* (c) 2003 F. Scott Kieff, Associate Professor, Washington University School of Law, and John M. Olin Senior Research Fellow in Law, Economics, and Business, Harvard Law School. I gratefully acknowledge the financial support of the John M. Olin Foundation and the Washington University School of Law. I also gratefully acknowledge contributions from participants in the Fall 2003 Hoover Economics Lunch Seminar, American Law and Economics Association 2003 Annual Meeting, the Harvard Law School Visiting Scholars and Visiting Researchers 2002–2003 Colloquium, the Federal Trade Commission and Department of Justice Antitrust Division 2002 joint hearings on Competition and Intellectual Property, the 2001 Workshop Series of the John M. Olin Program in Law and Economics at the University of Chicago Law School, and the 2002 and 2001 National Lawyers Conventions of the Federalist Society for Law and Public Policy Studies, as well as the more detailed comments provided by Michael Abramowicz, John R. Allison, Kenneth Arrow, John Barton, Bernard Black, Bruce Bueno de Mesquita, Chris Bracey, Lisa English, Richard Epstein, Paul Goldstein, Wendy Gordon, Joseph Grundfest, Robert Hall, Kenneth Judd, Jay Kesan, Edward Lazear, Mark Lemley, Doug Lichtman, Clarissa Long, Jerry Marr, Rob Merges, Michael Meurer, Arie Michelsohn, Pauline Newman, Troy Paredes, Tom Pasternak, Richard Posner, Marco Quina, Randall Rader, Arti Rai, Michael Schwartz, Steve Shavell, Henry Smith, Jay Thomas, Polk Wagner, and John Witherspoon. Please send correspondence to fskieff.91@alum.mit.edu (permanent address).
1 But see U.S. Patent No. 5,960,411 (issued Sept. 28, 1999) (entitled “Method and System for Placing a Purchase Order via a Communications Network,” listing Jeff Bezos and others as inventors and assigned to Amazon.com, Inc., which covers what is colloquially called “one-click shopping,” the application for which was filed on September 12, 1997).
2 Amazon.com, Inc. v. Barnesandnoble.com, Inc., 73 F. Supp. 2d 1228, 1249 (W.D. Wash. 1999) (granting motion for preliminary injunction on December 1), vacated and remanded by 239 F.3d 1343 (Fed. Cir. 2001).
3 Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1342, 1366 (2001) (vacating and remanding because of “substantial questions as to the validity of the ’411 patent”).
4 The published order of the trial court lists thirteen different attorneys on the side of the defendant. Amazon.com, 73 F. Supp. 2d at 1230. The case was filed on October 21, 1999, and the preliminary injunction was entered roughly seven weeks later, after expedited discovery including depositions and five days of oral arguments. Given the emergent need to handle so many tasks in such a case, it fairly may be assumed that the listed attorneys were billing most, say two-thirds, of their time on the case while working most of the time, say twelve-hour days six days a week. At a blended rate of $250 per hour, this suggests the total legal fees through the entry of the preliminary injunction were over one million dollars ($1,092,000). The fees through the appeal are likely to have been at least another one million dollars, based on similar calculations. See Am. Intellectual Prop. Law Ass’n, Report of Economics Survey 2001, at 88–89 tbl.22 (2001) (reporting the median total cost of litigation including discovery, motion practice, trial, and appeal to be $1.5 million or $2.9 million, depending upon whether the amount at stake in the lawsuit was either from $1–$25 million or greater than $25 million).
5 Notice of Public Hearings Competition and Intellectual Property Law and Policy in the Knowledge-Based Economy, 66 Fed. Reg. 58,146, 58,147 (Nov. 20, 2001) (announcing joint hearings and explaining the reasons for them); see also Press Release, Federal Trade Commission, Muris Announces Plans for Intellectual Property Hearings (Nov. 15, 2001) (collecting sources, including links to Federal Register Notice and to speech by Chairman Timothy Muris, and questioning these and other aspects of the patent system), http://www.ftc.gov/opa/2001/11/iprelease.htm (last visited Nov. 13, 2003).
6 For a schedule of the hearings including participants and topics, see http://www. ftc.gov/opp/intellect/detailsandparticipants.htm (last visited Nov. 13, 2003). For a collection of academic and popular literature making these criticisms, see Mark A. Lemley, Rational Ignorance at the Patent Office, 95 Nw. U. L. Rev. 1495, 1495 n.1 (2001).
Although many see only broad scope as a potential problem because the patent right to exclude may be seen as extending too far, others see a couple of problems associated with narrowness. First, the work by Rebecca Eisenberg and others points out how too many patents of too narrow scope can be seen to unduly tax and retard transactions. See Arti Kaur Rai, Regulating Scientific Research: Intellectual Property Rights and the Norms of Science, 94 Nw. U. L. Rev. 77, 126–29 (1999) (suggesting that patents on multiple gene fragments, such as expressed sequence tags, could block the use of a larger DNA sequence of which they are a part, and citing Michael A. Heller & Rebecca S. Eisenberg, Can Patents Deter Innovation? The Anticommons in Biomedical Research, 280 Science 698, 699 (1998) (arguing that patents can deter innovation in the field of basic biological research)). This argument and its implications are explored in depth in the other important works by Eisenberg. See generally Rebecca S. Eisenberg, Patents and the Progress of Science: Exclusive Rights and Experimental Use, 56 U. Chi. L. Rev. 1017 (1989) [hereinafter Eisenberg, Experimental Use] (exploring an experimental use exemption from patent infringement as a device for alleviating potential negative impact of patent rights on scientific norms in the field of basic biological research); Rebecca S. Eisenberg, Property Rights and the Norms of Science in Biotechnology Research, 97 Yale. L.J. 177 (1987) [hereinafter Eisenberg, Norms of Science] (exploring potential negative impact of patent rights on scientific norms in the field of basic biological research); Rebecca S. Eisenberg, Public Research and Private Development: Patents and Technology Transfer in Government-Sponsored Research, 82 Va. L. Rev. 1663 (1996) [hereinafter Eisenberg, Public Research] (offering preliminary observations about the empirical record of the use of patents in the field of basic biological research and recommending a retreat from present government policies of promoting patents in that field). But see F. Scott Kieff, Facilitating Scientific Research: Intellectual Property Rights and the Norms of Science—A Response to Rai and Eisenberg, 95 Nw. U. L. Rev. 691, 699–700 (2001) (showing why a patent claim directed to a gene fragment like an expressed sequence tag (“EST”) cannot be construed to cover a larger DNA sequence, such as a substantial portion of an entire gene); John P. Walsh et al., Research Tool Patenting and Licensing and Biomedical Innovation 1 (2002) (working paper, available online at http://www.heinz.cmu.edu/wpapers/retrievePDF? id=2003-2) (report of empirical research finding little in the way of anticommons problems with biotech research tools). Second, the work by Robin Jacob and others point out how claims of narrow scope may be enforced in ways that avoid significant antitrust scrutiny. Robin Jacob, Side Bar: Objectionable Narrowness of Claim, in Donald S. Chisum, Craig A. Nard, Herbert F. Schwartz, Pauline Newman, & F. Scott Kieff, Principles of Patent Law 1097–99 (2d ed. 2001) (providing examples and collecting sources of early arguments supporting pro-competitive aspects of narrow claims).
7 The “hard-look” and “soft-look” terminology refers to the level of scrutiny given a patent upon filing. Although at least some patents should get a hard look at some point, this Article shows how the social costs associated with providing a hard look through civil litigation are expected to be less, especially when accompanied by the other important features of the patent system discussed infra in Part IV.
8 See Harold Demsetz, Information and Efficiency: Another Viewpoint, 12 J.L. & Econ. 1, 1 (1969) (critiquing so-called nirvana approaches in favor of comparative institutional approaches).
9 See infra Part II.
10 See infra Parts III–IV.
11 The Article thereby builds on earlier work by the present author that offers a normative account of the rules for enforcing patents. See generally F. Scott Kieff, Property Rights and Property Rules for Commercializing Inventions, 85 Minn. L. Rev. 697 (2001).
12 See infra Parts I–IV.
13 See infra Part IV.
14 See infra Part IV.
15 As discussed infra in Parts I–IV, the registration theory’s ease of implementation is one of the theory’s important comparative benefits over other theories of the patent system, such as the “prospect” and “rent dissipation” theories.
16 See infra Part IV.
17 For a discussion of the broader debate between legal systems based on rules and those based on standards, see generally Mark Kelman, A Guide To Critical Legal Studies 15–63 (1987) (describing basic framework of the debate and collecting sources); Louis Kaplow, Rules Versus Standards: An Economic Analysis, 42 Duke L.J. 557 (1992) (exploring the costs implicated by the choice between rules and standards and showing: rules typically are more costly than standards to create; standards typically are more costly for individuals to interpret, both by individuals deciding how to act under them and by government decisionmakers deciding how to apply them; and individuals are more likely to act in accordance with the goals of rules as long as the individuals can determine how they will be applied); Russell B. Korobkin, Behavioral Analysis and Legal Form: Rules vs. Standards Revisited, 79 Or. L. Rev. 23 (2000) (reviewing more recent literature and collecting sources). Compare Robert Cooter & Thomas Ulen, Law and Economics 100 (1988) (arguing that private bargaining over the allocation of the legal entitlement may be more efficient if the entitlement is clearly defined and assigned ex ante according to a rule, rather than made ex post by a judge applying a standard), with Jason Scott Johnston, Bargaining Under Rules Versus Standards, 11 J.L. Econ. & Org. 256, 256–59 (1995) (showing how parties may negotiate with each other under both types of regimes and arguing that in certain two-party cases, bargaining may be more efficient under a standard than under a rule).
18 As discussed infra Parts I–IV, the registration theory’s explanatory power for the present patent system is another of the theory’s important comparative benefits over other theories of the patent system, such as the “reward,” “prospect,” and “rent dissipation” theories.
19 See infra notes 23–65 and accompanying text.
20 See infra notes 66–84 and accompanying text.
21 See infra notes 85–222 and accompanying text.
22 See infra notes 223–291 and accompanying text.
23 See infra Part III, elucidating the law and economics of the core patent-obtaining rules and showing how the registration theory dominates other normative theories both in ability to be implemented and in ability to account for the patent-obtaining rules in the present system.
24 See infra notes 46–49 and accompanying text.
25 See infra Part III, showing how these issues are addressed by the present patent-obtaining rules.
26 See infra Part III.
27 For a review of the literature and a collection of sources, see Chisum et al., supra note 6, at 58–90 (reviewing various incentive theories for the patent system) and Eisenberg, Experimental Use, supra note 6, at 1024–46 (same).
28 Patents give only a right to exclude use of whatever product or process is covered by the patent’s claim or claims. Thus, for example, patents do not interfere with other governmental efforts to restrict use, such as to mitigate environmental impact. See F. Scott Kieff, Patents for Environmentalists, 9 Wash. U. J.L. & Pol’y 307, 308 (2002) (invited symposium piece for National Association of Environmental Law Societies annual meeting entitled “Sustainable Agriculture: Food for the Future,” held March 15–17, 2002, at Washington University School of Law) (citing 35 U.S.C. � 154(a) (1994) (“Every patent shall contain . . . a grant to the patentee . . . of the right to exclude others . . . .”)).
29 Generally, prizes or rewards are thought to offer two main benefits over patents: (1) they do not confer power over price; and (2) they can be made later in time, after the demand curves are knowable, so a more precise calculation of the social benefit of the invention can be determined and then used when setting the reward amount. For a detailed review of the history and modern iterations of prize proposals, including a new improvement thereon, see generally Michael Abramowicz, Perfecting Patent Prizes, 56 Vand. L. Rev. 115 (2003) (collecting sources and arguing for the establishment of an agency to distribute a fund for rewarding corporate efforts to reduce the monopoly effects of patent rights). Determining how to administer rewards in the real world is a central problem the commercialization theory identifies in reward proposals, as well as any reward-based theory of patents. See Kieff, supra note 11, at 712–17 (discussing this problem in the context of the screening advantages of patents over rewards). Reward approaches and theories usually assume a one-to-one relationship between inventions and markets that can drastically deviate from reality—consider that the typical car or computer sold in a single market comprises a huge bundle of patent and other intellectual property rights. In addition, reward approaches do not elucidate how to determine what should be rewarded and how to allocate rewards among claimants.
30 Edmund W. Kitch, The Nature and Function of the Patent System, 20 J.L. & Econ. 265, 265–67 (1977) (citing Yoram Barzel, Optimal Timing of Innovations, 50 Rev. Econ. & Stat. 348 (1968)).
31 Mark F. Grady & Jay I. Alexander, Patent Law and Rent Dissipation, 78 Va. L. Rev. 305, 305–10 (1992).
32 Consider a case in which the value of the prize is X and the group of individuals is Y in number. Each individual might rationally elect to spend up to just less than X to obtain the prize, say some amount equal to X minus a small discount, say d, or (X-d). Yet, if all individuals spend that amount, then the community has spent the amount equal to [(X-d) ´ Y] to obtain something worth only X. The following mathematical representation will be true as long as X and Y are numbers greater than one and d is a number less than one:
[(X-d) ´ Y] > Y
This means that the amount society spent to obtain the prize is greater than the amount society got by obtaining the prize, which would be a waste of resources. To be sure, whether each individual would rationally elect to spend up to just less than X depends on a number of factors. See, e.g., Dennis C. Mueller, Public Choice II 232 (1989); Terry L. Anderson & Peter J. Hill, Privatizing the Commmons: An Improvement?, 50 S. Econ. J. 438, 441, 447 (1983). For a somewhat similar critique of the rent dissipation theory, see A. Samuel Oddi, Un-Unified Economic Theories of Patents—The Not-Quite-Holy Grail, 71 Notre Dame L. Rev. 267, 284–85 (1996).
33 Michael Abramowicz, Copyright Redundancy 10–18 (George Mason Sch. of Law, Law & Econ., Working Paper Series 03-03, 2003), available at http://ssrn.com/abstract_id=374580 (collecting sources and showing how each of these factors may operate to mitigate rent dissipation effects).
34 Id. at 11–12. A more palpable, albeit mythological, example of these positive externalities of racing might include the joy children experience when they drink the TangÒ and use the VelcroÒ that many think were brought to society through the NASA-sponsored space race; the corresponding negative externalities might include the cavities some children get from increased exposure to this sugared drink and their difficulty tying knots after growing up with shoes kept on by hook-and-loop fasteners instead of laces. See, e.g., A. Samuel Oddi, An Uneasier Case for Copyright Than for Patent Protection of Computer Programs, 72 Neb. L. Rev. 351, 378 n.95 (1993):
The creation of “spin off” inventions has often been urged as one of the benefits of government-funded research. See George J. Howick, The NASA Technology Utilization Program, in Utilizing R & D By-Products 69, 78–82 (Jerome W. Blood ed., 1967) (describing NASA program and examples of spin-off inventions, including inorganic paint, walking wheel chair, maintenance-free lubricated bearings, and sight-controlled switches). Some other examples of commercial products arising out of the space program include, smoke detectors, graphite, an artificial pancreas, heated ski goggles and hang gliders, but not velcro, teflon or tang.
35 Although it is often useful when modeling a problem to reduce it to a manageable form to construct the model, the single-solution element of the rent-seeking models cannot be extrapolated to provide meaningful guidance for policymakers without at least consideration of whether in the real world the set of possible solutions to a given problem (prizes) is limited, and whether we are nearing such a limit.
36 See infra note 39 and accompanying text.
37 Abramowicz, supra note 33, at 2–9. Interestingly, the fair use defense and the utility exception to copyrightable subject matter may combine to leave uses that are needed effectively beyond the enforceable reach of any valid copyright rights.
38 An increase in the number of available solutions will increase the chance of each person gaining access to any one solution. This is one reason why the patent system does not require the claimed invention to be “better” than the prior art, only new and nonobvious. As then-judge Warren Burger wrote, quoting Judge Giles Rich:
Progress is most effectively promoted by protecting those who enrich the art as well as those who improve it. Even though their inventions are not as good as what really exists, such inventors are not being rewarded for standing still or for retrogressing, but for having invented something. The system is not concerned with the individual inventor’s progress but only with what is happening to technology.
Comm’r of Patents v. Deutsche Gold-und-Silber-Scheideanstalt, 397 F.2d 656, 667 (D.C. Cir. 1968) (Burger, J.) (quoting Giles S. Rich, Principles of Patentability, 28 Geo. Wash. L. Rev. 393, 393, 402 (1960), reprinted in Nonobviousness—The Ultimate Condition of Patentability 2:1, 2:9 (John F. Witherspoon ed., 1980) (admonishing that we must avoid “the unsound notion that to be patentable an invention must be better than the prior art.”).
39 It is not always the case that an independently patentable invention will avoid infringement of earlier patents. Patentability of the second invention turns on a very different set of questions than its possible infringement of the first patent. The patentability analysis of the second invention will turn largely on the scope of information in the art at the time that invention is sought to be patented, which includes the disclosure in the first patent. For more on the rules of patentability over the prior art, see Chisum et al., supra note 6, at 323–706 (treatise and casebook teaching and collecting sources). The possible analysis of infringement of the first patent by the second invention will turn on the claims of the first patent. For more on the rules of patent infringement, see id. at 829–1041.
40 In areas where we can make good judgments ex ante about which avenues of research are most likely to be productive, it may be possible to fund the work prospectively. The government grant-making processes such as those at NIH and NSF basically operate this way by empanelling experts in the field to review grant applications.
41 Kitch, supra note 30, at 276.
42 Donald G. McFetridge & Douglas A. Smith, Patents, Prospects, and Economic Surplus: A Comment, 23 J.L. & Econ. 197, 202–03 (1980).
43 Edmund W. Kitch, Patents, Prospects, and Economic Surplus: A Reply, 23 J.L. & Econ. 205, 205–06 (1980).
44 Abramowicz, supra note 29, at 184 n.251 (collecting sources on cognitive biases of overconfidence and overoptimism).
45 They may not know each other because the field may be so new that the community of people working in it is not defined. Or, the potential members of the community may generally be known, but without the freedom to divulge their work to each other that is given by a patent, they may not know enough about each other to coordinate. This latter type of coordination problem is known generally as the Arrow Information Paradox. See Kenneth J. Arrow, Economic Welfare and the Allocation of Resources for Invention, in The Rate and Direction of Inventive Activity 609, 616–19 (Nat’l Bureau of Econ. Research ed., 1962).
46 Kitch, supra note 30, at 282–83 (discussing commercial success). Later in the same work, Kitch may be advocating that the test for patentability over the prior art should merely be novelty, without nonobviousness. See id. at 284 (“Thus substantial novelty is an economically rational test of patentability.”). Such an argument would accord with the social cost saving benefits of the registration theory outlined here. See infra Part III.A.
47 See Grady & Alexander, supra note 31, at 322–47 (offering a complicated method for making patentability determinations using a host of factors, many of which are determined long after a patent application is filed, such as the importance of the patent in controlling downstream rent-dissipating effects).
48 Id. at 343–47 (discussing only a few cases in summary). Furthermore, one of the few cases Grady and Alexander rely upon as illustrative of the rent dissipation theory, General Mills v. Pillsbury Co., 378 F.2d 666 (8th Cir. 1967), does not accord with any of the prevailing trends in the case law over time. An electronic search using the WestlawÒ KeyCiteÒ service did not reveal a single case after 1974 that cited Pillsbury on this issue and further revealed that, if anything, the case is miscited by a commentator as announcing a per se rule against patents in the field of culinary arts. See Malla Pollack, Note, Intellectual Property Protection for the Creative Chef, or How to Copyright a Cake: A Modest Proposal, 12 Cardozo L. Rev. 1477, 1482 n.30 (1991) (“Food items are patentable, but the culinary creativity of chefs is not the type of creativity which meets the standards for patentability.”).
49 See supra notes 46–48 and accompanying text.
50 R. Polk Wagner, Reconsidering Estoppel: Patent Administration and the Failure of Festo, 151 U. Pa. L. Rev. 159, 161–67 (2002) (arguing for a shift in focus from the allocation of liability during infringement (ex post) towards rules that generate incentives both during and before inventors apply for patents (ex ante) so as to better understand information-forcing default penalty rules like the limitation on the doctrine of equivalents known as the “doctrine of prosecution history estoppel,” which holds out the possibility of lost patent scope as an inducement to potential patentees to produce socially valuable information early in the life of the patent.).
51 Clarissa Long, Patent Signals, 69 U. Chi. L. Rev. 625, 625–28 (2002) (exploring the signaling function of patents generally, including the potential role of the patent document itself to convey information that would not be as credible when revealed in other contexts).
52 Kieff, supra note 11, at 707–10 (explaining how the right to exclude use promotes commercialization by facilitating the social ordering and bargaining around inventions that are necessary to generate output in the form of information about the invention, a product of the invention, or a useful embodiment of the invention).
53 Indeed, in addition to the administrability or screening problem discussed supra note 29, another central problem the commercialization theory identifies in the reward theories is the failure of rewards to achieve commercialization. Id. at 717–18, 727–41 (discussing Harold Demsetz, Toward a Theory of Property Rights, 57 Am. Econ. Rev. 347 (1967), and Harold Demsetz, The Private Production of Public Goods, 13 J.L. & Econ. 293 (1970)). The commercialization theory may resemble some aspects of the prospect theory. See id. at 707 n.47 (“The incentive to commercialize theory discussed herein is similar in some respects to the ‘prospect’ theory elucidated by Kitch, which views the patent as important in providing incentives for investment in increasing the value of a patented technology.”) (citing Kitch, supra note 30, at 276–77). But Kitch focused on Barzel’s work and on coordination as a tool to decrease pre-patent and post-patent rent-seeking, or what can be viewed as overuse of certain resources. See Kitch, supra note 30, at 265 (citing Barzel, supra note 30). In contradistinction, commercialization focuses on Demsetz’s work and on coordination as a tool to prevent the underuse of certain resources. Kieff, supra note 11, at 717–18, 727–41 (citing work by Kitch and Demsetz). Although the earlier literature does suggest some correlation between these works of Kitch and Demsetz, it merely collects them together, without elucidating their interrelationships and differences. See, e.g., Julie E. Cohen, Lochner in Cyberspace: The New Economic Orthodoxy of “Rights Management,” 97 Mich. L. Rev. 462, 497 n.121 (1998) (citing work by Demsetz and noting: “Similar reasoning underlies Edmund Kitch’s proposed ‘prospect’ approach to patents.”); Eisenberg, Experimental Use, supra note 6, at 1040 (citing work by Kitch and Demsetz and noting: “The prospect theory offers a justification for patents that is in keeping with broader theories of property rights elaborated by Harold Demsetz . . . .”); Neil Weinstock Netanel, Copyright and a Democratic Civil Society, 106 Yale L.J. 283, 309 n.108 (1996) (citing work by Kitch and Demsetz and noting: “For neoclassicists, therefore, intellectual property is less about creating an artificial scarcity in intellectual creations than about managing the real scarcity in the other resources that may be employed in using, developing, and marketing intellectual creations.”); Rai, supra note 6, at 121 n.236 (citing work by Kitch and Demsetz but seeing the underuse problem as “not readily apparent in the context of intellectual property”). At bottom, whereas the prospect theory can be seen to focus on coordination among competing users of an invention, the commercialization theory can be seen to focus on coordination among complementary users.
54 This is because the property right is not serving a reward function or a simple cost-subsidization function but rather is serving a coordination function. Kieff, supra note 11, at 712 (“Thus, as compared with a reward system, the patent system may be not only better able to improve coordination among market players engaged in the invention commercialization process, it also may be better able to avoid rent dissipation.”) (citing generally Grady & Alexander, supra note 31).
55 Id. at 736–46 (showing how the drafters of the 1952 Patent Act were motivated by the commercialization theory).
56 Abramowicz offers some important add-on tools for the patent system that would take the core rules for obtaining and enforcing patents as given, but at some point during the patent term buy out the patent right through a carefully crafted system to ensure the right price is paid. See Abramowicz, supra note 29, at 115–27; see also Michael Abramowicz, The Human Genome Project in Retrospect, in F. Scott Kieff, Perspectives on Properties of the Human Genome Project 231, 249–60 (2003) [hereinafter Perspectives on Properties] (describing and assessing a retrospective grant system).
57 See Abramowicz, supra note 29, at 174. I also thank participants in the Spring 2001 Workshop Series of the John M. Olin Program in Law and Economics at the University of Chicago Law School for raising a similar objection. My response to both begins with a reminder of the brief discussion of the screening function in the paper on which they were commenting, see Kieff, supra note 11, at 712–17, and continues with the registration theory presented in this Article.
58 These might be technologies that have been forgotten, that never managed to draw sufficient coordinated interest to have been commercialized, or have been commercialized only outside of this country. Indeed, although so-called “patents of importation” were available for inventions not previously commercialized in the realm in England and in the colonies before the country was established, they essentially have not been allowed in this country since its inception. See generally Edward C. Walterscheid, Novelty in Historical Perspective (pts. 1–2), 75 J. Pat. & Trademark Off. Soc’y 689, 777 (1993) (discussing history of the novelty provision in the U.S. patent system at the time of framing). The law and economics of the novelty provisions in the present patent system, including the treatment of foreign activity as prior art, are discussed infra Part III.A.1.
59 Kieff, supra note 11, at 712–17.
60 Id. It appears that Kitch also may have noticed this feature of the patent system in his reply to McFetridge and Smith:
A patent system is a grant system with the clever feature that it generates private incentives for those with comparative advantage in the innovating activity to reveal the information necessary to define the prospect right. Without this incentive, the granting agency would have to determine the appropriate scope and technological area of the prospect rights with access only to its own information.
Kitch, supra note 43, at 207 n.5. What is not clear from this text is whether “private parties” refers to patentees, the patentees’ competitors, or both. As explained in more detail infra in Part III, each of these players in the patent system plays a crucial role in making sure the patent claim scope is “just right” in a way that minimizes social costs.
61 See supra notes 1–4 and accompanying text.
62 See supra note 4 (showing representative costs).
63 See supra note 8 and accompanying text (discussing importance of comparative analysis). The advantages of screening under a soft-look approach, which were identified by the commercialization theory, bring into question the role of the Patent Office in a way that provides the impetus for the registration theory explored here. See supra notes 58–62 and accompanying text (citing Kieff, supra note 11, at 712–17). Thus, the registration theory can be seen as a companion to, or application of, the broader commercialization theory, which motivated the framing of the present patent system. See supra note 52 (summarizing commercialization theory).
64 See infra Part II for discussion of the registration model itself and infra Parts III–IV for application of the model to our present patent system, including proposed reforms.
65 See, e.g., Thomas W. Merrill & Henry E. Smith, Optimal Standardization in the Law of Property: The Numerus Clausus Principle, 110 Yale L.J. 1, 24–70 (2000) (discussing information-cost theory of property).
66 For sources, see supra note 5 and Lemley, supra note 6, at 1495 n.1.
67 See infra notes 75–84 and accompanying text (discussing costs of providing and evaluating the information needed to determine validity over the prior art).
68 This involves a shift to a soft-look approach that is counter to the suggested shifts in the literature. For sources arguing for harder look, see supra note 5 and Lemley, supra note 6, at 1495 n.1.
69 The extent to which the Patent Office is like other administrative agencies, and therefore subject to the body of administrative law, has been a topic of substantial debate over the past several years in the literature and in the case law. Compare, e.g., Orin S. Kerr, Rethinking Patent Law in the Administrative State, 42 Wm. & Mary L. Rev. 127, 127–33 (2000) (arguing that administrative law doctrines should not apply to patent law), with Craig Allen Nard, Deference, Defiance, and the Useful Arts, 56 Ohio St. L.J. 1415 passim (1995) (arguing that administrative law doctrines such as “Chevron deference” should be applied to Patent Office decisions). Also compare Dickinson v. Zurko, 527 U.S. 150, 152 (1999) (holding that contrary to almost a century of practice, the Administrative Procedures Act’s standard-of-review provisions set forth in 5 U.S.C. � 706 do apply to factual determinations of the Patent Office), with Merck & Co. v. Kessler, 80 F.3d 1543, 1549–50 (Fed. Cir. 1996), in which the U.S. Court of Appeals for the Federal Circuit stated the following:
As we have previously held, the broadest of the [Patent Office]’s rulemaking powers—35 U.S.C. � 6(a)—authorizes the Commissioner to promulgate regulations directed only to “the conduct of proceedings in the [Patent Office];” it does not grant the Commissioner the authority to issue substantive rules. Because Congress has not vested the Commissioner with any general substantive rulemaking power, the “Final Determination” at issue in this case cannot possibly have the “force and effect of law.” Thus, the rule of controlling deference set forth in Chevron does not apply.
(footnotes and internal citations omitted) (holding that the Patent Office is not entitled to the deference given other administrative agencies, which are vested with sufficient power by Congress, under the U.S. Supreme Court’s decision in Chevron, USA, Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842–45 (1984)).
70 See, e.g., Chisum et al., supra note 6, at 91–128 (describing examination procedures under present system).
71 35 U.S.C. � 282 (2000) (presumption of validity).
72 See SEC Filings & Forms (EDGAR), at http://www.sec.gov/edgar.shtml (last visited Nov. 13, 2003). As described on the front SEC web page about EDGAR:
All companies, foreign and domestic, are required to file registration statements, periodic reports, and other forms electronically through EDGAR. Anyone can access and download this information for free. Here you’ll find links to a complete list of filings available through EDGAR and instructions for searching the EDGAR database.
Id. A modest filing fee, say $1,000, might also be used to fund the operation, and to provide some disincentive against the filing of complete junk. Indeed, regular maintenance fees might also be required. See William M. Landes & Richard A. Posner, Indefinitely Renewable Copyright, 70 U. Chi. L. Rev. 471, 472–75 (2003) (suggesting modest filing and maintenance fees as an efficient tool for managing a system of copyright registration and potentially infinite copyright term).
73 Cf. supra note 71 (citing higher presumption of validity under current system).
74 See generally Lemley, supra note 6.
75 Id. at 1497. Merges also makes this argument in Robert P. Merges, As Many as Six Impossible Patents Before Breakfast: Property Rights for Business Concepts and Patent System Reform, 14 Berkeley Tech. L.J. 577, 594–96 (1999).
76 Lemley, supra note 6, at 1497 (deriving its essential insight from the little-acknowledged fact that the overwhelming majority of patents are never litigated or even licensed).
77 The screening function identified by the commercialization theory suggests the registration approach offered here. See supra notes 57–64 and accompanying text (discussing genesis of registration theory). For a discussion of strategies for bringing this information to the Patent Office, instead of to courts, see the discussion infra Part IV.D of systems that employ strategies that are soft-look/hard-look hybrids through various post-issuance procedures before the Patent Office.
78 This is the focus of the registration theory, as discussed throughout this Article. For a discussion of the law and economics of the patent-obtaining rules of the present system and why they make sense under the registration theory because they are cheap to enforce, see infra Part III. For a discussion of potential improvements that may further decrease social costs, see infra Part IV.
79 This is essentially the Lemley insight. See Lemley, supra note 6, at 1497.
80 A central problem explored in the public choice literature is ensuring the proper timing of decision making so that those most interested will be able to have their views counted. To be sure, this analysis must be seen against the background of the extensive literature on public choice theory. For collections of views and sources, see generally Perspectives on Public Choice (Dennis C. Mueller ed., 1997); Mueller, supra note 32; Maxwell L. Stearns, Public Choice and Public Law (1997); Mark Kelman, On Democracy-Bashing: A Skeptical Look at the Theoretical and “Empirical” Practice of the Public Choice Movement, 74 Va. L. Rev. 199 (1988); Dwight R. Lee, Politics, Ideology, and the Power of Public Choice, 74 Va. L. Rev. 191 (1988); Jonathan R. Macey, Transaction Costs and the Normative Elements of the Public Choice Model: An Application to Constitutional Theory, 74 Va. L. Rev. 471 (1988).
A related concern from the law and economic literature on patents is the importance of being able to know ex ante or at least early in the life of a patent whether the patent will be valid. See supra notes 50–52 and accompanying text (discussing the importance of ex ante approaches). But see supra note 56 (discussing the importance of ex post approaches in Abramowicz’s work on retrospective spending).
81 See Kieff, supra note 11, at 713–14 & n.77 (citing Leo Katz, Ill-Gotten Gains: Evasion, Blackmail, and Kindred Puzzles of the Law 200 (1996) and discussing the problems with allocating cash rewards, tax credits, or any other kind of kudos in comparison to those with allocating patents and showing why systems of cash rewards or tax credits would be poor substitutes for a patent system).
82 Whereas the Lemley insight looks to the aggregate cost across all patents, and points out that most patents turn out not to matter, see Lemley, supra note 6, at 1497, the insight provided in this Article looks at the cost for each patent that turns out to matter. For a discussion of the law and economics of the patent-obtaining rules when applied to any one patent, see infra Part III. These two insights may be combined to reveal the benefits of many of the proposed reforms discussed infra Parts IV.C–E.
83 Kieff, supra note 11, at 712–14 (discussing the role of a patentee’s competitors in policing the patent system by searching out and bringing to bear the best information regarding a patent’s validity).
A somewhat similar tool for bringing to bear this information is the bounty system proposed in John R. Thomas, Collusion and Collective Action in the Patent System: A Proposal for Patent Bounties, 2001 Univ. Ill. L. Rev. 305, 340–53. But such bounty systems may not be net improvements. They may provide some help in cases where the validity-destroying information is in the hands of someone other than the party seeking to invalidate the patent. But they may not be needed and raise further problems. To the extent the person having the information is subject to the jurisdiction of the courts, then that person is subject to the courts’ subpoena power and can be compelled to produce documents, testimony, or other evidence once uncovered by the party seeking to invalidate the patent. The creation of a side market for these people to “sell” their information will frustrate the operation of the present systems that courts have developed for obtaining such information through third-party discovery. To the extent third-party witness compensation practices are considered so stingy that they provide a disincentive to these people, they can be made more flush through modest amendment to the rules of procedure in such cases.
An alternative approach is the effort to create higher incentives for the patent applicant to bring this information to bear during the patent examination process in the first instance as suggested in Jay P. Kesan, Carrots and Sticks to Create a Better Patent System, 17 Berkeley Tech. L.J. 763, 767–70, 787–97 (2002) (building upon and citing the fee-shifting techniques presented in the early working paper version of this Article, see F. Scott Kieff, Comments Regarding Competition & Intellectual Property, Summary of Proposed Testimony, at 12–13, at http://www.ftc.gov/os/comments/intelpropertycomments/harvardlaw.pdf (2001) (last visited Nov. 13, 2003); infra text accompanying notes 280–282, but arguing that they should be used to provide an incentive for the patent applicant to better inform the patent examination process, which differs from the argument presented here in that it adheres to the orthodoxy of advocating methods for improving hard-look examination systems and eschews soft-look approaches like those explored in this work), and Shubha Ghosh & Jay Kesan, What Do Patents Purchase? In Search of Optimal Ignorance in the Patent Office 2–5 (Univ. of Ill. Coll. of Law, Ill. Law & Econ., Research Paper Series No. LE03-007, 2003), at http://papers.ssrn.com/pape.tar?abstract_id=410545 (arguing that Patent Office examination of patent applications, especially better informed examination, is important in making issued patents more valuable as the objects of licensing deals). But, as discussed infra Part III.A, the rules relating to patent validity are, and should be, responsive to information that happens to be not known or easily knowable by the patent applicant. As a result, heaping added incentives to find this information on the back of the patent applicant is not likely to be an efficient tool for bringing this information to the attention of decisionmakers. For other bounty approaches, see Joseph Scott Miller, Building a Better Bounty: Litigation-Stage Rewards for Defeating Patents 7–9 (2003) (working paper, available online at http://ssrn.com/abstract=431242) (suggesting cash rewards be granted to those who successfully defeat the validity of a patent).
Yet another approach is to alter the framework for appellate review of patent cases, as explored in the recent important work by Rai. See generally Arti K. Rai, Fact, Law, and Policy: An Allocation-of-Powers Approach to Patent System Reform (Univ. of Pa., Inst. for Law & Econ., Research Paper No. 02-20, 2003), available at http://ssrn.com/ab-stract_id=335122 (advocating change in the appellate review process).
84 See infra part III.A (reviewing patent-obtaining rules relating to the prior art, which turn out to be triggered by information that is in the hands of the specific parties the rules are designed to protect, not in the hands of the government). Merges makes a somewhat related point about the advantages private parties have over courts in evaluating information in patent cases in Robert P. Merges, Of Property Rules, Coase, and Intellectual Property, 94 Colum. L. Rev. 2655, 2664–65 (1994) (discussing private parties’ informational advantage in negotiating over an intellectual property right, which will be based at least in part on the subsidiary question of that right’s validity).
85 The rules are shown to practicably protect investment-backed expectations and facilitate ordering around protected territories. See infra Parts III.A–.A.3.
86 The registration theory has explanatory power for the intricacies of these rules, which are not well explained by other law and economic theories of the patent system, like the prospect and rent dissipation theories. Those theories merely point out rent-seeking concerns that are implicated by patents and at best suggest that ex post determinations be made about which patents turn out to be better at decreasing the rent-seeking type of social cost. See supra notes 30–49.
87 In contradistinction, the claims of the patentee are the focus of so-called “reward” theories discussed infra notes 105–108.
88 Other law and economics theorists have tried to align the benefit a patent confers on the patentee on the one hand with the benefit an invention confers on society on the other hand. See, e.g., Michael Kremer, Patent Buy-Outs: A Mechanism for Encouraging Innovation passim (Nat’l Bureau of Econ. Research, Working Paper No. 6304, 1997), at http://www.nber.org/papers/w6304 (discussing ways to improve the match between social surplus of the invention and the amount an inventor will recoup); Steven Shavell & Tanguy van Ypersele, Rewards Versus Intellectual Property Rights passim (Nat’l Bureau of Econ. Research, Working Paper No. 6956, 1999), available at http://www.nber. org/papers/w6956 (same).
89 The registration theory focuses on those claims that are verifiable, which turns out also to have strong explanatory power for the intricacies of the patent-obtaining rules relating to the prior art. See infra Part III.A. The more basic question of whether we should even elect to inject a patent system into the otherwise freer market is explored generally supra Part I, and the more specific case for a system of patents as property rights enforced by property rules is discussed in my earlier work on the commercialization theory as reviewed supra notes 11, 52–55.
90 See supra note 6 (providing sources of criticism).
91 The problem of getting patent scope “just right” has long dominated the literature. See generally Eisenberg, Experimental Use, supra note 6 (arguing for limited scope to protect competition rather than facilitate coordination); Grady & Alexander, supra note 31 (offering rent dissipation theory to show how scope can be adjusted to control rent dissipation in both upstream and downstream research efforts); Kitch, supra note 30 (offering prospect theory to show how broad scope controls rent dissipation in downstream research efforts); Mark A. Lemley, The Economics of Improvement in Intellectual Property Law, 75 Tex. L. Rev. 989, 1000–05 (1997) (exploring economic impacts of scope); Robert P. Merges, Intellectual Property Rights and Bargaining Breakdown: The Case of Blocking Patents, 62 Tenn. L. Rev. 75 (1994) (same); Robert P. Merges & Richard R. Nelson, On the Complex Economics of Patent Scope, 90 Colum. L. Rev. 839 (1990) (same). For a discussion of the patentee’s incentives to get scope “just right,” see infra Part III.C.
92 See infra Parts III.A–B.
93 35 U.S.C. � 102 (2000) (novelty and statutory bars); see also infra Part III.A.1.
94 Id. � 103 (nonobviousness); see also infra Part III.A.2.
95 See infra Parts III.A.1–2 (discussing how these rules account for verifiable investments).
96 For a discussion of how the rules on novelty and nonobviousness protect these investments, see infra notes 127–134, 154–182 and accompanying text.
97 For a discussion of the grace period, see infra notes 135–140 and accompanying text.
98 Robert Nozick, Anarchy State and Utopia 182 (1974) (noting that a patent does not deprive others of anything because, but for the act of inventing, the process or thing invented would not be in use); see also John Locke, The Second Treatise of Government � 27, in Two Treatises of Government 265, 288 (Peter Laslett ed., Cambridge Univ. Press 1988) (1690) (property rights are only justified “where there is enough, and as good left in the common for others”). The philosophy of intellectual property is a broad topic with its own literature. See, e.g., Wendy J. Gordon, A Property Right in Self-Expression: Equality and Individualism in the Natural Law of Intellectual Property, 102 Yale L.J. 1533 passim (1993) (exploring the case for the public’s property interest in being free from intellectual property rights); Justin Hughes, The Philosophy of Intellectual Property, 77 Geo. L.J. 287, 296–330 (1988) (exploring the case for property rights in intellectual property using the Lockean labor approach); Jeremy Waldron, From Authors to Copiers: Individual Rights and Social Values in Intellectual Property, 68 Chi.-Kent L. Rev. 841 passim (1993) (exploring potential liberty restraints associated with intellectual property rights).
99 Nozick, supra note 98, at 182.
100 This goal is different from the goals of preventing rent-seeking or giving a reward, which are the goals of the prospect, rent dissipation, and reward theories offered by others. Compare supra notes 30–49 (discussing prospect and rent dissipation theories), with infra notes 105–108 (discussing reward theories).
101 The prospect, rent dissipation, and reward theories fail to offer any easy way to implement their goals. Compare supra notes 30–49 (discussing prospect and rent dissipation theories), with infra notes 105–108 (discussing reward theories).
102 See infra Parts III.A.1–4 (discussing operation of these rules).
103 See supra notes 46–49 (prospect and rent dissipation theories do not offer workable rules); supra note 81, infra notes 106–108 (reward theories do not offer workable rules either).
104 President George Washington signed the Patent Act of 1790 into law on April 10, 1790. Act of Apr. 10, 1790, ch. 7, 1 Stat. 109. See Kenneth W. Dobyns, The Patent Office Pony: A History of the Early Patent Office 21–22 (1994) (reviewing history of the Patent Office and collecting sources).
105 Letter from Thomas Jefferson to Isaac McPherson (Aug. 13, 1813), reprinted in Jefferson Writings 1286, 1292 (Merrill D. Peterson ed., 1984). Interestingly, Jefferson’s views on patent issues may have been taken substantially out of context by many, including the Supreme Court:
[T]here is nothing whatever to indicate that the views held by Jefferson were those of the Framers themselves or those of either the first federal Congresses or the early federal judiciary, or, for that matter, the general populace. In this regard, the Graham Court completely ignored the rejection by the second federal Congress of Jefferson’s proposal that a good defense to infringement should be that the invention “is so unimportant and obvious that it ought not to be the basis of an exclusive right.”
Edward C. Walterscheid, “Within the Limits of the Constitutional Grant”: Constitutional Limitations on the Patent Power, 9 J. Intell. Prop. L. 291, 325 (2002) (footnotes omitted) (collecting sources) (citing Graham v. John Deere Co., 383 U.S. 1, 10 (1966) (consolidated with Calmar, Inc. v. Cook Chem. Co., and Colgate-Palmolive Co. v. Cook Chem. Co.) and companion to United States v. Adams, 383 U.S. 39 (1966)).
106 Theories like this are generally referred to as “incentive-to-invent” or “reward” theories. See generally supra notes 27, 81 (collecting sources that review these theories and their pitfalls).
107 The conceptual problems generally involve a mismatch between any particular metric of merit and our impressionistic view of the “right” result. For example, if the metric were hard work, then accidental inventions would not be patentable. If the metric were value of the invention to society, then determinations cannot be made ex ante. The many conceptual problems associated with measuring rewards are discussed in the sources cited supra note 81.
108 By the late 1940s, courts would only allow a patent on an invention that they determined met the self-referential standard of “invention,” a test that had become so overly robust that Justice Robert Jackson criticized its application in a 1949 dissent: “the only patent that is valid is one which this Court has not been able to get its hands on.” Jurgensen v. Ostby & Barton Co., 335 U.S. 560, 572 (1949) (Jackson, J., dissenting); see also Giles S. Rich, Congressional Intent—or, Who Wrote the Patent Act of 1952?, in Patent Procurement and Exploitation (Southwestern Legal Found. ed., 1963), reprinted in Nonobviousness—The Ultimate Condition of Patentability, supra note 38, at 1:1, 1:3 (discussing history of the nonobviousness requirement, and its use as a replacement for the requirement of invention); George M. Sirilla, 35 U.S.C. � 103: From Hotchkiss to Hand to Rich, the Obvious Patent Law Hall-of-Famers, 32 J. Marshall L. Rev. 437 passim (1999) (same). Even after the requirement for “invention” was statutorily replaced by the 1952 Patent Act’s requirement for nonobviousness in � 103, some courts continued to apply a standard remarkably similar to the one criticized by Justice Jackson. Gerald J. Mossinghoff, Side Bar: The Creation of the Federal Circuit, in Principles of Patent Law, supra note 6, at 30, 30–31 (former Patent Office Commissioner Mossinghoff explaining importance of creating the U.S. Court of Appeals for the Federal Circuit in 1982 to bring uniformity to the application of patent law and avoid the results in some circuits, as discussed during the confirmation hearings for then-Second Circuit Judge Thurgood Marshall’s nomination to the Supreme Court when he responded to a question about patents by saying “I haven’t given patents much thought, Senator, because I’m from the Second Circuit and as you know we don’t uphold patents in the Second Circuit”). Patent theories like these are more about the absence of patents than about how or why we want patents to operate.
109 The prospect and rent dissipation theories discussed earlier are two prime examples. See supra Part I. The commercialization theory also discussed earlier differs from these two theories in viewing the coordination effects of the patent not as a way to prevent rent-seeking or rent-dissipating behavior but only as a way to facilitate the industrial organization activities necessary to get the public to enjoy some benefit from a nascent invention. See supra notes 52–55 and accompanying text. The modest roles for the positive law prior art rules that are contemplated in the registration theory discussed here are entirely compatible with the commercialization theory and its views on the screening function played by competitors of the patentee. See supra notes 52–55 and accompanying text.
110 See supra Part I; see also Kitch, supra note 30, at 267–71 (discussing importance of broad claims early after initial discovery).
111 Grady & Alexander, supra note 31, at 346 (“By definition, an optimal proportion cannot be improved upon; rent dissipation theory, therefore, predicts patent nonenforcement.”). In part, the rent dissipation theory seems to be assuming that something may actually be “optimal” or “good” in a way that assumes a great deal. Most importantly, it seems to implicitly subscribe to some type of nirvana thesis, which is generally shunned in the literature because no example has been offered of any human endeavor that is in all respects “optimal.” See supra note 8 (critiquing nirvana approaches).
112 Compare supra notes 46–49 (prospect and rent dissipation theories do not offer workable rules), with supra note 81, and infra notes 106–108 (reward theories do not offer workable rules either).
113 Unlike the theories that focus on determining which claims to a patent are worth protecting, the registration theory focuses on determining which claims to freedom from patent are worth protecting.
114 See infra Part III.A.1.
115 See infra Part III.A.2.
116 See infra notes 141–143 and accompanying text (discussing how dates are compared).
117 See infra Parts III.A.1–4 (discussing the rules).
118 35 U.S.C. � 102 (2000). The many subsections of � 102, subsections (a) through (g), then set forth the categories of things that can count as prior art. Any single piece of prior art, sometimes also called a “reference,” will count as prior art for purposes of both the novelty and statutory bar analyses of � 102 and the nonobviousness analysis of � 103 if it is determined to trigger any one, or more than one, of the subsections of � 102. Chisum et al., supra note 6, at 554; see also In re Foster, 343 F.2d 980, 984–90 (C.C.P.A. 1965) (overruling In re Palmquist, 319 F.2d 547 (C.C.P.A. 1963) to hold that despite plain meaning of the statute, art qualifying only under � 102(b) may support an analysis under � 103). For the reasons discussed more thoroughly by Parchomovsky and Lichtman et al., the result in Foster is important to mitigate the costs associated with strategic disclosure. See generally Douglas Lichtman et al., Strategic Disclosure in the Patent System, 53 Vand. L. Rev. 2175 (2000); Gideon Parchomovsky, Publish or Perish, 98 Mich. L. Rev. 926 (2000).
119 See supra note 69 (citing Merck & Co. v. Kessler, 80 F.3d 1543, 1549–50 (Fed. Cir. 1996) (holding that because “the broadest of the [Patent Office’s] rulemaking powers—35 U.S.C. � 6(a)—authorizes the Commissioner to promulgate regulations directed only to ‘the conduct of proceedings in the [Patent Office];’ it does not grant the Commissioner the authority” needed to in turn entitle the Patent Office to the deference given other administrative agencies, which are vested with sufficient power by Congress, under the Supreme Court’s decision in Chevron, USA, Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842–45 (1984)).
120 See, e.g., Chisum et al., supra note 6, at 323.
121 See infra Parts III.A.1–4. What is more, in accordance with the registration theory’s goal of improving efforts to protect investments, many of these rules worked their way into our regime over time even though they were not all present at the outset. See generally P.J. Federico, Commentary on the New Patent Act, in Title 35, United States Code Annotated 1 (West 1954), reprinted in 75 J. Pat. & Trademark Off. Soc’y 161 (1993) (reviewing history and operation of our present patent system, which is largely based on the 1952 Patent Act); Edward C. Walterscheid, The Ever Evolving Meaning of Prior Art (pts. 1–3, 4–6, 7–8, & pt. 9), 64 J. Pat. & Trademark Off. Soc’y 457, 571, 632 (1982), 65 J. Pat. & Trademark Off. Soc’y 3, 477, 658 (1983), 66 J. Pat. & Trademark Off. Soc’y 479, 573 (1984), 67 J. Pat. & Trademark Off. Soc’y 33 (1985) (reviewing in detail the evolution of many of the prior art provisions that exist since the 1952 Patent Act and collecting sources); Walterscheid, supra note 58 (reviewing the first roughly 100 years of the prior art provisions with particular focus on the rules relating to derivation and foreign use).
122 F. Scott Kieff, How Ordinary Judges and Juries Decide the Seemingly Complex Technological Questions of Patentability over the Prior Art, in Perspectives on Properties, supra note 56, at 471, 473. Such a positive view of lay juries in patent cases marks a somewhat counterintuitive departure from most of the other work in this field, including earlier work of my own. See, e.g., S. Leslie Misrock and F. Scott Kieff, Latent Cures for Patent Pathology: Do Our Civil Juries Promote Science and the Useful Arts?, presentation at The Crisis of Science and the Law, Science in Crisis at the Millennium (an International Symposium), The George Washington University Center for History of Recent Science (Sept. 19, 1996), in Principles of Patent Law, supra note 6, at 1024, 1024–38; see also, e.g., Kimberly A. Moore, Judges, Juries, and Patent Cases—An Empirical Peek Inside the Black Box, 99 Mich. L. Rev. 365, 365 n.2 (2000) (collecting sources on “extensive scholarly debate and increasing skepticism regarding the role of juries in patent cases”).
123 35 U.S.C. � 102 (2000) (“Conditions for patentability; novelty and loss of right to patent”). The mention in � 101 of the word “new” has not been read to provide any separate novelty requirement. See Federico, supra note 121, at 178 (“The general part of the Committee Report states that section 102 ‘may be said to describe the statutory novelty required for patentability, and includes, in effect, an amplification and definition of “new” in section 101’”); see also In re Bergy, 596 F.2d 952, 960 (1979) (“Notwithstanding the words ‘new and useful’ in � 101, the invention is not examined under that statute for novelty because that is not the statutory scheme of things or the long-established administrative practice.”), dismissed as moot, 444 U.S. 1028 (1980).
124 The maxim setting forth the so-called “classic infringement test for anticipation,” which also applies to analysis under the statutory bar, is “[t]hat which will infringe if later, will anticipate, if earlier.” See Chisum et al., supra note 6, at 414 (citing Knapp v. Morss, 150 U.S. 221 (1893)). For more on how this test is applied in practice, see infra notes 141–150 and accompanying text.
125 For a discussion of the bar, which also operates as a one-year grace period for filing, see infra notes 137–140.
126 Compare supra note 48 and accompanying text (rent dissipation theory does not explain case law), with supra note 108 and accompanying text (reward theories do not explain case law).
127 See 35 U.S.C. � 102(a)–(b) (referring to printed publications).
128 See In re Hall, 781 F.2d 897, 898–900 (Fed. Cir. 1986) (counting a single cataloged student thesis at Frieburg University in Germany as prior art because it was, inter alia, physically available to the public); In re Cronyn, 890 F.2d 1158, 1161 (Fed. Cir. 1989) (not counting three student theses at an American university as prior art, even though they were physically accessible to the public, because there was no evidence they were logically accessible to the interested public by, for example, being indexed in the library’s subject catalog). Under the registration theory these publications should count as prior art because they might lead to third-party reliance, not because they might somehow fairly be said to have been available to the patentee.
129 See Alexander Milburn Co. v. Davis-Bournonville Co., 270 U.S. 390, 399–402 (1926) (Holmes, J.) (counting so-called secret prior art as prior art as of the application’s filing date). The present version of this rule is codified in � 102(e)(2). See 35 U.S.C. � 102(e)(2). For the same reasons, an application filed in foreign patent offices will also count as prior art as of its filing date with one of the international Patent Cooperation Treaty-designated patent offices, if filed according to the procedural rules of the treaty, and as long as the application is eventually published in English and designates that it should be sent to the United States Patent Office. Id. Also for the same reasons, under � 102(e)(1), prior art effect is extended to pending applications that do not issue as a patent but do get published under the rule of publishing eighteen months after filing, which was part of the 1999 American Inventors Protection Act and is codified in � 122(b). Id. �� 102(e)(1), 122(b). Applications not published pursuant to � 122(b), however, such as those abandoned, do not count as prior art. The authors of these documents are able to maintain their information as a trade secret but the documents themselves will not preclude patentability for others. To be sure, the use by these authors may in certain circumstances preclude patentability under � 102(a) or (g), as discussed infra at notes 130–132 and accompanying text.
130 The registration protects against the risk of these investments being later subject to a patent right to exclude by enforcing the rule that they destroy patentability.
131 Gayler v. Wilder, 51 U.S. (10 How.) 476, 494–98 (1850) (not counting use of a technology relating to a safe as prior art unless it is accessible to the public). See 35 U.S.C. � 102(a).
132 Section 102(f) is the provision governing cases of derivation, where the party claiming the patent right derived the claimed information from someone else. 35 U.S.C. � 102(f); see Gambro Lundia AB v. Baxter Healthcare Corp., 110 F.3d 1573, 1576–78 (Fed. Cir. 1997) (holding that � 102(f) prevents patentability if there can be shown to be both prior, corroborated, conception of the claimed invention, and its communication to the one claiming to be the first inventor). Where the prior inventor turns out to have sought its own patent, the Patent Office conducts something called an “interference proceeding,” which is the quasi-litigation process initiated when a patent application claims the same subject matter as another application or an issued patent to determine who is the first inventor. Section 102(g) is generally understood to govern interference proceedings but also has been held to be a provision under which information may be treated as prior art just like under the other subsections of � 102. See 35 U.S.C. � 102(g). See generally Chisum et al., supra note 6, at 441–51 (describing evolution of case law treating 35 U.S.C. � 102(g) as a provision under which prior use may count as prior art even if not public, as long as it is not abandoned, suppressed, or concealed, as well as the amount of evidence needed to satisfy that provision). For more on the rules governing priority disputes, see infra Part III.A.3. Where the prior inventor turns out to have been outside the United States, the rules become more complicated, as discussed infra Part III.A.4. For more on why the use of priority of invention as a test to determine who wins a patent right as between two or more claimants makes more sense under the registration and commercialization theories than the use of filing date, because when invention date is used it is more likely that a valid patent claim will emerge than when filing date is used, see infra notes 183–186 and accompanying text.
133 See 35 U.S.C. � 102(b). The policy goal of protecting investment has been recognized in the case law associated with this prior art provision. See General Elec. Co. v. United States, 654 F.2d 55, 61 (Ct. Cl. 1981) (“First, there is a policy against removing inventions from the public [that] the public has justifiably come to believe are freely available to all as a consequence of prolonged sales activity.”).
Often described as a statutory bar to the patenting of inventions publicized for more than a year, this provision operates to provide a one-year grace period for publicity that will not bar patentability. The grace period entered the U.S. patent system in 1839 as a period of “grace” lasting two years. Act of March 3, 1839, 5 Stat. 353. The period was shortened to one year in 1939. Act of August 5, 1939, Pub. L. No. 76-288, 53 Stat. 1212. It remains so in the present 35 U.S.C. � 102(b).
Not all patent systems in the world provide a statutory grace period, although it is not exactly clear whether most systems end up providing one through case law. See generally Joseph Straus, Grace Period and the European and International Patent Law (2001) (study commissioned by the European Patent Organization to examine whether European patent law should provide a pre-filing grace period) (collecting sources).
134 See Baxter Int’l, Inc. v. COBE Labs., 88 F.3d 1054, 1058–59 (Fed. Cir. 1996) (third-party use may raise statutory bar).
135 See Straus, supra note 133, at 80–81, 93 (discussing incentives to suppress publication under a regime of no grace period).
136 Id. at 95–96 (discussing decrease in value of patents under absolute novelty regimes, which do not have a grace period).
137 Under the registration theory, the specific amount of time is arbitrary as long as it is fixed and knowable ex ante and as long as it is both long enough to allow some grace-period effect and not long enough to unduly frustrate investment in recently public technologies. For some history of the various grace periods, see supra note 133.
138 See Egbert v. Lippmann, 104 U.S. 333, 333–38 (1882) (holding use even in a private undergarment, here corset steels, can count as prior art). Compare Metallizing Eng’g Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516, 517–20 (2d Cir. 1946) (Hand, J.) (use will count if it is commercial), with Elizabeth v. Pavement Co., 97 U.S. 126, 134 (1878) (use will not count if merely experimental). To whatever extent potential third-party reliance is a serious theoretical matter, actual third-party public use as in Baxter, 88 F.3d at 1058–59, counts as prior art because it shows actual reliance.
139 Pfaff v. Wells Elecs., 525 U.S. 55, 67–68 (1998) (holding the year begins when the technology is “subject to a commercial offer for sale” and “ready for patenting”).
140 The importance of taking the time to prepare a good application is discussed infra Part III.A.3.
141 Chisum et al., supra note 6, at 326 (providing sample analysis using these terms).
142 Anticipation occurs when the claimed invention is found to have been in the art that existed prior to the putative invention. See supra notes 118–132 and accompanying text. A statutory bar occurs when the application is not filed within one year of a bar-triggering event. See supra notes 133–139 and accompanying text.
143 This is either the date of use, publication, or filing, depending upon which part of � 102 is triggered. See supra notes 118–132 and accompanying text.
144 See supra note 124 (discussing basic statement of test for anticipation).
145 See infra notes 146–150 (discussing application of this test).
146 E1 through En represent the elements of the claim arbitrarily assigned numbers 1 through n. E* represents enablement of the entire claim. PAR1 represents any single prior art reference, such as a journal article, sample product, student thesis, etc.
147 The term invalidity refers to the failure of a claim in an issued and successfully examined patent to satisfy one of the substantive patent-obtaining rules. The term unpatentability refers to the failure of a claim in a patent application to satisfy one of the substantive patent-obtaining rules. These terms are interchangeable if operating under a soft-look system like the registration model that does not involve any examination.
The representation of a claim as a listing of its several elements in claim charts like Table 1 has become so common in patent cases that the local rules of some courts that hear many patent cases, like the Northern District of California, have for some time required their use. Chisum et al., supra note 6, at 848–49 (discussing local rules for claim charts). The identification of these elements turns largely on the interpretation, or construction, of a patent claim, which is treated as a matter of law for decision by the court, and which is the first step in any analysis of either validity or infringement because the claim must be construed the same for both purposes. See generally id. at 829–73 (discussing the substantive and procedural law of claim interpretation after the Supreme Court decision in Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996)). The great degree of debate over the law of claim construction itself injects a degree of uncertainty into this otherwise relatively crisp analysis. Recent empirical work by Wagner suggests that this uncertainty may lessen over time as the Federal Circuit develops predictable trends in its case law. See R. Polk Wagner & Lee Petherbridge, Is the Federal Circuit Succeeding? An Empirical Assessment of Judicial Performance, 152 U. Penn. L. Rev. (forthcoming 2003), available at http://www.claimconstruction.com (discussing empirical work relating to trends in the Federal Circuit’s law of claim construction) (last visited Nov. 13, 2003).
148 See Minn. Mining & Mfg. v. Johnson & Johnson, 976 F.2d 1559, 1565 (Fed. Cir. 1992) (Rich, J.) (invalidity under � 102 is “a question of fact, and one who seeks such a finding must show that each element of the claim in issue is found, either expressly or under principles of inherency, in a single prior art reference”); In re Paulsen, 30 F.3d 1475, 1479 (Fed. Cir. 1994) (“In addition, the reference must be enabling and describe the applicant’s claimed invention sufficiently to have placed it in possession of a person of ordinary skill in the field of the invention.”); see also In re Robertson, 169 F.3d 743, 745 (Fed. Cir. 1999) (“To establish inherency, the extrinsic evidence ‘must make clear that the missing descriptive matter is necessarily present in the thing described in the reference, and that it would be so recognized by persons of ordinary skill. Inherency, however, may not be established by probabilities or possibilities. The mere fact that a certain thing may result from a given set of circumstances is not sufficient.’” (citation omitted) (quoting Cont’l Can Co. v. Monsanto Co., 948 F.2d 1264, 1268, 1269 (Fed. Cir. 1991))). The inherency and enablement doctrines make sense under the registration theory because a disclosure may induce third-party reliance based upon its ability to enable those in the art to practice its teachings, even if those teachings do not contain all the words that might appear in some patent claim. What matters for purposes of such reliance is substance, not form.
149 This represents the presence of each element in the claim, plus enablement, which as discussed in the case law supra note 148, is required for a finding of invalidity under � 102.
150 As discussed in the case law, supra note 148, invalidity under � 102 requires the prior art disclosure to be in a single reference.
151 Indeed, the likelihood of these investments is logically closely tied to the presence in the art of a specific teaching, suggestion, or motivation to combine elements in the prior art to work towards the claimed invention. The registration view thereby provides a justification for the case law that requires these elements as part of a nonobviousness analysis. For more on the law of nonobviousness, see infra Part III.A.2.
152 The ultimate question of whether it goes far enough will turn on whether these investments can be efficiently identified and protected. As discussed infra in Part III.A.2, although it is clear that the nonobviousness test does a better job on this score than the former “requirement for invention,” it is not entirely clear whether the case law relating to the test of nonobviousness has implemented the test optimally.
153 See supra note 86 (the registration theory helps explain the intricacies of the patent-obtaining rules whereas the other theories do not).
154 For history of the nonobviousness requirement in patent law, see generally Nonobviousness—The Ultimate Condition of Patentability, supra note 38; Sirilla, supra note 108.
155 During the first half of the 1900s when called the requirement for invention, before the 1952 Patent Act, it had become known as “the plaything of the judiciary.” Giles S. Rich, Why and How Section 103 Came to Be, in Nonobviousness—The Ultimate Condition of Patentability, supra note 38, at 1:208. Even after Congress wrote the � 103 nonobviousness into the statute in the 1952 Patent Act, over ten years passed before the Supreme Court applied the new standard of nonobviousness in Graham and its companion cases. 383 U.S. at 12–37 (consolidated with Calmar and Colgate-Palmolive); Adams, 383 U.S. at 48–52. For an inside look at the Graham decision, see Tom Arnold, Side Bar: The Way the Law of Section 103 Was Made, in Principles of Patent Law, supra note 6, at 549, 549–54. Soon afterwards, the Court re-injected confusion by writing about synergism and combinations. See Sakraida v. Ag Pro, Inc., 425 U.S. 273, 282 (1976) (holding patent invalid because it was a mere combination of old elements and had no synergistic effect); Anderson’s-Black Rock, Inc., v. Pavement Salvage Co., 396 U.S. 57, 61 (1969) (holding patent invalid because “No such synergistic result is argued here”). These terms were not weeded back out of the law until the creation of the Federal Circuit in 1982. See Sirilla, supra note 108, at 543. As the Federal Circuit has reminded:
A requirement for “synergism” or a “synergistic effect” is nowhere found in the statute, 35 U.S.C. When present, for example in a chemical case, synergism may point toward nonobviousness, but its absence has no place in evaluating the evidence on obviousness. . . .
The reference to a “combination patent” is equally without support in the statute. There is no warrant for judicial classification of patents, whether into “combination” patents and some other unnamed and undefined class or otherwise. Nor is there warrant for differing treatment or consideration of patents based on a judicially devised label. Reference to “combination” patents is, moreover, meaningless. Virtually all patents are “combination patents,” if by that label one intends to describe patents having claims to inventions formed of a combination of elements. It is difficult to visualize, at least in the mechanical-structural arts, a “non-combination” invention, i.e., an invention consisting of a single element. Such inventions, if they exist, are rare indeed.
Stratoflex, Inc. v. Aeroquip Corp., 713 F.2d 1530, 1540 (Fed. Cir. 1983).
156 See supra notes 30–49 and accompanying text (other theories merely point out rent-seeking concerns that are implicated by patents and at best suggest that ex ante determinations be made about which patents turn out to be better at decreasing the rent-seeking type of social cost).
157 See generally Giles S. Rich, Laying the Ghost of the “Invention” Requirement, 1 Am. Pat. L. Ass’n Q.J. 26 (1972), reprinted in Nonobviousness—The Ultimate Condition of Patentability, supra note 38, at 1:501 [hereinafter Rich, Laying the Ghost] (discussing the great lag between the arrival of the new standard in the statute and its adoption by the courts); Giles S. Rich, The Vague Concept of “Invention” as Replaced by Section 103 of the 1952 Patent Act, 46 J. Pat. Off. Soc’y 855 (1964), reprinted in Nonobviousness—The Ultimate Condition of Patentability, supra note 38, at 1:401 (Judge Rich’s speech upon receipt of the Kettering Award in which he discusses the role of nonobviousness in � 103 as the replacement for the so-called requirement for invention).
158 Compare Federico, supra note 121, at 183 (the requirement for invention “is an unmeasurable quantity having different meanings for different persons”), with id. at 184 (“The problem of what is obvious and hence unpatentable is still of necessity one of judgment.”).
159 See supra notes 151–153 and accompanying text (discussing role of nonobviousness analysis according to registration theory).
160 See Federico, supra note 121, at 180:
In form this section is a limitation on section 102 and it should more logically have been made part of section 102, but it was made a separate section to prevent 102 from becoming too long and involved and because of its importance. The antecedent of the words “the prior art,” which here appear in a statute for the first time, lies in the phrase “disclosed or described as set forth in section 102” and hence these words refer to the material specified in section 102 as the basis for comparison.
Id.
161 Although all of the � 102 art is initially available for analysis under � 103, certain types of prior art are excluded. According to the registration theory, these carve outs exist to remove from consideration the prior art for which the inference of possible innocent third-party reliance is not reasonable. See infra notes 162–166 and accompanying text (discussing carve outs).
162 The statute provides that the analysis should look to a hypothetical “person having ordinary skill in the art to which [the claimed] subject matter pertains” and ask whether to that person “the [invention] as a whole would have been obvious” given the “differences between the subject matter sought to be patented and the prior art.” 35 U.S.C. � 103 (2000). This in turn requires that several factual inquiries be made: “the scope and content of the prior art are to be determined; differences between the prior art and the claims at issue are to be ascertained; and the level of ordinary skill in the pertinent art resolved.” Graham, 383 U.S. at 17. A person having ordinary skill in the art according to this framework is sometimes called a PHOSITA, thanks to the coining of that term by Soans. Cyril A. Soans, Some Absurd Presumptions in Patent Cases, 10 IDEA 433, 438–39 (1966). The “pertinent art” is selected from among the entire set of prior art identified by � 102 depending upon whether it is analogous or non-analogous. According to the Federal Circuit:
Two criteria have evolved for determining whether prior art is analogous: (1) whether the art is from the same field of endeavor, regardless of the problem addressed, and (2) if the reference is not within the field of the inventor’s endeavor, whether the reference still is reasonably pertinent to the particular problem with which the inventor is involved.
In re Clay, 956 F.2d 656, 658–59 (Fed. Cir. 1992) (citations omitted); see also Paulsen, 30 F.3d at 1475 (affirming Patent Office rejection under � 103 because references from the fields of cabinetry and desktop accessories are properly considered to be analogous art to a patent claim directed to a clamshell case for a laptop computer under the second of these two alternative criteria).
163 See supra notes 95–96 and accompanying text (discussing purpose of the prior art rules under the registration theory).
164 See Soans, supra note 162, at 438–39 (coining the term PHOSITA). Indeed, Judge Rich, who co-authored � 103, has portrayed this PHOSITA “as working in his shop with the prior art references—which he is presumed to know—hanging on the walls around him.” In re Winslow, 365 F.2d 1017, 1020 (C.C.P.A. 1966) (Rich, J.) (this metaphor is referred to as the “Winslow Tableau”); see also Custom Accessories, Inc. v. Jeffrey-Allan Indus., Inc., 807 F.2d 955, 962 (Fed. Cir. 1986) (“The person of ordinary skill is a hypothetical person who is presumed to be aware of all the pertinent prior art.”); Int’l Cellucotton Prods. Co. v. Sterilek Co., 94 F.2d 10, 13 (2d Cir. 1938) (Hand, J.) (“[W]e must suppose the inventor to be endowed, as in fact no inventor ever is endowed; we are to impute to him knowledge of all that is not only in his immediate field, but in all fields nearly akin to that field.”). Judge Rich improved upon the Winslow Tableau in In re Antle:
In Winslow we said that the principal secondary reference was “in the very same art” as appellant’s invention and characterized all the references as “very pertinent art.” The language relied on by the solicitor, quoted above, therefore, does not apply in cases where the very point in issue is whether one of ordinary skill in the art would have selected, without the advantage of hindsight and knowledge of the applicant’s disclosure, the particular references which the examiner applied. As we also said in Winslow, “Section 103 requires us to presume full knowledge by the inventor of the prior art in the field of his endeavor” (emphasis, except of “prior,” added), but it does not require us to presume full knowledge by the inventor of prior art outside the field of his endeavor, i.e., of “non-analogous” art. In that respect, it only requires us to presume that the inventor would have that ability to select and utilize knowledge from other arts reasonably pertinent to his particular problem which would be expected of a man of ordinary skill in the art to which the subject matter pertains.
444 F.2d 1168, 1171–72 (C.C.P.A. 1971).
165 See 35 U.S.C. � 103(c) (providing carve outs). The carve outs for � 102(f) and (g) were added in 1984 to reverse the holding in In re Bass, 474 F.2d 1276, 1288–91 (Fed. Cir. 1973). See Patent Law Amendments Act of 1984, Pub. L. No. 98-622, � 103, 98 Stat. 3383, 3384 (1984). The carve out for � 102(e) was added in 1999 through � 4807 of the American Inventors Protection Act of 1999. American Inventors Protection Act of 1999, Pub. L. No. 106-113, � 4807, 113 Stat. 1501A-552, 1501A-591 (1999). For a discussion of the history of these carve outs, see Chisum et al., supra note 6, at 575–78.
166 No carve out is needed for the novelty analysis because the co-owner can keep the information sufficiently secret before the later claim that the reference will not trigger any of the subsections of � 102, except perhaps � 102(f). See 35 U.S.C. � 102. For this subsection, derivation, the co-owner can seek a claim by naming the first inventor, whose activity is co-owned. If the earlier reference does not disclose enough to invalidate under a novelty analysis then it would not have been possible for the subject matter to have been claimed at the time of the earlier reference, and the only opportunity to claim the subject matter is at the later time. The exclusion of the prior art from a nonobviousness analysis at that later time helps ensure the possibility of it being covered by a claim. Because the subject matter is co-owned with the prior art and is not otherwise available under any of the other subsections of � 102, it also is not the target of third-party investment.
167 See supra note 115 and accompanying text (discussing the goal of the nonobviousness requirement according to the registration theory).
168 According to the Federal Circuit:
The consistent criterion for determination of obviousness is whether the prior art would have suggested to one of ordinary skill in the art that this process should be carried out and would have a reasonable likelihood of success, viewed in the light of the prior art. Both the suggestion and the expectation of success must be founded in the prior art, not in the applicant’s disclosure.
In re Dow Chem. Co., 837 F.2d 469, 473 (Fed. Cir. 1988) (citations omitted); see also Chisum et al., supra note 6, at 584–97 (discussing contours of this analysis in practice and collecting sources).
169 As in Table 1, E1 through En represent the elements of the claim arbitrarily assigned numbers 1 through n; and E* represents enablement of the entire claim. See supra note 146 and accompanying text. In this table, PAR1 and PAR2 each represent any single prior art reference, such as a journal article, sample product, student thesis, etc. The key to the analysis under � 103 is that it permits the looking to more than one reference in the prior art to find all the elements of the claim plus enablement but only if in those references there can also be found (1) a teaching, motivation, or suggestion (TMS in the table) for those references to be combined to form the claimed subject matter as well as (2) a reasonable expectation of success (RES in the table) that the claimed subject matter will result when the references are so combined.
The apparent crispness of this framework may be somewhat illusory for several reasons. First, as with Table 1, there is some uncertainty regarding claim construction. See supra note 147 (discussing uncertainty about the law of claim construction and its application in any given case). Second, as discussed, supra note 162, the determination of obviousness is to be done from the perspective of a PHOSITA, and the case law leaves some substantial uncertainty as to how this hypothetical person is to be conceptualized. The Federal Circuit has provided a number of factors to consider when determining the characteristics of the PHOSITA:
Factors that may be considered in determining level of ordinary skill in the art include: (1) the educational level of the inventor; (2) type of problems encountered in the art; (3) prior art solutions to those problems; (4) rapidity with which innovations are made; (5) sophistication of the technology; and (6) educational level of the workers in the field.
Envtl. Designs, Ltd. v. Union Oil Co., 713 F.2d 693, 696 (Fed. Cir. 1983); see also Chisum et al., supra note 6, at 597–600 (discussing the case law relating to the determination of the PHOSITA).
170 See supra note 147 (discussing the validity and patentability analyses).
171 For a discussion of the case law leading up to this composite test, see supra notes 162–168.
172 The nonobviousness analysis is presently pertinent when determining patentability before the Patent Office and when determining validity in litigation, but under a soft-look system would only be relevant in litigation. See supra note 147.
173 See supra notes 151–153 (discussing role of nonobviousness under registration theory).
174 As the Court in Graham stated when describing these secondary considerations and their purpose:
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. . . .
. . . .
. . . These legal inferences or subtests do focus attention on economic and motivational rather than technical issues and are, therefore, more susceptible of judicial treatment than are the highly technical facts often present in patent litigation. Such inquires may lend a helping hand to the judiciary which, as Mr. Justice Frankfurter observed, is most ill-fitted to discharge the technological duties cast upon it by patent legislation. They may also serve to “guard against slipping into use of hindsight,” and to resist the temptation to read into the prior art the teachings of the invention in issue.
383 U.S. at 17–18, 35–36 (citations omitted). It is important to realize that even this initial Supreme Court statement of the secondary considerations raises the specter of endeavoring to judge the technological merit of the record rather than its factual content, as the registration theory would require. That is, under the registration theory, the framework is a factual one that anyone well skilled in trial and appellate practice can use, whereas the Court seems to be suggesting a deeper foray into the technological merit by speaking of “technological duties.”
The Federal Circuit has gone further than the Supreme Court in Graham by requiring: “evidence rising out of the so-called ‘secondary considerations’ must always when present be considered en route to a determination of obviousness.” Stratoflex, 713 F.2d at 1538–39; see also Chisum et al., supra note 6, at 601–12 (discussing the case law and commentary on the secondary considerations and collecting sources).
175 See supra note 171 and accompanying text (discussing TMS and RES); see also In re Gurley, 27 F.3d 551, 553 (Fed. Cir. 1994):
A reference may be said to teach away when a person of ordinary skill, upon reading the reference, would be discouraged from following the path set out in the reference, or would be led in a direction divergent from the path that was taken by the applicant. The degree of teaching away will of course depend on the particular facts; in general, a reference will teach away if it suggests that the line of development flowing from the reference’s disclosure is unlikely to be productive of the result sought by the applicant.
Id.
176 In his work pre-dating the prospect theory, Kitch pointed out that commercial success may be a poor indicator of the nonobviousness of an invention because it relies upon too long of a chain of doubtful inferences between the original state of the art and the eventual success. Edmund Kitch, Graham v. John Deere Co.: New Standards for Patents, 1966 Sup. Ct. Rev. 293, 331–33. Commercial success, however, may operate as a good proxy for what was not being done by others to the extent it can be determined that its primary cause is the invention itself, as opposed to other factors such as marketing or happenstance. One problem with making such determinations is that they easily can be influenced by reward theory and thereby become as indeterminate as the reward theory.
177 Robert P. Merges, Commercial Success and Patent Standards: Economic Perspectives on Innovation, 76 Calif. L. Rev. 803, 838–42 (1988) (citing Kitch, supra note 176, at 330–35).
178 Kitch, supra note 30, at 282–83.
179 See Kieff, supra note 11, at 707–10 (discussing the commercialization theory’s focus on providing incentives for commercialization).
180 See supra notes 85–86 and accompanying text (discussing registration theory’s goals of minimizing social cost).
181 See supra notes 27, 81, 106–107 and accompanying text (discussing problems with focus on the merits of the inventions); see also supra notes 93–103 and accompanying text (discussing importance of investment-backed expectations by third parties). In cases where enough time has gone by for there to be evidence of commercial success, there is usually an infringer or two and then the court is left trying to determine whether to decide in favor of the coordination benefits of patents or in favor of protecting the investments of the infringers. In a single-cycle game it may be easy to decide in favor of protecting the infringer’s investment. But in a multi-cycle game such a rule would provide incentives to infringe too much and in an uncoordinated fashion and so instead the coordination benefits dominate and evidence of commercial success, or lack thereof, should be ignored, not required.
182 Only to the extent the secondary factors so soften the crispness of the framework modeled in Table 2 that the net benefits of the entire nonobviousness standard fade should it then be abandoned in its entirety. See supra note 46 (suggesting that the registration theory may not require the nonobviousness standard and noting that Kitch, supra note 30, may not be to the contrary). This conclusion, although admittedly not this reasoning, accords with the views of at least one framer of the 1952 Patent Act who described nonobviousness as “the heart of the patent system and the justification of patent grants.” Rich, Laying the Ghost, supra note 157, at 1:501.
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