Our Founders’ Inventive Constitutional Brilliance

“The Congress shall have power . . . to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive rights to their respective writings and discoveries[.]”

Constitution Day, September 17, is a fitting time to examine anew Clause 8 of Article I, Section 8 of our Constitution.

We 21st century Americans desperately need renewed appreciation for the Founders’ model for spurring innovation. It carefully balanced private interests with public interests, exclusive private property rights of limited duration with public disclosure and eventual entry of creative and inventive output into the public domain.

Our fledgling nation had a largely agrarian economy. Economic depression from 1774 to 1789 crippled GDP by 30 percent. America contended for her sovereignty among established nations like Britain and France. The Founders witnessed how the Articles of Confederation had fallen short. The newly independent nation needed global clout, and fast.

Article I, Section 8 enumerates powers bestowed on the legislative branch. The delegates in Philadelphia empowered Congress to secure intellectual property rights. The Founders opted for innovation as the key to sparking America’s economic diversification and expansion.

Notably, Article I, Section 8, Clause 8 provides for the only personal right in the Constitution itself. Other individual rights of life, liberty, and property came later in the Bill of Rights, the first 10 amendments.

Drawing from various state copyright and patent laws, the Founders fashioned the original “open-source” innovation model. Their approach leveraged secure private property rights and democratization of IP to incentivize sharing one’s discoveries.

Abraham Lincoln describes the Constitution’s Patent Clause as “add[ing] the fuel of interest to the fire of genius, in the discovery and production of new and useful things.”

Several facts illuminate the urgency and importance the Founders placed on Clause 8’s property rights-centered IP incentive system.

First, City Hall in New York City became the seat of the federal government in 1789. Renovated into Federal Hall, the building was outfitted not just with Senate, House, committee rooms, and a library. It also had a “machinery room” to house the models to come from patentees.

The Founders were serious about the promotion of progress of useful arts by way of private property rights. While Federal Hall contained a room for patent models, the Supreme Court met down Broad Street.

Second, James Madison, the Father of the Constitution, explains the IP Clause in Federalist 43. He refers to British copyright protection. He then notes that “[t]he right to useful inventions, seems with equal reason to belong to the inventors. The public good fully coincides in both cases, with the claims of individuals.”

Federalist 43 thus connects invention with the British protection of authors’ works. Madison observes that most of the American states had enacted patent laws. He had been a leading proponent of patent rights in the Continental Congress and the Constitutional Convention. Madison entwined secure property rights with the incentive to invent.

Third, President George Washington gave the first State of the Union in January 1790. He urged the First Congress to enact a patent law. He cited “the expediency of giving effectual encouragement . . . to the introduction of new and useful inventions” as key to advancing “agriculture, commerce, and manufactures.” Soon after, the Patent Act of 1790 was the third bill Congress enacted.

If the proof’s in the pudding, the Founders’ brilliant model to foster innovation proved a stunning success. Clause 8 led to over two centuries of unprecedented invention and practical progress of knowledge and useful arts.

The model the Founders gave us created so much wealth and improved the American standard of living such that every American has enjoyed tangible benefits. Invention moved the United States from fledgling backwater to global innovation leader in short order.

This Constitution Day, thank the Lord for the Founders and their understanding how to stimulate ingenuity by applying “the fuel of interest to the fire of genius.” And while you’re at it, thank an inventor.

Unhappy 10th Birthday, AIA

Ten years ago, Congress enacted a highly destructive law undoing important elements of the wildly successful, property rights-based, two-century-young U.S. patent system. Bipartisan congressional majorities wreaked havoc upon inventors and patent owners through the mislabeled America Invents Act. A decade later, the verdict is in, and it isn’t pretty.

Among its many poison daggers, the AIA denied de novo judicial review of patent office decisions made after a patent is granted. It set up adversarial, quasijudicial administrative proceedings for canceling patents far more easily than in real courts — the sacred province of all U.S. property rights matters until the AIA.

Other AIA changes replaced patent rights going to the original inventor with IP rights going to the first to file for a patent. AIA eliminated a one-year grace period and created an ersatz “provisional” patent.

This law dramatically expanded “prior art,” which is inventions, disclosures and publications, to encompass anything anywhere in the world — an outrageously impossible trove to dredge and irrelevant to U.S. invention and U.S. patent rights. There’s also “prior user rights” assertion for anybody anywhere to claim to have been using an invention for which an inventor tries to assert exclusivity under his or her patent.

Consider an example of what the AIA hath wrought: Patent owner Low Temp Industries in May 2020 filed a complaint in federal district court against Duke Manufacturing for patent infringement and sought preliminary injunction. The court issued an injunction in June 2021 following discovery and witness testimony. The court upheld the validity of LTI’s patent and cleared the way for trial.

Alleged infringer Duke is taking full advantage of the AIA’s weaponry. Duke appealed the ruling to the Federal Circuit and also requested interpartes review proceedings at the Patent Trial and Appeal Board, AKA “patent death panels.”

PTAB is one of AIA’s malicious assaults on private property rights in one’s inventions. To the contrary, the Constitution itself provides patents to secure private property rights in inventors’ discoveries.

Abominably, PTAB instituted the requested proceeding in what should have been a straightforward denial. LTI points out how this decision warrants scrutiny as to “whether the Board should institute an IPR where the district court has already heard and decided the same invalidity issues between the same parties and institution would guarantee duplication of effort between tribunals.” Moreover, Duke “appealed the district court’s injunction, thereby guaranteeing duplicate parallel proceedings in the Federal Circuit.”

For PTAB to allow a postgrant proceeding when a federal court has determined patent validity and granted an injunction pours salt in the wounds presumably infringed patent owners such as LTI have already suffered. It injects great uncertainty around patents, disrupts patent reliability and disquiets title in inventions, which are critical to our economic security.

The AIA has caused plights such as the one LTI finds itself in to happen on far too regular a basis. PTAB death panels have used adversarial proceedings more than 3,000 times. It’s demolished some 84 percent of the patent claims it’s reviewed.

Parallel proceedings. Duplication of effort and expense. Ignoring the law (35 U.S.C 316(b)) by instituting IPR when it threatens the "economy and the integrity of the patent system.”

Worst of all, setting the table yet again for an administrative tribunal of inferior, unconstitutionally appointed “judges” to second-guess and even overrule constitutionally appointed, real judges in real courts in the judicial branch. It makes Alice's Wonderland seem logical and rational.

Such destruction of the rule of law emerges from the slime of the Administrative State. And the U.S. Supreme Court feeds this monstrosity.

The high court legitimized PTAB in its 2018 Oil States ruling. That misguided opinion further harmed patent rights by opining that patents grant something like a public franchise. Talk about a property rights error on the cusp of a slippery slope!

This summer, a divided Supreme Court ruled in Arthrex that PTAB “judges” aren’t constitutionally appointed. But then the fractured justices fashioned a fig leaf so these administrative hacks can continue exercising judicial powers in the executive branch. Excuse me, what don't you understand about the Separation of Powers?

Not all of Capitol Hill is asleep. The Republican Study Committee in the U.S. House has introduced the Countering Communist China Act. Mainly geared to address China’s aggressive grabbing for the global innovative lead in critical emerging technologies, this legislation includes STRONGER Patents Act provisions to rein in PTAB’s excesses and force on it standards of fairness and due process akin to those of federal court.

The RSC bill also fixes the Supreme Court’s eBay decision that’s resulted in a steep barrier against patent owners winning injunctions. The legislation puts the United States on the side of the TRIPS agreement’s protections of intellectual property, currently under threat at the World Trade Organization and by the Biden U.S. Trade Representative. The bill allows inventor-patent owners to opt out of PTAB when infringers challenge their patents there.

Bottom line: The AIA, aided and abetted by cockeyed jurists, takes away important, constitutionally guaranteed private property rights. This law, compounded by rudderless judges, represents a victory for the Administrative State — the leviathan that gobbles up property rights, due process, fairness, the rule of law and spits out innumerable quasijudicial rulings, regulations and red tape.

Just ask inventors and patent owners like Low Temp Industries if the AIA’s 10th anniversary is reason to celebrate.

E.O.: Assaulting Property Rights Is a Strange Way to Promote Competition

President Biden’s July 9 executive order, “Promoting Competition in the American Economy,” purports to promote competition. Let’s just say the order presumes a whole lot. Its false presumptions lead to policies that weaponize a blunt instrument: antitrust.

The White House claims that the E.O. addresses anticompetitive problems arising from consolidation in industrial sectors such as banking, hospitals, agriculture, technology and biopharmaceuticals. Unfortunately, the “trust busting” order is long on concentrating Big Government’s power and short on fostering competition.

Two fundamental flaws underlie the E.O.: One, the order assumes a static, zero-sum economy. It may reslice the pie, but won’t grow the pie.

Two, it presumes intellectual property exclusivity to be anticompetitive. However, patents and IP are vital for sparking new competition, creating new markets and displacing monopolists.

The order supplants decisions in the market made by hundreds of thousands of businesses and investors with skin in the game and by millions of consumers. The E.O. empowers bureaucrats with nothing at risk if they choose wrongly or regulate unwisely to make decisions in Uncle Sam’s ivory tower. And the order hands bureaucrats an A-bomb with orders to seek and destroy.

This makes the E.O. a recipe for concentrated power and market lethargy. It locks in incumbent firms, protecting consolidation! It will kill dynamic competition and the kind of innovation that solves big problems and gives the United States an edge against China.

This order badly hurts inventors' private property rights. For example, the E.O. turns back the clock on the New Madison Approach that has restored balance between antitrust and IP.

For small and large inventors, whose innovation stands to spark dynamic competition, the companies that could implement their inventions hold asymmetric advantage. Implementers have no risk in the invention, while inventors have incurred substantial sunk costs.

Many implementers stoop to predatory IP infringement. Inventors need the exclusive period of the patent term in order to fend off those thieves and to go from 0 to 60 commercializing their inventions.

So, patent exclusivity enables innovators to shake up static markets and compete with established corporations. But throughout, the E.O. presumes that IP harms competition.

Other examples of the E.O.’s misguided directives include:

• Undoing Standard-Essential Patents’ Access to IP Remedies: The order threatens to reverse the 2019 Joint Policy Statement on Remedies for Standards-Essential Patents. The Justice-USPTO-NIST statement affirmed access to injunctions and other available remedies for SEPs subject to fair, reasonable and nondiscriminatory, or FRAND, licensing commitments. Returning to the 2013 approach turns FRAND into a compulsory licensing clause and weakens IP rights, harming both competition and innovation.

• “Unjustifiably” Delayed Generic Drug and Biosimilar Market Entry: The E.O. disrupts the balance the Hatch-Waxman Act and the Biologics Price Competition and Innovation Act strike between biopharma innovation and faster market entry by generic drugs and biologics. Twisting the patent system to diminish innovators’ market exclusivity rights leads to fewer new medicines as well as fewer generics.

• Industry-Specific M&A Rules: The order calls for industry-specific merger and acquisition rules for banks, health care, and other sectors. This is an unsound regulatory move. It introduces adverse unintended consequences by undermining the rule of law.

• Reversals of Approved Deals: Putting reversal of previously approved mergers, including vertical mergers, on the table injects costly uncertainty for investors and businesses across the board. It reduces competition by inducing extreme caution. Such roadblocks to M&A disincentivize startup activity by foreclosing exit strategies while abetting monopoly.

• Bayh-Dole Product Price or March-In: It discourages NIST from including in its Bayh-Dole final rule anything that relates to the law’s march-in rights or price of a product from federally funded inventions. This directive leaves unaddressed the most remarked-on part of the proposed rule. It leaves unsettled — and open to deliberate misreading — the statute’s narrow grounds for marching in on a patent. Nothing in the law itself justifies basing march-in on the price of a product.

But wait, there's much more! So, suffice it to say that this E.O. disrespects private property rights. It will make America poorer.