The CP legislates uncertainty

Although patent law has historically been uniform, with a single set of legal standards designed to cover “anything under the sun that is made by man,” 2 Congress has shown increased interest in tailoring patent law to the needs of particular industries. In the last twenty years, it has lengthened the patent term for most pharmaceutical patents (see 35 U.S.C. §§ 155, 156 [2000]), protected certain experimental uses of pharmaceuticals by generic suppliers from liability (see 35 U.S.C. § 271(e) [2000]), prohibited enforcing patents on medical procedures against doctors (see 35 U.S.C. § 287 [2000]), prohibited issuing patents for genetically modified humans (P.L. 108–199 § 634), relaxed the obviousness standard for biotechnological processes (see 35 U.S.C. § 103(b) [2000]), and created a new defense against business method patents (see 35 U.S.C. § 273(a)[3]). It has supplemented patent protection for semiconductors with a sui generis statute (see Semiconductor Chip Protection Act, 17 U.S.C. §§ 901–14 [2000]). It has enacted non-patent statutes granting patentlike exclusive rights in particular industries (see Plant Variety Protection Act, 7 U.S.C. §§ 2321–2583). It has even passed a “private” patent bill, lengthening the term of one narrow group of patents.3 In each case, Congress reacted to particular complaints about the perceived unfairness of applying a general legal standard to a particular industry. Still other bills recently introduced in Congress, but not passed, would have changed the obviousness standards for business method patents, had the government “take” a particular financial services patent, or extended the patent for Claritin.4

These rather modest technology-specific changes to the patent statute are but the tip of the iceberg. There are any number of scholars, lawyers, and clients out there who want to revise the law further, in diverse and sometimes contradictory directions. Here are a few examples. A number of scholars suggest that patent law needs to be modified to take account of the particular needs of the software industry. Some suggest that software patents are inappropriate altogether,5 some that only Internet business method patents are.6 Others suggest that a form of sui generis patentlike protection is appropriate for software.7 Still others who endorse the general framework of patent law argue that the courts should apply patent law to software in somewhat different ways than they do in other industries. Most commonly, scholars suggest that the rapid market cycles in software justify shorter terms of protection for software patents.8 Similarly, some scholars have explored whether biotechnology deserves its own sui generis form of protection,9 while others have suggested that biotechnology patent standards should deviate from the general patent law rules.10 Some argue that certain types of biotechnological innovations should be entirely unpatentable.11 Others suggest that the disclosure requirements should be loosened for biotechnology patents,12 that the obviousness standard should be lowered,13 or that the scope of DNA sequence patents should be restricted.14 They have variously argued that the Federal Circuit should defer to the PTO,15 or conversely that the PTO should defer to the Federal Circuit.16

Given what we have said so far in this book, the reader might be forgiven for expecting us to add our voices to the chorus calling for industry-specific statutory reform. Calls to modify patent law are a natural response to the different effects patent law has on different industries. Hie economic effects of patents are quite different in software and biotechnology, two of the industries in which the calls for specific legislation are loudest. It is hard to imagine that the same statute is in fact the best possible one for both of these very different industries. Thus, in a perfect world the patent system might well be tailored to give optimal incentives to each different industry.17

In the real world, however, a number of factors caution against explicitly tailoring the patent statute to the needs of particular industries.18 The most obvious barrier is legal—the agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) prohibits member states from discriminating in the grant of patents based on the type of technology at issue.19 As we have noted elsewhere, however, the United States has not faithfully followed this treaty mandate.20 Neither has the European Union, which has industry- specific rules for compulsory licensing of pharmaceuticals and for the patentability of software and business methods.21 TRIPs seems to leave some leeway for industry-specific tailoring, or at the very least it has not been enforced so far against departures from the nondiscrimination norm. But more systematic departures might trigger complaints by other countries, and it is not clear that an industry-specific patent statute would survive the scrutiny of the World Trade Organization under TRIPs.

Even if industry-specific patent legislation is legal, we are not persuaded that it is a good idea, for several reasons. First, while economics can make useful policy suggestions as to how patents work in different industries, we are skeptical of the ability of a statute to translate those suggestions into detailed patent rules for each industry. Many of the predictions of economic theory are fact-specific—they suggest different factors that should bear on the outcome of particular cases, but that require case-by-case application that cannot easily be captured in a statute. Economic theory is more useful in making general suggestions about how the patent system can be adapted to particular factual contexts than it is dictating hard and fast statutory rules.

Second, rewriting the patent law for each industry would involve substantial administrative costs and uncertainty. Congress would have to write new statutes not just for biotechnology and software but for numerous different industries with special characteristics. Semiconductors, pharmaceuticals, chemicals, nanotechnology,22 telecommunications, and other industries would all need separate statutes. District court judges, who already have enough trouble learning the arcane rules of patent law in the relatively few patent cases they hear, would have to learn a host of new statutes. The law supporting these statutes would be slow to develop, since fewer cases would come up involving each statute. The resulting uncertainty might enrich lawyers, but it surely would not be conducive to encouraging innovation. Industry-specific legislation would also require a great deal of line drawing, as the boundaries between industries are vague and notoriously mutable. Semiconductor manufacturers and computer hardware companies patent and use software all the time. So, for that matter, do carmakers.

Indeed, one study suggests that most software patents are obtained not by software companies but by hardware or electronics manufacturers. Drug delivery systems might be thought of as medical devices, pharmaceuticals, or biotechnology; presumably a different law would apply depending on how the invention was characterized. Even technologies that seem radically different, such as biotechnology and software, may unexpectedly converge, as recent developments in bioinformatics and proteomics have made clear.23 Further, a significant percentage of inventions fall into more than one field. John Allison and Mark Lemley find that on average each patented invention fits into 1.5 different technology categories,24 a number that is increasing with time.25 And new fields arise regularly. Nanotechnology, for example, combines advances in semiconductors, biotechnology, materials science, and even optics. As a result, it would prove impossible to carve up innovation into static fields. Imagine trying to fit all modern inventions into categories created fifty or one hundred years ago. The result would likely be a combination of constant legislative tinkering with categories and a system that was nonetheless behind the times.

Past experience with such specialized statutes is also not encouraging. The history of industry-specific statutes suggests that many fail because they are drafted with then-current technology in mind and are not sufficiently general to accommodate the inevitable changes in technology. In the United States, the poster child for failed sui generis legislation has been the notoriously neglected Semiconductor Chip Protection Act, or SCPA (17 U.S.C. §§ 901-914 [2000]). Passed at the behest of the U.S. semiconductor industry after six years of legislative debate, the SCPA created a detailed set of rules designed to protect the "mask work" or circuit design pattern etched into semiconductor chips. The statute was tailored specifically to the purported needs of the industry, including special provisions on reverse engineering and other practices common to semiconductor circuit design. The ostensible reason was to protect American innovation from foreign competitors. But the statute has virtually never been used to enforce the rights it created, generating only two published judicial opinions in the quarter century since its enactment.26 The most likely reason is that the particular focus of the SCPA (duplication of mask works) is obsolete because the nature of the semiconductor business changed to make the manufacturing process much more difficult and hence harder to imitate at low cost.27 The foreign competition so feared by U.S. chip fabricators has not vanished, but it is not based on imitation of the sort the SCPA prohibits, and in any event the industry appears to be thriving without recourse to its specialized statute.

A similar fate befell some industry-specific patent statutes, such as the biotechnology-specific amendments to the U.S. patent statute's obviousness provisions (35 U.S.C. §i03[b]). Like the SCPA, the biotechnology obviousness provisions were enacted after lobbying by the biotechnology industry, which claimed that the general standard for obviousness failed to meet the special process-based characteristics of their industry, requiring a sui generis standard. But the biotechnology amendment became irrelevant nearly as soon as it was enacted, in part because general patent standards now reach the same result28 and lack the more onerous procedural requirements of the specialized provision. It has apparently never been litigated.