PATENT GROUPTHINK UNRAVELS.

• Author: Barnett, Jonathan M.

TABLE OF CONTENTS I. INTRODUCTION 420 II. FROM PATENT HOLDUP TO PATENT HOLDOUT 428 A. The Big Shift 429 1. The Regulatory Consensus 429 2. The Dissenters 432 B. Letter to American National Standards Institute 434 C. Intervention in FTC v. Qualcomm 435 D. Update of Business Review Letter to IEEE 436 1. Towards an Adjusted Consensus 436 E. Replacing Conjecture with Data 440 1. Testing the Model 442 2. Enriching the Model 445 III. THE SUPREME COURT: THE OVERLOOKED POWER OF THE Creeping Dissent 447 A. Oil States: Two Decisions in One? 448 B. The Oil States Boomerang Effect 450 1. SAS Institute, Inc. v. Iancu 451 2. Cuozzo Speed Technologies, LLC v. Lee; Return Mail, Inc. v. United States Postal Service 452 3. Thryv, Inc. v. Click-To-Call Technologies, LP 453 4. Future Implications 454 IV. USPTO: AVOIDING "OVERSHOOTING" ON PATENT QUALITY 456 A. Knowing What We Don't Know About "Junk Patents" 457 B. The PTAB Rollout 461 C. Refining the PTAB 466 D. Refining Patent Examination 467 E. Putting It All Together 469 V. CONCLUSION 470 I. INTRODUCTION

For some time, there has been a broadly held consensus among significant portions of the scholarly, policymaking, advocacy, and business communities concerning the U.S. patent system. Namely: the system is "broken" and must be fixed by raising the bar to obtain a patent and limiting the remedies and other protections afforded to patent owners when suing third parties for infringement. Widely-cited books published in the mid-2000s by economists and legal academics vigorously expressed this position, arguing that alleged overissuance and overenforcement of patents imperiled innovators and consumers. (1) Legal scholars and other commentators have often called for the abolition of patents on software innovations (2) and, in a widely discussed book, two prominent economists advocated for the abolition of patent protection in most industries, (3) stating dramatically that it is an "unnecessary evil." (4)

These positions are generally motivated by a historical narrative of institutional decline. According to that narrative, the enactment of the Bayh-Dole Act in 1980, (5) the establishment of the Court of Appeals for the Federal Circuit in 1982, (6) and the consequent rapid emergence of patentee-friendly case law, triggered an unwise "explosion" in patent applications, patent issuances, and patent infringement litigation that threatened to deter innovation and increase prices in consumer markets. (7) In some versions of this narrative, it is asserted that certain business interests, in conjunction with the patent bar, captured the Federal Circuit, leading to a body of case law that serves the interests of patent owners over the public. (8) Rather than promoting innovation, these commentators argued that the patent system in its reinvigorated form threatened to undermine it (or, in some versions, allegedly had already done so to some extent).

To address this perceived state of affairs, commentators widely proposed policy interventions to significantly reduce patents' availability, scope, and enforcement remedies. (9) As this commentary migrated from academic publications to real-world advocacy by public-interest organizations, the patent defense bar, industry trade associations, and, perhaps most powerfully, significant segments of the "tech" industry, (10) it yielded concrete policy results. These include an extended sequence of patent-unfriendly Supreme Court decisions, starting with the eBay Inc. v. MercExchange, LLC (11) decision in 2006 (which rejected the historical presumption in favor of injunctive relief for prevailing patentees) and encompassing landmark decisions in 2012, 2013, and 2014 that substantially limited the scope of patentable subject matter. (12) Additionally, patent skepticism has been reflected in the America Invents Act ("AIA"), enacted by Congress in 2011, (13) and its subsequent implementation by the U.S. Patent & Trademark Office ("USPTO") through the Patent Trial and Appeal Board ("PTAB"), which expanded opportunities to challenge the validity of issued patents. Even the Federal Circuit, long associated with a "strong patent" orientation, (14) now regularly issues decisions that reflect a far more circumspect approach toward the interpretation and application of the patent statute. (15)

The patent-skeptical approach adopted by policymakers can cause significant legal and economic effects that ripple through the various components of the patent system as well as the technology markets that rely on that system. Consider the Supreme Court's 2014 opinion in Alice Corp. v. CLS Bank International. (16) Together with the Court's 2012 opinion in Mayo Collaborative Services v. Prometheus Laboratories, Inc., (17) Alice established an analytical framework for assessing the validity of patents that implicate the traditional judicial exclusion of "laws of nature, natural phenomena and abstract ideas" from patentable subject matter. As applied in lower-court litigation, the Alice decision has cast substantial doubt on the patentability of business-method and certain software-related patents, which inherently involve the application of mathematical algorithms and therefore potentially fall within the excluded category of abstract ideas. In the following five years through 2019, challenges to patent validity under Section 101 of the patent statute (the basis for the judicial exclusion of abstract ideas) grew dramatically--there were 838 federal court decisions concerning patent validity under Section 101, as compared to 101 such decisions in the five years preceding Alice. (18) Concurrently, litigation outcomes changed significantly: the Federal Circuit upheld Section 101 validity challenges with respect to 86% of patents contested on these grounds, and federal courts invalidated 781 patents in whole or in part. (19) By comparison, in the five years preceding Alice, only 41% of all patents contested under Section 101 were deemed invalid, resulting in the invalidation in whole or in part of only 77 patents. (20) During the same period, applicants reportedly abandoned more than 60,000 patent applications due to examiner rejections on subject-matter eligibility grounds. (21) These are nontrivial developments given that substantial percentages (according to one estimate, over 60% as of 2019) (22) of all utility patents issued by the USPTO comprise at least some software-related element and may therefore be exposed to some type of Alice-based patentability objection, either at the ex ante examination stage or the ex post litigation stage. Even though the Court in Alice did not heed calls to abolish software patents, (23) its decision as subsequently applied by the federal district courts, the Federal Circuit, and USPTO examiners has made it difficult for software firms to rely on patents as a strategy for earning returns on research and development ("R&D") investments.

These striking developments in the U.S. patent policy landscape point toward a single conclusion. IP skepticism (and, in some cases, rejectionism) has moved beyond the realm of academic discussion and achieved significant practical success as the leading intellectual force driving the trajectory of U.S. patent policy, encompassing the legislative, judicial, and regulatory branches of the federal government engaged in the making of patent law (including patent-relevant antitrust law). (24)

As I document elsewhere, the history of U.S. patent law consists of a series of alternating periods in which policymaking bodies (including antitrust regulators) have crafted patent protection of greater and lesser scope and strength on various parameters. (25) In this Article, I show that we currently stand at a historical juncture at which important elements of the patent system are exhibiting signs of a movement away from the IP skepticism that has dominated both the "patent conversation" and patent policymaking since approximately the mid-2000s. Some small but significant cracks have emerged in the existing policy consensus, as reflected in statements and actions by the Department of Justice, Antitrust Division ("DOJ Antitrust"), and the USPTO that have cast doubt on, or rejected outright, key elements of the conventional narrative. In remarks made in 2018, USPTO Director Andrei Iancu captured this current moment in U.S. patent history by observing that "the rhetoric surrounding the patent system has focused relentlessly on certain faults in, or abuses of, the system--instead of the incredible benefits the system brings to our nation" and urging that "we are at an inflection point with respect to the patent system." (26)

This Article identifies some incremental but significant steps around this "inflection point" in moving toward a more even-handed implementation of the patent system and the inevitable tradeoff between promoting innovation incentives and preserving access for intermediate and end-users. Critically, this still-emergent shift in the trajectory of U.S. patent law and policy is grounded in a growing body of empirical research and associated theoretical rethinking that challenges settled assumptions that have driven much of the policy conversation among academic and other commentators, "patent reform" at the legislative level, and efforts to restrain the force of patent protections in the courts. In particular, I discuss recent research that finds surprisingly meager factual support for certain widely accepted assumptions behind the still-dominant patent-skeptical school of thought. Remarkably, available evidence indicates that these commonly held views either lack factual support or describe particular cases that do not clearly support broader assertions about the patent system in general. These include the following hypotheses:

(1) the patent holdup thesis, according to which owners of standard-essential patents widely "hold up" producers and other intermediate users in information technology...