Congress has empirically been the only branch of government that has made sweeping patent reforms---and it does reform better than the courts.

My AEI colleagues Claude Barfield and John E. Calfee have written an excellent book about intellectual property law and its relationship to biotechnology. But I disagree with their argument that the “danger of unintended negative consequences” and the “self-correcting mechanisms” in the status quo necessarily militate against “sweeping legislative changes.” The problem of submarine patents was only fixed when Congress intervened with a sweeping change in 1995. And the problem of patent trolls is growing, notwithstanding the Supreme Court’s tightening of the injunction standard. Barfield and Calfee express legitimate concern that the legislative process can be hijacked by special interests. Indeed, passage of the legislation has been delayed by squabbling between the lobbies of groups who expect to be licensors and those who expect to be licensees. And legislation can shift the balance of power between the two groups, so there is risk of special-interest favoritism—though one concerned about that risk should not neglect the special interest of attorneys in a regime that generates billions of dollars in legal fees. Milberg Weiss spinoff Lerach Coughlin is diversifying from its practice of holding up deep-pocket corporations in securities litigation and is forming a practice that will focus on patent litigation, no doubt planning on employing the same strategy of using the hassle and expense of litigation and the risk of gigantic damages to force profitable settlements. Current debate on patent reform is largely nonpartisan, but this is in large part because the organized plaintiffs’ bar does not currently have a vested interest in the status quo of patent litigation. Should they obtain such a vested interest, future legislative efforts will have a partisan tinge that will make constructive changes more difficult.15 The time for reform, if ever, is now. Barfield and Calfee argue that it is better to resolve many of the problems in the status quo through “developing case law.”16 As a political matter, I think they err in assuming that the judicial branch and the U.S. Patent and Trademark Office (PTO) are in a superior position to solve the problems of the patent system, with little role for Congress. The submarine patent problem was itself an unintended consequence of the PTO changing its refiling procedures in the 1940s. Sometimes the federal common law of patents, as interpreted by the Federal Circuit, accumulates encrusted barnacles that take a working law and move it in the wrong direction. In such situations, the Supreme Court can certainly choose to clear up problems accumulated through years of accreted precedent. It did so in KSR International Co. v. Teleflex Inc., 18 when it loosened the Federal Circuit’s too-narrow “obviousness” test. But the courts can just as easily make a mistake. And the years of waiting for the Supreme Court to act can also impose costs. In the most infamous example, BlackBerry manufacturer Research In Motion Ltd. (RIM) agreed in March 2006 to pay $612.5 million to the patentholding company NTP Inc. to settle an infringement ruling over questionable patents to prevent an injunction that would have shut down its business19— even as the PTO had decided to reject all five patents involved in the dispute.20 Just two months later, the Supreme Court decided eBay v. MercExchange, 21 limiting the availability of injunctions, which would likely have permitted RIM to continue litigating the case to a successful resolution. But RIM does not get their $612.5 million back. Nor is it clear that the eBay rule—creating discretion for a court to choose to refuse to grant an injunction on the grounds that the plaintiff is “only” a licensor of the intellectual property— is the optimal rule for stopping patent trolls. Is the lesson from the BlackBerry case one about the dangers of injunctions at the back end of litigation or one about the dangers of PTO mistakes at the front end in issuing patents when the applications should have been rejected? Though it occasionally acts to the contrary, the Supreme Court is not a legislature, and it can only decide the case before it. What existing statutes and precedents require may not be what public policy requires. In eBay, the Court’s rule does not distinguish between the holder of a legitimate patent that has not yet succeeded in commercializing a patent and one misusing the legal system to enforce a questionable patent; it simply shifts the legal balance from patent-holders to patent-infringers. False positives like the BlackBerry case will be reduced at the cost of increased false negatives in other cases. But no one has answered the empirical question of whether the optimal balance has been struck. If the answer is no, the Supreme Court will have no judicial reason to correct itself. Punting to the courts could have deleterious effects. The Federal Circuit and the Supreme Court will be hard-pressed to seek more sensible apportionment rules for damages when Congress, given the opportunity, refused to do so. Congressional inaction might as easily lead to mistaken results as congressional action. A particular legislative reform may be wise or unwise, but there is no reason to create a presumption for the latter conclusion just because there is a lack of consensus. With that in mind, let us evaluate two areas ripe for reform: venue selection and damages calculation.