Cato praises NZ patent law

Eli Dourado at Cato writes:

Libertarians intuitively understand the case for patents: just as other property rights internalize the social benefits of improvements to land, automobile maintenance, or business investment, patents incentivize the creation of new inventions, which might otherwise be undersupplied.

So far, so good. But it is important to recognize that the laws that govern property, intellectual or otherwise, do not arise out of thin air. Rather, our political institutions, with all their virtues and foibles, determine the contours of property—the exact bundle of rights that property holders possess, their extent, and their limitations.

Intellectual property rights are very important, but they are a balance between rewarding innovation and allowing further innovation.

In defining the limits of patent rights, our political institutions have gotten an analogous question badly wrong. A single, politically captured circuit court with exclusive jurisdiction over patent appeals has consistently expanded the scope of patentable subject matter. This expansion has resulted in an explosion of both patents and patent litigation, with destructive consequences. …

In patent politics, the romance has been gone for at least three decades. Here’s why. In most areas of law, the loser in a federal trial appeals to the circuit court corresponding to the federal judicial district in which the trial was held. But in 1982, at the urging of the patent bar, Congress consolidated appellate review of all patent cases in a newly created Court of Appeals for the Federal Circuit.

And get this – the Federal Circuit Court basically is a law to itself, and ignores the Supreme Court.

Observers on all sides widely recognize that the Federal Circuit routinely undermines Supreme Court precedent. …

Supreme Court justices also recognize the Federal Circuit’s insubordination. In oral arguments inCarlsbad Technology v. HIF Bio (2009), Chief Justice John Roberts joked openly about it:

Mr. Rhodes: I can’t suggest what the Court might finally decide other than to say that—that, again, the circuit courts of appeal have uniformly applied this. They seem to be—

Chief Justice Roberts: Well, they don’t have a choice, right? They can’t say, I don’t like the Supreme Court rule so I’m not going to apply it, other than the Federal Circuit.

So what can be done?

Another helpful reform would be for Congress to limit the scope of patentable subject matter via statute. New Zealand has done just that, declaring that software is “not an invention” to get around WTO obligations to respect intellectual property. Congress should do the same with respect to both software and business methods.

Nice to see our law held up as a model.