Institutional Design and the Nature of Patents

• Author: Jonathan S. Masur
• Position: John P. Wilson Professor of Law and David & Celia Hilliard Research Scholar, University of Chicago Law School
• Pages: 2535-2557

2535

Institutional Design and the Nature

of Patents

Jonathan S. Masur*

ABSTRACT: What is a patent? That is, what is the nature of a patent? This

question has split patent law. Some scholars (and judges) have argued that

patents should be understood as a species of property, akin to plots of land,

while others have reasoned that patents are best understood as a type of

regulatory license, like Environmental Protection Agency permits to pollute.

This debate has assumed multiple methodological forms as well. Some scholars

(and judges) have approached the question from a formalist perspective,

asking what other legal instruments patents most resemble, or how they have

been treated historically. Others have approached it from a more functionalist

perspective, asking instead what purpose patents are meant to serve and what

legal rules would best effectuate that purpose. This debate has significant

ramifications for many of patent law’s most important institutional

questions, including the allocation of power between the Federal Circuit and

the United States Patent and Trademark Office (“PTO”), the

constitutionality of inter partes review, and the legality of the PTO Director’s

practice of choosing which patent judges should sit on Patent Trial and

Review Board panels. Yet the debate has also largely been submerged. Courts

and scholars have often failed to recognize this central schism in patent law.

The result is that proponents of each side of the debate have frequently talked

past one another without acknowledging the fundamental conceptual

principles that divide them. The primary object of this Essay is to describe and

explain the deep structure of this disagreement. The Essay then turns to the

institutional consequences of arriving at a conclusion regarding the nature

of patents. I demonstrate that once one has arrived at a conceptual

understanding of patents, answers to the most consequential institutional

questions fall neatly into place.

*

John P. Wilson Professor of Law and David & Celia Hilliard Research Scholar, University

of Chicago Law School. I thank the David & Celia Hilliard Fund and the Wachtell, Lipton, Rosen

& Katz Program in Behavioral Law, Finance & Economics for support. I also t hank Greg Reilly

for helpful comments and Alex Aparicio and Eian Katz for superb research assistance.

2536 IOWA LAW REVIEW [Vol. 104:2535

I.INTRODUCTION ........................................................................... 2536

II.THE NATURE OF PATENTS ........................................................... 2539

A.TWO VISIONS OF PATENTS ...................................................... 2539

B.TWO METHODOLOGIES FOR DETERMINING PATENT

FORM.................................................................................... 2542

C.THE FUNCTIONALIST APPROACH ............................................ 2546

III.PATENT LAW AND INSTITUTIONAL ANALYSIS .............................. 2549

A.SUBSTANTIVE RULEMAKING ................................................... 2549

B.PTO FEES AND SCREENS ......................................................... 2550

C.INTER PARTES REVIEW ........................................................... 2551

D.IPR PANEL STACKING ............................................................ 2553

IV.CONCLUSION .............................................................................. 2557

I. INTRODUCTION

What is a patent? That is, what is the nature of a p atent? Wh at sort o f legal

instrument is it? Is it a piece of property, like a tract of land or an automobile?

Is it a government license, like a license to operate a business, except in this

case a license to operate a government-sanctioned monopoly? Is it a form of

“new property,” like an entitlement to welfare or Social Security benefits? Is it

some combination of these things, or something else entirely?

For some readers, to pose the question in this fashion is to misunderstand

the inquiry. To inquire what type of legal instrument a patent is hearkens back

to the era before legal realism. This is how the formalist judges of the 19th

century would reason: first, determine the category into which a legal

instrument or claim fell; next, apply the legal rules that attached to objects or

claims within that category.1

The legal realists rejected this entire mode of thinking. They argue d that

form should follow function, rather than the other way around.2 Rather than

first categorizing a legal instrument, courts should begin by determining what

rules should be applied to that instrument in order to best effectuate the

1. See Brian Leiter, Legal Formalism and Legal Realism: What Is the Issue?, 1–2, 6 (Univ. Chi.

Law Sch. Pub. Law & Legal Theory Working Papers, Working Paper No. 320, 2010),

https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=1178&context=public_law

_and_legal_theory; see also, e.g., United Mine Workers of Am. v. Coronado Coal Co., 259 U.S. 344,

385 (1922) (“Undoubtedly at common law an unincorporated association of persons was not

recognized as having any other character than a partnership in whatever was done, and it could

only sue or be sued in the names of its members, and their liabil ity had to be enforced against

each member.”).

2. See Felix S. Cohen, Transcende ntal Nonsense and the Functional Approach, 35 COLUM. L.

REV. 809, 821 (1935).