Randall Rader’s patent truth

Few in the IP community have had as big an impact on US patent law and policy in the last 30 years as Randall Rader. As a judge and then chief judge at the Court of Appeals for the Federal Circuit (CAFC) from 1990 until his departure in June, Rader had a ringside seat as patent law sought to keep pace with the innovation economy, the Supreme Court became a far more frequent arbiter in patent disputes and the US Congress debated and introduced the first piece of major new patent legislation in more than 50 years.

Appointed just eight years after the CAFC was established, Rader took office when most still viewed it as a marked improvement on the days of disparate circuit court judgments which confused patent attorneys and businesses alike. He left, though, in a very different climate.

Although it hears more than just patent cases, the CAFC’s central role in the patent system has seen it caught in the crossfire between the different patent reform camps. Much of that criticism has emanated from academics, bloggers and writers who are keen to reform the system and weaken patent rights, as well as from some technology companies; but it has also appeared in more mainstream channels. In July, Rader’s departure prompted the Wall Street Journal to write a piece entitled “Critics fault Court’s grip on appeals for patents”.

At a time of such upheaval, Rader’s departure has dismayed many members of the patent bar. He has declined to comment on his exit; but for someone who served on the CAFC for almost a quarter of a century, the circumstances surrounding his decision to step down must have been particularly hard. In May this year a complimentary email which he had sent to a partner at Weil Gotshal & Manges, who had appeared in two cases for Microsoft and Medtronic in which Rader had initially been involved, came to light when the attorney used it for marketing purposes with prospective clients. Having initially recused himself from the cases in question, Rader then resigned as chief judge, telling his judicial colleagues that “the email constituted a breach of the ethical obligation not to lend the prestige of the judicial office to advance the private interests of others”. Then in June, he announced that he would leave the CAFC altogether, telling the IAM blog that he intended to focus his efforts on teaching.

In late August, as he prepared for his patent law class at George Washington University, Rader sat down with IAM to discuss the state of the CAFC, its relationship with the Supreme Court and the patent landscape in general. Unsurprisingly, he had much to say.

Back to school

Amid the new semester buzz at George Washington Law School, a few blocks west of his old digs at the CAFC, Rader looks right at home. An open-necked shirt, casual jacket and goatee (grown over the summer, but possibly not a permanent fixture) underline just how easily he has swapped his judicial robes for the greater informality of life as an academic.

As well as his teaching gig in DC, Rader has committed to giving classes at the University of Washington in Seattle (which also happens to be the home of the lead guitarist in his band) and at Tsinghua University in Beijing. His twin-track career perfectly suits a personality which can switch effortlessly between the approachable, enthusiastic professor and the steely, more guarded courtroom judge.

That steeliness certainly helped in the latter years of his stint at the CAFC. To some extent, he views the criticism that has mounted against the Federal Circuit as inevitable, given the point it has reached in its lifecycle. When he joined, he says, the court was still in the hands of “the legendary giants of the creation of the Federal Circuit – Howard Markey, Dan Friedman and Marion Bennett”. It was still bringing uniformity to an area of law that had suffered from forum shopping and splintered judicial opinions from the circuit courts.

“There was great enthusiasm about the work that the Federal Circuit was doing to bring uniformity and enforceability to the law,” Rader recalls. “To compare that with 2014, that initial enthusiasm has died; and indeed the Federal Circuit has as many critics as it has robust adherents. But if you ask anyone with an eye to the court’s contribution to US jurisprudence, then I think they speak of it as an institution that has fulfilled a great deal of its promise.”

He admits that the court now has more critics in part because it has fulfilled its purpose of bringing greater uniformity to patent law and because its achievements in its first decade were such a marked improvement on what had gone before. “The court now is striving to maintain doctrines that were established in that first decade, and no matter how hard you strive to maintain things, there’s always going to be some difficulty in sounding a single, predictable drumbeat,” he stresses.

Rader may recognise the difficulties and criticism that the CAFC faces, but he still sees a clear need for the role that it plays. “I think patent law benefits particularly well from the uniformity that the Federal Circuit has provided and the single message in patent law that can be provided by the court strengthens the United States and the world innovation market,” he insists. “We have a uniform set of rules that, if administered faithfully, can provide the kind of incentive for innovation that makes the US economy stronger.”

However, part of the problem, critics maintain, is that those rules are becoming increasingly confused. To some extent, this is because of the increasingly troubled relationship between the CAFC and the country’s highest court.

A cultural divide

For much of Rader’s tenure at the CAFC, the Supreme Court took a greater interest in patent law than at arguably any other point in its history. As intangible assets have grown in importance to the US economy and the pace of innovation has given rise to more complex questions around topics such as patentability, the Supreme Court has increased its oversight of the CAFC.

In its last term it heard six patent cases, including one – Alice Corp v CLS Bank – which Rader describes as the greatest judicial failure of his career. The case, which concerns the patentability of software designed to resolve complex financial deals at the end of a trading day, had produced a highly splintered en banc decision from the CAFC, which ran to an absurdly long 135 pages. Members of the patent bar continue to shake their heads in amazement at the judgment.

The Supreme Court’s greater oversight has undoubtedly increased the attention on the CAFC. The relationship between the two courts has given rise to what Rader describes as a “clash of cultures”. On the one hand you have the CAFC, which he sees as striving to provide greater clarity to a corporate world desperate for clear, predictable answers to business-critical questions. On the other, you have the highest court in the land, which has a very different set of objectives.

“You see, you can’t run a business by waiting two years for a district court to balance all the various factors and get back to you with an answer,” explains Rader. “You need a test which can be predictable and implementable in a fashion responsive to the speed of the market. So here’s an instance where the majesty of the Supreme Court’s culture – where it balances the public against the private, liberty against order and comes to these grand, magisterial decisions – doesn’t really serve the commercial world very well.”

Although Rader points out that it’s not all a one-way street, with the Supreme Court recognising on many occasions that it should defer to the CAFC to reach the final decision, its intervention has not provided clarity. “They’ve stepped in so often to disrupt the commercial wisdom of the Federal Circuit that now there’s an uncertainty inherent in a good deal of the intellectual property legal landscape that jeopardises the value of IP and the innovation policy of the nation,” he claims.

The discord between the two courts has been clearly apparent on a number of occasions. In writing the Supreme Court’s unanimous decision in Akamai v Limelight, for instance, Justice Alito wrote that: “The Federal Circuit’s analysis fundamentally misunderstands what it means to infringe a method patent.” For a court that hears as many patent cases as the CAFC, that’s quite an indictment. Chief Justice Roberts has even entered the fray, remarking in an oral argument in 2009 that the CAFC appeared to be the only court that did not feel bound by Supreme Court precedent.

Responding specifically to Alito’s criticism, Rader says: “You know, this is part of the culture clash. Remember, all of the justices came from regional circuits; they’re very uncomfortable with a circuit that has national jurisdiction. So there is this kind of culture clash again – there’s a discomfort that the justices have with another national court. You see, they’d like to see themselves as the only national court – well, Congress has created a second national court and that’s part of the clash of cultures here.”

A bleak future for software patents

Nothing seems to reflect this more than the confused jurisprudence around Section 101 of Title 35 USC, which deals with patentability. According to Rader, the courts’ thinking reached its nadir in the Supreme Court decisions in Mayo v Prometheus and Alice. “Alice simply carried Mayo over into the area of method patents and Mayo is probably the single most disappointing case in world patent jurisprudence,” he says. “It causes me great pain to recognise that the worst case in patent law history doesn’t come out of India or Pakistan or Vietnam or China, even; it has come from the United States as recently as a few years ago.”

The issues raised by Section 101, Rader stresses, require nothing more than a look at the statute. “The US statute does not have big exceptions that carve out software per se, as the European statute does,” he points out. “It says any machine, any process, any composition of matter, any article of manufacture – and software fits into about three of those – is eligible for patent protection. Now, whether it receives that protection depends on whether it improves over the prior art and whether it adequately discloses and whether the other facets of patent law permit the protection of innovation.”

In fact, he adds, the law goes even further than that. “101 says any invention or discovery – or even discoveries – is protected if it is a machine or composition of matter,” he insists. “So I can discover a new composition of matter and that ought to be protected, according to the statute. And yet our current jurisprudence doesn’t even consult the statute any more. It consults whether something fits within abstractness which is not defined if it’s software or a law of nature, which has been blown completely out of proportion by the Mayo decision.”

The prospects for the software industry following the Alice decision are particularly bleak, he predicts: “This is the great area of innovation, driving the market forward and serving mankind at paces we can’t even imagine. To say that that area of innovation is suddenly not going to be protected, there’s not going to be incentives for research and development in that area, is out of step completely with an understanding of what is driving innovation in the modern marketplace. I find the landscape for software innovation protection after Alice to be much more disturbing and less encouraging.”

Faith in the future

Rader may paint a particularly stark picture for large parts of patent jurisprudence, but he is nothing if not an optimist. The ‘culture clash’ that he identifies will ease, he insists; and in some areas – such as the attorney fee shifting which the Supreme Court addressed in Octane Fitness v ICON Health & Fitness last term – he is cheered by what he sees as the court moving in the right direction.

He has a firm belief in the power of the market to help change the prevailing judicial winds. “I think that as it becomes more apparent that the strengths of IP are being undermined by the uncertainty of the legal doctrines, the innovators – whether those in the biotech marketplace or the pharmaceutical marketplace or the high-technology marketplace – will eventually make clear that the value they bring to the market needs to be protected by sound and predictable doctrines of the law,” he suggests.

Of course, those innovators do not always speak with one voice. In fact, in the recent debates around patent reform, which was ultimately shelved in May by Senator Patrick Leahy, chairman of the Senate Judiciary Committee, it appeared that large parts of the pharma and high-tech industries were on opposing sides. With the rapid pace of change in technology and the much lengthier R&D process in pharmaceuticals, the interests of the two most powerful patent factions may now be diverging more than ever.

Not so, says Rader. “There are always going to be differences in the innovation model from one discipline to the next, but the basic need to protect your R&D investments exists in any responsible business,” he remarks. “They recognise that they must invest a certain degree of their current capital in developing future markets, which is done through innovation, and that current investment needs to be protected through IP. At that basic level, I don’t think there’s a great distinction between one discipline and the next.”

The right kind of reform

In Rader’s opinion, that the pharma and tech sectors may now be shifting to different sides of the reform debate shows how far proposed legislation has diverged from the real problems that afflict the patent community. The patent system is not broken; it is the runaway litigation climate in the United States that needs addressing, he insists.

“The problems, which have indeed given rise to some abusive patent litigation, are separate from our innovation policy and the need we have to continue to give incentives to investment in R&D and continue to spur progress in all the technical and biotech arts,” he explains. “My guess is that as we see that distinction, and see that we can deal with the abusive litigation without endangering innovation policy and the strength of the patent system, there will be less patent reform and more litigation reform, and there will be a return to a strengthening of the patent system per se.”

It is the astronomical cost of discovery that is in Rader’s crosshairs: “We need to be more efficient, more timely, and we need to cut back our onerous and unnecessary discovery expenses and get litigation back to its role of discerning the central relevant facts – not every little detail that can be discovered in millions of dollars of unnecessary legal gamesmanship.”

Although Rader says he would like to work with Leahy and the rest of the Senate Judiciary Committee on patent reform, he maintains that district judges can effect the most significant changes in litigation practices. “All the problems are not legislative,” he insists. “The Googles of the world would like to see it that way – you see they can invest $10 million in a lobbyist and hope then to achieve what they want with legislative change. I really think the better way to tackle the problem is to deal with the district judges.”

He adds: “I think those judges can identify better than anyone else the case with abuse as opposed to the case where the system is working to resolve legitimate disputes. Where they identify abusive litigation, they can dive in with early summary judgment motions and limiting orders of one kind or another and bring some discipline to the entire process. So I think that is worth emphasising more than legislation.”

Rader continually returns to the theme of abusive litigation as the problem, rather than the patent system as a whole. The issue of frivolous demand letters, he says, should in part be handled at the district court level, with judges encouraged to knock out the most egregious forms of patent abuse.

Behaviours, not business models

To Radar, the issue is clearly not about whether an entity is a patent troll, a non-practising entity or an operating company – “you just can’t do justice based on party identification,” he insists – but about how that entity behaves. His belief in a well-functioning, appropriately empowered court system is supplemented by a firm conviction that the private markets also have a crucial role to play in addressing many of the worst excesses of patent plaintiffs and defendants alike.

He peppers his comments with references to the market and, for someone who has never worked in-house or in private practice, he demonstrates a surprising level of concern for the needs and interests of businesses and their leaders. Where the markets and the courts are failing, though, is in valuing patents.

Rader is critical of a system which, he feels, places too high a value on technological change. He views this as a problem around the question of patent quality, which seemingly means that any innovation that does not represent a step change on what went before is somehow pegged as inferior. But the incremental progress of humankind, he points out, is based on “a little progress every day”. To suggest that those incremental improvements should not be recorded takes away from the purpose of the system – that progress is disclosed so that others can build on it. The secret, he argues, is appropriately valuing that progression.

“If something is a small advance and it’s non-obvious and so forth, it deserves a patent; but it should be valued at $10,000 not $10 million,” he comments. “We have an inclination to inflate the value of a contribution to the technical art field that it occurs in. If we devote more time to getting the right value, I don’t think we’d have to spend as much time worrying about whether it was quality.”

To hear Rader speak in such depth about the patent system is to appreciate just how much he still has to contribute on all thinking around intellectual property. He admits that being chief judge of the CAFC affords you little power per se, but it does give you a podium from which to voice your opinions.

His time on the bench coincided with a rising tide of criticism of the US patent system and the CAFC’s position within it, but it is hard to find anyone who is critical of Rader’s own contribution. Although he is clearly keen to play some sort of role in shaping reform, this may not be possible in the current febrile atmosphere in DC and the patent market.

That said, as the lead singer of his band De Novo and a natural frontman, it’s hard to imagine Radar staying out of the limelight for too long.