Our Deteriorating Patent System Threatens Our Economic Freedom and Prosperity

Last night, I watched Invalidated, Tea Party Patriots’ new documentary about the patent system.  The documentary does a good job laying out how the Patent Trial and Appeal Board – PTAB, as it’s known - is harming U.S. inventors and allowing American ingenuity to slip away to other countries.  Ironically, communist China might end up with a stronger patent protection system than the United States.

Article I, Section 8 of the U.S. Constitution guarantees patent protection, giving inventors exclusive rights to their discoveries.  The documentary emphasizes that investors always ask inventors whether they have a patent and will not put money behind an invention unless they do.

Enter the America Invents Act of 2011, which established PTAB.  PTAB is an administrative tribunal that has the power to invalidate patents that have already been granted, even if they have been upheld by courts and juries.  As shown in the documentary, one wing of the U.S. Patent and Trademark Office awards patents after thorough examination while another wing of the USPTO – PTAB – is very much inclined to invalidate them.  This works to the advantage of shady operators and big companies who use PTAB to steal inventors’ ideas and rob them of any hopes of profiting from their own inventions.

Arguments against the constitutionality of PTAB were heard in the Supreme Court this year.  Jenny Beth Martin discussed the Oil States case in an editorial late last year.  Unfortunately, the Court went on in April 2018 to reject certain constitutional challenges to PTAB.  Relying on previous Supreme Court precedent, Justice Clarence Thomas writing for the majority reiterated that the Supreme Court considers patents a mere “public franchise” like a concession to operate a city bike-share program – thus relegating patents to second-class status instead of recognizing them as full-fledged property rights.  As second-class rights, patents can be awarded and invalidated wherever Congress locates that power, and courts need not necessarily be involved, thus shooting down the separation of powers argument.

The Supreme Court said that prior cases calling patents ‘property rights’ are “best read as describing the statutory scheme that existed at that time.” Also, the Framers had to have been aware that an administrative Privy Council had the power to cancel patents in England in the 18th Century, but did not expressly exclude such administrative action in the Patent Clause in the U.S. Constitution.  The Court did say that patents remain property rights for purposes of the Due Process and Takings clauses.  Gee, why am I reminded of the Obamacare case where the Court said it was a tax but not a tax?  Such judicial backflips suggest that the Court just wanted to reach a certain result and nothing was going to stand in its way. 

The Court finished off its opinion by giving short shrift to the 7th Amendment challenge under the same reasoning.  Because patents are second-class rights that can be awarded and invalidated administratively, there is no right to a jury trial even though the 7th Amendment explicitly states that the right to take your case to a jury is guaranteed in lawsuits where the amount in controversy exceeds $20.  Losing a patent can cost an inventor millions, if not billions, of dollars. 

So here we have the Supreme Court treating patent rights like taxi medallions, which a taxi commission can grant or take away on a whim because they’re not really property rights.  That just seems wrong to me, since patent protection was explicitly written into the Constitution and taxi medallions are not.  What part of “exclusive Right” in the Patent Clause does the Supreme Court not understand?

It seems wrong to Justice Neil Gorsuch, as well.  He noted in his dissenting opinion in the Oil States case that the practice of administratively canceling patents in the Privacy Council had disappeared by 1746, decades before the U.S. Constitution was written.  Patents may have started as “public franchises” in English law way back when, but were accorded much more respect by the time of our Founding than were ordinary “public franchises” – like government-granted monopolies to operate toll bridges.  Patent holders at that time, for example, had the right to go before an independent court.   After Oil States, they still do but the judgments they receive in court can be wiped out later by the administrative tribunal PTAB.

That’s just bizarre, which suggests to me another constitutional challenge against PTAB which has yet to be made – if patents are still property rights for due process purposes as Justice Thomas wrote, how can they be taken away by an administrative agency after a court has already upheld them?  How is that not a denial of due process of law?  It might not be double jeopardy, because it’s not a criminal matter, but it’s every bit as unfair as trying a criminal defendant twice for the same crime.

Folks, we have another administrative monster on our hands, every bit as bad as IPAB under Obamacare – the decisions of which, purportedly, Congress could not reverse – and the CFPB (the Consumer Financial Protection Bureau) which was set up with one person at the helm not subject to removal by the President.  Where does Congress come up with this stuff?

The Supreme Court won’t be persuaded to elevate the status of patent rights any time soon, so the PTAB mess cries out for a legislative fix.  Representative Thomas Massie, Republican of Kentucky, has introduced a bill to repeal PTAB.  Massie and Jenny Beth Martin discussed the bill and other legislative fixes in a joint editorial in July 2018.

I highly recommend Tea Party Patriots’ documentary. It’s obvious something needs to be done about PTAB. Our prosperity and economic freedom depend on it.