(In)valid Patents

Abstract

Increasingly, accused infringers challenge a patent’s validity in two different forums: in litigation in federal court and in post-issuance review at the Patent and Trademark Office (PTO). These parallel proceedings have produced conflicting and controversial results. For example, in one recent case, a district court rejected a challenge to a patent’s validity and awarded millions of dollars in damages for infringement. The Federal Circuit initially affirmed those rulings, ending the litigation over the patent’s validity. In a subsequent appeal about royalties owed by the infringer, however, the Federal Circuit vacated the entire judgment — including the validity ruling and damages award it had previously affirmed — because the PTO had since decided that the patent was invalid. The Federal Circuit reasoned that only “final” court judgments are immune from the effects of PTO review and, because of the open issue about royalties, no final judgment existed when the PTO issued its conflicting decision on patent validity.The Federal Circuit’s stringent conception of finality, which this article terms the “absolute finality” rule, raises serious questions of judicial economy, fairness, and separation of powers. Among other things, it allows accused infringers multiple opportunities to defeat liability, permits an administrative agency to effectively nullify decisions of Article III courts, and incentivizes courts to abstain from hearing patent cases altogether, at least until the PTO reconsiders the patent’s validity. That said, some inefficiency or unfairness is inevitable when two different government bodies can evaluate the validity of the same patent, and the absolute finality rule, if nothing else, provides a relatively bright-line test. But it is not the only way to mediate disagreements between the courts and the PTO. This article, in addition to identifying, describing, and critiquing the absolute finality rule, explores several other options for providing greater certainty about patent validity.