Accused Infringers Research Articles

The Effect of New Information on Patent Litigation: Evidence from U.S. Inter Partes Review

We analyze how new information concerning the validity of a patent impacts the settlement of patent infringement litigation. A party accused of patent infringement in the U.S. may---in parallel with defending itself in court---additionally challenge the validity of the allegedly infringed patent by petitioning the Patent Trial and Appeal Board (PTAB), an administrative tribunal within the U.S. Patent and Trademark Office. PTAB proceedings generate new information concerning the validity of challenged patents at several points in time, and we study empirically the resulting effect on settlement of concurrent litigation. Using data on U.S. district court cases (filed 2011-2016) and parallel PTAB validity challenges (filed 2012-2017), we examine each of the three main events that comprise a PTAB proceeding: (i) the filing of a petition to challenge a patent's validity, (ii) PTAB's decision to (i.e., grant) or deny the petition based on its assessment of a reasonable likelihood of invalidity, and (iii) PTAB's final determination of the patent's validity. We find that all three decision points have large, positive effects on the settlement of parallel court proceedings. We further find that the effect of PTAB's initial decision is driven by settlements that follow a decision to institute the petition. This suggests that accused infringers can leverage the threat of a final decision invalidating the challenged patents to induce settlement, which may lead to a lower rate of patent invalidation than is socially optimal.

Issues to Consider Before Asserting A Software Patent

Software patents have garnered a lot of attention in recent years due, at least in part, to the proliferation of software-enabled devices, such as smartphones and tablets, and the use of software to control a range of devices from automobiles to kitchen appliances. Enforcement of software patents involves unique legal issues that should be considered before asserting a patent against an accused infringer. A primary issue to consider is whether the patent claims are still patent-eligible under recent changes in the law. Also, certain types of software patents are vulnerable to attack in U.S. Patent Office proceedings, but these proceedings are not available unless the patent owner takes step to provoke them. In addition, software inventions are often implemented as method patents, which have unique requirements and restrictions that should be considered. For example, steps of a method patent must all be performed by an accused infringer in the United States and must all be performed by the same entity (or under the direction or control of that entity). Where a software invention is not implemented as a method patent, pre-suit damages may not be available unless the patentee's own products are properly marked with the patent number, and software has very different requirements for marking than more tangible products. A careful consideration of each of these issues is essential before moving forward with a lawsuit.

On the Legal Protection and Value of Novel Designs: Evidence from Egyptian Goddess v. Swisa

In this paper, we empirically examine how the strengthened legal protection of novel designs prevents mimicking behaviors and thus enhances the economic value of novel designs and their assignees. We use the decision of the Federal Circuit Court of Appeals in Egyptian Goddess, Inc. v. Swisa, Inc. as an unexpected regulation change that prevented accused infringers from using the “point-of-novelty” test to defend themselves, which enhanced the protection of design patents, especially intricate ones. After this decision, we show that intricate designs are better protected than simple designs and are less mimicked by subsequent designs. Moreover, we show that stock market reactions to grants of intricate design patents are significantly more positive than reactions to grants of simple design patents after this decision. Finally, we show that such positive reactions are more pronounced among firms facing fiercer product market competition and among firms previously involved in design patent litigation.

Ajinomoto v. ITC, the Doctrine of Equivalents, and Biomolecule Claim Limitations at the Federal Circuit

The doctrine of equivalents (DOE) allows a court to hold an accused infringer liable for patent infringement in spite of the fact that the accused product (or process) does not fall within the literal scope of the asserted patent claim(s). Prosecution history estoppel (PHE), which can be triggered by a narrowing amendment of a patent claim during patent prosecution, or by arguments made during prosecution, imposes significant constraints on the ability of a patentee to assert the DOE. The 1990s and early 2000’s saw a proliferation of legal commentary postulating that the DOE would play an important role in protecting inventions arising out of biotechnology, particularly biomolecules (i.e., proteins and DNA/polynucleotides), and stressing the need for biotechnology patentees to avoid amendments or arguments during patent prosecution that might trigger PHE. In fact, however, prior to 2019 the Federal Circuit does not appear to have issued an opinion finding infringement under the DOE in a case in which the relevant claim limitation recites a biomolecule. It finally happened in Ajinomoto Co. v. Int'l Trade Comm'n, with a divided panel of the Federal Circuit holding that a claim limitation reciting a DNA sequence, defined in terms of the amino acid sequence of a protein encoded by the sequence, was infringed under the DOE by a DNA sequence encoding a protein having a different (but similar) amino acid sequence and equivalent function. This article begins with a brief overview of the DOE and PHE, and explains why DOE was at one time seen as particularly critical for the enforcement of patent claims reciting biomolecules. It then summarizes and analyzes the results of a Westlaw search designed to identify any and all Federal Circuit decisions applying the DOE and/or PHE to a claim limitation reciting a biomolecule, including the court’s most recent decision Ajinomoto.

Brief of Thirty-Four Law Professors as Amici Curiae in Support of Appellants in Altera Corp. v. Papst Licensing Gmbh

Beginning with its 1998 decision in Red Wing Shoe Co. v. Hockerson-Halberstadt, Inc., 148 F.3d 1355, 1360 (Fed. Cir. 1998), the Federal Circuit has embraced a rigid, bright-line rule for the exercise of personal jurisdiction in patent declaratory judgment actions. Specifically, the Federal Circuit has held, based on “policy considerations unique to the patent context,” Avocent Huntsville Corp. v. Aten Int’l Co., 552 F.3d 1324, 1333 (Fed. Cir. 2008), that contacts created through unsuccessful attempts to license a patent can never be sufficient to create specific personal jurisdiction over a patent holder. In contrast to that rigid, patent-specific rule, the Supreme Court has repeatedly emphasized that the analysis of personal jurisdiction “is not susceptible of mechanical application,” Kulko v. Superior Court, 436 U.S. 84, 92 (1978), and has instead required a case-by-case inquiry into the defendant’s contacts with the forum state and considerations of “fair play and substantial justice,” Burger King Corp. v. Rudzewicz, 471 U.S. 462, 485-86 (1985) (internal quotations omitted). Applying the analysis mandated by Supreme Court precedent, it is clear that personal jurisdiction exists in declaratory judgment actions, such as this one, where the patent holder purposefully targeted the forum state by sending demand letters into the state and engaging in in-person meetings in the state with the specific purpose of licensing the patent-in-suit.In addition, important public policy interests support allowing courts to exercise personal jurisdiction over patentees who engage in patent licensing activities targeted at the forum state. The Supreme Court and Congress have consistently emphasized a strong public policy in clearing invalid patents from the marketplace. The Declaratory Judgment Act furthers this policy by allowing accused infringers to obtain a decision on patent validity at a reasonable time and in a reasonable place. The rigid rule established by Red Wing Shoe, however, frustrates the goal of encouraging patent challenges by granting patent holders unilateral control over where a declaratory judgment suit may be filed. For these reasons, the Federal Circuit should sua sponte consider this case en banc to overturn the restrictive jurisdictional rule established by Red Wing Shoe.

Brief of 15 Law Professors as Amici Curiae, Return Mail, Inc. v. United States Postal Service, No. 17-1594, Supreme Court of the United States

Structurally, Congress in the Patent Act and the America Invents Act (AIA) preserved and established four distinct offices within Covered Business Method proceedings before the Patent Trial and Appeal Board (Board) — (1) accused infringer, (2) patentee, (3) the Patent Office, and (4) an agency which enjoys sovereign immunity and the power of eminent domain. It declared and incorporated the traditional rights and duties of accused infringers and patent owners to initiate and answer to proceedings concerning patent validity, while in the AIA it moved some of those proceedings from Article III courts to administrative proceedings before the Board. Congress extended to those proceedings the Patent Office’s power to initiate the determination of patent validity. All the while, it preserved the power of agencies other than the Patent Office to appropriate patent rights by eminent domain. Because different rights and duties are at stake in each of those four offices, and because the combination of separate powers could jeopardize the due process rights of patent owners and accused infringers, Congress did well to keep them separate. The powers of private parties and the federal government to initiate proceedings that implicate patent rights have important due process implications. The ruling below makes a hash of the procedural and institutional structure that Congress carefully designed. In jurisprudential terms, the Postal Service claims the powers and immunities of the legislative sovereign, who possesses the inherent power of eminent domain and is immune from liability for infringement. At the same time, it claims the powers of an accused infringer and so disavows the legal disadvantages of the sovereign. It cannot have both. In fact, the Postal Service cannot infringe and cannot be charged with infringement. The sovereign who exercises the power of eminent domain and pays just compensation has acted lawfully, not unlawfully, and therefore has not trespassed against the patent. And the Postal Service must pay compensation when it appropriates a license to practice a patented invention. Vested patents are property for Fifth Amendment purposes and a government must pay for licenses taken from them just as it pays for real and personal property that it appropriates.

The Scope of IPR Estoppel: A Statutory, Historical, and Policy Approach

When Congress implemented inter partes review (IPR) and other patent post-grant proceedings through the passage of the America Invents Act (AIA) in 2011, it provided that petitioners would be estopped in later proceedings from raising grounds for invalidity that they “raised or reasonably could have raised during that inter partes review.” 35 U.S.C. § 315(e)(2). However, substantial uncertainty in courts’ interpretation of this provision causes an enormous impact on an accused patent infringer’s decision of whether and on what grounds to petition for review. One reading of the statutory estoppel provision suggests that “during that inter partes review” refers to the time period after institution of the IPR and before a final decision from the Patent Trial and Appeal Board (PTAB). However, although the Federal Circuit has generally favored a textualist reading of this statute, it has yet to address how the estoppel standard would apply to grounds that the petitioner chose not to include in the petition for IPR. Lower courts have taken widely divergent approaches in this and various other factual scenarios where estoppel might apply, with some courts assessing legislative history to determine that Congress intended estoppel to apply broadly to any grounds that could have been raised in the petition. These courts often engage in complex assessments of what prior art the petitioner should have known about and added to the petition, which adds unnecessary complexity and cost to their determinations. This Article will explain that a narrow, textualist reading of the IPR estoppel provision is consistent with Supreme Court precedent on statutory interpretation and is justified in light of the strict limits on IPR petitions adopted by the PTAB—limits that Congress did not foresee and which effectively restrict the grounds for invalidity that a petitioner may raise during the IPR. When the Federal Circuit or the Supreme Court next has occasion to consider this issue, it should hold that IPR estoppel applies narrowly only to grounds actually raised and instituted.

Obtener o no obtener una opinión de no infringir patentes. ¡Esa es la cuestión!

Este trabajo pretende analizar el riesgo al adquirir una opinión de no infringir patentes. Después del caso Seagate, han aparecido muchas decisiones de los tribunales distritales o del Tribunal de Circuito Federal que han implicado infracciones intencionales. Este documento articula algunas observaciones de esas decisiones que dan una base para pensar en si se debería adquirir una opinión de no infringir patentes. El análisis está presentado para analizar a un infractor, sea potencial o ya acusado: la compañía T que podría ser acusada de violación directa o indirecta. Al analizar y discutir los casos federales de circuito o de juzgados de distrito después del caso Seagate, este texto sugiere que no hay ninguna obligación de obtener una opinión de no infringir patentes y que la mejor estrategia para un infractor, sea potencial o ya acusado, sería obtener tal carta de opinión.

Competition, Inalienability, and the Economic Analysis of Patent Law

Most influential economic theories about private disputes, including the Coase theorem, assume that there are no legal restraints on alienability. However, the parties to a patent dispute are often competing firms, and their private dealings may thus be constrained by the antitrust laws. Antitrust prohibits private transactions that allocate commercial rights in ways that unreasonably subvert competition between the parties. This creates an asymmetry between (1) the allocations of rights that the parties can effect through contract; and (2) those a court can effect through its judgment. For example, antitrust may condemn a “reverse payment” settlement in which a monopolist-patentee pays an accused infringer to stay off the market for several years. But if the dispute were litigated to judgment, a court could produce the same exclusionary outcome by issuing an injunction. The result is ultimately that, in contrast to familiar Coasean logic, a court’s delimitation of patent rights can influence the final allocation of such rights, even if the parties can bargain. Further, the parties may (rationally) litigate to judgment even if they have common expectations about litigation, and even if they are perfectly capable of entering into a lawful settlement ex ante.Antitrust limits on alienability may thus critically alter the nature of a private dispute, distinguishing it from the more conventional property conflicts studied in classical law and economics. Aside from altering the parties’ incentives and behavior, it changes the appropriate normative policies toward settlement and litigation. The parties may be settling not simply to avoid litigation costs, but rather to avoid a procompetitive judgment they cannot lawfully bargain around (e.g. patent invalidation), or to obtain a judicial stamp on what would otherwise be an unenforceable contract. As such, when a proposed settlement concerns rights that are not entirely alienable, the court should carefully review its terms to ensure they do not defy the relevant inalienability rule. Unfortunately, the patent courts have missed this important point (although it has been recognized implicitly in some other areas of law). They continue to treat patent suits as ordinary private conflicts over fully-alienable rights, approving virtually all settlement proposals as a matter of course. I explain the benefits of reviewing patent settlements in certain cases, and I offer a detailed account of how such review ought to operate in practice.

Predictably Expensive: A Critical Look at Patent Litigation in the Eastern District of Texas

In this Article, we compare U.S. patent litigation across districts and consider possible explanations for the Eastern District of Texas’ popularity with patent plaintiffs. Rather than any one explanation, we conclude that what makes the Eastern District so attractive to patent plaintiffs is the accumulated effect of several marginal advantages — particularly with respect to the relative timing of discovery deadlines, transfer decisions, and claim construction — that make it predictably expensive for accused infringers to defend patent suits filed in East Texas. These findings tend to support ongoing efforts to pass patent reform legislation that would presumptively stay discovery in patent suits pending claim construction and motions to transfer or dismiss. However, we also observe that courts in the Eastern District of Texas have exercised their discretion in ways that dampen the effect of prior legislative and judicial reforms that were aimed (at least in part) at deterring abusive patent suits. Given courts’ broad discretion to control how cases proceed, this additional finding suggests that restricting venue in patent cases may well be the single most effective reform available to Congress or the courts to limit patentees’ ability to impose unnecessary and unwarranted costs on companies accused of patent infringement.

(In)valid Patents

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.

IP jury trials--trouble ahead?

The creation of a Patent Trial and Appeal Board (“PTAB”) to preside over quasi-trials of patent validity after the fact at the Patent and Trademark Office (“PTO”), raises substantial issues of constitutional law that have far-ranging implications for both patent jury trials in the U.S. Federal district courts, as well as IP trial practice in general. Motions are regularly filed to stay district court litigation to await the outcome of PTAB proceedings. The patent owner therefore stands to be deprived of the right to a jury trial—in an actual case or controversy with a specific accused infringer—due to intervening invalidation of the patent-in-suit by an Article I tribunal acting without benefit of a jury. Hence, the jury trial right in patent cases, and by implication in other IP cases involving trademarks or copyrights, now logically seems in jeopardy of diminution. Success of the new PTAB proceedings in reducing the perceived exposure from patent jury trials, could lead to similar pressure from perennial defendants in copyright- and trademark-based industries to seek relief from perceived cost, delay and capriciousness of jury-trial proceedings; with the result being increasing reliance upon administrative determinations on validity by Article I judges acting without juries.

Reverse-Payment Patent Settlements in the Pharmaceutical Industry: An Analysis of U.S. Antitrust Law and EU Competition Law

In the pharmaceutical industry, originator companies researching and developing new medicines typically obtain a range of patents to protect these medicines against generic competition. On the other side, generic suppliers seeking to enter the market will often challenge the validity of these patents or may simply launch their products, forcing the originators to bring litigation to enforce their patents and prevent the generics' entry. In the context of the corresponding litigation, the originators and generic suppliers often decide to enter into a settlement. While the settlement terms will vary from case to case, a number of settlements have involved a payment made from the patent holder (the originator) to the accused infringer (the generic supplier) in order to settle the dispute (reverse-payment patent settlements). Against this background, this paper seeks to analyze the compatibility of such settlements under U.S. antitrust law and EU competition law drawing on recent cases.

Does Familiarity Breed Contempt Among Judges Deciding Patent Cases?

We offer the first comprehensive look at how a district judge’s experience affects decisionmaking in patent cases. We find that that there is a strong, statistically significant relationship between a judge’s experience and case outcome: more experienced judges are less likely to rule for the patentee. Notably, the relationship exists for rulings finding noninfringement; judicial experience had no relationship to the likelihood a judge would find a patent invalid. The relationship appears to hold across judges, rather than to be driven by the rulings of particular judges. Beyond individual judges, some technologies (biotechnology, mechanics) are associated with more patentee wins, while patentees are less likely to win computer hardware and software cases. Some district courts (Delaware, New Jersey) are more likely to find patents infringed. By contrast, perhaps surprisingly, we find no significant relationship between litigation in the Eastern District of Texas and a judge’s ruling for or against the patentee. Finally, we find that suing on multiple patents is associated with an increased likelihood that at least one patent will be found to be infringed. Our results challenge what has been an implicit assumption in the literature and discussion that particular districts are biased in a particular direction, driving forum shopping. And they test for the first time the implicit assumption in the literature, in calls for specialized patent trial courts, and in the Patent Pilot Program, that experience with patent cases at the trial level will lead to different — usually assumed to be “better” — outcomes from what we see from generalist courts. Our results suggest that there is a difference, but that “better” may be in the eye of the beholder. They suggest some sort of learning effect among district court judges across the country, and that patentees benefit from litigating before inexperienced judges, at least on issues of infringement. Depending on the reason for this effect, adoption of a specialized patent trial court might help accused infringers but not patentees, raising broader questions about patent reform and how to measure the value of an expert court.

Reverse-Payment Patent Settlements in the Pharmaceutical Industry: An Analysis of US Antitrust Law and EU Competition Law

In the pharmaceutical industry, originator companies researching and developing new medicines will typically obtain a range of patents to protect these medicines against generic competition. On the other side, generic suppliers seeking to enter the market will often challenge the validity of these patents or may simply launch their products, forcing the originators to bring litigation to enforce their patents and prevent the generics’ entry. In the context of the corresponding litigation, the originators and generic suppliers often decide to enter into a settlement. While the settlement terms will vary from case to case, a number of settlements have involved a payment made from the patent holder (the originator) to the accused infringer (the generic supplier) in order to settle the dispute (these settlements are known as “reverse-payment patent settlements”). The legality of such settlements is the subject of a heated debate, both in Europe and in the United States (“US”). Competition authorities on both sides of the Atlantic are concerned that such settlements may unduly delay market entry of generic drugs, to the detriment of consumers and governments’ health care budgets. In June 2013, both the US Supreme Court and the European Commission (“Commission”) addressed the legality of reverse-payment patent settlements between originator and generic drug companies, reaching rather different conclusions. In order to explain the causes and consequences of this divergence, this paper discusses first the relevant Hatch-Waxman Act provisions and explore the evolution of the US case-law with regard to patent settlements (Part II). Thereafter, we analyse the EU regulatory context and current investigation activity of the Commission and the national competition authorities (Part III). Finally, we compare the US approach to reverse-payment patent settlements, as highlighted by the recent Actavis ruling, to the approach endorsed by the Commission in the Lundbeck decision (Part IV).

The Exergen and Therasense Effects

This Article empirically investigates the effects of the Federal Circuit’s Exergen and Therasense decisions. It makes three main findings: First, the rate at which accused infringers won a final merits determination of inequitable conduct was 0.23 immediately preceding Exergen, dropping to 0.12 for cases between Exergen and Therasense, and then declining to 0.09 for cases post-Therasense. Second, inequitable conduct was plead in approximately 17 percent of patent cases before Exergen, 14 percent of cases between Exergen and Therasense, and 7.5 percent of cases after Therasense. Third, when courts decline to find inequitable conduct, they most often hold that proof of intent, rather than proof of materiality, is lacking. Based on these results, this Article argues that the Federal Circuit went too far in Therasense. A better formulation of inequitable conduct doctrine would be the test advocated by the dissent in Therasense, which embraced the PTO’s Rule 56 definition of materiality.

Patent Litigation and the Internet

Using both univariate comparisons and multiple regression techniques, we find that: (1) Internet patents and their two subtypes, broad Internet business models and narrower Internet business techniques, were litigated at a far higher rate than other (non-Internet patents, or NIPs) — they were between 7.5 and 9.5 times more likely to end up in infringement litigation, depending on the model we used. (2) Within the category of Internet patents, those on business models were litigated at a significantly higher rate than those on business techniques. (3) Across both Internet patents and NIPs, patents issued to small entities, especially individuals and small businesses, were much more likely to be litigated than those issued to large entities. (4) Patents of all kinds with more independent claims were significantly more likely to be litigated than those with fewer independent claims. (5) Including both Internet patents and NIPs, litigated patents received many more forward citations — citations received from later patents — than did unlitigated patents. (6) Patents issued to foreign entities were significantly less likely to be litigated than patents issued to U.S. entities. (7) The more time that an application for an Internet patent or NIP had spent in the PTO prior to issuance, the more likely it was that the patent granted from that application was to be involved in infringement litigation. (8) There was no difference in the ages of Internet patents and NIPs when they became the subject of litigation — both kinds were about 4.5 years old. (9) Once patent infringement litigation was initiated, the owners of litigated Internet patents were significantly more likely to settle before judgment than the owners of litigated NIPs (especially when probable settlements were taken into account along with obvious settlements, which we believe is the more accurate metric). (10) Across both sets of patents, the larger the number of potential infringers involved in a case (defendants in infringement actions and plaintiffs in declaratory judgment actions), the less likely the case was to settle. (11) Internet patents and NIPs went to trial at about the same rate. (12) When failing to settle, the owners of NIPs won on the merits at a significantly higher rate than did owners of Internet patents — although the win rate for NIP owners was quite low at around 16%, the win rate of Internet patents was even lower by a substantial margin. This finding did not hold up in regression analysis, however; when the effects of other variables were taken into account in a logistic regression analysis, there was no significant difference in the win rate for accused infringers between Internet patents and NIPs. Accused infringers did win more often when Internet patents were asserted against them than win they defended against NIP complaints, but the relatively small number of observations prevented the difference from being statistically significant. (13) Surprisingly, owners of both kinds of patents were significantly more likely to win as the number of inventors on the patents increased. (14) The longer that applications for Internet patents and NIPs had spent in the PTO before issuance, the less likely accused infringers were to win. (15) Accused infringers were less likely to win on the merits when the Internet patents or NIPs asserted against them had been litigated previously. (16) Across both sets of patents, the larger the number of potential infringers involved in a case, the more likely these potential infringers were to win a judgment on the merits. That is, the more infringement defendants per case, they more likely these defendants were to win. (17) There was no difference between the different types of patents in the percentage of cases that were terminated for procedural reasons. We also discussed several other findings of interest.

Joint Defense or Research Joint Venture? Reassessing the Patent-Challenge-Bloc's Antitrust Status

A patent challenger who defeats 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. I have argued previously that a litigation-stage bounty would help correct this tilt against patent challenges, for it would provide cash prizes to successful patent challengers that they alone would enjoy. Even the best-designed bounty, however, would likely fail to encourage patent validity challenges in all the cases where such encouragement would be salutary. Others have urged that, going forward, post-grant administrative review is a more promising approach to weeding out weak patents. A new post-grant review procedure, however, will do nothing to encourage worthy challenges to thousands of extant weak, overasserted patents.This article explores another litigation-stage approach to overcoming the free rider problem that undercuts patent validity challenges - namely, strong-form joint defense agreements among multiple accused infringers. Strong-form agreements, which go beyond light coordination and information sharing, have long been condemned as unlawful buyers' cartels. The seminal case remains Jones Knitting Corp. v. Morgan. But current doctrine’s condemnation trades on a category mistake rooted in a fatally simplistic view that patents are commodity property (rather than what they are, which is probabilistic exclusion rights). Contrary to conventional wisdom, a binding commitment among accused infringers jointly to fund a full challenge to patent infringement allegations is not, nor is it akin to, a buyers’ cartel for buying commodities. Rather, it is a research joint venture, the goal of which is to generate valuable - but otherwise inappropriable - information about the patent's true validity or scope.

Judicially Re(De)Fining Software Patent Eligibility: A Survey of Post-Bilski Jurisprudence

On June 1, 2009, the United States Supreme Court granted certiorari to hear the landmark Bilski v. Kappos case. Awaiting the Supreme Court’s decision, some district courts have exercised restraint by delaying their ruling on patent eligibility issues until the perceived uncertainty clears. For instance, one court has explained that “[a]fter the Supreme Court issues its Bilski opinion, this Court will likely have clear direction on the precise standard to be applied in evaluating the patentability of method claims. With that guidance, the Court will be able to efficiently consider and evaluate [the accused infringer’s] argument that the [patent-at-issue] is invalid.” Lincoln Nat’l Life Ins. Co. v. Transamerica Fin. Life Ins. Co., No. 1:08-CV-135-JVB-RBC, 2010 WL 567993, at *1 (N.D. Ind. Feb. 12, 2010) (citing Arrivalstar S.S. v. Canadian Nat’l Ry. Co., No. 08 C 1086, 20008 WL 2940807, at *2 (N.D. Ill. July 25, 2008)). This may be a prudent course, as the Federal Circuit Court of Appeals even “recognize[d] that the Supreme Court may ultimately decide to alter or perhaps even set aside [the Bilski machine-or-transformation] test to accommodate emerging technologies.” In re Bilski, 545 F.3d 943, 956 (Fed. Cir. 2008) (en banc)However, other courts have interpreted the Federal Circuit’s guidance in a manner that, if adopted by more courts, could cause material invalidity challenges to many patents. See, e.g., CyberSource Corp. v. Retail Decisions, Inc., No. C 04-03268, 2009 WL 815448 (N.D. Cal. May 26, 2009); Every Penny Counts, Inc. v. Bank of America Corp., No. 2:07-cv-042, slip op. (M.D. Fla. May 27, 2009); DealerTrack, Inc. v. Huber, 657 F. Supp. 2d 1152, 1153 (C.D. Cal. July 7, 2009); see also Assoc. for Molecular Pathology v. USPTO, No. 09 Civ. 4515, 2010 U.S. Dist. LEXIS 30629 (S.D.N.Y. March 29, 2010). This paper briefly reviews the Federal Circuit’s In re Bilski decision and details the Federal Circuit’s and district courts’ responses to it.

Gaming the Patent System: An Empirical Analysis of Litigation Economics and Possible Solutions

This paper attempts to form an economic model of how an entity could game the patent litigation system by suing multiple parties and offering settlements below a median amount. Empirical data is taken from district court cases involving patent infringement suits to determine mean and median settlement values. From there, suggested solutions are presented that may have varying effect on the gaming of patent litigation and the patent system itself. Patent litigation and settlement are based on the underlying economics and rules imposed by the litigation system itself. Inherent in this analysis is the assumption that accused infringers will take whatever option is expected to cost them the least. Therefore, when the cost of taking a license from the patentee is less than the expected cost of litigation, the accused infringer will take a license - without regard to the merit of the underlying suit. Once patent litigation has been initiated, this license offer comes in the form of settlement. The terms of settlement agreements would be very helpful to use in determining at what prices accused infringers have settled in previous cases. Settlement agreements are rarely made public, however, because of the impact they may have on other accused infringers. This allows only speculation on how risk-adverse patentees and accused infringers are gaming the patent litigation system and on what their litigation expected values are. There are two factors that determine the overall cost of litigation to an accused infringer: the money paid to litigate (actual cost) and the possible judgment damages from losing the suit. Each possible outcome has a certain probability of occurring in patent infringement which can be approximated based on historical data. All outcomes should be seen as future cash outflows. Then, a weighted average based on their probability of occurrence gives the true cost of litigation. The first part of Section I will focus on the actual cost of litigation and the judgment award amounts found based on the District Court docket research. The second part of Section I will then focus on ascertaining the probabilities of outcomes during patent litigation. The final part of Section I will formulate the expected value of a patent litigation settlement based on the calculated outcomes and probabilities.This paper will eventually discuss possible solutions to gaming the patent system based on the economic models and criteria above.