Not all inventions are created equal. Some inventions change the world in a beneficial way. Others are basically worthless. Some might even arguably make things worse. Patents are intended in large part to incentivize invention, but what role do the societal benefits or merits of the relevant invention play in patent law? Does patent law seek to incentivize innovation regardless of the benefits or harms resulting from the invention? The law provides conflicting answers.
A common and longstanding patent law theory, referred to herein as the “market mantra,” holds that it is not up to the courts to evaluate the extent of the benefits or harms of an invention; that determination is best left to the markets.1See infra Section II.A. So long as the invention meets the minimum statutory requirements of patentability, the time-limited right to exclude will be granted to the patentee. The value of this right depends entirely on what the market decides about the value of the patented technology.
This view’s supporters argue that courts are not as well suited as the market to decide which inventions are beneficial to society and which are not, in part because different judges might have different views as to what is beneficial.2See, e.g., Juicy Whip, Inc. v. Orange Bang, Inc., 185 F.3d 1364, 1368 (Fed. Cir. 1999); Lowell v. Lewis, 15 F. Cas. 1018, 1019 (C.C.D. Mass. 1817). One problem with this theory, though, is that the market sometimes fails to value an invention in accord with its social value—the degree to which it benefits or harms society. By departing from the “market mantra” theory, patent law might be able to play a role in correcting for the occasional mismatch between market value and social value.
Indeed, in a more informal sense, the merits or benefits of an invention do already play a role in court decisions in patent cases. A court’s belief that an invention is exceptionally beneficial often cannot help but color the resulting analysis. Essentially, the value of the invention, as seen by the courts, may help tilt the equities of a case, making the court more likely to rule one way or the other. This effect can be seen in court decisions spanning a variety of different doctrines in patent law, including patent eligibility, utility, nonobviousness, and damages.3See infra Part II. Thus, although the “market mantra”—the idea that valuation of an invention is left to the markets rather than the courts—could be called black letter theory in patent law, in reality it is at least something of a myth.
This Article exposes that myth and argues that patent law should embrace its role as a partial arbiter of an invention’s value. By making more explicit in the law what is already implicit, courts could develop more coherent standards by which to judge an invention’s value, making such analysis more consistent and providing the relevant communities with notice as to what will be considered. Various doctrinal possibilities will be explored, such as a modification and revival of the “pioneer patent” doctrine, wherein more important and beneficial inventions are given broader scope for purposes of infringement.4See infra Section IV.B. In balancing the societal benefits or harms of the patentee’s invention, courts might also consider the extent to which the patentee or prior owners of the patent have facilitated (or have stood in the way of) the commercialization of the invention.
In other words, this Article argues that instead of purporting to focus agnostically on the rate of innovation generally, patent law should more openly embrace the fact that it does play some role in shaping the direction of innovation as well.5See generally Nat’l Bureau of Econ. Rsch., The Rate and Direction of Inventive Activity: Economic and Social Factors (Princeton Univ. Press 1962). This is in contrast to the more common view that government grants or prizes are the primary way to steer the direction of innovation through public policy.6See, e.g., Ofer Tur-Sinai, Technological Progress and Well-Being, 48 Loy. U. Chi. L.J. 145, 150 (2016). To be sure, public funding of specific research areas does play a role in shaping the direction of innovation, and this Article does not dispute that; rather, it merely argues that patent law has a role to play as well.
This Article suggests some standards by which to judge an invention’s value, but such standards should be developed through case-by-case common law development. The cases discussed herein provide a starting point and some precedential foundation, but this Article argues that the law should move in the direction of making these considerations of social value more explicit. Although the determination of whether an invention has social value will unavoidably remain somewhat subjective, once standards are developed in the law, the subjectivity will arguably be no worse than some other common determinations in the law, such as reasonableness or obviousness. Perhaps more importantly, unpredictability will be lessened by making courts’ consideration of benefits or harms more explicit, as compared with keeping it covert. And, as will be explained, patent policy overall is by nature more guesswork than precise engineering to some extent.
To be clear, this Article is not arguing that the market has no role to play in evaluating an invention’s benefits or value. To the contrary, factors such as commercial success play an important role in patent law and should continue to do so. But this Article argues that courts also have a valid role to play in evaluating an invention’s value, especially in cases where there is reason to think that there might be a mismatch between the market value and the social value.
What is meant exactly by the benefits of an invention? An example may be helpful. An inventor applies for a patent claiming a sound system comprising: (1) a set of speakers in front of the audience; (2) a set of speakers to each side of the audience; and (3) a set of speakers behind the audience. This is found to meet the requirements of the patent act (essentially, it is found to be new, useful, and nonobvious), and the patent issues. Years later the patentee sues an alleged infringer, and the dispute ends up in court. The defendant’s various arguments include that the invention was obvious, so the patent never should have issued and should be found invalid. The patentee plaintiff responds that the invention is not obvious, it was the first system to use “surround sound.” The defendant responds that “surround sound” is not a claim limitation, as nothing in the patent’s claims requires or mentions “surround sound,” so that should be irrelevant. “Surround sound” is instead a way of characterizing the benefits of the invention. Although benefits like this that arise out of the claim limitations but are not explicitly claimed do not yet have a precise role in patent law,7See, e.g., i4i Ltd. P’ship v. Microsoft Corp., No. 6:07CV113, 2009 U.S. Dist. LEXIS 39128, at *8 (E.D. Tex. May 7, 2009). they cannot help but make their way into the arguments of parties and the analysis of courts.
This Article is the first to offer a comprehensive account of the role of benefits of the invention in patent law, seeking to make the role of benefits (or harms) more explicit and precise, and proceeding in four parts. Part I reviews the relevant literature, showing that although some prior scholarship has focused on usefulness, it has not comprehensively assessed the role of benefits in the sense of the invention’s social value. Part II provides a positive doctrinal assessment of what role benefits of the invention currently play in various patent law doctrines. It draws out the tension between the theory that valuation is left to the market, and the reality that perceived value does often color the analysis of courts. It thus exposes the “market mantra” as something of a myth. Part III then provides some relevant theoretical background, discusses some basics of patent policy, and briefly considers the origins of inventions, drawing out some of the unavoidable uncertainty in how patent law affects the degree of future innovation. Part IV evaluates the role of benefits or harms from a normative perspective, offering proposals for reform to make the law more coherent and consistent. It argues for a more explicit role for benefits or harms of the invention in patent law where there is reason to suspect that the invention’s market valuation does not adequately reflect its social value.
I. Literature Review
Although some prior literature has argued for a greater role for usefulness in patent law, it has not generally focused on an invention’s benefits or harms, in the sense of the invention’s social value as distinct from market value.8See, e.g., Michael Risch, A Surprisingly Useful Requirement, 19 Geo. Mason L. Rev. 57, 58 (2011) [hereinafter Risch, Surprisingly Useful]; Michael Risch, Reinventing Usefulness, 2010 BYU L. Rev. 1195, 1198–20 [hereinafter Risch, Reinventing Usefulness]. And although some prior scholarship has questioned the “market mantra,” it has generally focused on grants or prizes as the mechanism for steering the direction of innovation, rather than recognizing and exploring the role of patent law itself.9See, e.g., Tur-Sinai, supra note 6, at 150.
Patent law’s utility requirement has been interpreted as a very minimal requirement, a low bar. As long as some minimal usefulness of or benefit to the invention is alleged, the requirement is met, and courts will not generally evaluate the extent of the usefulness. However, Professor Michael Risch has argued that usefulness should play a greater role in patent law, as it “can help resolve novelty, obviousness, subject matter, enablement, claim scope, and damages questions,” and “[a]s such, . . . can be a principled driver of patent policy.”10Risch, Surprisingly Useful, supra note 8, at 111.
Professor Risch acknowledges that, “[i]n the broad scheme of things, . . . . the requirement that an invention be useful has been nearly nonexistent—essentially ignored.”11Id. at 58 (citing John F. Duffy, Patent Utility Reduxit, Jotwell (May 5, 2010), https://perma.cc/CC6X-7W5B); see also id. (“The level of ‘utility’ an applicant must currently demonstrate to obtain a patent is extremely low: the invention need only operate as described and potentially provide some de minimis public benefit.” (citing Brenner v. Manson, 383 U.S. 519, 533 (1966))). But he argues that this is a mistake, because in his view, “[t]he [usefulness] doctrine is especially helpful at the margins, where courts consider policy in deciding close cases; usefulness can often put a thumb on the scale.”12Id.
This observation is in accord with the doctrinal discussion below, which shows that the benefits of the invention are sometimes informally considered in various patent law doctrines, aside from just the utility doctrine as such. Professor Risch distinguishes between the “traditional patent utility requirement” and “usefulness,” which he says, “refers generally to an invention’s benefits,” and “can mean many things, such as how an invention operates, the practical benefits it provides to the public, or its effect on commercial markets.”13Id. Professor Risch also sometimes refers to the utility doctrine as “eligibility usefulness,” presumably because it stems from 35 U.S.C. § 101. See id. at 59. He also sometimes refers to the broader conception of usefulness as “input usefulness” which “considers all of an invention’s benefits, as well as the amount and timing of those benefits.” Id.
Professor Risch’s broader conception of “usefulness” is roughly in line with this Article’s use of “benefits.” As he points out, while the traditional utility doctrine plays a mere threshold gatekeeping role, the broader conception “allows for a more generalized consideration of an invention’s benefits,” wherein courts might consider the extent of an invention’s benefits, or benefits that become clear after the time of invention.14Id. at 59.
Professor Risch discusses three different categories of usefulness: operable, practical, and commercial.15Risch, Reinventing Usefulness, supra note 8, at 1201. Operable simply “requires that the patented invention must actually achieve some intended result”; this is a low bar that is encompassed in the traditional utility requirement.16Risch, Surprisingly Useful, supra note 8, at 65. Practical requires that the “invention must have some currently available specific and substantial use;” for example, a new chemical not yet shown to be specifically useful would not yet be patentable.17Id. at 66 (citing Brenner v. Manson, 383 U.S. 519, 534–35 (1966)). Commercial relates to “enhancing consumer demand for the invention or providing some supply-side benefit (such as reduced manufacturing cost).”18Id. at 68.
Benefits, as used in this Article, are more in line with what Professor Risch calls commercial usefulness, but the focus is more on social value rather than market value. Indeed, this Article argues that courts should pay particular attention to benefits or harms that the market may not properly value. In such cases, it is particularly appropriate for courts to depart from the traditional “market mantra” theory that evaluation of an invention’s merits is only for the markets.
Professor Ofer Tur-Sinai has challenged the market-based approach to valuing inventions on more theoretical grounds, arguing that “the mere fact that a future technology is likely to have demand in consumer markets does not necessarily imply that said technology would enhance the well-being of its users in any significant manner, and that it is therefore worthwhile for the state to incentivize its development.”19Tur-Sinai, supra note 6, at 203. He points out that “[d]ifferent innovative projects may have different social values,” and that there are “good reasons to suspect that the patent system provides an overincentive to develop, produce, and disseminate certain innovations with relatively low social value.”20Id. at 149–50. Professor Tur-Sinai “proposes a conceptual shift to an objective theory of well-being,” calling for “greater state involvement in directing innovation.”21Id. at 203–04. This would entail less reliance on the patent system, giving “greater weight to alternative institutional mechanisms for incentivizing innovation, including grants and prizes.”22Id. at 150.. This proposal is in accord with the more traditional notion that the direction of innovation is better shaped through grants or prizes as opposed to patents.23See, e.g., Daniel J. Hemel & Lisa Larrimore Ouellette, Beyond the Patents-Prizes Debate, 92 Tex. L. Rev. 303, 318–19 (2013) (“Specific proposals for performance-based prizes have focused on health technologies; for example, pharmaceutical companies that registered products with the proposed Health Impact Fund would receive payments based on the ‘assessed global health impact.’” (quoting Aidan Hollis & Thomas Pogge, Incentives for Glob. Health, The Health Impact Fund: Making New Medicines Accessible for All 109 (2008))); Benjamin N. Roin, Intellectual Property versus Prizes: Reframing the Debate, 81 U. Chi. L. Rev. 999 (2014). This Article also argues for a focus on the direction of innovation, but explores how courts can (and already do) influence the direction of innovation via the patent system itself, rather than calling for less reliance on the patent system.
Others have critiqued the notion that one may obtain a patent without showing that the invention is any “better” than what is already out there, even though the Constitution allows patent laws to exist only to “promote the Progress of Science and useful Arts.”24U.S. Const. art. I, § 8, cl. 8. Professor Bernard Chao calls this an “innovation loophole,” that companies take advantage of to prevent others from making compatible products,25Bernard Chao, Horizontal Innovation and Interface Patents, 2016 Wis. L. Rev. 287, 295. and argues that patent law should not encourage “horizontal innovations,” that is, inventions which are not better than what is already out there and thus do not promote progress.26Id. at 313. As a solution, Professor Chao proposes greater emphasis in damages law on whether the invention achieves benefits over the prior art, arguing that the “[p]atent law should only award a remedy if the underlying technology is better than the prior art,”27Id. at 315. and that “reasonable royalties [should] correspond to the size of the patented advance.”28Id. at 320; see also id. at 321 & n.145 (first citing Eric E. Bensen & Danielle M. White, Using Apportionment to Rein in the Georgia-Pacific Factors, 9 Colum. Sci. & Tech. L. Rev. 1, 7, 32–33, 40 (2008); then citing Jorge L. Contreras & Richard J. Gilbert, A Unified Framework for RAND and Other Reasonable Royalties, 30 Berkeley Tech. L.J. 1451, 1460 (2015); then citing Amy L. Landers, Patent Claim Apportionment, Patentee Injury, and Sequential Innovation, 19 Geo. Mason L. Rev. 471, 473 (2012); and then citing David O. Taylor, Using Reasonable Royalties to Value Patented Technology, 49 Ga. L. Rev. 79, 144 (2014)). Similarly, Professor Nicholson Price has pointed out that “multiple doctrines of patentability and infringement promote divergent innovation but do not require improvement,” and that this divergence has significant costs.29W. Nicholson Price II, The Cost of Novelty, 120 Colum. L. Rev. 769, 794 (2020). Nevertheless, Professor Price calls Justice Story’s traditional market-based approach “mostly right,” but argues that in the biomedical context it is problematic because “the market doesn’t work very well”; that is, the market doesn’t “do a good job letting purchasers decide which biomedical innovations are better.”30Id. at 826 (emphasis omitted). As a solution, Professor Price looks outside the patent system, arguing that, in the biomedical context, FDA approval and insurer reimbursement may work together to better shape the development of new technology.31Id. at 831.
With respect to nonobviousness specifically, Professor Dmitry Karshtedt has recently offered some discussion of the role of the benefits of the invention in the context of the “secondary considerations” or “objective indicia” of nonobviousness discussed below.32Dmitry Karshtedt, Nonobviousness: Before and After, 106 Iowa L. Rev. 1609,
1613, 1676 (2021). Specifically, he argues that in the context of unexpected results, courts should ask whether “the invention’s benefits come about thanks to post-filing growth in the field, or, instead, are the benefits actually indicative of gaps in understanding that were present at the time of filing.”33Id. at 1676 (citing Bristol-Myers Squibb Co. v. Teva Pharms. USA, Inc., 752 F.3d 967, 978–79 (Fed. Cir. 2014)).
Thus, while the prior literature has offered some criticism of patent law’s market-based approach and offered various solutions, it has not offered a comprehensive account of the role that the benefits or harms (in the sense of social value) of the invention already play in patent law, or fully considered normatively what role the social value of an invention should play in patent law itself.
II. Benefits In Patent Law Doctrine
This Part will explain the haphazard way in which the benefits of the invention are currently used in various patent law doctrines. Although in theory the evaluation of the extent of an invention’s benefits is for the markets rather than the courts, the “market mantra” is in fact a myth. To determine whether a patent is valid and the extent of damages from patent infringement, courts will sometimes consider the invention’s benefits in various doctrines, including utility, eligibility, and nonobviousness. As such, a greater and more explicit role for benefits or harms of the invention in patent law could be implemented without any sharp break from precedent, merely by amplifying and tailoring one or more of these doctrines.
Perhaps the most natural place for a consideration of an invention’s benefits would be in patent law’s utility doctrine, which requires that the invention be shown to have some utility in order to receive a patent.34See 35 U.S.C. § 101 (requiring that an invention must be “new and useful” in order to be eligible for a patent); see also 35 U.S.C. § 112 (“The specification shall contain a written description of the invention, and of the manner and process of making and using it . . . .” (emphasis added)). However, as this Section will show, this requirement has largely been interpreted as a minimum threshold requirement, and a very low threshold at that. As long as there is some plausible assertion of utility, the patent will be granted, and the extent of the utility is not evaluated. As such, it is quite rare for a patent to be invalidated on the grounds of lack of utility, and this doctrine does not currently serve as a venue for consideration of the extent to which the invention is beneficial.
To the contrary, this doctrine has given rise to what is referred to in the introduction as the “market mantra” of patent law; the theory that evaluation of the extent of the merits or value of a patented invention is left to the market rather than the courts. This theory is initially set forth well in Lowell v. Lewis,3515 F. Cas. 1018 (C.C.D. Mass. 1817). an 1817 decision wherein Justice Story explained:
All that the law requires is, that the invention should not be frivolous or injurious to the well-being, good policy, or sound morals of society. The word “useful,” therefore, is incorporated into the act in contradistinction to mischievous or immoral. For instance, a new invention to poison people, or to promote debauchery, or to facilitate private assassination, is not a patentable invention. But if the invention steers wide of these objections, whether it be more or less useful is a circumstance very material to the interests of the patentee, but of no importance to the public. If it be not extensively useful, it will silently sink into contempt and disregard.36Id.at 1019; see also Bedford v. Hunt, 3 F. Cas. 37, 37 (C.C.D. Mass. 1817) (“It is not necessary to establish, that the invention is of such general utility, as to supersede all other inventions now in practice to accomplish the same purpose.”).
Thus, according to Justice Story, in order to be patentable, the invention in this case, an improvement in the construction of pumps, did not have to necessarily “supersede the pumps in common use,” or be “a better pump than the common pump.”37Lowell, 15 F. Cas. at 1019. Rather, the determination of the relative merits of the patented pump versus other pumps would be left to the market. If the new pump were in fact not as good as other pumps, there would not be much harm in granting the patent, as it would merely be a worthless patent, for the invention would “silently sink into contempt and disregard.”38Id.
Similarly, in another opinion issued a few months later, Justice Story states that “[t]he law . . . does not look to the degree of utility; it simply requires, that it shall be capable of use, and that the use is such as sound morals and policy do not discountenance or prohibit.”39Bedford, 3 F. Cas. at 37. This again emphasizes the “market mantra” idea that as long as the basic requirements are met, the patent is granted and it is then up to the market to evaluate the extent of the invention’s value.
Justice Story did, however, leave some substance for the utility requirement, stating that it required at least that the invention not be mischievous or immoral.40Lowell, 15 F. Cas. at 1019. But even this modest requirement has been weakened in the modern law. The Federal Circuit’s 1999 case, Juicy Whip, Inc. v. Orange Bang, Inc.,41185 F.3d 1364 (Fed. Cir. 1999). shows this weakening. It involved a beverage dispenser of the kind one might commonly have seen in shopping malls, with a display tank showing a liquid, as shown in Figure 1.
Figure 142U.S. Patent No. 5,575,405 fig.1 (filed Apr. 18, 1996).
In the invention at issue, the improvement over the prior art—that is, the beverage dispensers that were already known—was that the displayed liquid was not actually dispensed to customers but was just for show.43See Juicy Whip, 185 F.3d at 1365. The display bowl has limited capacity and is subject to contamination by bacteria, but the visual display of the liquid was thought to stimulate impulse buying. Unbeknownst to customers, the beverages dispensed for consumption were mixed and stored below the counter. The claimed invention captured the marketing benefits of displaying the liquid, without the downside of possible contamination.
The lower court concluded that the invention lacked utility because its “purpose was to increase sales by deception,” that is, by giving the impression that the liquid displayed would be that dispensed, and that the invention “confers no benefit to the public other than the opportunity for making [the invention] more salable.”44Id. at 1366. The lower court thus essentially questioned whether a mere marketing benefit that is based on deception is really the sort of invention the patent law should seek to encourage. It questioned the invention’s societal value.
However, the Federal Circuit reversed, explaining that “[t]he threshold of utility is not high: An invention is ‘useful’ under section 101 if it is capable of providing some identifiable benefit.”45Id. The court did acknowledge Justice Story’s statement that a patentable invention must not be “injurious to the well-being, good policy, or sound morals of society,”46Id.(quoting Lowell v. Lewis, 15 F. Cas. 1018, 1019 (C.C.D. Mass. 1817)). but found the “principle that inventions are invalid if they are principally designed to serve immoral or illegal purposes has not been applied broadly in recent years.”47Id. at 1366–67. In the court’s view, “[t]he fact that one product can be altered to make it look like another is in itself a specific benefit sufficient to satisfy the statutory requirement of utility.”48Id. at 1367. Thus, if the deception helped the vendor sell more beverages, that was enough of a benefit to meet the utility requirement’s low bar. And the fact that the invention may be “considered deceptive” was “not by itself sufficient to render the invention un-patentable.”49Juicy Whip, 185 F.3d at 1368.
The court offered some fairly persuasive justifications for this view: it stated that patent law’s utility requirement “is not a directive to the Patent and Trademark Office or the courts to serve as arbiters of deceptive trade practices,” given that “[o]ther agencies, such as the Federal Trade Commission and the Food and Drug Administration,” are better suited to perform that task.50Id. And similarly, federal judges deciding patent disputes might not be particularly well suited to judge the extent of an invention’s benefits, as different judges might have very different views on this score. But the court did note that there was no allegation that the deceptiveness in the beverage dispenser was unlawful.51Id. at 1367–68. This perhaps left open the possibility that the case for a lack of utility would be stronger for an invention designed to break the law.
Although the Federal Circuit was correct that other agencies may be better suited to police deceptive trade practices, the patent system is well suited for steering the direction of innovation. Innovation policy is squarely within the patent system’s purview, and although the system has mostly focused on increasing the general rate of innovation, some influence on the direction of innovation is unavoidable.52See Petra Moser, How Do Patent Laws Influence Innovation? Evidence from Nineteenth-Century World’s Fairs, 95 Am. Econ. Rev. 1214, 1214–15 (2005). The patent system should more openly embrace its role in shaping the direction of innovation.
The most recent Supreme Court statement on the utility doctrine (which was decades before the Juicy Whip Federal Circuit case just discussed) arguably does suggest a slightly higher threshold for utility. It provides some grounds for a possible reinvigoration of the doctrine, if the Court were to decide to revisit it. In Brenner v. Manson,53383 U.S. 519 (1966). the Court held that the Patent Office had properly rejected a patent on a chemical compound for lack of utility because the applicant was still searching for tumor-inhibiting effects (the alleged utility of the compound) as of the claimed priority date54The priority date is the date by which the patent is judged for purposes of novelty (and utility); that which was already in the public domain prior to the priority date is considered “prior art” available to invalidate the patent, for example for lack of novelty (known as “anticipation”) or obviousness. for the patent, but had not yet found such effects.55Brenner, 383 U.S. at 532, 535. The Court explained: “a patent is not a hunting license,” that is, it “is not a reward for the search, but compensation for its successful conclusion.”56Id. at 536. But the Supreme Court has not spoken on utility again since Brenner, and the Federal Circuit interprets it narrowly. Thus, despite Brenner, utility is still generally considered a very low threshold, at least outside of the chemical context. Indeed, in Juicy Whip, the Federal Circuit cited Brenner for the proposition that the “threshold of utility is not high: An invention is ‘useful’ . . . if it is capable of providing some identifiable benefit.”57Juicy Whip, Inc. v. Orange Bang, Inc., 185 F.3d 1364, 1366 (Fed. Cir. 1999).
Even within the space of chemical inventions, the very technological space in which Brenner was decided, its holding has been narrowed by the Federal Circuit.58See Richard M. Re, Narrowing Supreme Court Precedent from Below, 104 Geo. L.J.921, 924 (2016) (“[N]arrowing from below happens all the time . . . .”). In the 1995 case of In re Brana,5951 F.3d 1560 (Fed. Cir. 1995). the Federal Circuit found that a chemical compound’s alleged uses of “treatment of diseases” and “antitumor substances” were sufficient to pass the utility requirement.60Id. at 1565, 1567. The Patent Office had rejected the application for lack of utility, but the Federal Circuit reversed, stating that the office had “confuse[d] the requirements under the law for obtaining a patent with the requirements for obtaining government approval.”61Id. at 1567. The court explained that patent law’s utility requirement is a lower bar than FDA approval, in part because patents can help protect the incentive to go through with the expensive FDA approval process.62See id. at 1568 (“Were we to require Phase II testing in order to prove utility, the associated costs would prevent many companies from obtaining patent protection on promising new inventions, thereby eliminating an incentive to pursue, through research and development, potential cures in many crucial areas such as the treatment of cancer.”). Thus, “[u]sefulness in patent law, and in particular in the context of pharmaceutical inventions, necessarily includes the expectation of further research and development.”63Id. Surprisingly, the Federal Circuit did not even bother to cite Brenner,64See generally id. at 1562–69. thus contributing to the perception that this particular appellate court has a tendency to disregard Supreme Court precedent.65See, e.g., Transcript of Oral Argument at 18, Carlsbad Tech., Inc. v. HIF Bio, Inc., 556 U.S. 635 (2009) (No. 07-1437) (“Chief Justice Roberts: Well, they don’t have a choice, right? They can’t say, I don’t like the Supreme Court rule so I’m not going to apply it, other than the Federal Circuit. (Laughter.)”).
In sum, although utility might seem like the most natural place for benefits to be considered in patent law, the current law of utility does not provide for a substantive evaluation of benefits. Rather, essentially all that is required under this doctrine is a credible assertion that the invention is capable of providing some specific, identifiable (and not manifestly illegal) benefit. Justice Story’s theory that the evaluation of the benefits is better left to the market rather than the courts continues to hold all these years later, at least as regards the utility doctrine.66See, e.g., Grunenthal GmbH v. Alkem Lab’ys Ltd., 919 F.3d 1333, 1345 (Fed. Cir. 2019) (“The bar for utility is not high.” (citing Juicy Whip, Inc. v. Orange Bang, Inc., 185 F.3d 1364, 1366 (Fed. Cir. 1999))); Chiron Corp. v. Genentech, Inc., 268 F. Supp. 2d 1148, 1168 (E.D. Cal. 2002) (“To establish a non-utility defense, Genentech must prove total incapacity by clear and convincing evidence.” (citing Moleculon Rsch. Corp. v. CBS, Inc., 793 F.2d 1261, 1269 (Fed. Cir. 1986))); In re Depomed Pat. Litig., No. 13-4507, 2016 U.S. Dist. LEXIS 166077, at *77–78 (D.N.J. Sept. 30, 2016) (“An application need only . . . ‘disclose a use which is not so vague as to be meaningless.’” (quoting In re Fisher, 421 F.3d 1365, 1371 (Fed. Cir. 2005))). However, there are other doctrines in patent law where benefits sometimes play a role in the courts.
The doctrine of patent eligibility stems from 35 U.S.C. section 101,6735 U.S.C. § 101 (“Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”). which courts understand as barring certain categories of inventions from patenting such as abstract ideas, natural phenomena, and laws of nature.68See, e.g., Alice Corp. v. CLS Bank Int’l, 573 U.S. 208, 216 (2014) (“We have long held that this provision [§ 101] contains an important implicit exception: Laws of nature, natural phenomena, and abstract ideas are not patentable.” (quoting Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576, 589 (2013))); Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980) (“The laws of nature, physical phenomena, and abstract ideas have been held not patentable.”).. Essentially, things that occur in nature, or are too abstract, are not eligible for patenting.69See Andrew C. Michaels, Abstract Innovation, Virtual Ideas, and Artificial Legal Thought, 14 J. Bus. & Tech. L. 1, 9 (2019) (noting “the third category of non-eligible subject matter, abstract ideas, is different from the first two in that it does not invoke ‘nature’ or the ‘natural’”). This serves to ensure that patents remain limited to inventive technological applications, rather than basic, abstract scientific equations or things that already exist in nature.
These exceptions to patent eligibility are arguably also rooted in the constitutional clause that authorizes Congress to create patent laws only to “promote the Progress of Science and useful Arts.”70See U.S. Const. art. I, § 8, cl. 8 (granting Congress the power “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”). Although (as discussed in further detail below) it is notoriously difficult to predict exactly how changes in patent law might affect future innovation,71See, e.g., Andrew C. Michaels, Retroactivity and Appointments, 52 Loy. U. Chi. L.J. 627, 683–84 (2021); Lisa Larrimore Ouellette, Patent Experimentalism, 101 Va. L. Rev. 65, 67–68 (2015); see also infra Part III. there is some concern that monopolization of the natural or abstract “basic tools of scientific and technological work” could “‘tend to impede innovation more than it would tend to promote it,’ thereby thwarting the primary [constitutionally mandated] objective of the patent laws.”72Alice Corp., 573 U.S. at 216 (first quoting Myriad Genetics, 569 U.S. at 589; then quoting Mayo Collaborative Servs. v. Prometheus Lab’ys, Inc., 566 U.S. 66, 71 (2012)).
There are various ways to think about the eligibility carve-outs. One might think of patent law’s prohibition on patenting that which is too abstract or too natural as preventing monopolization of “intellectual infrastructure,” or the “raw ingredients” of technological advances.73See Peter Lee, The Evolution of Intellectual Infrastructure, 83 Wash. L. Rev. 39, 61–62 (2008) (“[P]atent law prohibits exclusive rights on certain ‘raw’ ingredients of creation—natural laws, physical phenomena, and abstract ideas—and reserves patents only for specific inventions . . . . [T]his differential treatment of infrastructure and application helps patent law achieve its utilitarian objectives.”). Or, one could conceptualize knowledge as a pyramid, with “big ideas” on top, and “specific applications” at the bottom—the “higher up a patent is on the pyramid, the greater the social cost and the greater the hindrance to further innovation.”74See Bilski v. Kappos, 561 U.S. 593, 653 (2010) (Stevens, J., concurring in the judgment) (first citing Rochelle Cooper Dreyfuss, Are Business Method Patents Bad for Business?, 16 Santa Clara Comput. & High Tech. L.J. 263, 275–76 (2000); then citing Robert P. Merges & Richard R. Nelson, On the Complex Economics of Patent Scope, 90 Colum. L. Rev. 839, 873–78 (1990)). The eligibility carve-outs for fundamental, abstract ideas, and natural tools limit patents to the specific applications further down the pyramid. A related argument in favor of exempting the biggest fundamental ideas from patent eligibility is that there may be sufficient incentives to create or discover such major advances even without patents, via “first-mover advantages, including lock-ins, branding, and networking effects.”75Id. at 651. Leaving big ideas and basic tools open to experimentation and use by others preserves the patent incentive for the more numerous and more specific applications of the idea or tool, for which the patent incentive may be more necessary.
Although the eligibility carve-outs can be traced back to the mid-1800s,76See O’Reilly v. Morse, 56 U.S. (15 How.) 62, 112–21 (1854); Le Roy v. Tatham, 55 U.S. (14 How.) 156, 175 (1853). the doctrine has evolved significantly and become more stringent within the past decade, leading to a sharp increase in patents being invalidated under this doctrine.77See, e.g., Robert Sachs, Alice: Benevolent Despot or Tyrant? Analyzing Five Years of Case Law Since Alice v. CLS Bank: Part I, IPWatchdog (Aug. 29, 2019), https://perma.cc/2355-LJHB (finding a 1,056% increase in the number of decisions finding ineligible patent claims, comparing the five years after the Supreme Court’s 2014 Alice decision with the five years prior to that decision). Part of this evolution has led to some consideration of the invention’s benefits in section 101 eligibility analysis by courts.
In Alice Corp. v. CLS Bank International,78573 U.S. 208 (2014). the Supreme Court solidified a new “two-part test” for patent eligibility that had initially been set forth in the Court’s 2012 Mayo Collaborative Services v. Prometheus Laboratories, Inc.79566 U.S. 66 (2012). decision (as an arguable distillation or new interpretation of prior case law).80See Alice, 573 U.S. at 217; Mayo, 566 U.S. at 77–78. Under this test, a court is to first “determine whether the claims at issue are directed to one of [the] patent-ineligible concepts,” that is, an abstract idea, a natural phenomenon, or a law of nature.81Alice, 573 U.S. at 217.. If not, there is no eligibility problem. If so, the court is then to ask whether the additional elements in the patent claims contain an “inventive concept” that is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.”82Id. at 217–18 (quoting Mayo, 566 U.S. at 72–73).
A number of courts and judges have observed that the Supreme Court’s two-part test for eligibility is somewhat incomprehensible and could at least arguably be reduced to a single inquiry.83See, e.g., Interval Licensing LLC v. AOL, Inc., 896 F.3d 1335, 1351 (Fed. Cir. 2018) (Plager, J., concurring in part and dissenting in part) (“A small puzzle—if a court . . . determines the claims to be ‘abstract’ in Step 1, how can the same court be expected to determine on a second reading that the same claims have become ‘unabstract’ via Step 2?”); Iron Gate Sec., Inc. v. Lowe’s Cos., No. 15-CV-8814, 2016 U.S. Dist. LEXIS 101796, at *39 n.10 (S.D.N.Y. Aug. 3, 2016) (“A number of courts have aptly observed that it is easier to separate the two steps in recitation than in application and that the two steps could arguably be collapsed into a single one.”). One way of making sense of this test is that in the eligibility (section 101) analysis, after setting aside or filtering out the ineligible (abstract or natural) concepts, there must remain something that is inventive in application. For example, merely taking an ineligible abstract idea and requiring it to be performed on a general-purpose computer is not inventive enough in application to be patent eligible.84See Alice, 573 U.S. at 222–23. The abstract idea or natural thing itself cannot supply the inventiveness, for it is ineligible. What remains aside from the abstract or natural must be more inventive than “well-understood, routine, conventional activities.”85Id. at 225 (quoting Mayo, 566 U.S. at 73).
In applying this test, courts have sometimes considered benefits relevant to the inquiry of whether the claims contain sufficient inventiveness in application to be patent eligible. In Enfish, LLC v. Microsoft Corp.,86822 F.3d 1327 (Fed. Cir. 2016). the Federal Circuit found that claims to a new computer data indexing technique were sufficiently inventive to be patent eligible, noting that “multiple benefits flow from this design,” including “faster searching” and “more effective storage.”87Id. at 1333. Although the district court had found all of the patent claims to be ineligible abstract ideas, the Federal Circuit disagreed, finding that the patent had made a non-abstract improvement to computer technology, that is, “an improvement to computer functionality,” rather than an abstract idea.88Id. at 1335–37. Because the “self-referential” data storage system “function[ed] differently than conventional database structures,” the court found that the claims were directed to a non-abstract “improvement of an existing technology,” and this conclusion was “bolstered by the specification’s teachings that the claimed invention achieves other benefits over conventional databases, such as increased flexibility, faster search times, and smaller memory requirements.”89Id. at 1337.
When evaluating eligibility in the software context, the Federal Circuit has continued to ask whether the claims are directed to a non-abstract “improvement to the functionality of the computer or network platform itself.”90Customedia Techs., LLC v. Dish Network Corp., 951 F.3d 1359, 1364 (Fed. Cir. 2020). However, the court has clarified that not all types of benefits are helpful to a patentee seeking to pass the eligibility threshold, for “improving a user’s experience while using a computer application is not, without more, sufficient to render the claims directed to an improvement in computer functionality.”91Id.(citing Trading Techs. Int’l, Inc. v. IBG LLC, 921 F.3d 1084, 1092–93 (Fed. Cir. 2019)). For example, in Customedia Technologies , LLC v. Dish Network Corp.,92951 F.3d 1359 (Fed. Cir. 2020). the court found that the claimed invention was ineligible because the “only improvements identified in the specification are generic speed and efficiency improvements inherent in applying the use of a computer to any task,” so the claimed invention was “at most an improvement to the abstract concept of targeted advertising wherein a computer is merely used as a tool.”93Id. at 1365. In other words, the claims were not sufficiently directed to a “physical-realm improvement”; rather, any inventiveness was in the abstract idea of targeted advertising, so the claims were patent ineligible.94Id.
Although an invention’s benefits might not initially seem directly relevant to whether a patent claims something abstract or natural, the courts’ focus on benefits in the context of eligibility relates to the statutory hook for the eligibility exceptions. The eligibility exceptions are not explicitly found in the text of section 101, but they are arguably supported by the statutory language “new and useful.”9535 U.S.C. § 101. Specifically, a pure abstract equation arguably has not been made useful until it has been applied in technology, and something found in nature is arguably not new.96See Bilski v. Kappos, 561 U.S. 593, 601–02 (2010) (“While these exceptions are not required by the statutory text, they are consistent with the notion that a patentable process must be ‘new and useful.’”); Wesley D. Markham, How to Explain the “Implicit Exceptions” to Patent-Eligible Subject Matter, 16 Vand. J. Ent. & Tech. L. 353, 370 (2014) (“By the terms of the statute, an invention or discovery must be ‘new and useful’ to be patent eligible. This language may provide a textual hook for the implicit exceptions.” (footnote omitted)). If the statutory rationale for exempting abstract ideas from eligibility is that they are not useful, an invention’s benefits (such as faster or more effective data storage, for example) would seem potentially relevant to rebutting the claim that it is ineligible as abstract. Thus, despite the utility requirement’s formal status as a low threshold, the extent of the usefulness or the benefits may also be relevant in passing the more substantial eligibility hurdle.
Like the eligibility exceptions for inventions that are too abstract or natural, the nonobviousness requirement is also at least arguably rooted in the Constitution’s mandate that the patent laws be designed to “promote the Progress of Science and useful Arts.”97U.S. Const. art. I, § 8, cl. 8. If a claimed invention is merely an obvious improvement on or modification of the prior art, a patent is likely not necessary to incentivize its creation, or its creation might not be considered “progress.”98Cf. Graham v. John Deere Co., 383 U.S. 1, 9 (1966) (“Jefferson did not believe in granting patents for small details, obvious improvements, or frivolous devices.”)..
If a claimed invention is able to clear the low hurdle of utility, and pass the more substantial hurdle of patent eligibility, it still must pass nonobviousness—“the ultimate condition of patentability.”99See Nonobviousness—The Ultimate Condition of Patentability (John F. Witherspoon ed., 1980); see also Karshtedt, supra note 32, at 1611. This requirement is found in section 103 of the patent statute, and states that a patent may not be obtained “if the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious . . . to a person having ordinary skill in the art to which the claimed invention pertains.”10035 U.S.C. § 103. The “prior art” includes patents, printed publications, or inventions already in public use as of the priority date (generally the application filing date) of the patent claims at issue.101See id. § 102.
If a single prior art reference contains every element of a patent claim, the claim is invalid (under 35 U.S.C. section 102) as “anticipated” by the prior art. In other words, the claimed invention is not new, it was already in the prior art.102See id. But even if a patent claim is new, that is, there is nothing exactly like in the prior art, it may still be invalid for obviousness—if a person having ordinary skill in the art (a “PHOSITA”) would have likely found it obvious to combine various prior art references to create the claimed invention.103Id. § 103. One classic way to think about it, known as the “Winslow tableau” (after the case In re Winslow104365 F.2d 1017 (C.C.P.A. 1966)..), is to picture a PHOSITA in a shop with the known prior art references hanging on the walls around them, and ask: would it be obvious for that person, in light of the teachings of those prior art references, to create the claimed invention?105See id. at 1020 (“We think the proper way to apply the [§] 103 obviousness test to a case like this is to first picture the inventor as working in his shop with the prior art references—which he is presumed to know—hanging on the walls around him.”). Thus, in arguing against obviousness, patentees and patent applicants must “distinguish” the various prior art references, and argue that their patent claims something not just different, but different enough so as to not be merely an obvious combination of the prior art.
Pointing to benefits that flow from the claimed invention may sometimes be helpful in seeking to distinguish the prior art, even when the benefits are not explicitly claimed. For example, in Intellectual Ventures I, LLC v. Canon Inc.,106143 F. Supp. 3d 143 (D. Del. 2015). the defendant argued that the asserted patent claims on a wireless chipset were obvious.107See id. at151–52. The patentee responded that the invention is a nonobvious advance over the prior art, in part because it was the first chipset to allow for a “single receive path,” which, according to the patent specification, has the benefit of being more efficient as compared with the prior art’s “plural parallel receive paths.”108See id. at 151; U.S. Patent No. 5,712,870 col. 2 ll. 53–60 (filed July 31, 1995) (“In some prior art systems, plural parallel receive paths are used for the diverse antennae so that each antenna may be evaluated in parallel. Obviously, such duplication of elements is relatively expensive in terms of cost, power[,] and area.”). The defendant argued the patentee could not argue based on a “single receive path,” because that term was not specifically a claim limitation.109See Intellectual Ventures, 143 F. Supp. 3d at 151.. The court disagreed, finding that the patentee could properly point to this benefit of the invention that arises out of the claim limitations as a way of distinguishing the prior art.110See id. (“IV’s expert did not mean ‘single receive path’ to be a substantive claim limitation, but rather used it to distinguish prior art in the context of obviousness.”); id. at 151–52 (referring to “single receive path” as “a phrase to contrast the invention with prior art”).
This use of an invention’s benefits in nonobviousness analysis is arguably in some tension with what this Article has referred to as the “market mantra” of patent law.111For a discussion of Lowell, see supra Section II.A.. This theory is also sometimes reflected more directly in the nonobviousness doctrine, for example in the 1851 Supreme Court case of Hotchkiss v. Greenwood,11252 U.S. (11 How.) 248 (1851). where the Court rejected the test used by the circuit court, that if the invention was “new . . . [,] better[,] and cheaper,” it was the proper subject of a patent.113Id. at 266 (“Now the new article was better and cheaper than the old one; but I did not then suppose, nor do I now, that this could make any difference, unless it was the result of some new contrivance or arrangement in the manufacture.”); cf. id. at 268 (Woodbury, J., dissenting) (“[I]n my view the true test of its being patentable was if the invention was new, and better and cheaper than what preceded it.”). The Court in Hotchkiss instead required that the invention show “more ingenuity and skill . . . than were possessed by an ordinary mechanic acquainted with the business.”114Id. at 267 (majority opinion). This formulation of nonobviousness was largely codified in the 1952 Patent Act and has carried forward into modern law.115See Graham v. John Deere Co., 383 U.S. 1, 14–15 (1966) (“The first sentence of this section [35 U.S.C. § 103] is strongly reminiscent of the language in Hotchkiss. . . . It is undisputed that this section was, for the first time, a statutory expression of the additional requirement for patentability, [i.e., nonobviousness,] originally expressed in Hotchkiss.”).
However, the claimed invention’s marketplace success is relevant to other aspects of the nonobviousness doctrine. Although the prima facie determination of nonobviousness turns on a comparison of the teachings of the prior art with the elements of the claimed invention, courts will also look to “secondary considerations” (also known as “objective indicia”), such as commercial success, failure of others, unexpected results, copying by others, licensing activity, and industry accolades.116Id. at 17–18 (“Such secondary considerations as commercial success, long felt but unsolved needs, failure of others, etc., might be utilized to give light to the circumstances surrounding the origin of the subject matter sought to be patented. As indicia of obviousness or nonobviousness, these inquiries may have relevancy.”); Karshtedt, supra note 32, at 1613. Though relegated to “secondary” status, these considerations sometimes implicate a direct evaluation of benefits of the invention and can be important.117See, e.g., Transocean Offshore Deepwater Drilling, Inc. v. Maersk Drilling USA, Inc., 699 F.3d 1340, 1355 (Fed. Cir. 2012); Arkie Lures, Inc. v. Gene Larew Tackle, Inc., 119 F.3d 953, 957 (Fed. Cir. 1997) (“Indeed, evidence of secondary considerations may often be the most probative and cogent evidence in the record. It may often establish that an invention appearing to have been obvious in light of the prior art was not.”); In re Mayne, 104 F.3d 1339, 1343 (Fed. Cir. 1997) (“An applicant may make this showing with evidence that the claimed invention exhibits some superior property or advantage that a person of ordinary skill in the relevant art would find surprising or unexpected.”); Hybritech, Inc. v. Monoclonal Antibodies, Inc., 802 F.2d 1367, 1380 (Fed. Cir. 1986) (“Objective evidence such as commercial success, failure of others, long-felt need, and unexpected results must be considered before a conclusion on obviousness is reached and is not merely ‘icing on the cake,’ as the district court stated at trial.”).
Thus, tension exists between the “market mantra” and the reality that such benefits are often considered by the courts, not only in patent law’s utility doctrine, but also the doctrines of eligibility and nonobviousness. The law of damages for patent infringement adds further to this discord between the “market mantra” and reality.
Under the “market mantra,” if an invention meets the requirements of patent law (essentially, it is new, useful, and nonobvious), the patent is granted, and the value of the patent depends entirely on the market. The patent is a time-limited right to exclude others from practicing the patent’s claims,118See 35 U.S.C. § 154(a)(2) (providing that a patent shall expire twenty years from the effective filing date). but the value of that right depends on how much others want to (and are willing to pay to) practice those claims.
In reality, though, a patent is not a pure “property” right; it is often governed instead by “liability rules.” In particular, a patentee in many cases will not be able to obtain an injunction to enforce the right to exclude and will be forced to settle instead for monetary damages.119See generally Guido Calabresi & A. Douglas Melamed, Property Rules, Liability Rules, and Inalienability: One View of the Cathedral, 85 Harv. L. Rev. 1089 (1972). In such cases, although courts will certainly consider evidence from the market, courts will also conduct some evaluations of the merits or benefits of an invention in determining the damages award.
The availability of injunctions for patent infringement was significantly limited by the Supreme Court in eBay Inc. v. MercExchange, L.L.C.120547 U.S. 388 (2006). The Court rejected the Federal Circuit’s “general rule” that “a permanent injunction will issue once infringement and validity have been adjudged,” and that “injunctions should be denied only under ‘exceptional circumstances,’”121Id. at 393–94 (quoting MercExchange, L.L.C. v. eBay, Inc., 401 F.3d 1323, 1338–39 (Fed. Cir. 2005), vacated 547 U.S. 388 (2006)). holding that courts instead must apply the general, traditional “four-factor test” for injunctions, which applies “with equal force to disputes arising under the Patent Act.”122Id. at 391. One of the factors directs courts to consider whether “the public interest” would be served by an injunction,123Id. thus providing solid doctrinal support for a consideration of the invention’s benefits or harms in the equitable remedies analysis.
The eBay case thus represents a prime example of a trend wherein the Supreme Court has repeatedly told the Federal Circuit that it must apply generally applicable legal rules, and that patent law is not exempt from such rules.124See Peter Lee, The Supreme Assimilation of Patent Law, 114 Mich. L. Rev. 1413, 1438 (2016) (“The Court’s opinion [in eBay] exhibits a systematizing tone that repudiates any form of patent exceptionalism.”). It is worth noting that “the [eBay] Court’s four-factor test actually departs from traditional injunction analysis in important ways.” Id. at 1439 (citing Mark P. Gergen, John M. Golden & Henry E. Smith, The Supreme Court’s Accidental Revolution? The Test for Permanent Injunctions, 112 Colum. L. Rev. 203, 207–08 (2012)). After eBay, injunctions have issued less frequently in patent cases, particularly when the patentee does not actually “practice” the patent; that is, the patentee does not actually make the product or use the method claimed by the patent.125See Christopher B. Seaman, Permanent Injunctions in Patent Litigation After eBay: An Empirical Study, 101 Iowa L. Rev. 1949, 1958–59 (2016) (“eBay represents a significant shift away from a property rule approach, at least for certain types of patent owners.”).
Absent an injunction, a patentee that succeeds in showing infringement is forced to settle for monetary damages, which according to the statute, must be “adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer.”12635 U.S.C. § 284. Such damages are intended to put the patent holder back in the position that they would have been in had infringement not occurred; that is, if the patent infringer had paid the patentee for a license prior to infringing.127See, e.g., ARO Mfg. Co. v. Convertible Top Replacement Co., 377 U.S. 476, 507 (1964) (“[H]ad the Infringer not infringed, what would Patent Holder-Licensee have made?” (quoting Livesay Window Co. v. Livesay Indus., Inc., 251 F.2d 469 (5th Cir. 1958))); Pall Corp. v. Micron Separations, Inc., 66 F.3d 1211, 1223 (Fed. Cir. 1995) (“[T]he purpose of compensatory damages is not to punish the infringer, but to make the patentee whole.”).
A common approach to determining such damages is the “hypothetical negotiation” approach, where a court “attempts to ascertain the royalty upon which the parties would have agreed had they successfully negotiated an agreement just before infringement began.”128Lucent Techs., Inc. v. Gateway, Inc., 580 F.3d 1301, 1324 (Fed. Cir. 2009). Under this approach, a court “tries, as best as possible, to recreate the ex ante licensing negotiation scenario and to describe the resulting agreement.”129Id. at 1325. However, while a true ex ante licensing negotiation would likely include some discussion of whether the patent is actually valid and infringed, the hypothetical negotiation approach “assumes that the asserted patent claims are valid and infringed,” id., since the damages calculation is occurring after the patent has already been found valid and infringed (otherwise there would be no liability). This is a difficult inquiry and is generally settled by conflicting expert testimony to a jury, but courts and litigants often use a set of fifteen factors, known as the Georgia-Pacific factors, to frame the evidence and argument.130Id. (“We review the damages award within the Georgia-Pacific framework.”); see also Georgia-Pacific Corp. v. U.S. Plywood Corp., 318 F. Supp. 1116, 1120 (S.D.N.Y. 1970).. Some of these factors implicitly or explicitly require courts to consider benefits of the invention, most obviously factors nine, ten, and thirteen:
9. The utility and advantages of the patent property over the old modes or devices, if any, that had been used for working out similar results.
10. The nature of the patented invention; the character of the commercial embodiment of it as owned and produced by the licensor; and the benefits to those who have used the invention.
. . . .
13. The portion of the realizable profit that should be credited to the invention as distinguished from non-patented elements, the manufacturing process, business risks, or significant features or improvements added by the infringer.131Georgia-Pacific, 318 F. Supp. at 1120.
In applying these factors, the court’s evaluation of an invention’s value or benefits can influence the court’s determination of the proper amount that the defendant would have agreed to pay in the hypothetical negotiation.132See, e.g., Lucent, 580 F.3d at 1332 (“These two factors [10 and 13] . . . both aim to elucidate how the parties would have valued the patented feature during the hypothetical negotiation.”). To be sure, courts do largely focus on more objective market evidence in the damages analysis, such as the rates paid by the defendant for the use of other comparable patents, the established profitability of the product made under the patent, and the extent to which the infringer has made use of the invention.133See, e.g., Georgia-Pacific, 318 F. Supp. at 1120 (factors 2, 8, and 11). Although the court must often determine a royalty rate, the “royalty base” to which that rate is applied is determined by the extent of the infringer’s sales.134See, e.g., LaserDynamics, Inc. v. Quanta Comput., Inc., 694 F.3d 51, 66–67 (Fed. Cir. 2012) (“[I]t is generally required that royalties be based not on the entire product, but instead on the ‘smallest salable patent-practicing unit.’” (quoting Cornell Univ. v. Hewlett-Packard Co., 609 F. Supp. 2d 279, 283 (N.D.N.Y 2009))); Lucent, 580 F.3d at 1326 (“Royalties are dependent on the level of sales or usage by the licensee . . . .”).
But while courts strive to focus largely on more objective market evidence in determining damages, some subjective evaluation of the invention’s merits or benefits often creeps into the analysis.135Cf. LaserDynamics, 694 F.3d at 66 (“To assess how much value each patented and non-patented component individually contributes to the overall end product—e.g., a personal computer—can be an exceedingly difficult and error-prone task.”); see also Mark A. Lemley, Taking the Regulatory Nature of IP Seriously, 92 Tex. L. Rev. 107, 109 (2014) (“A focus on social value, then, is more likely to reduce than to enhance patent remedies.”); Ted Sichelman, Purging Patent Law of “Private Law” Remedies, 92 Tex. L. Rev. 517, 526 (2014) (“[I]f the private economic value of a patented innovation to a single patentee is substantially less than the social value of the innovation . . . then the patentee will need more reward than mere compensatory damages in the event of infringement.”). This seepage resembles the subjective evaluations in the doctrines of utility, eligibility, and nonobviousness. The tension between the “market mantra” and the reality that the courts often do engage in such evaluation is thus ubiquitous across patent law, spanning doctrines of both liability and damages.136Benefits of the invention likely even play a role in other patent law doctrines aside from the areas discussed above. Risch, Surprisingly Unique, supra note 8, at 62 (discussing how a broader conception of an invention’s usefulness or benefits plays a role in the § 102 novelty and § 112 enablement requirements of patent law); see also id. at 64 (“Whether or not courts have intended to analyze usefulness, it has always been an important consideration that permeates patent law.”).
III. Uncertainty In Patent Policy
As discussed in the last Part, one of the primary justifications for the “market mantra” is that courts are not necessarily well suited to assess the value of an invention. There is some force to this view; different judges may well have different conceptions of an invention’s benefits and harms, or social value. But courts are already letting their view of an invention’s value implicitly color their analysis in the various patent law doctrines discussed above.
As this Part will discuss, the justification for the “market mantra” is also undercut by the significant degree of uncertainty that unavoidably pervades patent policy. It is generally very difficult to know the precise effect of changes to patent law on the value and amount of future innovation. As such, any uncertainty introduced by departing further from the “market mantra” would not be upsetting an analysis that is otherwise very precise. If patent policy inevitably involves a degree of guesswork, we might as well try to guess in the direction of increasing innovations with greater social value.
A. Policy Objectives of Patent Law
In considering what role an invention’s benefits or harms should play in patent law, it is helpful to consider the policy aims of patent law. Patent law’s three primary policy aims are (1) to incentivize the creation of more new inventions by rewarding the inventor with a limited property right; (2) to encourage public disclosure of inventions (as opposed to trade secrecy), thus allowing future innovators to build upon such public disclosures; and (3) to facilitate the commercialization or dissemination of new inventions by allowing the licensing of such ideas to those with the capacity to make the greatest use of them.137See, e.g., Katherine J. Strandburg, Users as Innovators: Implication for Patent Doctrine, 79 U. Colo. L. Rev. 467, 470 (2008) (“[D]iscussions of patent law and policy have for the most part remained rooted in the paradigm of commercial sale as motivation for invention, disclosure, and dissemination of technical advances.”)..
Aside from these “big three” basic objectives, there are some other supplementary advantages of the patent system. In certain sectors, patents may help smaller firms or startups more than they help established incumbents, thus reducing market concentration and leading to less dominance by large firms, which could be seen as socially beneficial for a variety of reasons.138See generally Jonathan M. Barnett, Three Quasi-Fallacies in the Conventional Understanding of Intellectual Property, 12 J.L. Econ. & Pol’y 1, 5 (2016) (“With the exception of the biopharmaceutical industry, large integrated technology firms tend to resist expansions of the patent system. . . . By contrast, R&D-intensive (and typically smaller) firms that lack independent production and distribution capacities tend to favor expansions of patent rights.”); Andrew C. Michaels, The Patent Lawyer’s Guide to Fascism: On Individual Autonomy and Private Law, 49 N.M. L. Rev. 169, 181–92 (2019) (explaining that intellectual property can “‘allow the makers of the input to set themselves up as a separate, independent firm,’ which ‘gives them more say over their work, more control over their professional fate—more autonomy.’” (quoting Robert P. Merges, Justifying Intellectual Property 83 (2011))). This effect is likely greatest in sectors such as software or information technology, where large firms can leverage network effects, branding, and lock-ins to maintain dominance even without patents, but where patents may help startups get a foot in the door by, for example, attracting venture capital investment.139See Michaels, supra note 138, at 182–83. Another supplementary advantage is that with a basic area of innovation protected, a patent holder may be more likely to invest in that area, leading to further products and inventions.140See Price, supra note 29, at 779 (“[P]rospect theory argues that patents, especially early patents, enable initial innovators to orchestrate the many efforts to develop later innovative products from that initial innovation.” (citing Edmund W. Kitch, The Nature and Function of the Patent System, 20 J.L. & Econ. 265 (1977))).
Under the basic “quid pro quo” of patent law, as it generally developed in the last half century, the inventor agrees to publicly disclose the invention in exchange for a time-limited right to exclude; and society agrees to grant that right in exchange for the disclosure.141See, e.g., Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 481 (1974) (“When a patent is granted and the information contained in it is circulated to the general public and those especially skilled in the trade, such additions to the general store of knowledge are of such importance to the public weal that the Federal Government is willing to pay the high price of 17 years of exclusive use for its disclosure, which disclosure, it is assumed, will stimulate ideas and the eventual development of further significant advances in the art.”). Professor John Duffy has explained, however, that early Supreme Court precedent stated the quid pro quo differently, emphasizing that the “basic quid pro quo contemplated by the Constitution and Congress for granting a patent monopoly is the benefit derived by the public from an invention with substantial utility.”142John F. Duffy, Reviving the Paper Patent Doctrine, 98 Cornell L. Rev. 1359, 1361 (2013) (quoting Brenner v. Manson, 383 U.S. 519, 534 (1966)). As Professor Duffy explains, this “difference is subtle but extraordinarily important,” for under the formulation of earlier times, the grant of the patent is conditioned not only upon disclosure by the patentee, but also upon “the benefit flowing from the practical knowledge and experience gained from actually building and commercializing the invention.”143Id. at 1361–62. The Court’s earlier statement of the quid pro quo thus provides some theoretical and jurisprudential foundation for the consideration of social value and an invention’s benefits in patent law and policy.
With the invention secured by a patent, the inventor is free to publicize the invention and negotiate licenses without fear of losing the idea, thus facilitating commercialization.144See, e.g., F. Scott Kieff, Property Rights and Property Rules for Commercializing Inventions, 85 Minn. L. Rev. 697 (2001). The ideal level of patent protection should properly balance the societal benefits of granting a patent (such as increased incentives for innovation, disclosure, and commercialization), against the societal harm of granting a patent, most obviously in the form of the deadweight loss (i.e., the social economic cost of the patent monopoly).145See, e.g., Michael Abramowicz, Perfecting Patent Prizes, 56 Vand. L. Rev. 115, 126 (2003) (“Because placing a patent in the public domain reduces deadweight loss, there are likely to be many applications for which the social value of placing a patent in the public domain is greater than the corresponding sacrifice in terms of reduced revenues from a patent.”); Richard A. Posner, The Law & Economics of Intellectual Property, Daedalus, Spring 2002, at 5, 12 (2002) (“[G]ranting property rights in intellectual property increases the incentive to create such property, but the downside is that those rights can interfere with the creation of subsequent intellectual property . . . .”). The litigation costs that sometimes result from patent could also be considered another form of consequent deadweight loss. See William H. Janeway, Doing Capitalism in the Innovation Economy: Markets, Speculation and the State 281 (2d ed. 2012) (“[R]eform of patent law in the 1980s spawned a monster, creating a deadweight burden by way of a vast extension of what is patentable and an equally vast expansion of related and consequent litigation.”).
In theory, this is a fairly straightforward question.146See Posner, supra note 145, at 12 (“The problems are not conceptual; the concepts are straightforward. The problems are entirely empirical.”). In reality though, there are many difficulties with this inquiry.147See id. (“The task is daunting, for it requires that we be able to estimate both the social gains from additional intellectual property of different types and the social costs of trying to induce the creation of the additional intellectual property by means of adjustments in the regime of intellectual property rights.”). For one thing, it is very difficult to know how much future innovation will be incentivized by a strong patent system, as compared with a weaker patent system or no patent system.148See Ouellette, supra note 71, at 66–68 (“Despite well over a century of intense interest, we lack answers to fundamental empirical questions in patent law. . . . Locking the world into uniformly strong patent protection simply makes it more difficult to address these questions because empirical progress depends on policy variation.”); see also Michaels, supra note 71, at 683. Also, even if the amount of future innovation induced by an incremental increase in the strength of the patent system could be known, the value of future innovation to society is debatable and depends, to some degree, on what type of innovation is produced, as well as how such innovation is used.149See, e.g., Albert Camus, The Rebel 295 (Anthony Bower trans., Vintage Books 1991) (1951) (“The machine is bad only in the way that it is now employed. Its benefits must be accepted even if its ravages are rejected.”); Martin Heidegger, The Question Concerning Technology 33 (William Lovitt trans., Harper & Row 1977) (1954) (“The essence of technology is in a lofty sense ambiguous.”); Shawn Bayern, Why I Don’t Blog. (Yes, I Recognize the Irony of Posting This on a Blog.), HuffPost (June 20, 2010, 5:12 AM), https://perma.cc/C6V8-L2U7 (“The problem isn’t technology; it’s what we’re doing with it.”). The ideal level of patent protection likely varies by industry and is likely impossible to precisely determine in any event.150See Staff of H. Subcomm. on Pats., Trademarks, & Copyrights of the H. Comm. on the Judiciary, 85th Cong., An Economic Review of the Patent System 80 (Comm. Print 1958) (prepared by Fritz Machulp) (“If we did not have a patent system, it would be irresponsible, on the basis of our present knowledge of its economic consequences, to recommend instituting one. But since we have had a patent system for a long time, it would be irresponsible, on the basis of our present knowledge, to recommend abolishing it.”); Ouellette, supra note 71, at 76 (noting that some have argued that the concerns of Machulp ring false today due to an “outpouring of empirical economic work” but stating that no such work “resolves whether patents have a net positive effect on innovation, much less their net welfare effect”); see also Michele Boldrin & David K. Levine, Against intellectual Monopoly 216–17 (2008) (arguing that there is “weak or no evidence that strengthening patent regimes increases innovation”); Ouellette, supra note 71, at 128.. This hypothesis is consistent with the fact that, even just within the current Federal Circuit (the primary court that hears patent appeals) and even under the constraints of the current law, various judges have widely varying views on how strong the patent system should be.151See, e.g., Ted L. Field, Hyperactive Judges: An Empirical Study of Judge-Dependent “Judicial Hyperactivity” in the Federal Circuit, 38 Vt. L. Rev. 625, 627 (2014) (“Many patent practitioners believe that decision-making by the U.S. Court of Appeals for the Federal Circuit is highly judge-dependent.” (footnotes omitted) (first citing John R. Allison & Mark A. Lemley, How Federal Circuit Judges Vote in Patent Validity Cases, 27 Fla. St. U. L. Rev. 745, 745 (2000); then citing Paul R. Michel, The Court of Appeals for the Federal Circuit Must Evolve to Meet the Challenges Ahead, 48 Am. U. L. Rev. 1177, 1191 (1999); and then citing Craig Allen Nard & John F. Duffy, Rethinking Patent Law’s Uniformity Principle, 101 Nw. U. L. Rev. 1619, 1627 (2007))).
Nevertheless, if the proper inquiry with respect to an incremental increase in the strength of the patent system is to balance the societal benefits against the societal costs, then perhaps we can move towards a more optimal patent system by focusing on granting patents for inventions that are socially beneficial as opposed to socially harmful.152On the other hand though, in some situations it might be best to leave the most beneficial inventions (perhaps life-saving vaccines in the context of a pandemic, for example) in the public domain, to enable wider distribution. Cf. Sapna Kumar, Compulsory Licensing of Patents During Pandemics, 54 Conn. L. Rev. 57, 59–60 (2022) (suggesting that in exchange for receiving government funding for new drug development, patent holders should be required to out-license their technology and know-how during drug shortages). The question of how beneficial an invention is to society will no doubt be a difficult and imprecise inquiry, which perhaps is why courts have generally avoided addressing it head-on. But imprecision is similarly present in many other inquiries in the law, including in patent law, such as the inquiry into whether an invention would have been obvious.153See, e.g., Kirsch Mfg. Co. v. Gould Mersereau Co., 6 F.2d 793, 794 (2d Cir. 1925) (“An invention is a new display of ingenuity beyond the compass of the routineer, and in the end that is all that can be said about it . . . . There comes a point when the question must be resolved by a subjective opinion as to what seems an easy step and what does not.”). And given that the question of the ideal patent policy balance is difficult and imprecise to begin with, the case for excluding consideration of the invention’s social value due to its imprecision seems weaker, as that consideration would not involve introducing imprecision into an inquiry that is otherwise straightforward and precise.
B. Uncertain Origins of Invention
The uncertainty in patent policy is compounded by uncertainty in where inventions come from, given that one primary aim of the patent system is to incentivize further inventive progress.154See Dan L. Burk & Mark A. Lemley, Policy Levers in Patent Law, 89 Va. L. Rev. 1575, 1580 (2003) (“There is virtually unanimous agreement that the purpose of the patent system is to promote innovation by granting exclusive rights to encourage invention.”); Price, supra note 29, at 779 (stating that “incentive theory” is “by far the dominant theory” to “justify patent law”). The question of how inventions arise is occasionally touched on in the Supreme Court’s patent jurisprudence. For example, in Graham v. John Deere Co.,155383 U.S. 1 (1966). a foundational nonobviousness case, the Court discussed the views of Thomas Jefferson as “worthy of note,” given that he was the author of the 1793 Patent Act and “might well be called the ‘first administrator of our patent system.’”156Id. at 7 (quoting P.J. Federico, Operation of the Patent Act of 1790, 18 J. Pat. Off. Soc’y 237, 238 (1936)). In a portion of an 1813 letter by Jefferson reproduced in the Court’s opinion, Jefferson stated:
It would be curious then, if an idea, the fugitive fermentation of an individual brain, could, of natural right, be claimed in exclusive and stable property. If nature has made any one thing less susceptible than all others of exclusive property, it is the action of the thinking power called an idea, which an individual may exclusively possess as long as he keeps it to himself; but the moment it is divulged, it forces itself into the possession of every one, and the receiver cannot dispossess himself of it . . . . Society may give an exclusive right to the profits arising from them, as an encouragement to men to pursue ideas which may produce utility, but this may or may not be done, according to the will and convenience of the society . . . .157Id. at 8 n.2 (quoting Letter to Isaac McPherson, in 4 The Writings of Thomas Jefferson 180–81 (Washington ed., 2014)).
Jefferson’s view that an invention is “the fugitive fermentation of an individual brain,” or “the action of the thinking power,” rests on what might be called an internal consciousness view of inventions (i.e., that consciousness and ideas arise entirely from inside individuals).
Consciousness, however, has been an area of study and debate for some time, and alternative theories of consciousness have arguably been gaining ground. Some empirical evidence is said to support the notion that free will is an illusion, calling into question whether ideas in fact arise completely via internal human action.158See Annaka Harris, Conscious: A Brief Guide to the Fundamental Mystery of the Mind 26–27 (2019) (“[O]ur consciousness also doesn’t appear to be involved in much of our own behavior, apart from bearing witness to it . . . . [R]esearchers can reliably detect the cortical activity signaling these impending movements about half a second before subjects feel they make the decision to move.” (emphasis omitted)); cf. Carlo Filice, Free Will Is Still Alive!, Philosophy Now, Feb.–Mar. 2018, at 22, 23 (explaining experiments which show human nerve impulses fire fractions of a second before recorded conscious decisions, and noting that some have “used this data to argue that all the neurological activity associated with a choice happens before the choice is consciously made or even independent of any conscious choice, so showing that there is no such thing as free will,” but arguing that the “entire area surrounding these experiments is too contested to carry much weight”). The fundamentals of quantum physics also suggest that conscious observation may play a fundamental role in shaping physical phenomena, arguably calling into question our intuitions about consciousness being internal.159See Steve Taylor, Spiritual Science: Why Science Needs Spirituality to Make Sense of the World 268–69 (2018) (“But in quantum physics this gulf fades away. It is not possible to separate the observer from what he or she is observing. Our own consciousness participates in the world. For example, whether an entity manifests itself as a particle or a wave appears to depend on our expectations, and how an experiment is designed.”). One example is the famous “double-slit” experiment, wherein light passes through two slits in a plate and lands on another screen behind it, and an interference pattern suggesting a waveform can be found on the screen, but if the experimenter detects which particular slit the particle passes through, then the wave-like interference pattern does not appear, thus leading to the theory that observation “collapses” a wave into a particle. See id. at 268; see also Imants Baruss , Radical Transformation: The Unexpected Interplay of Consciousness and Reality 35 (2021).
Various thinkers have accordingly hypothesized more external models of consciousness, wherein consciousness might be thought of as an external field (akin to the gravitational field or the electromagnetic field), which humans (and other conscious beings) tap into via their nervous systems.160Taylor, supra note 159, at 267 (“[T]he failure to explain consciousness in neurological terms has led to a renewed interest in panpsychism and idealism, both of which suggest that consciousness is a fundamental quality of the universe.”); Robert K.C. Forman, What Does Mysticism Have to Teach us About Consciousness?, 1 AntiMatters, no. 2, 2007, at 71, 84–85 (“Consciousness is . . . more like a field than a localized point . . . . The brain may be more like a receiver or transformer for the field of awareness than its generator. . . .”); see also Baruss, supra note 159, at 64 (“From the panspiritist perspective, the brain does not produce consciousness but rather it acts as a kind of receiver, which transmits and canalizes universal consciousness . . . into our own brain.”); cf. Henri Bergson, Creative Evolution 182 (Arthur Mitchell trans., 1911) (1907) (“[C]onsciousness, in shaping itself into intelligence, that is to say in concentrating itself at first on matter, seems to externalize itself in relation to itself; but, just because it adapts itself thereby to objects from without, it succeeds in moving among them and in evading the barriers they oppose to it, thus opening to itself an unlimited field.”).
These external models arguably call into question the incentive justification for patents. If inventions arise not via individual human will, but rather from some more external source, one might reasonably question whether patents are really necessary to incentivize them, or even whether an individual is entitled to own the idea.161Some inventors have reported finding certain psychedelics helpful in stimulating creativity, for example, Kary Mullis reportedly claimed “that LSD had helped him develop the polymerase chain reaction that helps amplify specific DNA sequences.” Ann Harrison, LSD: The Geek’s Wonder Drug?, Wired(Jan. 16, 2006, 2:00 AM), https://perma.cc/EX3A-QS38.. On the other hand, if individual effort is required on the part of a human to “tap into,” recognize, and develop ideas that are “floating around” in the consciousness field, then perhaps patents are still just as warranted even if the idea in some sense originates externally.
The question of where inventions come from is also complicated by the fact that it is becoming more common for artificially intelligent machines to create new inventions on their own. Ryan Abbott has recently argued that, in light of this development, the bar for nonobviousness should be raised, and that “given there may be no limit on how intelligent computers will become, it may be that every invention will one day be obvious to commonly used computers.”162Ryan Abbott, Everything Is Obvious, 66 UCLA L. Rev. 2, 8–9 (2019).
The question of where inventions come from was also briefly raised by the Supreme Court in Kewanee Oil Co. v. Bicron Corp.163416 U.S. 470 (1974). The Court noted that under the “ripeness-of-time concept of invention,” it has been empirically observed that multiple individuals will often independently create inventions at around the same time.164Id. at 490 (“The ripeness-of-time concept of invention, developed from the study of the many independent multiple discoveries in history, predicts that if a particular individual had not made a particular discovery others would have, and probably in a relatively short period of time.”). As the Court put it: “If something is to be discovered at all very likely it will be discovered by more than one person.”165Id. (citing Jonathan Cole & Stephen Cole, Social Stratification in Science 12–13, 229–30 (1973); Robert K. Merton, Singletons and Multiples in Science, in The Sociology of Science 343 (1973); William F. Ogburn & Dorothy Thomas, Are Inventions Inevitable?, 37 Pol. Sci. Q. 83 (1922)). For example, “Oxygen was discovered by Scheele and by Priestley in 1774,” both “Cros and du Hauron invented color photography in 1869,” and the “law of the conservation of energy,” was “formulated four times independently in 1847.”166Ogburn & Thomas, supra note 165, at 83–84 (discussing additional examples); see also id. at 93–98 (listing 148 examples of inventions and discoveries made independently by two or more persons). And according to the Court, “[i]f Watson and Crick had not discovered the structure of DNA it is likely that Linus Pauling would have made the discovery soon.”167Kewanee, 416 U.S. at 490 n.19 (citing James D. Watson, The Double Helix (1968)); see also Matthew G. Sipe, Patent Law’s Philosophical Fault Line, 2019 Wis. L. Rev. 1033, 1049 (“For every Alexander Graham Bell, there was an Elisha Gray; for every Thomas Edison, a William Sawyer. But it was only the Bells and Edisons that came away with patents.” (footnotes omitted)).
This ripeness-of-time concept again calls into question the incentive justification for patents.168See Mark Lemley, The Myth of the Sole Inventor, 110 Mich. L. Rev. 709, 713–14 (2012) (“For inventions worth the trouble of patenting and enforcing in court, then—the very inventions the patent system might be thought to encourage—simultaneous invention seems to be the norm.”); see also Marconi Wireless Tel. Co. of Am. v. United States, 320 U.S. 1, 62 (1943) (Frankfurter, J., dissenting in part) (“[T]he history of thought records striking coincidental discoveries—showing that the new insight first declared to the world by a particular individual was ‘in the air’ and ripe for discovery and disclosure.”); 1 William C. Robinson, The Law of Patents for Useful Inventions § 29 (Boston, Little, Brown & Co. 1890)) (“With very few exceptions, every invention is the result of the inventive genius of the age, working under the demand of its immediate wants, rather than the product of the individual mind.”). If another individual likely would soon have created the same thing, why grant the patent to the first inventor? With the incentive theory, one of patent law’s foundational justifications, arguably on shaky ground,169Cf. Rachel E. Sachs, The Uneasy Case for Patent Law, 117 Mich. L. Rev. 499 (2018); Strandburg, supra note 137, at 471 (explaining how “user innovators do not need the prospect of sales to motivate them to invent”). perhaps the patent system should at least try to steer innovation in a direction that is more beneficial to society. That is, rather than focus entirely on increasing the rate of innovation, patent law should focus as well on the direction of innovation.170Cf. Joshua A. T. Fairfield, Runaway Technology: Can Law Keep Up? 6–7 (2021) (“And if we do not straighten out why we do science, provide some account for where we need to go with scientific progress, we will end up continuing to blindly create technologies that harm our democratic institutions and our long-term chances for survival on a dying planet.”). After all, some types of innovation have more beneficial social value than others. Further highlighting the role of benefits or harms of the invention in patent law could lead naturally to these sorts of considerations, as explained further in the next Part.
IV. Towards More Explicit Consideration of Social Value in Patent Law
This Part considers frameworks for evaluating the benefits or harms of an invention in patent law transparently and consistently. Section A considers various failures in the market’s valuation of inventions, undercutting the normative basis for the “market mantra.” Section B considers various possible doctrinal hooks for further consideration of an invention’s benefit in patent law. Section C considers whether the extent to which the patent owner is commercializing the invention should play a role in assessing the invention’s social value. Section D discusses how a move towards greater consideration of the invention’s social value could be implemented gradually through traditional common law development.
Ultimately, this Part will argue that courts should pay particular attention to the benefits or harms of an invention when there is reason to suspect a mismatch between the invention’s market value and social value, and that this move towards more explicit consideration of social value can and should happen gradually on a case-by-case basis through common law development. Courts may also want to consider the degree to which the current or previous owners of the patent have contributed to or stood in the way of actualizing the invention’s benefits or harms.
A. Market Failures
The basic problem with the “market mantra” theory is that the market does not always value an invention in accord with the invention’s social value or benefit to society. Some inventions that are socially valuable might be undervalued by the market, and worthless or harmful innovations might be commercially overvalued.
Traditionally, patent law has focused on increasing the rate of innovation generally without much attention paid to the type or direction of innovation. This traditional focus on innovative rate rests on an assumption that all innovation is (at least on balance) inherently good,171See, e.g., Burk & Lemley, supra note 154, at 1588 (“Innovation is, in general, socially valuable.”). but this assumption is sometimes questionable.172See, e.g., Kentaro Toyama, Geek Heresy: Rescuing Social Change from the Cult of Technology (2015); Lee Vinsel & Andrew L. Russell, The Innovation Delusion: How Our Obsession With the New Has Disrupted the Work That Matters Most 11 (2020) (“[I]nnovation-speak is built on the hidden, often false premise that innovation is inherently good.”).. For example, some have questioned whether the world of near-constant distraction and surveillance that technology has ushered in might have some negative impacts on our collective psychology.173See Nicholas G. Carr, The Shallows: What the Internet Is Doing to Our Brains (2010); Franklin Foer, World Without Mind: The Existential Threat of Big Tech 8 (2017) (discussing some potential negative effects of “a world in which we’re constantly watched and always distracted”). Stephanie Bair has recently explored the notion that some innovations create negative externalities, such as path dependencies, anti-innovation norms, and psychological effects.174See Stephanie Plamondon Bair, Innovation’s Hidden Externalities, BYU L. Rev. (forthcoming 2022). Professor Peter Lee has also recently explored how many inventions such as social media, automation, and big data technologies create negative externalities, and how “the patent system is massively subsidizing the invention of technologies that impose uncompensated harms on others.”175Peter Lee, Patent Law’s Externality Asymmetry, 43 Cardozo L. Rev. 101, 106 (forthcoming 2022); see also id. at 107 (“[B]y not providing effective mechanisms for internalizing negative externalities, patents likely overincentivize innovation, incentivize the wrong mix of innovations, and provide suboptimal incentives for technological design”).
Additionally, Professor Camilla Hrdy has pointed out that certain innovations, for example autonomous vehicles, “are partly responsible for what economists call technological unemployment: job loss resulting from technological change.”176SeeCamilla A. Hrdy, Intellectual Property and the End of Work, 71 Fla. L. Rev. 303, 307–10 (2019). Professor Hrdy also explains that although in the past the jobs created by new technologies has kept pace with the jobs displaced, there are some reasons to question whether this will hold in the future, such as the accelerating pace of innovation and the increasing complexity of tasks that can be automated.177See Hrdy, supra note 176, at 319–21. According to Professor Hrdy, such job losses are partly driven by patents,178See id. at 330 (“[T]oday, neither the Patent Office nor courts scrutinize the moral or economic implications of inventions when deciding whether to grant or uphold intellectual property rights.”). and are a negative externality that the market does not properly value.179See id. at 347 (explaining that patent owners “do not internalize the full costs that those same inventions impose on workers across the economy—workers whose skills are now made obsolete by the advancement of technology”). This may be one type of externality that courts could consider in assessing the benefits or harms of an invention. Further, innovation resources are sometimes excessively concentrated into certain fields, like in the dot-com bubble.180Hugo Hopenhayn & Francesco Squintani, On the Direction of Innovation, 129 J. Pol. Econ. 1991–92 (2021).
Economic work in patent law has generally concentrated on a tradeoff between the incentives to invent created by the patent system on the one hand, and the underuse of inventions (or deadweight loss) due to patent monopolies on the other.181SeeMerges & Nelson, supra note 74, at 868. The analysis is complicated by the fact that these two variables are in some sense incommensurable, or, at least, it is very difficult to precisely balance them against each other.182Cf. Rebecca Haw Allensworth, The Commensurability Myth in Antitrust, 69 Vand. L. Rev. 1, 67–68 (2016); Shawn Bayern, Methodological Failures in Leading American Economic Analyses of the Private Law, 5 Critical Analysis L. 19, 37 (2018) (“[L]egal-economics has been motivated not just by innovation but also by what seems to be an intense desire to popularize the methods of economists; a reader of Posner’s early work can’t escape the conclusion that Posner was engaged in an attempt to show that economic reasoning could be relevant to law and that he could reach any result or justify any legal rule by means of economic reasoning.”); Fairfield, supranote 170, at 154 (“[T]he overwhelming common purpose, at least in practice, of neoclassical economic language in legal academic publication is to obscure the mind-bendingly obvious so that it appears more publishable.”). Moreover, the pattern of technical advance varies significantly by technology, further complicating things.183Merges & Nelson, supra note 74, at 880.
Professor Tur-Sinai has challenged patent law’s reliance on the market to value inventions, or the equation of market value with social value.184Tur-Sinai, supra note 6, at 149.. In his view, the patent system over-incentivizes certain innovations with relatively low social value, such as various electronic gadgets or other luxury products, and this “might come at the expense of investing in other, more beneficial, endeavors.”185Id. at 150. For example, it has been observed that “few medicines are developed for diseases that primarily affect the poor but have little or no impact on the rich.”186Id. at 157.
As another example, “a gap between social value and market demand might exist when the innovative product serves public-good ends, as in the case of certain innovations related to the environment or to national security.”187Id. at 158 (first citing Brett M. Frischmann, Infrastructure: The Social Value of Shared Resources 265 (2012); then citing Brett Frischmann, Innovation and Institutions: Rethinking the Economics of U.S. Science and Technology Policy, 24 Vt. L. Rev. 347, 373–74 (2000)). Indeed, some economic work has found that innovation leads to positive externalities or “spillovers,” and that the level of these spillovers varies by industry.188Burk & Lemley, supra note 154, at 1587–88 (citing Dietmar Harhoff, R&D Spillovers, Technological Proximity, and Productivity Growth—Evidence from German Panel Data, 52 Schmalenbach Bus. Rev. 238 (2000)). Similarly, Professor Amy Kapczynski has explicated how the patent system’s market mechanism for evaluation tends to undervalue and under-incentivize inventions aimed at poorer populations.189Amy Kapczynski, The Cost of Price: Why and How to Get Beyond Intellectual Property Internalism, 59 UCLA L. Rev. 970, 996–99 (2012) (“IP is problematic, from a distributive justice perspective, for reasons that in some sense are well known: IP rations access via the price mechanism, and so it distributes resources in a way that is sensitive to the background allocation of resources.”).
Although the market’s role in shaping the direction of innovation should not be abolished, courts should play a role as well. Specifically, courts should give particular attention to an invention’s benefits where there is reason to think that the market might value an invention insufficiently.
Conversely, where an invention has harmful effects that are not reflected in the market, such as negative impacts on the environment,190See Tur-Sinai, supra note 6, at 173. this could be considered as a harm of the invention, and could count against the patentee on the margins in the various doctrines where benefits are normally considered.191Cf. id. at 195 (“Another direction could be to make the requirements for patentability more stringent to make it more difficult to secure patent protection over technologies with relatively low social value.”). For example, Professor Leah Fowler has explained how certain digital health applications might actually increase the likelihood of negative health consequences such as suicide or unintended pregnancy and has likened the worst of these applications to digital snake oil.192See Leah R. Fowler, Health App Lemons 1–3, 11, 28–29 (Feb. 8, 2022) (unpublished manuscript), https://perma.cc/HQF7-A4E4.. The market overvalues these applications due to incomplete consumer information and confusion, and poor health applications are sometimes able to free ride off of the positive consumer goodwill in higher-quality applications.193See id. As another example, the patented drug OxyContin has caused a great deal of harm due to its addictive potential.194See, e.g., Rebecca L. Martin, The Big Pharma Game: How Pharmaceutical Companies Have Gamed the United States Patent Law System and Undermined the United States Constitution, 30 Fed. Cir. Bar J. 213, 223–24 (2021). If these companies knew that the harmful effects of their innovations might hurt their chances of obtaining patents they might, at the margins at least, make greater efforts to provide accurate health information and prevent such harms.
B. Doctrinal Possibilities
An appropriate framework for evaluating an invention’s social benefits is elusive, which perhaps explains why the law has generally turned away from any such explicit analysis. However, as explained in Part II, courts do implicitly consider benefits in a variety of patent law doctrines, including eligibility, nonobviousness, and damages. Perhaps the most straightforward possibility would simply be to make such analysis more explicit in those doctrines. But this Section also considers several different options for where consideration of benefits and harms, particularly in the context of market failures, could be appropriate in patent law.
One such possibility might be a revival of the morality component in patent law’s utility doctrine. As explained in Section II.A, although some prior case law has suggested a morality component in the utility doctrine, this requirement has largely fallen out of the current law. Current doctrine instead relies on the market to determine the extent to which an invention is beneficial and other agencies to police deceptive trade practices or harmful products.195See supra Section II.A (discussing, for example, Juicy Whip).. However, there are sufficient legal grounds upon which to revive the morality aspect of the utility doctrine.196SeeLeanne M. Fecteau, The Ayahuasca Patent Revocation: Raising Questions About Current U.S. Patent Policy, 21 B.C. Third World L. Rev. 69, 87 (2001) (“[T]he PTO should give greater consideration to the morality component of the utility requirement when deliberating an invention’s patentability.”). Indeed, the U.S. Patent and Trademark Office has, albeit rarely, asserted a right to reject patent applications on the grounds of the morality aspect of utility. For instance, it rejected a proposed patent on a human-animal chimera in part on these grounds.197See Media Advisory, U.S. Pat. and Trademark Off., Facts on Patenting Life Forms Having a Relationship to Humans (Apr. 1, 1998), https://perma.cc/T45F-KNEE (noting that “the courts have interpreted the utility requirement to exclude inventions deemed to be ‘injurious to the wellbeing, good policy, or good morals of society’” (quoting Lowell v. Lewis, 15 F. Cas. 1018 (C.C.D. Mass. 1817))); see also Timothy R. Holbrook, The Expressive Impact of Patents, 84 Wash. U. L. Rev. 573, 606–07 (2006); Thomas A. Magnani, The Patentability of Human-Animal Chimeras, 14 Berkeley Tech. L.J. 443, 444 (1999). Moreover, a revival of the morality component at least arguably finds some support in international law, as the Agreement on Trade Related Aspects of Intellectual Property (“TRIPS”) “provides that states may exclude an invention from patent protection if prevention of ‘commercial exploitation’ of that invention in their territory is ‘necessary’ in order to ‘protect ordre public or morality.’”198Fecteau, supra note 196, at 94 (quoting Agreement on Trade-Related Aspects of Intellectual Property Rights, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, art. 27(2), Apr. 15, 1994, 1869 U.N.T.S. 299).
Another possibility might be a revival and modification of the pioneer patent doctrine. Although it is mostly forgotten in the current law, the pioneer patent doctrine historically provided a venue where courts openly considered an invention’s benefits and adjusted patent breadth accordingly, granting broader patent scope to groundbreaking, so-called “pioneer” patents.199John R. Thomas, The Question Concerning Patent Law and Pioneer Inventions, 10 High Tech. L.J. 35, 37, 52 (1995).
Perhaps the most famous example of the pioneer patent doctrine comes from Judge Learned Hand’s 1910 opinion regarding the Wright Brothers’ early airplane patent.200Wright Co. v. Paulhan, 177 F. 261 (C.C.S.D.N.Y. 1910). The court stated that where an invention is merely a minor advance in a crowded art, the claims must be “limited to the precise specifications” of the patent. But where an invention is more groundbreaking, the patent “becomes a pioneer, and as such under the well-known rules is entitled to a broad construction.”201Id. at 264; see also Miller v. Eagle Mfg. Co., 151 U.S. 186, 207 (1894)) (“If the invention is broad or primary in its character, the range of equivalents will be correspondingly broad, under the liberal construction which the courts give to such inventions.”); Perkin-Elmer Corp. v. Westinghouse Elec. Corp., 822 F.2d 1528, 1532 (Fed. Cir. 1987) (“A pioneer invention is entitled to a broad range of equivalents.”); Dan L. Burk & Mark A. Lemley, Fence Posts or Sign Posts? Rethinking Patent Claim Construction, 157 U. Pa. L. Rev. 1743, 1746 & n.13 (2009).. Although courts no longer endorse the notion that utility patent claim scope depends on the degree to which an invention is a “pioneer,” the pioneering notion is still sometimes used in damages or remedies analysis.202See Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1554 (Fed. Cir. 1995) (explaining that the district court, in its hypothetical negotiation analysis, “considered that the ‘847 patent was a ‘pioneer’ patent with manifest commercial success”).
Other types of intellectual property, however, still regularly apply a principle that more significant advances deserve broader scope. For example, in determining whether a design patent is infringed, courts consider the differences between the prior art and the claimed design as providing useful context for the question of whether the allegedly infringing design is close enough to the claimed design.203See, e.g., Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 682 (Fed. Cir. 2008) (en banc) (“In light of the similarity of the prior art buffers to the accused buffer, we conclude that no reasonable fact-finder could find that EGI met its burden of showing, by a preponderance of the evidence, that an ordinary observer, taking into account the prior art, would believe the accused design to be the same as the patented design.”). The more the claimed design represents a significant advance over the prior art, the greater the scope given to the claimed design for purposes of infringement.204See, e.g., Fanimation, Inc. v. Dan’s Fan City, Inc., 2010 U.S. Dist. LEXIS 134526, at *5 (S.D. Ind. 2010) (“[P]rior art plays an integral role in the infringement analysis . . . . If, for instance, the patented design is close to the prior art, small differences between the accused design and the claimed design may become more noticeable, given the hypothetical ordinary observer’s familiarity with the prior art”), aff’d, 444 F. App’x 449 (Fed. Cir. 2011); Wing Shing Products (BVI) Co. v. Sunbeam Prods., Inc., 665 F. Supp. 2d 357, 361 (S.D.N.Y. 2009) (“[I]f the patent and the prior art are particularly close, the scale of comparison between the accused and patented designs shrinks.”). Similarly, in copyright law, courts consider the extent to which a work is creative in assessing whether there is substantial similarity for infringement,205Compare Atari, Inc. v. N. Am. Philips Consumer Elecs. Corp., 672 F.2d 607 (7th Cir. 1982) (finding no substantial similarity and thus no copyright infringement where the similarities between the games largely followed from the idea of karate, which the copyright holder did not create), with Data East USA, Inc. v. Epyx, Inc., 862 F.2d 204 (9th Cir. 1988) (finding substantial similarity where the infringer appropriated the basic idea of the pac-man game that was created by the copyright holder). and also whether the alleged infringer has a fair use defense.206See, e.g., Google LLC v. Oracle Am., Inc., 141 S. Ct. 1183, 1197 (2021) (“[C]opyright’s protection may be stronger where the copyrighted material is fiction, not fact, where it consists of a motion picture rather than a news broadcast, or where it serves an artistic rather than a utilitarian function.”); Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 586 (1994) (“[S]ome works are closer to the core of intended copyright protection than others, with the consequence that fair use is more difficult to establish when the former works are copied.”). Creativity in the copyrighted work weighs against fair use, such that, in effect, more creative works are more likely to be infringed and thus given broader protection.207See, e.g., 4 Mellville B. Nimmer & David Nimmer, Nimmer on Copyright § 13.05[A][a] (Matthew Bender, rev. ed. 2022) (“[C]opyright protection is narrower, and the corresponding application of the fair use defense greater, in the case of factual works than in the case of works of fiction or fantasy.”); Andrew Michaels, Functionality’s Role in Oracle Copyright Ruling Isn’t So Novel, Law360 (May 7, 2021, 4:32 PM),https://perma.cc/HT5Q-KCX6 (“The basic idea is that more creative works are closer to the core of what copyright protects, and thus entitled to broader protection, as compared with more factual or functional works.”).
The analysis for design patents and copyrights is more flexible and equitable, in that the significance of the advance is bound up with the question of infringement, as compared with modern utility patent doctrine, wherein the prior art is considered for purposes of whether the patent claim is valid, but not in determining infringement.208See, e.g., Nextec Applications v. Brookwood Cos., 703 F. Supp. 2d 390, 417 (S.D.N.Y. 2010) (“[I]f a patentee shows by a preponderance of the evidence that every limitation in a patent claim is found in the accused product, thereby making out a prima facie claim of literal infringement, a finding of infringement cannot be defeated simply by alleging that one ‘practices the prior art’ and proving that by a preponderance of the evidence.” (first citing Tate Access Floors, Inc. v. Interface Architectural Res., Inc.,279 F.3d 1357, 1365–66 (Fed. Cir. 2002); then citing Baxter Healthcare Corp. v. Spectramed, Inc., 49 F.3d 1575, 1582–83 (Fed. Cir. 1995)). The rigid bifurcation of infringement and validity in modern patent law doctrine is related to the fact that utility patents contain claims that are relatively precise in setting the scope of the right,209Cf. Jason Rantanen, The Malleability of Patent Rights, 2015 Mich. St. L. Rev. 895, 928–30 (comparing patent litigation to a sports game). whereas copyrights do not, and design patent claims are merely pictures of the design.210See Egyptian Goddess, Inc. v. Swisa, Inc., 543 F.3d 665, 679 (Fed. Cir. 2008) (“[D]esign patents ‘typically are claimed as shown in the drawings’ . . . . [T]his court has not required that the trial court attempt to provide a detailed verbal description of the claimed design, as is typically done in the case of utility patents.”) (quoting Arminak & Assocs., Inc. v. Saint-Gobain Calmar, Inc., 501 F.3d 1314, 1319 (Fed. Cir. 2007)). In other words, because the scope of the right for design patents and copyrights is not as precisely fixed via claims, it can be adjusted in a more flexible and equitable way—in the ex post context of an infringement action—based on the degree of the advance; that is, the difference between the claimed design and the prior art, or the creativity of the copyrighted work.211See Burk & Lemley, supra note 201, at 1772–73 (discussing the connection between the pioneer patent doctrine and central claiming).
Reintroducing this sort of flexible and equitable analysis into patent law via a revival and modification of the pioneer patent doctrine is one possibility for where an invention’s benefits or harms could be considered more consistently.212Cf. Warner-Jenkinson Co. v. Hilton Davis Chem. Co., 520 U.S. 17, 27 n.4 (1997) (“[J]udicial recognition of so-called ‘pioneer’ patents suggests that the abandonment of ‘central’ claiming may be overstated.”); Burk & Lemley, supra note 201, at 1747 (“[W]e could reinvigorate the doctrine of pioneer patents . . . in the subset of cases in which the defendant’s product in fact captures the principle of the invention.”).. Under the modified doctrine, courts could consider not just whether the claimed invention is a major advance over the prior art, but also whether it is a socially beneficial advance over the prior art. Inventions that are both pioneering and socially beneficial could be given broader scope for purposes of infringement, as in the historical pioneer patent doctrine, or could be given a boost in the damages analysis, as has been done more recently. Essentially, inventions that offer major, socially beneficial advances could be given the benefit of the doubt on close questions of infringement and damages via this sort of equitable analysis.213Cf. Duffy, supra note 142, at 1361–62 (“[P]atents that disclose more than the minimum provide a greater public benefit and thus should be valued more.”); Risch, Surprisingly Useful, supra note 8, at 58 (“[A]t the margins, where courts consider policy in deciding close cases; usefulness can often put a thumb on the scale.”)..
One advantage of using the pioneer patent doctrine to assess the benefits or harms of the invention is that it is non-binary, unlike validity doctrines. Ultimately, a patent claim is either valid or not, but under the pioneer patent doctrine, a patent claim can have a varied scope in accord with a more nuanced assessment of the benefits or harms of the invention. Because damages, like the pioneer patent doctrine, are similarly non-binary, they are also a good doctrinal candidate for a more explicit assessment and valuation of an invention’s benefits or harms. Another advantage of these possibilities is that they would be used in the context of an infringement action, where there is more ex post information about the real-world benefits or harms of the invention, as compared with ex ante when the patent is first being sought.
In a similar vein, Professors Dan Burk and Mark Lemley have argued that various patent law doctrines could be used as policy levers to tailor patent policy depending on the industry, stating that “although patent law is technology-neutral in theory, it is technology-specific in application.”214Burk & Lemley, supra note 154, at 1577; see also Sean B. Seymore, Making Patents Useful, 98 Minn. L. Rev. 1046, 1050 (2014) (arguing that “the utility threshold is decidedly biased—a de minimis threshold for some inventions but a considerably more stringent one for others,” and calling for the “elimination of a stand-alone utility requirement”). Professors Burk and Lemley find that courts have “applied the common legal standards of obviousness, enablement, and written description” differently depending on the technological industry, but that courts have generally not acknowledged that they are “designing industry-specific patent policy.”215Burk & Lemley, supra note 154, at 1577–78. Indeed, they find that the courts have, at least in certain industries, “gotten the policy precisely backwards,” perhaps because they are “not making industry-specific patent policy intentionally,” and as such they argue that it “makes sense to take economic policy and industry-specific variation into account explicitly in applying general patent rules to specific cases.”216Id. at 1578–79.
As Professors Burk and Lemley say, “courts are much better off setting policy consciously and correctly than accidentally and haphazardly.”217Id. at 1579. Similarly, the courts should make explicit and conscious something they are already doing in the background—in this case, considering an invention’s benefits. A more explicit consideration of the invention’s social value would provide better notice to affected firms, allowing them to better predict how the law will be interpreted.218Cf. Andrew C. Michaels, Artificial Intelligence, Legal Change, and Separation of Powers, 88 U. Cin. L. Rev. 1083, 1097 (2020) (“A judge writing an opinion is in part explaining their reasoning so that the legal community and society can better understand the decision and thus the law.”); Pierre Schlag, Spam Jurisprudence, Air Law, and the Rank Anxiety of Nothing Happening (A Report on the State of the Art), 97 Geo. L.J. 803, 828 (2009) (“To the extent that ‘all lawyers think alike,’ they can with some certainty predict what other lawyers will do—both in litigation and in transactional contexts. This is arguably socially useful.”). A revived and modified pioneer patent doctrine might provide a place for a more formal consideration of the benefits or harms of an invention that are not fully appreciated by the market.
C. Non-Practicing Entities
One might also consider taking into account the extent to which the patent owner is practicing the invention and thus actualizing the benefits (or harms) of the invention. However, this raises some different considerations, as discussed in this Section.
Many lament so-called “patent trolls,” companies that do not practice their patent but merely license or sue others.219See, e.g., Sara Jeruss, Robin Feldman & Joshua Walker, The America Invents Act 500: Effects of Patent Monetization Entities on US Litigation, 11 Duke L. & Tech. Rev. 357, 358 (2012) (“Any discussion of flaws in the United States patent system inevitably turns to the system’s modern villain: non-practicing entities.”); Andrew C. Michaels, Patent Transfer and the Bundle of Rights, 83 Brook. L. Rev. 933 (2018); Kristen Osenga, Formerly Manufacturing Entities: Piercing the “Patent Troll” Rhetoric, 47 Conn. L. Rev. 435, 437 (2014) (“Everyone seems to hate ‘patent trolls.’”).. Under the current law, this is permissible, as there is no “working requirement” in U.S. patent law; that is, a patentee is not required to commercialize the invention in order to enforce the patent.220See, e.g., Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1547 (Fed. Cir. 1995) (“A patent is granted in exchange for a patentee’s disclosure of an invention, not for the patentee’s use of the invention. There is no requirement in this country that a patentee make, use, or sell its patented invention.” (citing Cont’l Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 424–30 (1998)). One reason for this is that the inventor or initial patent owner may not be the entity best suited to commercialize the invention, and so the law allows them to sell the patent or license others to practice it. Of course, licensing and the right to sue go hand in hand: if the non-practicing owner had no right to sue, a potential commercializer would have no reason to pay for a license. Indeed, as explained above,221See supra Section II.B. this facilitation of commercialization is one of the three primary policy aims of patent law.
Nevertheless, the law does discriminate against non-practicing entities (“NPEs”) in certain situations, most notably with regard to the right to an injunction to stop patent infringement. Although there is no per se rule against granting such an injunction to an NPE, the likelihood of such an entity obtaining an injunction is greatly reduced after the Supreme Court’s eBay decision discussed above.222See supra Section II.D (discussing eBay); see also Seaman, supra note 125, at 1952 (“The data in this study reveal that while the vast majority of patentees still obtain injunctive relief following eBay, [Patent Assertion Entities (essentially another term for NPEs)] rarely do.”); cf. eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 396–97 (2006) (Kennedy, J., concurring) (“An industry has developed in which firms use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees. For these firms . . . legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.” (citation omitted)). And because an NPE does not make profits from commercialization, it will generally be foreclosed from lost profits damages as well.223See, e.g., Rite-Hite Corp., 56 F.3d at 1548 (“Normally, if the patentee is not selling a product, by definition there can be no lost profits.”). Thus, NPEs are generally limited to reasonable royalty damages.
But some have argued that patent law should take further steps to discourage NPEs. For example, Professor Duffy has proposed a revival of the “paper patent doctrine,” which, until the mid-twentieth century, “authorized courts to differentiate among patents based on whether the patentee had ever practiced the patented technology in the real world.”224Duffy, supra note 142, at 1360. Under this doctrine, patents that were never practiced by the patentee were construed narrowly and were more likely to be held invalid, whereas “patents successfully commercialized by a patentee (or the patentee’s licensees) were favored in determining patent scope and validity.”225Id. Professor Duffy argues that the paper patent doctrine was grounded in and squares with the public benefit theory of patent law, which holds that the patent is granted in exchange for “the benefit derived by the public from an invention with substantial utility,” rather than merely in exchange for the patentee’s disclosure.226Id. at 1361 (quoting Brenner v. Manson, 383 U.S. 519, 534 (1966) (emphasis omitted)).
Professor Duffy recognizes that NPEs can be beneficial when they purchase patents not currently being used by their owners, thus performing “the socially beneficial function of creating liquidity in the market for intellectual property rights.”227Id. at 1364; see also James F. McDonough III, Comment, The Myth of the Patent Troll: An Alternative View of the Function of Patent Dealers in an Ideal Economy, 56 Emory L.J. 189, 223–24 (2006)). As such,
[t]he practices of NPEs are least justifiable where the patents have never been practiced by any entity in the chain of patent ownership and are asserted against entrepreneurial firms that not only developed the technology independently but also took the risks associated with bringing the technology to market.228Duffy, supra note 142, at 1363; see also id. at 1397 (“[A]n accused infringer’s commercial success should not count in favor of the validity of the patent where that accused infringer’s commercial success is not actually tied to the teachings of the patentee.”).
This account of NPEs and the proposal to revive the paper patents doctrine squares with this Article’s theory that courts should more openly consider an invention’s benefits in patent law doctrine. Courts could consider not just an invention’s benefits or harms in the abstract, but also the extent to which the patentee, or at least someone in the patent’s chain of title (a previous owner), or a licensee of the patent, has contributed to bringing those benefits (or harms) to real-world fruition. Where an entity in the patent’s chain of title has fostered the real-world development of a beneficial invention, even if only through licensing, this could count in the patentee’s favor. But where owners of the patent have merely stood in the way of a beneficial technology’s application, the patentee should not be rewarded with the potential doctrinal assistance discussed in this Article.
D. Common Law Development
A more explicit consideration of an invention’s benefits in patent law can happen gradually through continued common law development in the courts,229Cf., e.g., Benjamin N. Cardozo, The Nature of the Judicial Process (1921). without any congressional action.
This assertion might seem contrary to the general rule in statutory interpretation that the text of a statute should be read according to the ordinary meaning of the words at the time of enactment.230See, e.g., Bostock v. Clayton Cty., 140 S. Ct. 1731, 1738 (2020) (“This Court normally interprets a statute in accord with the ordinary public meaning of its terms at the time of its enactment.”). Applying this general rule might seem to imply that patent law must be frozen in place as of the 1952 Patent Act, or, with respect to certain provisions, as amended with the America Invents Act of 2011. However, in certain situations, it has been recognized that Congress intended to codify the current common law and leave further development to the courts.231See, e.g., William N. Eskridge, Jr., Dynamic Statutory Interpretation, 135 U. Pa. L. Rev. 1479, 1482 (1987) (“The static vision of statutory interpretation prescribed by traditional doctrine is strikingly outdated.”). Certain provisions in various intellectual property statutes represent prime examples.232See Peter S. Menell, The Mixed Heritage of Federal Intellectual Property Law and Ramifications for Statutory Interpretation, in Intellectual Property and the Common Law 63, 64 (Shyamkrishna Balganesh ed. 2013) (“[I]ntellectual property reflects a mixed heritage in which courts, operating in what can most aptly be characterized as a common law mode, came to play a principal role in fleshing out and evolving terse early legislative enactments. . . . [T]he courts continue to play a central, although contextually variable, role in the evolution of IP law.”). As Judge Pierre Leval has explained, the Copyright Act’s fair use provision (codified at 17 U.S.C. section 107) is the “paradigm” of a statutory provision “in which Congress approximately summarized common law developments, implicitly leaving such further development to the courts.”233Capitol Recs., LLC v. ReDigi Inc., 910 F.3d 649, 664 (2d Cir. 2017) (emphasis added).
Similarly, Judge Richard Posner has recently pointed out that, despite the general ordinary-meaning-at-the-time-of-enactment rule of statutory interpretation, courts often do continue to update old statutes “on the basis of present need and present understanding,” giving the example of the Sherman Antitrust Act, which was “enacted in 1890, long before there was a sophisticated understanding of the economics of monopoly and competition.”234Hively v. Ivy Tech Cmty. Coll. of Ind., 853 F.3d 339, 352–53 (7th Cir. 2017) (Posner, J., concurring).
Much of patent law was intended as a codification of the common law,235See P.J. Federico, Commentary on the New Patent Act, 75 J. Pat. & Trademark Off. Soc’y 161, 162 (1993) (“While patents are creatures of statute, the entire body of patent law is much fuller than the statute itself, including a vast amount of case material on subjects such as invention and infringement which are dealt with by the statute only in general terms.”); id. at 166 (“The patent act of 1952 . . . stems from two movements, one to amend the patent laws, and the other to revise and codify the laws of the United States.”). It would be fair to say that statutory provisions that were more specific and intended to change the law in a specific way should be interpreted in the more traditional static textual manner. Cf. Capitol Recs., 910 F.3d at 664 (explaining that the “copyright statute is a patchwork, sometimes varying from clause to clause, as between provisions for which Congress has taken control, dictating both policy and the details of its execution, and provisions in which Congress approximately summarized common law”). particularly as regards the longstanding doctrines of utility, eligibility, nonobviousness, and damages at issue in this Article. Indeed, the need for continued judicial development of patent law in these longstanding doctrines has generally been taken for granted. For example, the Supreme Court has recently updated the law of eligibility with a new two-part test.236See supra Section II.B.
This updating is not without support in the prior law and is done under the partial fiction that it is merely a restatement of what the law always was.237See Michaels, supra note 69, at 633. Few would dispute, however, that such updating does change the law in a real sense.238See, e.g., James B. Beam Distilling Co. v. Georgia, 501 U.S. 529, 549 (1991) (Scalia, J., concurring in the judgment) (“I am not so naïve (nor do I think our forebears were) as to be unaware that judges in a real sense ‘make’ law.”); Interval Licensing LLC v. AOL, Inc., 896 F.3d 1335, 1354 (Fed. Cir. 2018) (Plager, J., concurring in part and dissenting in part) (“[I]n the period following Alice until April 30, 2017, one study reported that federal courts invalidated patents on § 101 grounds in 330 out of 488 decisions.”).. Indeed, as explained above, there is ample support in patent law doctrine for consideration of an invention’s benefits,239See supra Part II, Section IV.B. so a move towards making this consideration more explicit could happen in the gradual manner appropriate to judicial development, without a sudden, drastic break from precedent.
Courts should more openly consider an invention’s benefits in patent law, paying particular attention to benefits or social value that may not be adequately captured by the market, for example where the invention is designed primarily to serve lower income communities or the environment. Such benefits could count in favor of the patentee in marginal cases in any of the various patentability doctrines discussed above: primarily utility, eligibility, nonobviousness, and damages, or potentially in a modified morality or pioneer patent doctrine. Courts may also consider the extent to which the patentee, a licensee, or a former owner of the patent, has contributed or hindered the real-world development of a beneficial invention.
Conversely, and perhaps more importantly, where an invention causes social harms or negative market externalities, this should count against the patentee in these same doctrines. Examples of such harms might include where a patented invention has been shown to cause negative psychological or health effects, extensive job losses, pollution, or other destructive environmental impacts.
In one sense this is a radical argument that fundamentally alters the nature of patent law. The primary counterargument will no doubt be that the social value of an invention is subjective, and that courts and the Patent Office are not well positioned to evaluate social value. This counterargument underlies what is referred to above as patent law’s common “market mantra,” that evaluation of an invention’s benefits is better left to the markets rather than the courts.
But as discussed above, this mantra or theory is a myth. Courts already often consider the extent of an invention’s benefits in various patent law doctrines, albeit in the background and in a haphazard and inconsistent way. Thus, in another sense, the argument of this Article is modest in that it merely asks that courts make more explicit an analysis that is already occurring covertly. This move towards more explicit consideration of an invention’s benefits or harms could occur in the normal way through case-by-case common law development, allowing courts to gradually develop a more consistent and coherent framework. More explicit consideration of the invention’s social value would also provide better notice to the affected public and predictability in the law, as compared with the status quo where benefits are considered covertly and implicitly.
To be clear, this Article is not arguing that market considerations are irrelevant; to the contrary, the secondary considerations or objective indicia of nonobviousness, for example, should remain important in the law, and of course the market remains highly relevant to damages analysis for infringement. But in some cases, there may be reasons to think that the market is not adequately accounting for an invention’s benefits or harms, and in such cases particularly, courts should not shy away from more explicitly doing so.
Another response to the subjectivity objection or counterargument is that subjectivity is similarly present in other places in patent law, such as the question of whether an invention would have been obvious. Patent policy is by its nature difficult and uncertain because it is not really known where inventions come from or how patent incentives affect future innovation. Thus, introducing the additional subjectivity inherent in courts considering social value or benefits may not meaningfully add to the imprecision. In any event, since courts are already doing this without acknowledging it, being more explicit about the analysis would make it more consistent.
In sum, rather than purportedly focusing entirely on the rate of innovation in a technology-neutral way, patent law should more openly embrace the fact that it plays a role in shaping the direction of innovation by more explicitly incorporating a consideration of an invention’s benefits or social value into the law.