By Kevin E. Noonan --
Judge Paul Michel (at right), Chief Judge of the Court of Appeals for the Federal Circuit, recently had the opportunity to speak to a meeting of the Association of Corporate Patent Counsel, one of the preeminent patent law groups in the country and one of the most exclusive clubs: attendance at the Association's annual meeting is by invitation only. During his talk, Judge Michel discussed the workings of the Federal Circuit, including the arbitration initiative (one of his pet projects), the aging of the Court (seven of the twelve judges will be eligible for senior status in the next few years), and the effects of recent Supreme Court decisions on the working of the Federal Circuit and patent law in general (evincing more equanimity than perhaps the Supreme Court could reasonably expect).
He also spoke about the recent Congressional efforts to "reform" patent law, and while his equanimity didn't slip, his frustration with these efforts was plainly evident. Like many in the patent community, it is clear that Judge Michel recognizes the disconnect between the problems and issues that exist in patent law and the blunt instrument the proposed legislation represents ("it's not a scalpel, it's a hammer"). Specifically, Judge Michel noted the preponderance of academic input in the draft Senate Report on the bill, and the dearth of evidence in the cited articles and testimony. Some have noticed, and reported on, the carelessness and sloppiness of what is passing for academic commentary on patent law (see "BIO Report Indicts "Patent Reform" Proponents"), and although too astute to mention it, the blatant, outcome-driven politics of both the commentators and the Congressional proponents of "reform." Sticking to specifics, Judge Michel noted that one commentator, Amy Landers (below left), advocated the proposed changes in the damages provisions on the grounds that the changes "would inject some balance into the entire market-value rule, cutting back on the recent expansion of the rule." Judge Michel confessed to (justifiable) surprise when a close reading of her article ("Let the Games Begin: 
Incentives to Innovation in the New Economy of Intellectual Property Law") revealed no examples of any expansion of the rule. That surprise turned to suspicion (of her scholarship if not her motives) when her passage that "a consistently over-broad application of the entire market-value rule threatens to chill innovation for those seeking to design, manufacture and sell products, or invest in such endeavors" cross-cited to another part of her article that was devoid of any examples of this "consistent practice."
He also cited the book, Innovation and its Discontents: How Our Broken Patent System is Endangering Innovation and Progress, and What to Do About It (although he did not mention it by name), where authors Adam Jaffe and Josh Lerner argue that damages law is "totally out of control." Their example: State Industries Inc. v. Mor-Flo Industries Inc. (Fed. Cir. 1991) (coincidentally, a decision penned by Judge Michel), which they allege permitted "double-dipping" by assessing damages on the basis of both a reasonable royalty and lost profits. The problem with their analysis is that, according to Judge Michel, these two measures of damages were "for different products and different time periods" and was not double-dipping at all. Worse -- and illustrating the current penchant in patent law academia 
for one commentator to get it wrong and another to support his incorrect analysis by citing the first -- another academic relied on by the draft Senate Report, Professor Viet Dinh (at left) (who Judge Michel describes as "a very well-known former official now at Georgetown Law School") cites the State Industries case as an example of how the entire market rule is misapplied, never bothering to explain the basis for this conclusion.
Judge Michel also cites Professor Mark Lemley (at right) of Stanford for another common practice: the patent law strawman (although bogeyman might be more appropriate). Citing Professor Lemley directly for the proposition that "[a]t a minimum, courts should consider technical expert testimony on the contribution the patented component makes to the entire product" but that "courts should go further, permitting survey evidence of customers about the reason they purchased the product and the attributes of that product they find useful," Judge Michel notes that he knows of no case where such evidence has been excluded or prohibited, and that there is no Federal Circuit precedent to that effect. Although he won't say it, clearly Professor Lemley would prefer influencing Congress to impose his ideas by fiat rather than having these ideas tested in the crucible of litigation.
Another concern voiced by Judge Michel is the imbalance of the testimony heard by the Senate Judiciary Committee. The draft Report states that "[n]o doubt several alarming cases, which have captured the attention of the public and the Congress, represent the tip of the iceberg. These, not surprisingly, involve outsized damages awards," based on testimony from another academic, Professor John Thomas (at left), who analyzed ten cases in which he considered the damages awards to be excessive. The Committee did not hear or consider a different report, from William Rooklidge (below right) (a practitioner), analyzing the same ten cases that came to the opposite conclusion (according to Judge Michel, that "the awards were not inappropriate or unjustifiable under the facts of the case and were not a misapplication of the entire market-value rule or any other aspect of the rule of damages"). Of course, coming from a mere practitioner, this study was not considered by the Committee. Judge Michel noted a similar disparity of opinion obtained with regard to venue, where the Committee quoted witnesses from a few companies (such as Goldman Sachs, J.P. Morgan, and Visa) but had no input from "scores" of other industries. Nor did Judge Michel find any reliance on the testimony of members of organizations like the American Bar Association, the American Intellectual Property Lawyers Association, or the Intellectual 
Property Owners (despite submissions by all these groups of white papers and letters, none cited in the Senate draft report), all groups Judge Michel thinks are "broad-based groups of knowledgeable lawyers" whose input, apparently, the Committee felt it could do without. The impression left with Judge Michel is that "only certain voices are being heard."
All this misinformation and sloppy scholarship has consequences fully recognized by Judge Michel (and anyone else in the patent community who has been paying attention): the creation of the (false) impression that the patent system is "broken" and in need of reform. Judge Michel cites a recent posting on the Forbes.com website, where it is claimed that "the problem with the patent system in the courts as to how damages are handled is that damages 'are based on the cost of an entire car when the patent covered an innovative tire'" (see Robert Weber, "Congress: Reform Those Patents" [Ed.: Mr Weber wrote: "So, why are we awarding patent damages based on the value of the entire car to the inventor of the tire?"]). Mythology, Judge Michel rightly states, but he also recognizes (and mentioned in his remarks) that members of Congress are not in the position to separate the wheat from the chaff of these various voices in the chorus of concern over the parlous state of patent law. It is too much to expect that these legislators, who are burdened with "the innumerable problems they face: the war in Iraq and economy . . . a stimulus package, a defense appropriation bill, a counterterrorism, electronic-surveillance bill . . . very tough stuff" will be able to understand "which of these assertions or claims are accurate, are supported, are not aberrational, not the famous anecdotal evidence but are representative of what really happens out there in industry or out there in the courts."
Alluding to the televised sessions of the British Parliament questioning the Prime Minister, Judge Michel voiced concern that no one had asked the members of the Judiciary Committee questions like:
• "Mr. Chairman, can you assure the House that the passage of this section four on damages will not seriously devalue the patent portfolios of every company in America?"
• "Mr. Chairman, can you assure us that this bill won't result in more jobs and U.S. wealth going overseas?"
• "Mr. Chairman, can you assure us that there have been some studies about the effects that will allow us to know, with reasonable confidence, what the actual consequences of these changes will be?"
He did voice his concern that these questions had not been considered by the committee.
What Judge Michel didn't say but others (like BIO CEO Bill Greenwood) have is that the Senate draft report, and S. 1145, was "hijacked" by certain special interests, and the impetus behind patent "reform" is not legal but political. Whether specifically targeted to protect specific groups (like the bankers whom had their champion, Senator Sessions of Alabama, insert provisions immunizing them from past and future patent infringement) or by certain sectors seeking to cripple the capacity of patent holders to protect their inventions from corporate depredation, the bill ready to be sent to the floor is about everything but patent "reform." Judge Michel reminded his listeners that he was not in a position to lobby or advise Congress on the wisdom (or its opposite) in considering this bill. Many others have, and the rest of us should join them.
A transcript of the address given by Chief Judge Michel can be found here.
For additional information on this and other related topics, please see:
• "The (Un)Intended Consequences of the Law," February 18, 2008
• "BIO CEO Provides Update on Patent Reform and Follow-on Biologics Legislation - Part I," February 14, 2008
• "BIO Report Indicts "Patent Reform" Proponents," February 13, 2008
• "Millennium Pharmaceuticals Spent $1.28 Million on Lobbying in 2007," February 8, 2008
• "Patent Reform and Infringement Damages: Some Economic Reasoning," February 5, 2008
• "Department of Commerce Sends Letter on Patent Reform to Senator Leahy," February 4, 2008
• "Biotech and Pharma Opposition to Senate Patent Reform Bill," February 3, 2008
• "The Letters Keep Coming Over the Senate Transom," January 30, 2008
• "U.S. Senate Mailbox Filling with Letters against Passage of Patent 'Reform' Bill: An Update," January 23, 2008
• "U.S. Senate Mailbox Filling with Letters against Passage of Patent 'Reform' Bill," January 18, 2008
• "Patent Reform Discussed on Senate Floor," December 21, 2007
• "Enjoined New Rules and Patent Reform Finally Appearing on Biotech Industry's Radar," December 20, 2007
• "Chinese IP Judge Discusses Implications of U.S. Patent Reform Bill and Two Congressmen Heed Warning," December 17, 2007
• "IPO President Seeks Deletion of Patent Reform Provision," December 12, 2007
• "Senate May Act on Patent 'Reform' Bill in the New Year," December 2, 2007
• "The Wall Street Journal Gets It Half Right," November 5, 2007
• "BIO CEO Provides Briefing on Follow-On Biologics and Patent Reform," September 18, 2007
• "Patent 'Reform' Bill Passes House of Representatives," September 9, 2007
• "Reversal in Microsoft Case Weakens Patent Reform Argument," August 7, 2007
• "San Francisco Chronicle Opines on Patent Reform," August 6, 2007
• "Patent Reform Bill to Be Delayed?" June 12, 2007
• "Senate Judiciary Committee Holds Hearing on Patent Reform," June 10, 2007
• "Could Creating a U.S. 'Utility Model' Patent Fulfill the 'Need' for Patent Law Reform?" May 21, 2007
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