Living with Patents: Insights from Patent Misuse

INTRODUCTION PART I: THE CONTEXT A. Patent Policy-The Economic Efficiency Paradigm, in Brief B. The Origins and Evolution of the Patent Misuse Doctrine PART II: THE ARGUMENT FOR ELIMINATING PATENT MISUSE A. The Current Situation-Why Worry? B. Excess Costs from Patents C. The Argument against an Independent Misuse Doctrine 1. The Antitrust "Gap" Justification for Misuse a. The Market Power Gap b. Antitrust Enforcement Uncertainties/Costs and Doctrinal/Remedial Shortcomings 2. Patent Policy Justifications for Misuse a. Excessive Financial Returns b. Harm to Innovation c. Unjustified Acquisition or Enforcement of Patents i. Improperly obtained patents ii. Inappropriate enforcement of patents PART III: WHAT NEXT? A. Eliminating Misuse B. Living with Patents: Getting What We Want from Patent Law 1. Complaints Involving Improper Implementation 2. Complaints Involving Goal Disagreements CONCLUSION INTRODUCTION Patent owners have managed to offend almost everyone. Patented pharmaceuticals come at breathtakingly high prices, (1) while their owners pay others not to produce cheaper generics. (2) Dense patent thickets hamper competitive entry and waste existing participants' energies and resources on defensive portfolios and intramural litigation. (3) Patents on the stuff of life constrain agricultural activity (4) and medical innovation, (5) making it harder to eat well and obtain treatment for what ails us. (6) Patent owners attach conditions to goods we buy, limiting our ability to use and sell them to others. (7) Non-producing patent-holding companies ambush industry standards that improve quality and ease of use (8) and demand tolls from anyone doing anything successfully. (9) There ought to be a law. There is. It is called patent misuse. (10) When a patent owner overreaches, the courts refuse to enforce the patent until the related harm has been undone. That sounds eminently reasonable. When patent owners interfere with society, society takes their patents away. But not everyone feeling patent pain can legitimately claim misuse. Patent law expressly intends and depends upon patent owners interfering with others' desires. (11) Misuse only occurs when the pain exceeds the inherent costs of the system--the harm society has decided individuals must bear to obtain the regime's benefits. Distinguishing between inherent and excessive/misuse costs has proven problematic. (12) We do not even agree that the misuse doctrine should exist, much less when it should apply. Some argue misuse stands as a vital guardian of patent policy, particularly the regime's mission of promoting innovation. (13) Others argue that, at best, the doctrine uselessly duplicates the role of other laws (notably antitrust); while at worst it affirmatively interferes with efficient market operation. (14) Unsurprisingly, confusion also reigns at the coalface of application. The Supreme Court created the doctrine almost a century ago (15) when society was feeling the powerful effects of unchecked monopoly, patent and otherwise, and determining how best to respond. Despite the considerable refinement of the patent and antitrust regimes, the Court has not revisited the substantive law of patent misuse for almost forty years. (16) Congress, the legislative custodian of the patent system, has only kibitzed, indicating that market power is important, but (perhaps) only sometimes. (17) The Court of Appeals for the Federal Circuit (the "Federal Circuit") finds itself in the inopportune middle, seeking to reconcile the Supreme Court's past with its present. The resulting misuse chimera first attempts to apply the vague misuse "exceeding the scope of the patent" test to identify problematic provisions, then makes the determination by awkwardly relying on modern antitrust anticompetitive effects assessment except when Court precedent explicitly requires otherwise. …