Patents, the Federal Circuit, and the Supreme Court: A Quiet Revolution

Over the last twenty years, a quiet revolution has taken place in patent law. Before 1982, courts rigorously enforced the nonobviousness requirement, limiting patents to those innovations representing a substantial technical advance. At the same time, once an innovation satisfied this rigorous standard, courts accorded the patent a broad scope by applying a vibrant doctrine of equivalents. Since 1982, the Federal Circuit, with the acquiescence and sometimes the consent of the Court, has rewritten both doctrines, sharply limiting their reach. Through their doctrinal changes, we have moved over the last twenty years from patents that were rarely valid, but if valid, broadly enforced, to patents that are routinely valid, but narrowly enforced. In order to evaluate whether this switch is likely "to Promote the Progress of . . . the useful Arts," this article explores the economics of patents and identifies the uniformity of patent protection as a key to understanding the structure of patent law. Both patent and copyright protect a wide range of innovative products. Some of these innovative products require very little protection to ensure their development and disclosure, while others require considerably more. If we had perfect information, then in the absence of agency and transaction costs, an optimal patent system would individually tailor protection to each innovative product, providing protection just sufficient to ensure each desirable innovation's development and disclosure. Historically, however, the practice of both patent and copyright has been to provide more-or-less uniform protection to all information products that satisfy a given set of prerequisites. Although this uniformity is a potentially rational response to the presence of information, agency, and transaction costs, the fact of uniformity creates a trade-off, in expanding patent protection, between: (i) the social value of the additional information products broader protection ensures; and (ii) the reduced social value associated with the preexisting information products protected more broadly than necessary to secure their discovery and disclosure. Measured against the costs of uniformity, the switch to routinely valid, but narrowly enforced patents has two principal consequences. First, effectively eliminating the nonobviousness requirement will extend patent protection to a wider range of innovative products that would have been forthcoming with no or less protection. Given the trade-off uniformity entails, protecting a wider range of preexisting innovations increases the cost of any given expansion in protection and thereby drags down the optimal level of uniform protection. Eliminating the nonobviousness requirement thus limits the patent system's ability to encourage desirable, but more costly innovation. Second, at the same time, the switch removes from the patent system two of the principal doctrines by which courts could attempt to vary the effective level of protection provided to particular innovations. By reducing the ability of courts to tailor protection to the individually optimal, the switch to routinely valid, but narrowly enforced patents pushes us towards a more uniform, "one size fits all" system of patent protection. As with the first consequence, reducing the legal system's ability to tailor protection to the individually optimal level will limit the patent system's ability to encourage desirable, but more costly innovation. As a result, the switch to routinely valid, but narrowly enforced patents will limit the range of desirable innovations that the patent system can ensure.