Jeers and Cheers for Prof. Duffy

by on July 28, 2008 · 6 comments

I’ve got two new articles on patent reform out today, and by sheer coincidence, both of them are related to the work of law professor John Duffy. First, over at Ars Technica, I analyze John Duffy’s article at Patently-O, where he argued that the US Patent Office has shown a growing hostility toward software patents over the last couple of years. He seems to be right that the Patent Office is becoming more skeptical about software patents, but of course we have a difference of opinion about whether this is a good thing:

Duffy seems to regard the end of software patents as a calamity for innovative companies, but his argument is awfully thin. Duffy focuses on Google’s PageRank patent, which he has long regarded as a poster child for software patenting. He describes it as “surely one of the most famous and valuable of all modern software patents,” and suggests that the invalidation of Google’s patents would be a calamity for the company. Curiously, however, he never explains how Google benefits from this or other patents in its portfolio.

Google derives little, if any, of its revenue from patent royalties and has managed to dominate the search engine marketplace without suing its major rivals for patent infringement. Indeed, it appears that the primary function of Google’s patent portfolio is as a defensive stockpile to be used if any competitors should sue it for patent infringement. If that’s true, then the only real effect of software patent abolition on Google would be that the company could lay off its patent lawyers.

Duffy has been citing the PageRank patent as a poster child for software patents for a while now, and it makes no more sense today than it did when I first called him out on it in 2006. There just isn’t any reason to think that Google’s search engine profits depend in any significant way on its PageRank patent. The PageRank patent describes only the most general features of the PageRank algorithm, and trade secret and copyright protections are more than enough to prevent people from ripping it off. I wish Duffy would elaborate on what he has in mind here, but so far he’s been mum on the topic.

Lest I be regarded as a knee-jerk Duffy critic, my other article, for Cato’s TechKnowledge newsletter, praises Duffy’s stance on judicial competition in patent law. I’m becoming increasingly convinced that many of the current problems with patent law can be traced back to the ill-fated decision to create the Federal Circuit with exclusive jurisdiction over patent appeals. The result has been an insular and arrogant appeals court that has made a hash of patent jurisprudence. Restoring the pre-1982 status quo, in which all the circuits shared jurisdiction for patent appeals, seems like a much better option:

Decentralization at the federal appellate level has three important benefits. First, competition mitigates “path dependence,” the danger that a single poorly argued case will lead to the establishment of a bad decision as binding precedent. When a single court hears all appeals on a given subject, the first case can have an outsized influence on subsequent decisions, even if that case is atypical in important respects. In contrast, when several independent courts hear appeals of one legal issue in parallel cases, more dimensions of the legal issues are revealed, and the majority of them working in parallel are more likely to reach the right result.

That brings us to the second benefit of jurisdictional competition: the role of “circuit splits” in signaling a need for the Supreme Court’s attention. Because the Federal Circuit hears all patent appeals, it has no sister institutions to voice contrary opinions. This forces the Supreme Court to “fly blind,” using other, less reliable indicators to decide which cases to hear. Duffy and Nard note one sign of the problem: between 2000 and 2005, the Supreme Court requested the input of the Patent Office on certiorari petitions (petitions to review cases) 15 times and almost always complied when the Patent Office recommended taking a case. Considering that the Supreme Court requested only 91 such opinions from the entire executive branch during that period, the Supreme Court appears to be relying heavily on the Patent Office to discover problems with the patent law—a role that would be performed better by multiple appellate courts.

The final advantage of jurisdictional competition is that it provides the Supreme Court with several well-developed bodies of law to choose from in crafting new precedents. The Patent Office may be able to provide the Supreme Court with some advice about which cases to take, but it is not a good substitute for competing courts. Ordinarily, if the high court is dissatisfied with one circuit’s precedents, it can look to the other circuits for alternative approaches. Each circuit will boast a well-developed body of case law, and the high court (perhaps aided by legal scholars) can compare the performance of different legal regimes and determine which has proven most successful. The Federal Circuit’s monopoly over patent appeals means that the Supreme Court must do much of the heavy lifting itself.

Duffy’s paper with Craig Allen Nard making this argument in more detail is excellent, and I encourage you to check it out.

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