Building a Better Bounty: Litigation-Stage Rewards for Defeating Patents

Abstract

Patent litigation’s basic framework tilts decisively against a definitive court test of patent validity. A patent challenger who succeeds in defeating a patent wins spoils that it must share with the world, including all its competitors. This forced sharing undercuts an alleged infringer’s incentive to stay in the fight to the finish—especially if the patent owner offers an attractive settlement. Too many settlements, and too few definitive patent challenges, are the result. A litigation-stage bounty would correct this tilt against patent challenges, for it would provide cash prizes to successful patent challengers that they alone would enjoy. After briefly describing the free rider problem with inventions that patent law attempts to solve, this article details how the Supreme Court’s decision in Blonder-Tongue creates an equally troubling free rider problem in the context of patent validity challenges. It then critiques two recent proposals directed at solving the free rider problem that undercuts patent challenges: an examination-stage bounty proposed by Professor Thomas, and a one-way fee-shifting rule more recently proposed by Professor Kesan. The article next proposes a new bounty, one that offers the benefits of the Thomas and Kesan proposals without their respective drawbacks. The proposed bounty would apply at the litigation stage, in an amount that varies as a function of the patentee’s net profits from practicing the technology set forth in the asserted patent claims. In recognition that a patentee may assert a commercially significant patent before it has profited from practicing the technology claimed therein, it then introduces an independent alternative to the bounty—namely, a patent attack bloc, comprising actual and potential alleged infringers, that overcomes the free rider problem created by Blonder-Tongue with a narrowly drawn agreement to fund a definitive patent challenge to its conclusion. Finally, the article tries to answer the most likely objections to a litigation-stage bounty. BUILDING A BETTER BOUNTY: LITIGATION-STAGE REWARDS FOR DEFEATING PATENTS