The difficulty of identifying patent boundaries also bears on the question of what kinds of things should be patentable at all. For example, the Myriad Genetics case in front of the Supreme Court this year concerns patents on the genetic mutation associated with certain forms of breast and ovarian cancer, along with patents on methods of testing for that mutation and researching treatment. Over time, the Supreme Court has been reducing the broad latitude that the Federal Circuit had permitted in what can be patented—which, as one judge noted, had resulted in a host of patents that ranged from the somewhat ridiculous to the truly absurd. Examples include business method patents, such as patents on methods for toilet reservations, on enticing customers to order additional fast food, and on using color-coded bracelets in dating to avoid embarrassment. Placing limitations on these types of patents implicates a number of other categories of patents—from genes to software to medical testing.
If the courts and Congress start acknowledging the essential bargaining aspect of patents, it will become easier to deal with cases like these, which currently tie up courts and companies for years on end. In an intense bargaining environment, it becomes clear that courts and agencies must set rules that limit the possible roaming space for a patent holder—in other words, that prevent them from making excessively broad claims over what their patent covers. With certain categories of patents, perhaps some types of gene and software patents, so few things are likely to survive close scrutiny—and the bargaining power that can be wielded with them is so great—that it appears wiser to forbid patenting in these areas completely.
The high-tech and biotechnology industries are often sharply divided on patent policy; single strong patents are profoundly important to drug firms, while high-tech companies cross-license huge portfolios of patents. But patent bargaining affects biotech as well; it’s a component of the messy negotiations over the introductions of generic drugs, for instance. And more important, there is no way to close Pandora’s box. Now that patent monetization is exploding, it is only a matter of time before patent trolls find their way into biotech and pharma, using weak or tangential patents to extract payments from companies with useful products on the market.
One could ask whether characterizing patents as an invitation to bargain might hurt innovation. After all, if you can’t be sure of exclusivity based on clearly defined ownership, what is the incentive to develop products, and to invest the money needed to bring them to market? I would argue that patents already operate this way—and the investors who support companies understand that. It is our failure to acknowledge the way patents actually operate in courts and in our patent laws that increases the risk of crippling patent suits, and gets in the way of solving modern problems.
This year, there may finally be a chance for movement on this issue. The Supreme Court is taking on two important patent cases this year—Myriad, and a generic drug case called FTC v. Watson. The Department of Justice and Federal Trade Commission have both signaled they are interested in investigating this corner of the legal world so crucial to American business. As they do, courts, agencies, and perhaps even Congress will have a rare opportunity to reframe the conversation.
Innovation is a key driver of the American economy, and our most innovative companies should be focusing on developing new products, rather than on patent strategy. To keep every company, as well as the economy, on track, it is essential that our patent system find a way to rein in those elements that allow parties to exploit weaknesses in the system and bring improper bargaining leverage to bear. In a system built on more realistic assumptions about patents, we will still have licensing demands, and still have lawsuits. But the stakes will be lower for everyone, and the rhetoric—and costs to society—will finally begin to go down.
Robin Feldman is a professor of law at University of California Hastings College of the Law. This article is adapted from “Rethinking Patent Law,” published by Harvard University Press, copyright 2012 by the President and Fellows of Harvard College.