[UPDATED] The Patent-Antitrust Debate Annotated

Professor Patterson’s antitrust essay has been updated.  I had inadvertently posted a draft version. ☹ – DDC

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Guest Post by Professor Mark R. Patterson (Fordham)

The past few months have seen a remarkable back-and-forth between Makan Delrahim, the Assistant Attorney General for the Antitrust Division of the Department of Justice, and attorneys both objecting to and supporting his views on standard-essential patents (SEPs) and standard-setting organizations (SSOs). For parties who are interested in this controversy but who do not have time to review and compare all the documents, I have annotated them, with Acrobat sticky notes keyed to highlighting of text.

To put my cards on the table, I am largely in agreement with AAG Delrahim’s critics, though I did not sign either of their letters. I agree with Delrahim that it is reasonable to devote scrutiny to the patent “hold-out” problem that is his focus, but doing so does not require dismissing a well-established consensus on the validity and harm of patent “hold-up.” The most compelling evidence for hold-up, it seems to me, is the 100-to-1 ratio of royalty demands to royalty awards that have been seen in some cases. Perhaps that differential is the product of confused courts, but despite the calls of AAG Delrahim and his supporters for evidence or more evidence for hold-up, they themselves provide nothing to show that the courts are confused. Nor do they provide empirical evidence to demonstrate the claimed greater importance of hold-out.

In the (currently) final document from AAG Delrahim in this saga, he states that the DoJ is “not able to comment on any pending investigation or evidence that [they] have reviewed.” As I note on that document, the possible problems he suggests might turn out to be present in the SEP context, perhaps in the process of the 2015 amendment of the IEEE’s patent policy, to which the speeches might obliquely refer. If so, his speeches will merely have been valid warnings to SSOs. Again, though, the speeches seem to go much further than necessary in dismissing other problems.

I make no claim to complete objectivity or thoroughness in my annotations, which are only my immediate responses to various points made in the documents. But I have pointed out what I think are weak points and strong points not only in the comments of Delrahim and his supporters but also in the responses of his critics. Also, some of my points in some of the documents are raised also in others, but I have tried to avoid duplication.

Finally, the annotation approach that I take here might seem more argumentative than necessary. Obviously neither my own writings nor anyone else’s would emerge unscathed from such an approach, but some of the rhetoric in these documents is best addressed in this way. I also think this approach is warranted by the importance of the issues, the dramatic differences in the views expressed, and the unfamiliarity of some with these issues. This controversy deserves even more attention than it has already received.

Mark R. Patterson is a Professor of Law at Fordham University School of Law. 

 

29 thoughts on “[UPDATED] The Patent-Antitrust Debate Annotated

    1. 5.1

      As I have noted previously, the legal concept is known as “Void for Vagueness,” and applies equally as well to civil matters as it does to its usual target of criminal matters.

      (Life, liberty and property – borrowing from Greg’s view that even “public franchise” property is still a form of property)

    2. 5.2

      For an alleged attorney who can write a complete sentence, Warren Woessner has about as little understanding of subject matter eligibility as possible. I could go back and revisit Warren’s brilliant insights into Mayo v. Prometheus but let’s save the guy further embar@ssment.

      Here’s a fact: you can’t patent “a result”. “Results” aren’t eligible subject matter for patenting. But when a court notes that a cr @p claim comprises a bunch of results, Warren weeps that the court is engaging in a 112 analysis which Warren evidently believes is “improper.” Apparently the idea that one could point to a claim element in a 101 analysis and observe (correctly) that there is no “there” there, just a result, is somehow verboten in Warren’s world. Got a cite for that, Warren? Of course you don’t.

      Then Warren repeats the same problem when the court observes (correctly) that a bunch of the other g@ rb@ge scrivened into the claim is ancient art. So now Warren weeps and moans that an obviousness analysis ha allegedly “improperly” inserted itself into the analysis. Wake up, Warren! It’s 2018. Many many years ago the Supreme Court and most intelligent attorneys realized that a comparison of the claim elements to the prior art is a necessary logical step in any subject matter eligibility analysis … unless Warren believes (bizarrely, for a supposed registered patent attorney in 2018) that 101 is just a technical scrivening hoop that claim drafters need to jump through (e.g., “Use these words and you’ll be fine). How can anyone believe that in 2018? How ign 0rant do you have to be to believe that? Serious question. Here’s hoping Warren can answer but we know that he can’t. Logic doesn’t allow Warren that privilege. So Warren will predictably insist on denying reality instead. And why not? He can make some money that way.

      As for this laughable passage from Plager’s “dissent-in-part” that Warren fell in love with:

      Plager argues that the “‘abstract ideas’ idea, cannot function as a valid rule of law” because it fails to predict how courts will decide future cases…

      First of all, to the extent there is a “unpredictability”, that’s Plager’s fault, and the fault of his cohorts on the CAFC who have done everything they can to take a fundamental proposition underlying the patent system and kick it in the face so that the patenting of logic can be made to seem “normal” (hint: it’s not normal, it was a terrible idea from the beginning, and it continues to be terrible).

      Second of all, in most cases whether a claim is ineligible or not is entirely predictable. At worst, it’s no more or less predictable than obviousness.

      Third of all, Plager makes the beginner’s mistake of lumping all the ineligiblity issues together under one banner. That is an egregious error. Different claims present different eligibility issues from different angles. It is not particularly helpful from a naive reader’s point of view (and rest assured Plager is writing for the most naive readers out there) to lump a discussion of the ineligibility of “logic instructions for a computer” type claims with a discussion of the ineligibility of a “detect this scientific phenomenon using old detection tools” type claims.

      1. 5.2.1

        Before you commentators on patent eligibilitiy continue reading this comment, please read my post on Interval Licensing at Patents4Life.com. I promise that it will make more sense than the rant you just read, that has the general tone of Cecily Strong playing “The Girl You Wish You Hadn’t Started a Conversation with at a Party” where she bombards Seth Myers with malapropisms like, “Who do you think you are because you’re not,” and “You need to wake up and smell the music.”
        In the post, I did not say that pure “results” claims should be patentable – I have always recognized the rationale of the Morse decision. Also, I didn’t suggest drafting tricks to get around the judicial exceptions to patentability, particularly in claims involving software. Please note that, while the Supreme Court referenced all three exceptions to patent eligible subject matter in one phrase [in Chakrabarty], the courts have recognized that the exception for abstract ideas is the most difficult to evaluate: “Computer software inventions – due to their intangible nature – can be particularly difficult to to assess under the abstract idea exception.” Interval Licensing Slip op. at 13-14. “[The abstract idea exception is the one that causes the most trouble.” Plager at Slip op. at pages 2-3. Judge Plager also notes that the Alice/Mayo rules causes analytical confusion because Alice is an abstract idea decision and Mayo is a phenomenon of nature decision.
        The Fed. Cir. has at least been able to define “phenomenon of nature” in the context of diagnostic and method of medical treatment claims. The recognition of the utility of a natural correlation (If high PSA, then prostate cancer) not sufficient to provide the inventive step required by Alice/ Mayo, while a claim to a diagnostic step followed by a method of medical treatment will usually be found patent eligible as a practical application of a natural phenomenon. (I think that simple “if A, then B, “diagnostic claims should be patent eligible, but I agree with the S. Ct.’s holding in Mayo, even though the Fed. Cir. has characterized it as a diagnostic claim.)
        The exception for natural products is easier. If the claimed compound or composition is not in the prior art (this is a 102 question) and exhibits markedly different characteristics from its closest natural counterpart(s), (a 103 analysis) they are patent eligible. This was the basis for the S. Ct. decision in Chakrabarty, that has not been revisited by the S. Ct. So, no, MM I don’t think that the 3 exceptions are in “one basket” for the purposes of +/- analysis.
        What is an abstract idea MM? You certainly don’t tell us, and the panel in Interval Licensing describes the claimed invention differently in at least 3 places. Slip op. at 3, 8, 15 and 21. This simply supports the truism that the more broadly you read a claim, the more abstract is the claimed invention. How does this decision help a future court to consistently resolve the abstract idea question?
        My comments about the Court’s employing 103/122 analysis to answer (I could have added 102) the question of inventive step leads to the conclusion that, if this sort of analysis can settle the question, why not abolish 101 inquiries and subject the claim to the conventional patentability tests? Certainly, a 102/103 analysis would resolve the natural product question. It worked for Judge Rich in Bergy and it will work for us today. A 102/103 analysis will also uncover attempts to patent “naked” natural phenomenon, like a claim to “lightning” ,and it would allow patenting simple, but highly useful, diagnostic claims.
        Software claims remain a problem, particularly when they are claimed as a “system” as in Interval Licensing, with enumerated “instructions.” But, MM, why immediately conclude that I have no knowledge of the “printed matter doctrine”? The 9 instructions in the Interval Licensing claim could be analogized to the mechanical aspects of a press that give it the capability to make vulcanized rubber. The panel effectively found that the instructions, and thus, the claim, were broader than the enabling disclosure, not that they were like instructions on a label, which bare no functional relationship to the system. (The district court felt the claims were anticipated by prior art displays). Either way, there is really no way that the claim would have survived a conventional 102/103/112 analysis.
        So take off your blindfold and listen, MM!

        1. 5.2.1.1

          Too much, too late, Warren – Malcolm has already moved on and has no interest in an actual dialogue.

          His general motif is “Drive-by Monologue.” It is “dangerous” to his believe system to actually engage on the merits of any conversation.

          It’s been that way for a solid 13 and a half years now.

    3. 5.3

      Plager: software can make non-abstract improvements to computer technology

      Software is instructions written so that existing “computer technology” can do what it was designed to do, i.e., carry out the instructions (written by programmers) for applying logic to data. Software is not “computer technology”, a fact which Plager appears to understand otherwise one presumes that he would just come out and state the opposite.

      Does Plager understand that instructions are ineligible subject matter? And that writing instructions is also ineligible subject matter? And that logic applied to data is ineligible subject matter and instructions for applying logic to data is ineligible subject matter? One assumes that Plager must understand and agree with these fundamental propositions. So the question becomes: (1) why make an exception for logic instructions that are written for computers which are designed to carry out logic instructions? and (2) if you are going to make an exception out of thin air, why not be up front about it and explain the reasoning and justification for the exception in the most detailed manner possible? The CAFC failed miserably in this respect but I don’t see Plager acknowledging any of it.

      1. 5.3.1

        >>Software is instructions written so that existing “computer technology” can do what it was designed to do,

        In what invention is this not generally true.

        1. 5.3.1.1

          >>Software is instructions written so that existing “computer technology” can do what it was designed to do,

          In what invention is this not generally true.

          That’s easy. It’s not generally true for all the technology that was not built to carry out post-manufacture logic instructions. You know, the kind of technology that was the main subject of the US patent system before the system was inundated with patents intended to protect logic, instructions and information.

          1. 5.3.1.1.1

            You inventions that were meant to process information in the information age?

            I still am floored the way the anti-patent people try to diminish the important of information processing particularly as we are seeing the machines performing more and more tasks that humans can.

            So, MM, would have all patents to information processing machines that drive be ineligible.

      2. 5.3.2

        “Written…”

        See the simple set theory explication as to how something written is nonetheless quite eligible for patent protection.

        See any number of many other posts debunking your twaddle here for the dissembling that it is.

        1. 5.3.2.1

          See the simple set theory explication as to how something written is nonetheless quite eligible for patent protection.

          OMG I SEE IT NOW IT IS TEH CONVINCEING I NEVER DREAMED OF

          Seriously, you need to step your game like ten thousand fold.

          1. 5.3.2.1.1

            says the guy who refuses to engage on the merits…

            Maybe it is YOU that needs to step up the game (shockers – Malcolm playing his number one meme of Accuse Others….)

            1. 5.3.2.1.1.1

              the guy who refuses to engage on the merits…

              What in heck is there to “engage” with in 5.3.2? It’s a bunch of dust glibly kicked in the noble face of merit.

              1. 5.3.2.1.1.1.1

                Lol – maybe you want to actually engage without the empty snark.

                Oh wait, you have nothing but empty snark.

                1. maybe you want to actually engage without the empty snark.

                  No, thanks. I might impregnate you with actual knowledge. Way too dangerous.

                2. There is zero chance of you impregnating anyone with your flacid control of actual knowledge.

                  As i stated: you have nothing but empty snark.

  1. 4

    *Annotated

  2. 3

    It is a question who will develop the standards if you can’t make any money from it.

    (I work with standards all the time and regularly write claim charts to standards.)

    1. 3.1

      And the reality is after eBay that if you can’t get an injunction that you have little leverage over an alleged infringer (plus it is hard to impossible to get treble damages, so what you are left with is infringers that have the upper hand.)

    2. 3.2

      It is a question who will develop the standards if you can’t make any money from it.

      I am not quite clear what you mean here. It is not as if the folks who set the standards own any of these “standard essential” patents. As the system is presently constituted, there is very little money in setting industry standards, and yet they still end up getting set.

      As it happens, I take a dim view of compulsory licensing of SEPs. Still and all, the existence of SEPs does nothing to drive the process of setting industry standards, and provides exactly $0 to the bodies that set such standards.

      1. 3.2.1

        Actually, there is a lot of money spent on creating standards with teams of researchers building new systems and developing standards at the same time.

        There some other companies that are NPEs that try to write patents to get claims that read on the standards, but there are always a core of companies that are putting out a lot of money to develop new standards.

      2. 3.2.2

        Greg,
        Your comment that “there is very little money in setting industry standards” is so incorrect that I though I would point you to the fact that industry standard setting is entirely about REDUCING COST…not paying them.

        The reason that standard bodies were created was entirely to reduce the FRICTIONAL costs endured by both manufacturers and consumers when competing standards arose out of private companies efforts to dominate particular technology. By creating a standard well BEFORE rollout, manufacturers reduced their risk of backing the WRONG standard (i.e. Betamax) and the subsequent costs associated with any wrong choices. Rather than have a patent owner’s technologies competing in actual devices in actual markets….the process is truncated by other industry players (many of which don’t own significant patent portfolios and thus have no reason to maximize royalties) so that the winner is determined before ANY MARKET COMPETITION ACTUALLY OCCURS.

        Being able to QUASI-LEGALLY collude as an industry to set the technical aspects of a standard is about COST AVOIDANCE…and the magnitude of such avoidance is HUGE. With the ability of a gov’t sanctioned monopolistic tech cartel to chose the winners and losers…all the patent owners have to compete for INCLUSION by reducing their rates to a pittance (to even get considered) rather than be fairly rewarded for their advancements in the tech. Some refuse and their tech is incorporated into the standard anyway….since no injunction is effectively possible after the Ebay decision…with the industry daring to be sued under the current system where a single patents contribution often CAN’T be adequately proven to the judiciary’s nebulous “damages allocation” scheme….so the standard gets to use it for FREE. Unless you own patents amounting to at least 1% of the ‘recognized’ SEP patents…you are a beggar at the table for the scraps left by those ‘other’ major contributors….NO MATTER HOW IMPORTANT your patent is to advances in the standard and how ‘tired’ the patents of the top 10 owners might be (i.e. technologically obsolete but still supported IN the standard).

        1. 3.2.2.1

          Your comment that “there is very little money in setting industry standards” is so incorrect that I though I would point you to the fact that industry standard setting is entirely about REDUCING COST…not paying them.

          My apologies for any confusion that my phrasing may have engendered, but I think that you are misunderstanding me. I did not mean to convey that there is not a great deal of money at stake in standard setting. I merely meant that the bodies that set standards do not make a lot of money by setting the standards. The USB-IF, for example, is a not-for-profit operation.

          There is no doubt a great deal of money at stake in making sure that everyone uses the same USB configurations. There is little money to be made, however, as the organization responsible for coordinating standard USB configurations. That is all that I meant by my 3.2.

          1. 3.2.2.1.1

            I am curious as to the larger import of your intended message.

            The response to your message (whether confused or not) appears to be in line with a refuting of what appears to be your desired takeaway.

            “Does nothing to drive the process” then is probably also “misunderstood”

            Your post simply sounds like you are trying to diminish something valuable.

            Even if you are not, what is the purpose of your post?

  3. 2

    The big picture is that the patent system created the most innovative country in the history of the world. In the last 10 to 15 years there are these people that have been dismantling the patent system. We know that the patent system was working great and there was no troll problem, but just fictionalized problems or problems that were minor in comparison to the great good of the patent system. The people that are dismantling the patent system have fantastical arguments about why it is good. The arguments they present why things will be fine without patents are the same arguments that were found not to work back in the 1960’s through 1970’s for large corporate research.

    Anyway, the anti-patent people have almost a complete victory with the patent system on its knees and close to a complete collapse. One more good punch from the SCOTUS or Congress and it will be down and out. I don’t think there is any chance of saving the patent system from the Corporate interests.

    I guess we are going to find out what it’s like to live in an economy without patents.

  4. 1

    What is the 100-to-1 demand to award ratio? The initial demand by the patent owner v. the legal damages determined by a jury trial? How is this evidence of much at all, except erosion in the damages case law and lack of permanent injunctions under eBay?

    1. 1.1

      Amen to that. Back in the 1970’s the DOJ was anti-patent and went around giving speeches that enunciated the 9 no-no’s. As a result, President Carter formed a commission to study the patent system, and its report (including calling for a Court that become the Fed.Cir.) emphasized the criticality of the ability of the patent owner to walk away from the negotiations in order to reach a free-market established royalty.

      It is just like buying a car: you negotiate with the dealer, and both you and dealer have the right to say NO to the terms offered by the other. So, if and when you do reach an agreement, that is a free-market negotiated price. If one of you is REQUIRED to make a deal, the other can get terms that are better than a free-market negotiated price.

      If the potential licensee can make and sell without a negotiated license and the patent owner cannot be awarded an injunction, then the paten owner is REQUIRED to make deal, which will be worse for the patentee than a free-market negotiated price.

      1. 1.1.1

        A mere “public franchise” instead of a “real” private personal right, clearly is something that the government (as franchisor) still has their “fingers into” after grant (what should then be ‘properly’ called a license, as no longer are ALL the sticks in the bundle of property rights being transferred).

        That being the case, it is not difficult to see the path to other conditions on the franchise being invoked at the political whim, and erosion of what patents were meant to be exposed to further degradation.

        Compulsory licensing is a blink away.

      2. 1.1.2

        Kind of funny too isn’t it that a Democrat that was considered one of the more liberal Presidents we had was for strong patent rights.

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