Rolling Stone cover wannabe to IP headliner: In conversation with Randall Rader

Ron Dimock: Hello, my name is Ron Dimock, and I am an Intellectual Property Litigation Partner in the Gowling WLG office in Toronto. It is my pleasure today to have Professor Randall Rader as my guest for the next half hour or so to discuss patent law. But first to get some formalities out of the way, I could call you Professor Rader or Judge Rader but today I will call you Randy for short, how is that?

Randall Rader: Thank you that is just great Ron.

Ron: OK. Well welcome Randy and thank you for doing this. As I read about you and know you for many years now, you were born in Nebraska, grew up in Oregon, went to university in Utah and studied English as a major and then you went to law school in George Washington; so you moved around. You now teach patent law at some of the prestigious universities in the world, such as your own alma mater, you are an author or co-author of many patent texts including one of the Nutshell Collections. But I should mention that you sat on the US Court of Appeals for the Federal Circuit for over 25 years and served as the Chief Judge before retiring from the Bench in 2014. Since then, you have founded the Rader Group focusing on arbitration, mitigation, mediation, and legal consulting. And but more than that Randy you are a musician in a rock 'n' roll cover band and aspired to be on the cover of Rolling Stone and rumour has it that early on in your musical career you considered joining the 60's rock group Paul Revere and the Raiders.

Randall: Well they auditioned me, I do not think I made the audition.

Ron: So we do not have to debunk that rumour, it is true, OK. But since leaving the Bench you have been extremely busy and seemingly for you, kicks are not getting harder to find.

Randall: Good song.

Ron: Good song, yes. Now well, harmony is music to your ears, harmony in patent laws is dear to your heart as I understand. Is the rest of the world getting closer to harmonising patent laws Randy?

Randall: You know I am a little disappointed in the United States. We have been the one that has been diverging, for many years we diverged in the area of first to file vs first to invent. We finally solved that problem to a degree and now we are creating other ones.

Ron: Yes, well as you have written before, the world is trying to solve several problems in patent law and one is how to put a proper value on patents. Has the world succeeded there, like the first to invent aspect?

Randall: You know Ron, I really believe that this is the key to make the whole system work. There is apprehension about whether patents on small components and larger machines are sometimes overvalued, but you know if you have got the right value on every invention, there would not be problems. We could rent them out through royalties seamlessly and litigation could become a secondary consideration.

Ron: That sounds like it needs sort of a very broad brush stroke by…

Randall: It was.

Ron: …a sort of a trend towards more analytically sound methodologies in determining the value of a patent for deciding the quantum of damages for infringement for example.

Randall: Well you know these are difficult principles but we do have tools. We have the cost method which was looking at comparable licences or established licences, we have, that is actually the cash method, the cost method is looking at how the technology has saved some economic value over the prior art. And then of course there is the market valuing system where you look at the demand created by the claimed invention. I think if we could somehow work to bring those closer together so they produce the same valuation, yes I think we could achieve that broad brush stroke of making the system work better through proper valuation.

Ron: In trying to harmonise the world there are certain laws in some countries that have changed but some have stayed the same for many years. I know in the United States you used to have an accounting of profits for patent infringement many years ago and in Canada, for example, we have an accounting of profits and recently we had the largest award of money in an accounting of profits in a case between Dow and Nova. I am not suggesting that the world go to an accounting of profits, but that is one way of making a patent far more valuable than it might be at the present time.

Randall: Yes that can be a very effective way when you are in a smaller two supplier or three supplier market where you are relatively confident that any sale that the infringer made would have been made by the patent owner, but that is not the general outlook of the market place today. You usually have to account for a vast array of non-infringing substitutes.

Ron: Yes, well alright we want to get through a number of different issues today and I think we have done a pretty good job in that first one on harmonisation and patent value, but I know one issue that really is important to you and has irked you recently and that is the patent eligibility or patent subject matter. And you have written about that, that the United States for example, is now out of step with Europe and Asia. Where at one time the United States would recognize, I think one of your judges said that everything under the sun is patentable, everything new under the sun is patentable. But the recent, well I would not say recent it was about over six years ago, there was a case decided by the Supreme Court of the United States that you thought was wrongly decided and has caused a sort of a backwards step in deciding patent subject matter, perhaps you would like to comment on that.

Randall: Well there is two problems in this area here and you are right on Ron that this is an area where the United States is completely out of step with the rest of the world. And that is very disappointing because in the first place our statute is broader and more receptive of all fields of technology as being eligible for patenting than another other law in the world. We have the one that if it was followed would not only keep us in harmony, but perhaps set a standard for the rest of the world to achieve to. But that is one problem is that the Courts have misconstrued and not followed the law given to them by Congress.

The second problem has been that the Supreme Court I think really kind of delegated this issue to the Federal Circuit and hoped that they would use a scalpel to carefully distinguish between cases that really do not warrant further patentability enquiries and those that do and instead I think the Federal Circuit, to my dismay, has used a bit of a sledgehammer and instead of drawing careful little lines, it has just kind of thrown everything aside. Again, the Supreme Court did not give them a lot of guidance, but I am disappointed that the true patent experts have not used that scalpel instead of the sledgehammer.

Ron: So, I take it that Alice still lives in the United States?

Randall: Oh, it does very much so and not only does it live but it disrupts. Sometimes things are eligible and the same technology with the same amount of clear concrete practical application is ineligible and that is not really tolerable in any system.

Ron: In Canada we are going through the same angst as to how to decide patent subject matter when it comes to business methods or inventions that utilise computers and our Federal Court recently sent a patent application issue back to the Patent Office to look at it differently, to apply a standard which the Court thought should allow for the invention to be the proper subject matter of a patent. So, we will see there. Now you mentioned about the Federal Circuit not following suit with the Alice decision of the Supreme Court of the United States. Can the Supreme Court make amends with the upcoming, as they call it, the garage door case?

Randall: Well, I hope so. You mentioned the garage door case. I actually wrote a brief for the Court on that in which I suggested here is a classic example of a concrete machine and its operation and so it is not really abstract at all, and remember that is the principle they are using to say it is ineligible that somehow a garage door opener is too abstract for patenting, that is hard to comprehend by anyone.

Ron: Well maybe they will close the door on the Alice decision.

Randall: I hope so.

Ron: Let us hope so. It is something I think is a very important issue because if you do not have a patent then you do not have the exclusive rights to protect your invention that you have written and talked about it before. We really need innovation to spur our economy and patents do allow for incentivising …

Randall: They are kind of taking us in a direction of remedies Ron, that once again our Courts have had trouble with the proper remedies for patent infringement.

Ron: Well, we talked a bit about damages and so on, but I guess the other remedy that is important for a patentee is to enforce the exclusive rights that are attached to a patent and that is getting a permanent injunction.

Randall: It is this simple Ron, when someone trespasses on your property the remedy is to remove the trespasser. You can talk about damages, that is important in a commercial law sector, but you know the first and fundamental remedy has to be to remove the trespasser.

Ron: Well, we all know that there is no longer an eBay on the internet, but there is still an eBay in your patent law and although it has been altered, particularly by one of your decisions, the Douglas case, but tell me about eBay, is there a fundamental flaw in the analysis?

Randall: Yes, there is. In eBay the Supreme Court seized on the use of the word "may" in our statute which says that even after a finding of infringement a District Court "may" impose a permanent injunction and they thought, well if they use that discretionary term we are going to throw it open to a four factor test and that has led to enormous confusion in our law and a decline in the general rule that you ought to remove the trespasser. The problem is the Court did not recognize why the word "may" was there in the first place. The word "may" had to be there to accommodate a threat to public health and public safety which might otherwise occur.

My favourite example here Ron is a heart pacemaker and so you find out that this new technology, the pacemaker, is infringing. Well you are not going to stop it. There is an instance where a judge would step in and say 'due to a threat to human safety we are not going to impose the 'remove the trespasser' rule. The other example…by the way that is a real case. The other real case that comes to mind is a wastewater treatment plant. Again, that technology if it is infringing we are still not going to shut it off and if you recognize however that that "may" is there only for those severe cases of threat to public safety, then the trespass rule continues to work where you remove the trespasser in any other situation after they have had a full chance to prove that the patent was not valid or they were not infringing, they are trespassers they should be removed.

Ron: Well in the United Kingdom recently we had the decision of the UK Supreme Court on the SEP case involving…

Randall: Unwired Planet.

Ron: Yes and they reinforced the idea that a patent gives the patentee an exclusive right which can be enforced with a permanent injunction. In Canada, our Federal Court of Appeal, the equivalent of your Federal Circuit if you want to call it that, said that it is rare not to have a permanent injunction when a patentee succeeds at trial. So with the eBay case, the United States sort of stepped out of harmony with the rest of the world but I think you tried to rest it back again in the Douglas Dynamics case did you not?

Randall: We did. It has not succeeded so far because we still have a lower injunction rate down below 75%25 and it is still applied in a very fuzzy manner. They apply this 'no injunction' rule according to the characteristics of the party. Well that should never be a factor that enforces the law. The law should not be judged and changed based on whether you are a big company or a small company, whether you are a clinic or a university. The nature or the characteristic of your business should not influence the enforceability of your property rights.

Ron: Well you talked about the nature of the patentee and we have heard about trolls wreaking some havoc on some patent portfolios in the United States, not so much in Canada because our market is smaller and we do have costs that are awarded to the victor in a patent case. Has the Courts in the United States taken account of trolls and perhaps have started to award costs decisions?

Randall: This is more available now at the discretion of the District Judge, they can award costs. Sadly they have moved instead in the direction of not giving a proper remedy and that again is penalising parties according to their characteristics, not according to their legal proof and that is disturbing.

Ron: Well, as I said at the outset, you are now doing arbitration work and we are all trying to do arbitration work at our late stages of our careers, but I see, and I would like to have your comments about this, that arbitration of some international patent disputes might be the way of harmonising some of our laws or some of the results that one can get enforcing patents around the world. Has that sort of got any sort of germ of a good idea?

Randall: Now that resonates with me very much Ron, particularly in the standard essential patent area where you often have competitors licencing each other's portfolios that are incorporated into a standard and it avoids the anti-suit and the anti-anti-suit injunctions and the very complex and difficult market-to-market enforcements such as you see evidenced in this Unwired Planet case, so I think that arbitration may be a big part of the answer to that problem.

Ron: Yes well I think alternative dispute resolution has its place now where because of the cost of doing patent litigation and because we are a flat world, according to Friedman, that there is infringement around the world of some patents now and I think we need to have a broader brush stroke and maybe through arbitration we can as well as through the harmonisation methods that you described earlier. I am hoping that one or both will succeed but we will have to wait and see Randy. What issues do you see coming forward in the next few years that will have an impact on patent harmonisation of our patent laws in the United States and elsewhere?

Randall: Well I think some of the biggest moves in favour of a world harmonisation are going to be taken in China and Asia and you already see for instance that China is, through its trade agreements, adopting some kind of a linkage system like our Hatch-Waxman Act. They call it an expedited remedy instead, but I think maybe the initiative for harmonisation may shift to the Asian markets.

Ron: I am impressed in one respect with your patent system in the United States in that the Supreme Court does seem to be interested in giving 'leave' as we would call it to appeals from decisions of the Federal Circuit. Perhaps for some of those who may be interested and do not know, could you explain how one gets from say a District decision of a patent judge to the Federal Circuit that ends at the Supreme Court of the United States.

Randall: Yes, see the interesting difficulty in a Federal Circuit decision is that there is no competing Circuit Court to which you can compare the Federal Circuit's doctrines. And so you have to just look for instances where there is enough confusion internally in the Court for the Supreme Court to act. I think that is very apparent in the eligibility area that we discussed earlier. I think there is a coming area of enablement where the Court has had some doctrines trending away from the international norms and again I would love to see some kind of a patent valuation emphasis that would bring us back to the commercial roots of this law and really make it work.

Ron: Well I have been in practice as long as you have and there have been a lot of changes and one of them was at one time corporations would come to Canada to fight their patent lawsuits, Xerox vs IBM, Polaroid vs Kodak in the 70's and early 80's. And then along came your Federal Circuit and that seemed to change things for the United States patent system, there was more attention given to the value of patents, intellectual property became an acronym, IP, and then so on. What role do you think the Federal Circuit had in giving more value to IP?

Randall: No question that the 1982 creation of the Federal Circuit breathed life into intellectual property worldwide and the Federal Circuit for at least a couple of decades was the leader on intellectual property thought. That is why it is so saddening to see the Court leading some of those doctrines out of a posture of international harmony.

Ron: Well before we finish today I do want to thank you for something you did for me some time ago and that is delivering one of the first Fox lectures in Canada.

Randall: That was a joy I remember it well.

Ron: And you came to Canada to give that lecture in the middle of winter and you also decided the championship moot for Canadian universities on IP and there was a bench of five, I think you sat with one of the judges of the Supreme Court of Canada and three other appellate judges. I wonder whether or not we should try to get to an international moot, I know Oxford has one, and I wonder whether or not you have been involved in any other moots since then.

Randall: I have on occasion, maybe we ought to talk to our fellow brother.

Ron: Yes.

Randall: Sir Robin Jacob over in London and see if we cannot pull something together like that.

Ron: Let us try to do that, but I do want to thank you Randy for taking your time, as busy as it is, to talk to me today and for giving your candid comments about issues in patent law. Thank you very much Randy.

Randall: Thank you Ron. I hope we get together often.

Ron: OK, thank you, goodbye.

Randall: Bye.