Bricks Tumble from Administrative State’s Walls

The latest greatest hits at the U.S. Supreme Court further curb the excesses of the Administrative State by restoring an important aspect of the Constitution’s separation of powers and Seventh Amendment constitutional rights.

The court’s holding in Loper Bright Enterprises v. Raimondo ends "Chevron deference,” the legal doctrine under which Article III courts defer to the interpretations of federal agencies regarding the meaning of the statutes agencies administer.

"Chevron deference” has bound the judiciary from questioning unaccountable bureaucracies’ opinions—what bureaucrats say goes. This has empowered agencies to operate unchecked by the legislative or judicial branches, steadily building the Administrative State that cancels constitutional protections and legal rights.

The majority opinion in Loper Bright rests on a sounder reading of the Administrative Procedure Act. The APA recognizes the “elemental proposition reflected by judicial practice dating back to Marbury: that courts decide legal questions by applying their own judgment. It specifies that courts, not agencies, will decide ‘all relevant questions of law’ arising on review of agency action . . .—even those involving ambiguous laws—and set aside any such action inconsistent with the law as they interpret it. And it prescribes no deferential standard for courts to employ in answering those legal questions.”

U.S. House Republican leaders responded to the Supreme Court’s overturning of a rule that tied the hands of Congress and the judiciary from performing their constitutional checks and balances against the imperial executive.

“For forty years, Chevron deference has led to a massive expansion of the federal government and a reduction of Congress’[s] role in the policymaking process. Chevron upended the separation of powers between our three branches of government and is responsible for many of the burdensome regulations that stifle progress and curtail liberty. Today’s landmark decision by the Court restores the balance outlined by the Founders in our Constitution and represents the beginning of the end of the administrative state.”

Look for executive agencies being held accountable and constrained under this restoring of separation of powers.

Also, the high court ruled in Securities & Exchange Commission v. Jarkesy that "the Seventh Amendment entitles a defendant to a jury trial when the SEC seeks civil penalties against him for securities fraud.”

The majority in Jarkesy described in some detail the contrast between Article III courts and administrative proceedings that hand an agency legislative, executive and judicial powers.

Further, the SEC (and many other administrative agencies) have had the prerogative of taking someone to real court or to an in-house, quasijudicial administrative proceeding.  The court held that “[a] defendant facing a fraud suit has the right to be tried by a jury of his peers before a neutral adjudicator. Rather than recognize that right, the dissent would permit Congress to concentrate the roles of prosecutor, judge and jury in the hands of the Executive Branch.”

This cozy arrangement deprives individual rights and butchers the division of authorities the Founders constructed in the Constitution and Bill of Rights. Perhaps most chilling in the majority opinion is its description of this aspect of unbounded administrative fiat: “The Commission or its delegee also determines the scope and form of permissible evidence and may admit hearsay and other testimony that would be inadmissible in federal court” (emphasis added).

Thus, securing constitutional rights to individuals and limiting excessive administrative overreach, through these two rulings, represent victories for private property rights.

These rulings, particularly Loper Bright, follow the Supreme Court’s laudatory decisions against the EPA’s stretching the Clean Air Act in West Virginia v. EPA and similarly lassoing the EPA’s gross expansion of the Clean Water Act in Sackett v. EPA.

Steadily, SCOTUS is hauling the Administrative State in line with the Constitution’s limits on government.

Patent Suit Trends Aiding Infringers

A new study of patent litigation finds significant, troubling changes in U.S. patent litigation patterns

Republicans and conservatives tend to react in knee-jerk fashion to civil litigation. We reflexively react as though all civil lawsuits are tantamount to advertising ambulance-chaser lawyers who clog the courts with shady shakedown cases.

While there are plenty of sketchy attorneys playing a numbers game against corporate deep pockets, conservatives should be more discerning, more astute, more prudent, and differentiate between the dregs and the cream.

Indeed, much civil litigation is legitimate. Courts exist in large part to settle legal disputes between private parties.

Patent litigation is one such critically important category of civil lawsuits. Unlike copyright, patent law provides only civil, not criminal, penalties for infringement.

Patent owners’ only recourse to defend their intellectual property is civil litigation. At stake in these cases is the right to exclude anyone else from making, using, selling or importing their invention.

The inventors have already invested much in their invention: Time, money and other resources poured into research and development perfecting a working item that represents newly created property. Then there are the costs of commercializing an invention.

In exchange for exclusivity for a limited time, their patent has disclosed the invention’s details to the degree than someone else could make a functioning model of the invention. The patent (i.e., a deed) is supposed to secure exclusivity, enforceable only by litigation.

The patent litigation study by Marcum reports that patent case filings have fallen over recent years, from 6,497 in 2013 to 3,639 in 2022. This drop has occurred even after the 2011 America Invents Act antijoinder provision forced separation of infringer defendants into their own cases. Compared to the number of patents granted, only 1.7% of patents on average were involved in infringement litigation in 2013 to 2017; that percentage has fallen to a negligible 1%.

Damages awards in patent infringement cases have dropped, as well. Median damages that courts award in patent litigation only amount to $3.7 million. In just 22 percent of cases with damages awarded do court levy enhanced damages against infringers for willfulness.

Marcum confirms that awards of permanent injunction are less likely now. Courts awarded patent-owner plaintiffs 80 injunctions between 2008 and 2012—after the Supreme Court’s infamous 2006 eBay v. MercExchange ruling. Injunctive relief was granted in a mere 36 cases between 2018 and 2022.

Marcum's assessment also puts the lie to the patent infringers’ lobby’s “patent troll” propaganda--as though there were actually all these bad actors driving up a patent litigation explosion and preying on Big Tech “innovators.” In fact, nonpracticing entities, which are innovators that don’t make their own inventive products (e.g., R&D firms that, like most of the iconic American inventors, license their patents to manufacturers, and universities) were awarded only 23% of remedies against patent infringers from 2013 to 2022, including just 12 injunctions to NPEs.

These results demonstrate that enforcing patent rights of exclusivity through civil litigation today holds much less hope of bringing patent owners justice. U.S. patents have lost value while predatory infringement has put the gangsters in charge of IP. This development threatens property rights and U.S. innovation.

On World IP Day, Appreciate IP's Economic Benefits

World Intellectual Property Day, Friday, April 26, offers the opportunity to reflect on the importance of intellectual property rights to a healthy, functioning society.

Strong IP protections are vital not only for responding to pandemics and putting natural materials to constructive use for humankind’s benefit; they're also integral to a strong job market and economic growth.

The U.S. Patent and Trademark Office documents the tremendous blessings that IP-intensive industries bring to the U.S. economy. IP-intensive sectors accounted for 41% of domestic economic output in 2019.

IP-intensive industries provide 47 million U.S. jobs and support another 15.5 million jobs that supply those sectors—totaling 62.5 million or 44% of U.S. jobs. IP-intensive industries typically pay higher wages and provide employer-sponsored health insurance and retirement benefits.

The Bayh-Dole Act, which outlines specific instances in which—and only in which—the government can "march-in" and take over licensing of patents, "has yielded four decades of practical benefit from otherwise wasted government grants."

The Bayh-Dole Coalition has shared a graphic touting economic benefits from academic technology transfer, 1996-2020. Some of the highlights include:

• $1.9 trillion toward U.S. gross industrial output;

• $1 trillion in gross domestic product;

• 6.5 million jobs;

• 17,000 startups.

IP rights make the world go 'round. However, in recent years, we've seen how threats to intellectual property are threats to American innovation and our global leadership in fields like health care, AI, quantum computing and biotechnology.

A strong culture of IP rights is critical to the jobs available to Americans as well as innovations in biomedical sciences and creative industries that power our everyday lives.

Imagine, for a moment, you're a filmmaker. You and your crew—actors, writers, costume designers, caterers, and more—have worked for months to make a movie. Your movie then gets illegally uploaded to the Internet on pirate websites while the feature film is still in theaters.

Some people will avoid paying ticket prices to see in theaters what they can illegally stream online, virtually for free. Your studio loses money, and perhaps it can't pay all of the people who made your film possible—including you. This puts your (and your collaborators') next project in jeopardy.

That's the reality for a world without strong protections for IP. Films and video games aren't the only things threatened by piracy. Patents for innovative inventions and life-saving medications also stand at risk. Recent measures at the World Trade Organization and the World Intellectual Property Organization damage the security and strength of patents.

At the WTO, waiving the TRIPS Agreement for COVID-19 vaccine IP, then considering expansion of the waiver to IP of COVID diagnostics and therapeutics has threatened related patents by "set[ting] a reckless precedent for foreign expropriation of U.S. companies’ IP.” This WTO effort, led by South Africa and backed by the Biden administration, hinders innovation and opens the floodgates to future waivers of IP rights.

IP made the successful worldwide response to the pandemic possible. Waiving IP rights to invaluable medications and therapies doesn't help efforts—domestic or foreign—to respond to COVID-19 or future crises.

In fact, the U.S. International Trade Commission last year conducted a thorough, months-long investigation that provides no basis for expanding the TRIPS waiver to COVID diagnostics and therapeutics. The USITC found no indication that waiving TRIPS IP protections further is warranted. Rather, IP facilitated collaboration, making supply of COVID vaccines, diagnostics and therapeutics available, including to poor countries.

WIPO is supposed to support secure, reliable IP rights and to promote adoption of these property rights worldwide. Yet, WIPO recently proposed mandatory patent disclosure requirements on genetic resources. This proposal would weaken IP rights by requiring a patent applicant to disclose the source or origin of traditional knowledge and genetic resources used in an invention.

Rather, WIPO would cause the cost and burden on innovation to increase. It would force innovators to limit the scope of their discoveries to domestic genetic material. Such a restriction would foreclose access to the full breadth of what our planet has to offer for scientific and medical breakthroughs. A slower, less predictable, more expensive patent application process would follow. And that would discourage ingenuity and quash productive economic activity in the United States and elsewhere.

Clearly, it’s critical to America’s economic success, our job market, our emergency responsiveness and our continued leadership in innovation that we protect IP rights. Without strong IP protections, all that progress and innovation goes out the window.