For decades, the courts have struggled to decide what types of innovation are eligible for patent protection. For much of that time, the central institution in that debate has been the United States Court of Appeals for the Federal Circuit, the appeals court that has jurisdiction over patent cases.

The Federal Circuit has been strongly pro-patent since its inception in 1982. It was the court that opened the floodgates for software patents with a series of permissive decisions during the 1990s. And it was the court that gave the green light to patents on medical diagnostic techniques, only to be overruled by the Supreme Court in March.

Why is the Federal Circuit so enthusiastic about extending patent protection to new fields? The court's current members are understandably circumspect, but retired judges can be more candid. So on Friday, Ars Technica traveled to Princeton University to hear a keynote address by retired Judge Paul Michel, as part of a conference on patent law. Michel served on the Federal Circuit form 1988 to 2010, and was its chief judge for the last six years of his tenure. His comments shed light on the motivations behind the dramatic changes in patent law over the last two decades.

"Bad solutions"

In his remarks, Michel argued that policymakers crafting the America Invents Act, last year's patent reform bill, should have focused more on the interests of small, fast-growing technology startups. These firms, the "Apples of the future," are a key source of job creation, he said.

After Michel finished his speech, Ars Technica asked him what seemed to us the obvious question: given that many software startup founders find the patent system to be more of a hindrance than a help, shouldn't excluding software from patent protection be considered as a reform option? The judge didn't agree.

"My view is that broad categories treated pejoratively are going to lead us toward bad solutions," Michael told us. "People say 'We know all business method patents are bogus, so let's just get rid of them.'" He added that people make similar arguments about software and medical diagnostic patents. "I don't think that's a constructive way to proceed. Certainly there are software patents out there that are no good, and that's a shame. We've gotta clean those out. But I'm against these kinds of broad, polemical ways of proceeding."

Michel did concede that software patents don't appear to be very helpful to the software industry. "Software is way less dependent on patents—maybe not dependent at all except in certain areas. How much [patents] retard [software] I'm not so sure. I hear a lot of anecdotes, a lot of scare stories. I'm a facts and figures guy. I'm not for anecdotes and assumptions."

Some scholars have collected facts and figures. For example, a 2008 book by James Bessen and Michael Meurer attempted to compute the costs and benefits of the patent system to various industries. They found that benefits significantly exceeded costs for the pharmaceutical industry, but the costs of litigation exceeded the benefits of holding patents in many other industries. Their work suggests that the patent system has become a net disincentive to innovation in those industries. The problem was particularly severe in software.

Strangely, Michel singled out Bessen and Meurer's book as an example of a text that relied too much on anecdotes and not enough on data, declaring it "very disappointing." We pressed him on this. Michel conceded the problem was less that it was too anecdotal and more that he disagreed with the book's premise—that high litigation costs were a sign the patent system wasn't working.

Just opt out?

Judge Michel seemed unaware of the depth of the software industry's dissatisfaction with the patent system. He suggested the patent system's critics were relatively marginal figures not representative of the views of the broader technology industry. And he didn't seem to understand the dynamics of the patent arms race currently affecting the software industry.

"If software is less dependent on patents, fine then. Let software use patents less as they choose," Michel said. "If other industries are terribly dependent on patents, then let's not wreck the system just because software people are unhappy."

Unfortunately, software firms don't have the option to opt out of the patent system. A firm that chooses not to seek patents will be vulnerable to ruinous lawsuits from its competitors. And so every firm is compelled to participate in the system for defensive reasons even if they'd be collectively better off if none of them participated.

And if Michel is worried about anti-patent agitation from the software industry will "wreck the system" for other industries, that's an argument in favor of creating a carve-out for the software industry. As long as software firms are vulnerable to patent trolling, they'll be exerting pressure to weaken patent protections across the board. Freeing the software industry from the burdens of the patent system will make it easier to fine-tune the system for other industries where patent protection works better.

Hard work needed

Rather than looking for "magic bullets," Michel told us that fixing the patent system would require "a lot of very careful hard work from the lowest examiner to the top of the Supreme Court and all of the rest of them."

This is a common refrain among software patent supporters. In 2008, Doug Lichtman, now a law professor at UCLA, told us that excluding software from patentability was an "odd way to divide up the world."

Judge Randal Rader, the Federal Circuit's current chief judge, also spoke at the conference. He complained about "the patent system coming under attack." "Let's not damage the system that promotes the progress of science and the useful arts," he said.

Rader and Michel's perspectives are likely skewed by the fact they spent their time on the bench surrounded by patent lawyers (who by definition work with firms that have the resources to hire patent attorneys). For the typical software-producing firm, patent lawyers are simply too expensive. Most firms never get patents, and they typically settle patent claims rather than taking them to court. As a result, Judges Michel and Rader rarely hear from smaller firms for whom the patent system is nothing but a burden.

We weren't able to get Judge Michel to clearly articulate why software patents were needed. But at root, his objection to eliminating them seems to be that excluding entire classes of technology from patent law is a clumsy way to solve the system's problems. If you care most about promoting innovation, offering carve-outs from the patent system to certain industries and technologies looks like a pragmatic solution to a serious problem. If, like Michel and Rader, you're emotionally invested in the success of patent law as such, then allowing certain industries to opt out looks like an admission of failure and a horrible hack.