Transcript Information Policy in the Patent System: An Administrative

Innovation Policy in the
Patent System: An
Administrative Approach
Arti K. Rai
Duke Law School
Innovation Policy
 Economic diversity of invention  one
component of innovation policy
 “Neutral standards” flexibly address
economic diversity of invention over time
(some possibility of rent-seeking, but
diminished)
 Patent statute already has some neutral
standards
 Question of what institution(s) should use
neutral standards (and develop others)
Invention or Industry
 Software vs. pharma: # of patents;
importance of patents
 End product drug  not “complex”;
few patents (but see “reach-through”
claims in Ariad v. Eli Lilly)
 Modern pharma research 
complex; many relevant patents (not
as many as pure software but pharma
hardly likes all patents)
Why Has Impact (Number) Been
Different?
 Public domain” strategy by NIH
 Pharma’s PD strategy (SNP
Consortium; GAIN project;
Toxicogenomics consortium)
 Research infringement often not
caught
 Pharma has secured favorable policy
(PTO utility, WD guidelines)
 Saying patents are (or are not)
important to “industry” is too simple
An Administrative Approach
 Does not (necessarily) mean that
agency is institution that makes
definitive policy
 Incorporates insights of administrative
law and theory (theories of
institutional competence) into how
patent system makes policy
 Patent policy is one type of regulatory
policy (let’s not re-invent the wheel)
Case Study: In re Fisher and PTO
Utility Guidelines
 PTO relies on utility guidelines to
deny patents on gene fragments of
unknown function
 Motivating force behind guidelines 
policy (“anti-commons”)
 Policy is best way to distinguish ESTs
from other “research tools” (e.g.
microscope)
CAFC Decision
 Affirms PTO; rejects policy
 “Public policy considerations . . . are
more appropriately directed to
Congress as the legislative branch of
government”
 Should courts make large-scale
economic policy? (most “neutral
standards” currently in statute tightly
tethered to scientific fact)
Reframing Policy
 Under administrative law/theory, “policy”
well-accepted
 What agencies do when language of statute
is extremely vague (e.g. “utility”)
 “Hard look review” by court addresses
concerns re: agency capture
 But does not require courts to make largescale economic policy in first instance
 Admin law infiltrating antitrust, tax (other
areas of “exceptionalism”); Dickinson v.
Zurko
Objection 1: Will Chevron Be
Brought In?
 Policy shades into legal interpretation
 PTO subject to capture; does not
have economic expertise
 Mead: Chevron deference requires
substantive rulemaking authority or
formal adjudication
 No (current) PTO proceedings subject
to Chevron
Chevron for future reforms?
 Substantive rulemaking authority in
recent Senate proposal
 May be good idea, but need to
proceed cautiously (“Notice and comment
rulemaking is to public participation as Japanese
Kabuki theater is to human passions – a highly
stylized process for displaying in a formal way the
essence of something which in real life takes place
in other venues”)
 Chevron for results of opposition
proceedings (but that’s good)
 Chevron for “gold plated” patents?
Objection 2: Does This Matter?
 Fisher reached right result (who cares
about whether CAFC explicitly recognizes
policy)
 In re Deuel problem (Judge Rader: “[T]his
court has deprived the Patent Office of the
obviousness requirement”)
 “Economic nonobviousness?” CAFC trying to
protect patents on therapeutic genes?
(Boyd, 1997)
 Only transparent policy analysis can
distinguish between therapeutic genes,
genes that are “research tools”
Objection 3: What About Policy
Concerns At Infringement Stage?
 Here courts are better suited
 Ex post, can tailor relief in specific
circumstances faced by two parties
 Injunctive relief provision allows for
policy considerations that may differ
by type of invention
Kennedy concurrence
“Trial courts should bear in mind that . . . [a]n industry
has developed in which firms use patents not as a basis
for producing and selling goods but, instead, primarily
for obtaining licensing fees (cite to FTC report)
For these firms, an injunction, and the potentially serious
sanctions arising from its violation, can be employed as a
bargaining tool to charge exorbitant fees to companies
that seek to buy licenses to practice the patent. When
the patented invention is but a small component of the
product the companies seek to produce and the threat of
an injunction is employed simply for undue leverage in
negotiations, legal damages may well be sufficient to
compensate for the infringement and an injunction may
not serve the public interest.”
Reference
 Stuart M. Benjamin and Arti K. Rai,
Who’s Afraid of the APA: What the
Patent System Can Learn from
Administrative Law, 95 Georgetown
Law Journal __ (forthcoming 2007)