and generally acknowledges the problems with patent abuse. 

Additionally, while there’s no doubt that patent hawks would prefer someone who takes a “nothing to see here” approach to the issue of patent quality (or lack thereof), there’s strong support for addressing patent quality on the Hill. Senators Patrick Leahy (D-VT) and Thom Tillis (R-NC) held a hearing last week on the question of patent quality. Senator Coons raised the familiar, overstated concerns about invalidating “good” patents, but the general sense of the hearing was recognition of the fact that “sometimes,” in the words of Justice Gorsuch, “bad patents slip through.”

We will have to wait for the formal announcement to see whether my prediction pans out, but until then let’s consider what a USPTO Director can do to improve the functioning of the office.

To begin, while the USPTO is bound by the laws enacted by Congress and interpreted by the courts, the USPTO does have significant authority to issue examiner guidance on how to apply different rulings and statutes to the patent examination process. At first blush this isn’t particularly controversial. Statutes cannot anticipate every contingency. However, the priorities of the USPTO Director (as with any other agency) will inform the guidance that is crafted. More important than what priorities a director has, however, are what priorities a director resists.

One of these is the issue of “uncertainty” in patent issuance. Under Andrei Iancu the USPTO focused on certainty in the patent granting process. This is unobjectionable at first glance; nobody wants the grant of a patent to be totally random. But “certainty” and “uncertainty” are Barnum statements to shepherd policies that increase patent grants overall. Over the past decade or so, the Supreme Court has made several rulings limiting the scope of what deserves patent protection based on subject matter eligibility, as defined by Section 101 of the Patent Act. In response to such rulings (especially Alice v. CLS Bank, which limited software patent eligibility), the USPTO issued guidance on subject matter eligibility putting reducing “uncertainty” front-and-center. In practice, this meant increased patent grants. This is far from ideal, and a good USPTO Director will issue guidance which harmonizes patent granting policy with the law instead of working around it.

While subject matter eligibility is important as a “first pass” for whether or not something will receive a patent, it’s likely more important to improve the USPTO’s ability to determine a patent’s novelty (whether or not the invention has been described before) and obviousness (whether someone holding ordinary skill in the art would have anticipated such an invention.) Unlike subject matter eligibility, these issues are best viewed as a question of state capacity and administration rather than policy.

What would a good director do to ensure patents issued represent truly novel inventions? Colleen Chien, law professor at Santa Clara University, part-time senior counselor at the Department of Commerce has many suggestions for reforming the USPTO. One such suggestion is to implement a “Team or Time on Demand” pilot program, where patent examiners can take more time themselves or by collaborating with other examiners. Importantly, this would be determined at the “local” level by examiners within an art unit. Research from Michael D. Frakes and Melissa F. Wasserman found that examiners on average have 19 hours to examine a patent. More worrisome, senior examiners are expected to grant patents in less time.

Further, an examiner would make efforts to increase the ability of the patent office to rely on prior art from the “non-patent literature.” Obviously, previous patents are a good starting point when determining whether an invention is novel or obvious. But the universe of prior art goes far beyond other patent applications. Problems with the relatively limited capacity of prior art searches discussed above create a recipe for patents which aren’t novel, such as the case of a patent on the creation of Panela, a form of cane sugar which people in Colombia have known how to make long before the creation of the US patent system.

These are just a few examples of ways a new director can increase capacity to improve the general quality of patents issued by the USPTO. And while a director will have significant latitude in the day-to-day functioning of the office, it’s important to have a Director who will work closely with Congress, cognizant of the fact that more isn’t more when it comes to patent issuance. Quality over quantity is (or should be) the name of the game.

Post-Arthrex and the expanded power of the USPTO Director, these changes are particularly important. Ensuring examiners have the time and resources they need to make sure bad patents don’t slip through will help mitigate any “damage” that could come from the Arthrex decision by making it so bad patents aren’t seen by Administrative Patent Judges (APJs) at the Patent Trial and Appeal Board (PTAB) in the first place. State capacity and a general improvement in the ability of patent examiners to do their work will prevent rent-seeking and, at least on the margins, mitigate the effects of a “revolving door” that exists between the private sector and patent examiners. A 2018 study from the National Bureau of Economic Research found that patent examiners grant more patents to firms that later hire them, with stronger effects when such firms are actively hiring. 

This concern is particularly ironic considering Justice Gorsuch’s dissent in Arthrex. Gorsuch criticized the “supposedly ‘independent’ APJs,” discussing examples of aggrieved amici (one of which was submitted by “39 Aggrieved Inventors”) concerned about the relationship between industry attorneys becoming APJs, only to return to the private sector. This revolving door is troubling, and this should be prevented. Even if the wildest fever dreams of PTAB critics were true and APJs were hopelessly corrupt, the answer isn’t to get rid of an efficient and accurate alternative to weed out low-quality patents. It’s to make sure those patents aren’t issued in the first place.

However, from a certain point of view, preventing capture and increasing capacity of patent examiners are more important than doing so for APJs. The “power” of a government official isn’t part of the calculus for determining one’s status as a superior or inferior officer, but if we’re concerned about the harm done by capture it’s very relevant. As my colleague David Bookbinder and I wrote in our amicus brief in Arthrex, “when the U.S. Patent and Trademark Office (USPTO) improperly grants Smith a patent for his widget, it eliminates Jones’ inherent right to do what she wants with that widget, but without the corresponding public policy benefit.” [Emphasis in original]

In other words, the PTAB is, at the end of the day, an institution which at its most powerful can only expand the ability of firms to enter into an industry. Patent examiners, by contrast, reduce access by granting temporary exclusive rights. This isn’t to say that patents are purely roadblocks to competition; there are very clear benefits to a patent system. But if we are concerned about competition, we should focus more on an institution that creates barriers to entry and the incentives to accumulate a portfolio of them, than one which knocks them down.
To be clear, there is only so much that a USPTO Director can do before they start running against statutory limits created by Congress and interpreted by the courts. And lest there be any confusion on my perspective, I firmly believe the US patent system is an asset to American industrial policy and innovation, even if there are circumstances where it is a sub-optimal policy tool compared to other alternatives. But there are real excesses and inefficiencies in the patent system that a new USPTO Director should be cognizant of and seek to correct.

Daniel Takash is a regulatory policy fellow at the Niskanen Center. He researches regulatory policies on occupational licensing, financialization, land use regulation and zoning, intellectual property, and other topics related to regressive rent-seeking.

2020 Election/TransitionIntellectual Property
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