The effectiveness of incentives in changing patenting behavior

The first article in the BJHS December 2016 special issue (Authority and ownership: the growth and wilting of medicine patenting in Georgian England (hereinafter "Authority and Ownership")) describes a sudden rise and equally precipitous fall in the patenting of medicines in England in the mid eighteenth and early nineteenth centuries. Specifically, it describes how medicine patenting expanded in response to specific economic pressures - the emergence of a truly national market, and the concomitant increase in the importance of a patent as both a means of protection and a tool for legitimization.¹. It also describes how legal changes - judicial decisions tightening the disclosure requirements for a medicine patent² and, more importantly, the introduction of an excise stamp which could perform many of the same roles as a patent but was cheaper and easier to obtain³ - led to a corresponding downfall at the end of the period of study.

Reading through the article, I was struck by the responsiveness of patenting of medicine in Georgian England to the changes in incentives caused by the various legal and economic changes the article discusses. By contrast today, despite recent anti-patent changes such as the institution of post grant review proceedings in the AIA and the tightening of subject matter eligibility standards in Alice and Mayo, the number of patent applications filed per year has held roughly steady through the patent office's 2015 fiscal year.⁴ One reason for this potential difference in responsiveness? At the end of the period examined in the article, those who might otherwise have gotten a patent had a viable alternative in the form of an excise stamp. By contrast, today the policy changes which could serve to make patenting less attractive have not been accompanied by any alternative form of protection that would be patent holders could avail themselves of. As a result, because inventors today (like in Georgian England) are responsive to economic incentives, I predict that the current anti-patent policies will ultimately prove ineffective at changing behavior unless they are supplemented with some kind of alternative protection which could address the needs which inventors will otherwise look to have satisfied by the patent system (regardless of how hostile it becomes).

^1. Authority and Ownership at 553-54

The rise of medicine patenting was secondary to changes in the market for 'patent medicines' and their ownership in teh middle third of the eighteenth century. Helped by advertising in the expanding provincial press and improved communications, true national markets were created for several medicines, and the owners and wholesalers became more expert and specialized in supplying medicines across the country. ... So the participants in the industry had become more commercially aware, and they were probably seeking greater protection for their property. Also, selling medicines across the country needed better publicity and improved branding: both were enhanced by the authority of a royal patent.

^2. Authority and Ownership at 555

Lord Mansfield’s judgement in Liardet v. Johnson (1778) determined that the patentee should ensure that the specification was sufficient for a skilled tradesman to make the product without further experimentation after the patent had expired. This seemed to place the patentee under a positive obligation to provide useful information on the composition of the medicine. Once again, the specification was threatening the secrecy of a patented medicine, though several more legal judgments were required before the specification of patents became fully informative. By the end of the eighteenth century, an owner would be more concerned about the risks to the secrecy of his recipe posed by the specification than he would have been thirty years earlier.

^3. Authority and Ownership at 556

the major cause of the decline in medical patenting in the late eighteenth century was probably the introduction of the compulsory medicine excise stamp, another official device which could itself provide many of the benefits of the patent, but with much less expense and inconvenience.

^4. According to the patenting activities table in the patent office's 2015 performance and accountability report, there was a slight drop off in the number of patent filings from 2014-2015, and that the number of filings had increased in each of the preceding three years.

A new hope for inventors?

The Federal Circuit's recent opinion in Trading Technologies International, Inc. v. CQG, Inc., could be part of a broader trend signaling a liberalization of subject matter eligibility. As I wrote in an advisory with my colleague Doug Gastright, in that case, the Federal Circuit affirmed the lower court’s decision that the asserted patent claims, which covered a software invention relating to improved graphical user interfaces for electronic stock trading, were patent eligible subject matter. In handing down this opinion, the Federal Circuit designated it as being non-precedential, which is usually done when a decision “does not add significantly to the body of law.” However, notwithstanding the designation of this case as non-precedential, it should still be seen as noteworthy as it indicates that that the Federal Circuit may be coalescing around a relatively inventor-friendly approach to determining subject matter eligibility.

The change in approach which this case represents can be seen by contrasting it with the Federal Circuit’s initial opinions applying the Supreme Court’s decision in Alice v. CLS Bank to software inventions. In those early decisions, the Federal Circuit almost seemed poised to adopt a per-se rule that software-implemented inventions which solved business problems were not patent eligible. However, Trading Technologies not only made clear that there was no such per-se rule, it also demonstrated that an invention which solves a problem specific to a particular computer-enabled business context could be patent eligible even if it didn’t include any further inventive concept to limit the scope of its claims. This result was consistent with, and built on, several recent Federal Circuit cases dealing with software-implemented inventions, including Enfish LLC v. Microsoft Corp., which established that a software invention could be patent eligible even if didn’t include any additional hardware-based inventive concept, and Bascom Global Internet Services, Inc. v. AT&T Mobility LLC, which made clear that an invention which solved a business problem could be patent eligible if it was claimed in a manner which included an additional inventive concept. Accordingly, while non-precedential, the decision in Trading Technologies could be very useful as an inventor-friendly demonstration of how the Federal Circuit’s precedential decisions (e.g., Enfish and Bascom) should be applied.

The advisory I co-authored with Doug Gastright, which includes links to, and supporting citations from, the cases referred to above, is available here.

BJHS Special Issue on Patents

The December 2016 issue of the British Journal for the History of Science is a special issue titled Owning Health: Medicine and Anglo-American Patent Cultures, and reading through it has had the odd effect of making me simultaneously more disgusted with, and hopeful for, the U.S. patent system. The disgust is for the law as it is, as taking a historical view brings into sharp relief how inappropriate it is for cases like Association for Molecular Pathology v. Myriad Genetics, Mayo v. Prometheus and Alice v. CLS to graft 19th century anti-patent sentiment onto 21st century research and development. The hope is for the law as it is likely to be, as history also illustrates that the pressures which lead people to seek patent protection are deep-rooted and can ultimately sway even the most vociferous patent critics.

As it happens, I'm a firm believer in the much less quotable corollary to the saying "those who do not learn history are doomed to repeat it" - i.e., "those who do not learn history make the rules, and so we are all doomed to repeat it, but that repetition can be made less onerous by learning history so you have some idea of what comes next." Accordingly, throughout the month I'll be blogging the individual articles from the December 2016 BJHS special issue, I'll be blogging the individual articles from the December 2016 special issue, addressing not only what they say about the past, but also what I think they can tell us about the future.