Patent Exceptionalism with Presidential Advice and Consent
James Donald Smith
Administrative Power in the Era of Patent Stare Decisis
Stuart Minor Benjamin & Arti K. Rai
The elaborate adjudicatory proceedings set up by the America Invents Act of 2011 (AIA) have thrust the U.S. Patent and Trademark Office (PTO) squarely into the patent-litigation process. The AIA proceedings, conducted by the newly formed PTO Patent Trial and Appeal Board (PTAB), are now a formidable competitor to district court litigation. The executive branch has further enhanced PTO and PTAB power by vigorously asserting the agency’s prerogatives with respect to certain aspects of these proceedings. Despite the formality of the AIA proceedings, the agency’s lawyers have steered clear of asking for Chevron deference on legal issues decided in these proceedings. Although the executive branch’s caution may reflect the unusual institutional structure of the PTAB, PTAB decisionmaking could be structured in a manner that should, under conventional administrative law principles, merit Chevron deference. In all likelihood, the chief roadblock to Chevron is not formal administrative law but specific challenges within the patent regime. Many judges on the Court of Appeals for the Federal Circuit, which reviews all appeals from PTO decisions, have long been reluctant to apply conventional administrative law. Perhaps more surprisingly, the Supreme Court’s recent decisionmaking in the area has emphasized its own earlier cases (including cases predating the Administrative Procedure Act) and stare decisis over conventional administrative law. Given potentially hostile courts, the costs of the PTO leadership expending the political capital necessary to embed the PTO more fully into the administrative state may exceed the benefits. At best, in those cases where stare decisis is not implicated or is on the agency’s side, the PTO may be able to exercise indirect influence on the Court through the Office of the Solicitor General.
Concerns regarding low-quality patents and inconsistent decisions prompted Congress to enact the first major patent reform act in over sixty years and likewise spurred the Supreme Court to take a renewed interest in substantive patent law. Because little compelling empirical evidence exists as to what features affect the patent office’s granting behavior, policymakers have been trying to fix the patent system without understanding the root causes of its dysfunction.
This Article aims to fill at least part of this gap by examining one factor that may affect patent examiners’ grant rates throughout their tenures: the year in which they were hired by the U.S. Patent and Trademark Office (PTO). An examiner may develop a general examination “style” in the critical early stages of her career that persists even in the face of changes in application quality or patent allowance culture at the agency. To the extent initial hiring environments influence a newly hired examiner’s practice style, variations in such initial conditions suggest examiners of different hiring cohorts may follow distinct, enduring pathways with their examination practices. Consistent with this prediction, we find strong evidence that the year an examiner was hired has a lasting effect on her granting patterns over the course of her career. Moreover, we find that the variation in the granting patterns of different PTO cohorts aligns with observed fluctuations in the initial conditions faced by such cohorts. By documenting the existence of cohort effects and by demonstrating the importance of initial environments in explaining certain long-term outcomes, this analysis holds various implications for patent policy and the administrative state more generally.
Through a proliferation of post-issuance administrative proceedings, the U.S. Patent and Trademark Office (PTO) has become a major player in the fate of patents after their initial examination and grant. In combination with the PTO’s more traditional roles in initial examination and general guidance, new post-issuance proceedings enable the PTO to help steer the development of substantive patent law even without general provision of high-level Chevron deference for the agency’s interpretations of substantive aspects of the U.S. Patent Act. Contrary to some commentators’ suggestions, congressional authorization for new post-issuance proceedings does not appear to have included an implicit delegation of interpretive authority generally warranting Chevron deference on such matters. But the PTO can still accomplish much with lower-level deference and the advantages that its common “first mover” position provides.
What are the costs and benefits of patent laws? While Congress and the courts are often able to evade this difficult question, there is one institutional actor that is not only well-advised but also required to consider costs and benefits: the Patent and Trademark Office, which—as an administrative agency—is required by executive order to conduct cost-benefit analysis of all economically significant regulations. Yet the agency’s efforts have been less than satisfactory. In its cost-benefit analysis, the PTO overlooks crucial functional considerations, misunderstands basic precepts of patent economics, and resists quantification when quantification is required. In combination, these shortcomings suggest that the PTO has not correctly measured the social costs and benefits of the rules it creates, in part because it has adopted an overly limited view of the welfare effects of intellectual property and the agency’s own role in promoting or discouraging IP. In other instances, the PTO has promulgated rules that will likely have tremendous economic significance without recognizing their importance or conducting a cost-benefit analysis. These errors cast doubt on whether the PTO’s regulations will increase or diminish social welfare. Before the PTO is granted any additional substantive authority, reform will be necessary.