Monday, the Supreme Court is hearing oral arguments in a blockbuster case that could reshape the federal bureaucracy and constitutional law — and impact the U.S. innovation economy.
The case is Oil States v. Greene’s Energy, and it addresses whether Congress can create an administrative tribunal to invalidate the property rights secured to innovators — in this case, whether an agency called the Patent Trial & Appeal Board can cancel patents without having to follow the same rules as courts.
{mosads}This administrative tribunal has been invalidating patents willy-nilly without respecting the basic constitutional rights of all U.S. citizens in their property. In Oil States, the Supreme Court will decide whether Congress has arbitrary power to create an equally arbitrary kangaroo court in the federal bureaucracy, and the fate of the U.S. innovation economy is at risk.
Many Americans learn in school about great inventors who revolutionized our lives with innovative products, such as Thomas Edison’s light bulb, Alexander Graham Bell’s telephone and the Wright Brothers airplane. What is less commonly known is that all of these inventions were patented.
Patents are property rights secured to inventors of new products or services. Stable and effective patent rights has fueled the U.S. innovation economy for over 225 years.
In 2011, Congress passed a new law that made significant changes to the U.S. patent system. Among many other changes, it created a new agency to invalidate “bad patents,” which were mistakenly issued and thus undermine the culture of innovation.
Unfortunately, it ended up doing the exact opposite. Rather than fixing the problem of bad patents, the board has created uncertainty for inventors and investors.
The board immediately engaged in overregulation and has invalidated thousands of patents in an overzealous hunt for bad patents. Innovators are subject to multiple challenges to their patents, as the board has made it very easy to harass or challenge owners of patents, regardless of whether the patents are good or bad.
Of course, the more successful a patented innovation is, the more likely it is to be challenged before this tribunal, because the value to copycats in getting it for free is obvious. No patent is safe from these repeated challenges that have been filed by anyone for any reason. As a result, patents have decreased substantially in value since 2011.
The uncertainty — and the decrease in market value — surrounding patent rights have diminished incentives for individuals and companies that are working within the innovation economy. This in turn has discouraged innovators, venture capitalists and companies in creating the new technologies that make modern life a veritable miracle.
It takes years of hard work and investment for inventors to turn their ideas into reality.
For example, it took tens of thousands of person-hours of work and an estimated $150 million for engineers at Apple to go from Steve Jobs’ conception in 2003 of a mobile computer in a telephone to the commercial release in 2007 of the iPhone.
The investments necessary to bring a new drug to market can run as high as $2.6 billion.
But if an inventor develops an idea and obtains a patent to protect his property in the marketplace, if he is successful, he will find himself harassed and run through a Kafkaesque bureaucratic process at the board, where he bears all the risk of losing and the petitioners either win or walk away with no consequences to them.
As a result of this overregulation and the uncertainty it has caused, it is easy to see why inventors and investors in the innovative economy have little trust today when it comes to patents and intellectual property rights.
The U.S. has always had a gold standard patent system compared to the rest of the world, which have fueled our innovation economy for over two centuries and has been the source of admiration (and jealousy) the world over.
The inventions that have come from U.S. inventors have changed the course of the world. Rather than strengthening this system, the board is ruining the patent system.
It is critical that we fix it before it ruins innovation and the economy. Hopefully, the Supreme Court will rein in the board and send it back to Congress to create a new administrative system that respects the basic constitutional rights of all property owners.
If the Supreme Court misses this opportunity, Congress should still act, passing the stronger Patents Act that will fix many of the problems and help put innovation ship back on course in the U.S.
Kristen Jakobsen Osenga teaches and writes in the areas of intellectual property, patent law, law and language and legislation and regulation at the University of Richmond. She is a member of the Regulatory Transparency Project on Intellectual Property.