As I've noted a couple of times, one of the key issues that has yet to be resolved concerning the proposed EU Unitary Patent system is which court will have the final say. Will it be the European Court of Justice (ECJ), or the main Unitary Patent Court? Or, put another way, will Articles 6 to 8 of the Unitary Patent Regulation to be adopted by the Council and the European Parliament be deleted or not? If they are removed, ultimate power rests with the Unitary Patent Court; if they remain, the ECJ has the last word.
That question might seem to be of only minor importance, of interest mostly to lawyers. But an excellent recent article about the US experience here demonstrates very clearly why that is not the case, and why the choice will not only determine whether software patents become as widely allowed here in the EU as in the US, but whether the entire EU patent system becomes affected by the worst flaws of the transatlantic system – including the massive influx of patent trolls. Here's why.
As the article explains, there was a watershed in the US judicial system, when the United States Court of Appeals for the Federal Circuit was created in 1982. Here's what happened in the world of patent litigation as a result:
In the two decades before the creation of the Federal Circuit, appeals courts sided with patent holders in only 20 to 40 percent of cases. Such a low rate would have caused potential patent plaintiffs to think twice about filing a lawsuit using a weak patent.
In contrast, the Federal Circuit sided with patent holders more than 80 percent of the time during its first year on the bench. And it would continue siding with patent holders for the next decade. As companies saw the opportunity—or the threat—posed by this newly permissive patent regime, the number of patent applications, granted patents, and patent lawsuits all began to soar.
Worse than that, the new court greatly expanded what was regarded as patentable:
the Federal Circuit gradually reversed the rule against patenting software. The process culminated in the infamous 1998 decision of State Street Bank v. Signature Financial Group, which held that a strategy for managing a mutual fund using a computer was eligible for patent protection. The ruling made it clear that, in the Federal Circuit's view, no practical boundaries existed on software patents. It also opened the door to patents on "business methods," which had previously been seen as off-limits.
These decisions opened the floodgates for patents on software. Microsoft received just five patents during the 1980s and 1,116 patents during the 1990s, for instance. Between 2000 and 2009? The company received 12,330 patents, more than ten times the amount.
In a very real sense, then, the Federal Circuit is responsible for the rise of patent thickets, patent trolls and the granting of absurdly obvious and trivial patents on every aspect of software. The reason that occurred is that its decisions were rarely reviewed or overturned. Only when the US Supreme Court chose to take on a case was there any possibility of that. For the first couple of decades of the Federal Circuit's life, that didn't happen; more recently, in the face of the increasing abuse of patent system, it has:
under newly-appointed Chief Justice John Roberts, the Supreme Court stepped up its oversight of the Federal Circuit's work. The justices did not like what they found. Between 2006 and 2008, the Supreme Court decided at least four major patent cases. In all four cases, the high court overruled a patent-friendly decision from the Federal Circuit. Three of the rulings were unanimous; the fourth was decided 7-1.
In one decision, the Supreme Court reiterated the need to use common sense when evaluating the obviousness of a patent. Another ruling made it harder for a patent holder to get an injunction against an infringing product. A third decision prohibited patent holders from "double dipping" by demanding patent licenses from two different firms in the same supply chain (say, a memory maker and the computer company who used that memory in its products). The final decision limited the reach of patent law over software installed on a computer overseas.
The article also has a very clear explanation of why the Federal Circuit has this clear bias in favour of patents, and of extending them as widely as possible:
Patent attorneys tend to have a pro-patent bias, and these attitudes seem to have rubbed off on Federal Circuit judges. Most obviously, a significant minority of Federal Circuit judges have been patent lawyers themselves, whereas judges on other courts almost never come from a patent law background. But beyond that, the heavy load of patent cases on the court's docket means that the judges of the Federal Circuit are constantly interacting with patent lawyers. In addition to hearing their arguments in the courtroom, they read the same patent law publications as the lawyers, hire young patent lawyers to clerk for them, and are invited to speak at events organized by the patent bar.
It is highly likely that exactly the same dynamics will operate in the new EU Unitary Patent court, which will therefore produce the same serious problems. As the article on the US experience notes, the solution is obvious:
breaking the Federal Circuit's monopoly on patent appeals may be the single most important step we can take to fix the patent system. The Federal Circuit looks likely to undermine other reforms undertaken by Congress, just as it has resisted the Supreme Court's efforts to bring balance to patent law. Only by extending jurisdiction over patent appeals to other appeals courts that are less biased toward patent holders can Congress return common sense to our patent system.
We are fortunate here in Europe that we can learn from the US experience what will happen if the Unitary Court is allowed the last word on patentability. As the article suggests, only if there is an independent appeals court able to take a more balanced view of patents for the good of society will the Unitary Patent system function fairly. And that can only be achieved if the ultimate arbiter of patents is the European Court of Justice.