Courts don’t solve—past policies prove they’re weakening patent law

In contrast to China’s gradual strengthening of IP protections, the United States has seen the robustness of its IP system steadily erode.

Much of this erosion comes from three changes to the U.S. patent system made over the last two decades. First, in the 2006 case eBay v. MercExchange, the Supreme Court weakened patent owners’ ability to receive legal injunctions blocking the sale of their patented technology by an infringer. While injunctions are still available, they are now sought and granted significantly less often. The decreased threat of an injunction may create perverse incentives that cash-rich firms can exploit, such as “efficient infringement,” where the benefits of patent infringement outweigh the costs of defending against and even losing a lawsuit.

Second, in 2011 Congress passed the Leahy-Smith America Invents Act, which created the Patent Trial and Appeal Board (PTAB) as a faster and cheaper alternative to district courts for retrospectively adjudicating patent validity. However, according to bill co-sponsor Lamar Smith, lawmakers unintentionally included several design flaws that are exploited to harass start-ups, small businesses, and individual inventors. For instance, the PTAB has a lower standard of proof for invalidating patents than district courts, which contributes to the PTAB invalidating over 80 percent of patents it agrees to review. Indeed, former federal circuit chief judge Randall Rader referred to the PTAB as a “death squad” killing property rights.

And third, a series of Supreme Court decisions between 2010 and 2014 greatly decreased the scope of patent-eligible subject matter. The decisions established a two-step test for determining patent-eligible inventions known as the Alice/Mayo test, which restricts patents related to laws of nature, natural phenomena, and abstract ideas. Under the restrictions of Alice/Mayo, many once-patentable inventions became patent ineligible, resulting in the nullification of hundreds of patents. Through 2020, 60 percent of patents challenged under the Alice/Mayo framework were invalidated.

Ultimately, the key issue with these three changes is the increased uncertainty they inject into the U.S. patent system. The increased risk of a successful retrospective patent eligibility challenge at the PTAB, for instance, introduces significant uncertainty for start-ups and other small actors who rely on IP to attract financing. Moreover, critics of Alice/Mayo assert that the test is vague and unpredictable, which hampers start-ups, reduces investment, and ultimately undermines innovation. Kimberly A. Moore, chief judge of the U.S. Court of Appeals for the Federal Circuit, expressed that Federal Circuit judges were “at a loss” in how to apply the current patent eligibility provisions, while some IP legal professionals claim that they are unable to provide clear guidance to businesses due to Alice/Mayo.