Intellectual Property Law
Innovation has made information, science and technology in their many varied forms dominant influences on society and the economy, and advances in biotechnology, computer science, nanotechnology, and digital art forms have accelerated the pace of change worldwide. Increasingly, creators, compilers, publishers, interpreters, remixers, commentators, users, consumers, appropriators and regulators of innovation must rely on the law of intellectual property to settle disputes.
The burgeoning field of intellectual property law encompasses patent, copyright, trademark, trade secrets and many other fascinating legal theories for protecting and regulating an expanding list of innovations and creations, including writings, music, art, dance, performances, architectural works, scientific and technical inventions, compilations of data, business models, brands, names used in trade, know how, business secrets, confidential information and even celebrity publicity. Knowledge of intellectual property law is now a fundamental part of a good legal education.
KU Law alumni include patent examiners at the United States Patent & Trademark Office and intellectual property attorneys at leading firms across the United States, such as Fish & Richardson PC; Finnegan, Henderson, Farabow, Garrett & Dunner LLP; Goodwin Procter; Christensen O’Connor Johnson Kindness PLLC; Hovey Williams LLP; and Shook, Hardy & Bacon LLP.
KU Law offers a rich and expanding program in intellectual property law. Professor Andrew Torrance teaches a comprehensive survey course covering all forms of intellectual property protection. Professors Mike Hoeflich, Mike Kautsch, Phil DeLaTorre and Torrance offer specialty classes in patent, copyright, digital copyright, trademark, media, biotechnology, and international and comparative intellectual property law.
In addition, Professors Raj Bhala, Elizabeth Kronk, and Torrance offer classes in international trade, indigenous, and biodiversity law, respectively, that include coverage of intellectual property issues. Any of these professors are available to supervise research papers on intellectual property topics sufficient to fulfill the school's writing requirement, and several previous student papers have been published in law reviews or garnered competitive awards.
Some of the courses offered in the area of intellectual property law include:
- Intellectual Property Law
- Patent Law
- Introduction to Copyright in Literary and Artistic
- Copyright Law and Digital Works
- Food and Drug Law
- International Trade Law
- Patent Practice
The Patent Conference
PatCon5 | April 10 - 11, 2015 | University of Kansas School of Law
The Patent Conference is the largest annual conference for patent scholars in the world. The conference is a cooperative effort among the University of Kansas School of Law, IIT Chicago-Kent College of Law, University of San Diego School of Law, and Boston College Law School to hold an annual conference where patent scholars in law, economics, management science, and other disciplines can share their research.
In 2010, the founders of PatCon — law professors David Olson, David Schwartz, Ted Sichelman and Andrew Torrance — realized that the growth and importance of research in the area of patents required an exclusive forum that would enable participants to share their research with other experts and explore links across the legal and business side of patents.
KU Law hosted the inaugural Patent Conference in April 2011, and the conference returns to KU in April 2015. The conferences rotates among KU, Boston College, Chicago-Kent and San Diego.
Written Description named PatCon among the top three intellectual property conferences in the United States.
Friday, April 10, 2015
|8:00 - 9:00||Breakfast|
|9:00 - 9:30||Welcome Remarks
Professor, University of Kansas School of Law
Chancellor Bernadette Gray-Little
University of Kansas
Dean Stephen Mazza
University of Kansas School of Law
|9:30 - 10:15||State and Future of the USPTO Including Day in the Life of Examiners and PTAB Judges
A. Christal Sheppard
Director, USPTO Elijah J. McCoy Satellite Office, Detroit, MI
|10:15 - 11:00||Patent Law and the White House Office of Science and Technology Policy
Professor, Santa Clara University School of Law; former senior advisor to White House Office of Science and Technology Policy
|11:00 - 11:30||Break|
|Track A — Patent Value||Track B — Patent Policy|
11:30 - 12:30
|Redefining 'Valuable Patents': Analysis of the Key Value Factors of Patents Enforced in U.S. Infringement Litigation
Jonathan H. Ashtor
Skadden, Arps, Slate, Meagher & Flom LLP
|Does Patent Litigation Diminish R&D?
Stanford Law School
University of San Diego School of Law
|Litigation and Patent Value
Andrew W. Torrance
University of Kansas School of Law
Jevin D. West
University of Washington Information School
|Coase 2.0 and the Patent System: Why Policy Makers Need To Look at the Information Sharing Incentives and Mechanisms in Patent Law
Stanford Law School
|Patently Interesting: Measuring Public Patent Interest with Google Search Data
Whittier Law School
|Are Patent Trolls 'Opportunistic'?
University of San Diego School of Law
|12:30 - 1:30||Lunch|
|1:30 - 2:30||Exploring Massive IP-Free Innovation by Consumers
Eric von Hippel
T. Wilson (1953) Professor in Management, Professor of Management of Innovation and Engineering Systems, MIT Sloan School of Management
|Track A — Roles of Patents||Track B — Claims|
2:30 - 3:30
|Exclusionary and Diffusionary Levers in Patent Law
Santa Clara Law
Kellogg, Huber, Hansen, Todd, Evans & Figel PLLC
|An Error-Cost Assessment of the Presumption of Validity
University of Memphis Cecil C. Humphreys School of Law
|The Unresolved Interpretive Ambiguity of Patent Claims: A Response to Solum and Chiang
Cornell University Law School
|The Layered Patent System
Villanova University School of Law
|U.S. Patents Are About the Few, the Well-Paid, and Foreign Activities: An Economic Analysis of the Patent Dockets of Prominent Patent Venues
Timothy T. Lau
Federal Judicial Center | Research Division
|3:30 - 4:00||Break|
|Track A — Liability||Track B — Licensing|
4:00 - 5:00
|Property vs. Liability Rules in Patent Litigation Post-eBay: An Empirical Study
Christopher B. Seaman
Washington & Lee University School of Law
|A Jukebox for Patents: Should Patent Licensing be Controlled by Compulsory Licensing?
Ralph D. Clifford
University of Massachusetts School of Law
|The Misinterpretation of eBay v. MercExchange and Why: An Analysis of the Case History, Precedent, and Parties
Ryan T. Holte
Southern Illinois University School of Law
|The Practical Model for Calculation of the FRAND Licensing Royalties In terms of Resolution of Hold-up and Royalty-Stacking Disputes
College of Law, National Chengchi University, Associate Professor
|Causal Responsibility and Patent Infringement
Stanford Law School
|Standard Value Hold-Up
Norman V. Siebrasse
University of New Brunswick
Thomas F. Cotter
University of Minnesota Law School
Saturday, April 11, 2015
|Track A — Disclosure||Track B — Patents + Other Law|
9:30 - 10:30
|How Courts Adjudicate Patent Definiteness and Disclosure
Lisa Larrimore Ouellette
Stanford Law School
|The Uneasy Case for State Anti-Patent Laws
Roger Allan Ford
University of New Hampshire School of Law
|Secrecy and Innovation
University of New Hampshire School of Law
|Can the Approach to Product Market Definitions in Trade Law be Useful in Antitrust Cases Involving Patented Products?
Northeastern Illinois University College of Business & Management
Northeastern Illinois University College of Business & Management
|Patent Claims and Causal Claims: The Epistemological Function of the Patent Document
University of North Carolina School of Law
|The Early American Design Patent System
Jason J. Du Mont
Indiana University Maurer School of Law
Mark D. Janis
Indiana University Maurer School of Law
|Track A — Patent Eligibility||Track B — Patent Theory II|
10:30 - 11:30
|Separating Patent-Able from Patent Act
Bryan H. Choi
New York Law School
|Patents: Intellectual Property, Income Inequality and Inter-connectivity in the United States: Transcendence, the Human Calculus of Technology and the Historical Distribution of Wealth
North Carolina Central University School of Law
|Justifying Patent Ineligibility: Regulation-Resistant Technologies
Kevin Emerson Collins
Washington University Law School
|Patent Assertion Entity (PAE) Lawsuits: An Empirical Study of Settlement Behavior and Litigation Outcomes
Christopher A. Cotropia
University of Richmond School of Law
Jay P. Kesan
University of Illinois College of Law
David L. Schwartz
Chicago-Kent College of Law
|Amending Patent Eligibility
David O. Taylor
SMU Dedman School of Law
|A Proposal for an International Patent System
Queensland University of Technology
|11:30 - 12:30||Lunch|
|Track A — Litigation||Track B — Patents & Medicine|
12:30 - 1:30
|The Selection of Issues for Judicial Resolution
University of Iowa College of Law
|Five Years to the Biologics Price Competition and Innovation Act (BPCIA): A Stocktaking
Georgia State University College of Law
|Preclusion and the PTO
Paul R. Gugliuzza
Boston University School of Law
|Do Biotech Patent Lawsuits Overwhelmingly Lose: A Response to 'Our Divided Patent System''
Christopher M. Holman
University of Missouri-Kansas City School of Law
|Rethinking Patent Preemption: The Power to Create is Not the Power to Destroy
Camilla A. Hrdy
University of Pennsylvania Law School
Jacob S. Sherkow
New York Law School
|1:30 - 2:30||Plenary Discussion on Patent Law|
Speakers & Abstracts
Redefining 'Valuable Patents': Analysis of the Key Value Factors of Patents Enforced in U.S. Infringement Litigation
This research seeks to identify and understand the key factors that make patents “valuable”. To start, we must redefine the term “valuable patents” from what has been widely accepted by prior scholarship. Most leading studies use the binary fact of whether a patent has been asserted in litigation as a proxy for value, but this fails to account for the reality that most cases are decided against the patent-holder, not to mention the vast majority that settle for mutually negotiated sums. Moreover, among the few cases that do result in an infringement verdict, there is huge variation among award amounts. Accordingly, rather than rely on assertion as a proxy, this study directly analyzes the specific amounts of infringement awards in order to develop a more accurate understanding of “valuable patents”.
Importantly, infringement awards provide only one perspective on patent value, and other measures are important to consider. For example, the value of patents in licensing transactions may differ from litigation value (even if licenses are negotiated in the “shadow of litigation”), particularly where negotiated transactions involve sources of value apart from the patents themselves (including associated services, information exchange, etc.). This study approaches patent value by distinguishing patent enforcement from voluntary transactions, whereby the enforcement of patent rights means litigating a claim to judgment and obtaining a non-negotiated remedy. To measure such enforcement value, court-awarded judgments for infringement are analyzed herein.
Specifically, this study mines a vast array of data relating to each patent held valid and infringed in each U.S. District Court decision from 2006 to 2011. The dataset comprises approx. 400 patents from approx. 300 cases decided during the six year timeframe. For each patent, over 70 unique data points have been coded regarding intrinsic attributes, acquired attributes and related market factors, including prosecution history factors, inventor expertise, patent structure and family characteristics, forward citations, recorded transfers and collateralizations, and party characteristics. Using this extensive dataset, this study seeks to achieve precise statistical analysis of the factors that drive patent enforcement value.
 The research and writing of this work is being supported by a Leonardo da Vinci Fellowship awarded by George Mason University School of Law. A draft of this paper is forthcoming in the Spring 2015 issue of the Stanford Technology Law Review.
An Error-Cost Assessment of the Presumption of Validity
In every trial involving a validity issue, a validity baseline specific to that case will be established based on the information presented to the jury. For example, an express jury instruction on the presumption of validity is optional under Federal Circuit law, such that by deciding to include (or exclude) an instruction on the presumption, a trial judge is establishing a particular validity baseline that may render it more (or less) difficult to prove invalidity. Prior to and during trial, a district judge has multiple opportunities for exercising discretion in (dis)allowing certain information to be presented to the jury. I argue that this baseline-setting mechanism is a policy lever that should be operated with reference to the relative social costs of erroneously invalidating patent claims (Type I errors) versus erroneously confirming their validity (Type II errors).
Patents give their owners the right to exclude others from practicing the invention, reducing the risk of competitive entry and inducing greater investments in innovation. While the promise of exclusive rights remains the primary way in which patents support innovation, a mounting body of empirical evidence refutes that “exclusionary innovation” is the only, or even primary, mode of innovation today. Mechanisms for sharing inventions have long existed in niche contexts, like patent pools and standards. But a growing body of evidence shows that collaboration between innovators has grown measurably across industries, and that patents are playing a role. Consider the following:
- Nearly 50% of manufacturing firms report that their most important new product originated from an outside source, and that patented inventions were among the most valuable inputs; 
- Up to 50% of companies say that a motivation for obtaining patents is to ensure freedom to operate, that is in order to protect their ability to access to the technology of others; startups rank such motivations as moderately important in obtaining patents;
- Biopharmaceutical companies signed $160B worth of licenses in 2011; and over a third of biotech startups license in technology;
- A number of leading companies, including Tesla, Honda, Google, Twitter, and Yahoo, have taken steps to voluntarily reduce their ability to assert their patents, and in some cases, to urge others to practice them.
Across industries and settings, then, inventors are seeking patents, not to exclude others from practicing their patents, but to encourage them to do so. Once diffused, a patented technology may take on a more exclusionary path. As innovation continues to take place in both closed and open modes, and sometimes both, it is worth considering how the patent system may support the patent system’s twin goals of diffusion and exclusion. This paper reviews a number of overlooked doctrinal, administrative, and procedural levers of both patent diffusion and exclusion, and recommends steps for balancing our patent system to support both forms of innovation. It recommends reconsideration of the willfulness doctrine, the greater collection and dissemination of contextual patent information including willingness to license the technology, and the adjustment of maintenance fees to reward the dissemination of patented technology.
 http://www4.pucsp.br/icim2009/ingles/downloads/pdf_proceedings_2008/08.pdf, accord
Mayo and Alice have left the patent community searching for “significantly more”: namely, the kind and quantum of additional “improvement” that is “‘enough’ to transform an abstract idea into a patent-eligible invention.” I offer a descriptive theory of the Court’s reasoning in these cases, in which the Mayo and Alice patents’ failings are seen to be epistemological in nature. To use the terms of Hume’s bifurcated epistemology, only matters of fact can obviate undue experimentation. Newly discovered relations of ideas (e.g., essential properties of natural kinds, stipulated properties of artefactual kinds, and deductive inferences therefrom) provide no new knowledge of the kind that can license the causal claims underlying the operability of a claimed invention. Alice’s claimed invention and disclosure, based on a “purely functional and generic” recitation of computer system hardware components — the semantic content of a “data storage unit” is exhausted by the stipulation that it stores data — provide only a new relation of ideas deductively inferable from the prior art idea of using clearinghouses to mitigate settlement risk. In contrast, the operability of an invention purporting either to “improve the functioning of the computer itself” or to “effect an improvement in any other technology or technical field” entails a new causal claim justified at least in part by inductive inference from new matters of fact about the computer or other technology. This reading of Mayo and Alice provides clear and robust guidance for “Mayo step 2” (as I will illustrate with numerous examples) and offers a vision of the patent system’s epistemological project aligned with the purpose of promoting the progress of useful causal knowledge; i.e., “Arts.”
Separating Patent-Able from Patent Act
The patentable subject matter doctrine is a cornerstone of patent law, allowing courts to disqualify patents as per se ineligible for protection. After decades of dormancy, the doctrine has been abruptly revived by the Supreme Court. Caught off guard, many in the patent community have criticized the judicial doctrine as dangerously unprincipled and have sought to confine it to the more familiar contours of the Patent Act. Indeed, “patentable subject matter” is commonly referred to as a § 101 issue, as though it were principally a matter of statutory construction.
Yet, the proper understanding of the doctrine is that it constitutes independent exercise of judicial power separate from the Patent Act. It is a constitutional doctrine—not a statutory one—that checks legislative and executive power from exceeding the authorization of the Progress Clause. As such, it is not a threshold “gatekeeper” inquiry, but rather a parallel inquiry that owes no fealty or deference to the Patent Act.
The underlying quarrel is not that the patentable subject matter doctrine leads to bad outcomes, but the fact that it disrupts settled assumptions regarding the supremacy of the Patent Act. Those who have come to rely on the Patent Act as the first and final arbiter of patent policy have good reason to find the patentable subject matter doctrine unsettling. It restores an uninvited variable to the system: independent judicial authority to police patent policy, not just rubberstamp it.
A Jukebox for Patents: Should Patent Licensing be Controlled by Compulsory Licensing?
The patent system today no longer follows the classic understanding of how it is designed to work. In theory, to avoid infringement, a product developer searches the database of issued patents looking for those that might read onto the product being developed. If such patents are found, the developer can approach the patent holder for a license, can attempt to design around the claims, or can abandon the project. With many hundreds of thousands of patents being issued annually—a rate of issuance almost an order of magnitude larger than a hundred years ago—it is now a practical impossibility to search for collisions. Last year, for example, approximately 760 new utility patents were issued every day. In any major technological area, there are not enough hours in the day to read, understand, and apply the outstanding patents that might cover a new product. As a consequence of the overwhelming number of new patents (as well as the declining probable validity of them), innovation companies have changed the way they use patents. Recently, for example, a patent practitioner from a major computer firm described his company’s current strategy of using patents as deploying the haystack rather than the needle. Discovering that a particular patent reads onto a competitor’s product is no longer the method of analysis; instead, he wants to be able to throw hundreds if not thousands of patents at any opponent asserting that they are being violated. The financial reality of patent defense makes defending against a single patent costly; doing so against a haystack of them is prohibitively expensive. As the practitioner described it, as long as his haystack is bigger than the other company’s haystack, he is going to win. In effect, therefore, the marketplace for licensing patents no longer works, making it unreasonable to expect the classical patent model to operate.
This paper presents an alternative based on copyright law concepts. As music distribution technology expanded throughout the twentieth century, it became prohibitively expensive for a music copyright holder to trace who was performing the work. In other words, as is now being seen in patents, the viability of one-on-one licensing disappeared. To address this, copyright law creates several licensing mechanisms for different uses of music that establish the royalties that will be owed through an administrative process. An individual who is using recorded music need not seek out the copyright owner for permission to use a work of music; instead, by paying the set royalty, non-infringement is ensured.
Most patents today would be better managed by a system of mandatory royalties. This system would have to be sensitive to the field of invention as well as the inventive scope of the patent claims. This paper will present such a system and defines the outlines of how it would work. The system will include most patents, but will allow some exceptions where, for example, the patent owner desires to maintain the patent rights exclusively for the owner’s product or to engage in limited direct licensing.
Justifying Patent Ineligibility: Regulation-Resistant Technologies
Over the last five years, the Supreme Court issued an unprecedented four opinions restricting the reach of patent-eligible subject matter. Patent scholars have sharply criticized these opinions on consequentialist grounds. They argue that patent law has a robust set of non-eligibility doctrines—novelty, nonobviousness, enablement, utility and the like—that invalidate most, if not all, unusually costly patents on a fine-grained basis and that restrictions on patent eligibility are therefore either superfluous or counterproductive. This Article advances a novel justification for restrictions on patent eligibility: some technologies have unusual, intrinsic qualities that make them resistant to the regulation that is usually enforced by the patent law’s noneligibility doctrines. That is, while the non-eligibility doctrines usually perform the socially valuable, cost-reducing work of regulating what constitutes a valid patent interest, they cannot do this work when confronted with patents on regulation-resistant technologies. Regulation resistance turns the common scholarly criticism of restrictions on patent eligibility on its head. When patents claim regulation-resistant technologies, the doctrine of patent eligibility offers a relatively effective tool for doing the sorely needed, cost-reducing work of invalidating costly patents.
After introducing the theory regulation resistance as a justification for restrictions on patent eligibility, this Article offers proof of concept: it demonstrates that diagnostic inferences and computer software are regulationresistant technologies. It also examines the fit between the Supreme Court’s recent cases restricting the reach of patent-eligible subject matter in the fields of diagnostic inferences and computer software, on the one hand, and the restrictions on patent-eligibility in these subject matters that are justified by the theory of regulation resistance, on the other.
Patent Assertion Entity (PAE) Lawsuits: An Empirical Study of Settlement Behavior and Litigation Outcomes
Is most patent assertion entity (PAE) litigation frivolous? Conventional wisdom holds that most of the lawsuits brought by PAEs are of low quality and are settled quickly for substantially below the cost of defense. If almost all of the lawsuits brought by PAEs are frivolous, then PAE litigation is societally harmful. Empirical support for the conventional wisdom, however, is very thin.
To rigorously study these questions, we study settlement behavior and litigation outcomes of lawsuits brought by different types of PAEs. We began with a dataset we previously compiled that includes the entity status of all patent holders (i.e., individual inventors, patent holding companies, patent aggregators, universities, failed start-ups, etc.) in lawsuits filed in 2010. We expanded to the dataset to include the timing and type of disposition for each defendant in each lawsuit. The completed dataset permits us to assess whether there are differences in litigation durations and outcomes by entity type.
In this paper, we report detailed information about case duration, settlement, and resolution on the merits for the various types of patent holders. We find there are differences among the various entity types. Surprisingly, we find that the true outliers are not patent holding companies, which are the subject of much academic and public ire. Instead defendants sued by individual inventors are much more different from other parties. We set forth how these differences may be relevant to patent policy and potential reform efforts.
Scholars have long puzzled over the multifarious character of design patent protection. Viewed in the context of the modern intellectual property ecosystem, the design patent systems seems to be composed of a confounding miscellany of patent, trademark, and copyright doctrines. Moreover, the modern design patent system often seems to have little independent character, passively taking its cues from changes in utility patent law, or sometimes trade dress law.
In this study, we seek to better understand the American design patent system by examining its early decades of operation, a time period spanning the second half of the nineteenth century. During that time period, the Supreme Court formulated the Gorham v. White infringement standard, Congress enacted the special remedies provision for design patents, and the courts and the Patent Office first applied patentability rules to designs. We analyze these developments against the backdrop of the prevailing intellectual property jurisprudence of the time (mainly from patent and copyright law), and look for insights that might illuminate modern design patent law controversies. We also draw on an empirical examination of all of the design patents granted from the inception of the system through the turn of the twentieth century.
The material for this study is drawn from a forthcoming book, Jason J. Du Mont and Mark D. Janis, "The American Design Patent System: A Comparitive Legal History" (Cambridge University Press).
The Uneasy Case for State Anti-Patent Laws
Several states have enacted laws in recent years that seek to limit the ability of patent-holders to enforce their patents within the enacting states. There is an easy case to be made against these laws: the patent system relies on nationwide uniformity to fulfill its notice and incentive purposes, and if they became widespread and effective tools against patent holders, state laws could substantially disrupt this uniformity.
There is, nevertheless, an uneasy case that these laws are a good thing. Patent law has a public-choice problem. Patent holders and applicants are a concentrated interest group, at least compared to the group of possible patent infringers. We should expect, then, the scope and strength of patent protections to expand over time; indeed, the widespread complaints about the patent system over the last few decades suggest this has happened. States offer their own opposing interest groups: businesses located within each state. States pushing back with anti-patent laws, then, may represent an effective second-best solution to the problem of patent expansion.
Tailoring the Shifting of Attorney’s Fees: Patent Litigation Reform Meets Judicial Discretion
A recurring theme in the current wave of patent litigation reform is the movement towards a British rule for awarding of attorney’s fees to the prevailing party. Various proposals recommend a tailored version of the British rule which would automatically shift fees unless the nonprevailing party can establish why they should not be shifted. Under the current patent statute, fees shift in exceptional cases. Under the reform proposals, fees would shift unless the case is, in some sense, not exceptional. Among my arguments in this presentation is the inefficacy of merely shifting the burden of production while retaining the evidentiary standard for persuasion. Based on a study of published opinions and orders dealing with attorney fee shifting from 1982 to 2015, I find that the shift from a preponderance to a clear and convincing evidence standard may have had more of an influence on fee shifting than the determination of when a case is exceptional (or unexceptional). Section 285 gives fairly wide latitude to the exercise of judicial discretion, and judges exercise that discretion in ruling on fee shifting motions. The presentation presents preliminary evidence of what factors courts have found salient in the section 285 rulings over the period 1982-2015. This period covers three different regimes for fee shifting (pre-Brooke Furniture, Brooke Furniture, and post-Octane) and comparisons across regimes provides insight on the use of fee shifting as a policy lever. The ultimate conclusion is that fee shifting is a low torque lever, and policy makers are advised to consider other reform efforts.
Federal courts have drifted away from a once basic tenet of patent law: a patent is an integrated written instrument and most anything beyond that instrument—including the correspondence between the Patent Office and the inventor (that is, the prosecution history)—is extrinsic evidence. Over the past two centuries, courts have shifted from treating prosecution history as extrinsic to intrinsic evidence when interpreting a patent’s scope. In the 1800s, the U.S. Supreme Court construed the scope of a patent primarily based on the four corners of the document and only later (and only sometimes) in light of the prosecution history—but with the caveat that the history could not “enlarge, diminish, or vary the language of a patent.” In the first half of the 1900s, most courts of appeals considered a patent as an integrated written instrument—similar to a contract—and refused to consider a prosecuting attorney’s arguments when construing claims. But by 1960s, the Supreme Court clarified that a court could interpret a patent’s claims in light of the prosecution history and limit the patent’s claims based on an applicant’s disclaimer during prosecution. And by the mid-1990s, the U.S. Court of Appeals for the Federal Circuit formally elevated prosecution history from extrinsic to intrinsic evidence. This year in Teva Pharmaceuticals USA, Inc. v. Sandoz, Inc., the Supreme Court described prosecution history as intrinsic evidence for the first time and held that a court’s determination of claim scope based on any intrinsic evidence is a determination of law subject to de novo review on appeal.
This doctrinal drift has led the Supreme Court and the Federal Circuit to adopt an inconsistent view of the patent document: it is an integrated instrument but one that includes the negotiation history for purposes of claim construction. In viewing a patent this way, the Federal Circuit has maximized its power to review a district court’s claim construction, but at the cost of a coherent claim-construction theory.
In this Article, I argue that contract law provides a coherent paradigm to view a patent, its prosecution history, and construction of its claims. In contract theory, construction is the act of giving legal effect to the text of a written instrument. Interpretation is the act of determining the linguistic meaning of text within the instrument, including consideration of negotiation history. The former is a legal inquiry; the latter a factual inquiry. That contract theory treats only the written instrument as the subject of construction—and the negotiation history as a subject of interpretation—suggests a coherent approach to patents. By statute, the patent instrument includes the written description, diagrams, and claims, but not the prosecution history. In looking at the prosecution history, courts look outside the instrument primarily for evidence of how one of ordinary skill in the art would understand a claim’s meaning. With contract law’s interpretation-construction distinction in mind, courts should view the inferences a district court draws from the prosecution history as a factual inquiry—an act of interpretation—subject to review for clear error.
Patently Interesting: Measuring Public Patent Interest with Google Search Data
Academic observers of the patent system are sometimes too close to their subject. We are concerned with minute changes in patent laws and potential implications of those changes, but somewhat detached from the ways that innovators and business persons see and are influenced by the patent system. Given that a major goal of patents is to influence and incentivize actions by innovators and leaders of related companies, the perceptions of patents held by these individual are of central importance. Yet we know very little about these individual views.
This study is aimed at starting to fill this gap in understanding of the perceptions and impacts of the patent system. The study uses Google search data to scrutinize the nature and magnitude of interests of Internet users regarding patents and other intellectual property (IP) interests. Using information on volumes of searches related to different types of IP interests and under different circumstances, the study seeks to measure the intensity of public interest in patents, as well as to determine if that interest relates to views of patents as assets or threats.
Early results of the study include some surprising findings. These include tentative findings that: 1) public interest in patents is higher than for any other type of intellectual property interest (and has remained so over the period covered by Google search data); 2) interest in patents is much higher than interest in trade secrets even though both are typically generated in the same innovation settings and the latter may be even more prevalent in many business environments than the former; 3) concern over abusive patent practices of “patent trolls” seems rare relative to interest in patents generally, suggesting that efforts treating patent trolls as central threats to the patent system worthy of legislative reforms may be misplaced; 4) public interest in “patent trolls” seems to spike in tandem with related press accounts of such trolls, suggesting that what public interest exists is prompted by media accounts rather than direct adverse experience with the practices of such trolls in business or innovation settings; and 5) patents figure in business-related searches even more prevalently than other types of intellectual property interests, suggesting their importance to business leaders conducting business strategy and value analyses.
Preclusion and the PTO
Increasingly, the validity of a patent is being determined in two different forums: in litigation in federal district court and in post-issuance review at the PTO. These proceedings may occur simultaneously or sequentially, but, regardless of the timing, duplicate proceedings to determine patent validity pose complications. For example, a court judgment might allow a patent holder to collect millions of dollars in damages for infringement, only for the infringed patent to later be invalidated by the PTO. Also, the courts and the PTO use different legal principles to determine patent validity, which helps explain why conflicting decisions might occur. The PTO, for instance, gives patent claims their broadest reasonable interpretation, but courts interpret patent claims more narrowly, making those claims less likely to encompass prior art and therefore less likely to be invalid for lack of novelty or for obviousness. However, an accused infringer in court must prove invalidity by clear and convincing evidence—a higher standard of proof than the PTO applies. Differing prospects of success between the two forums incentivize both patent holders and potential infringers to engage in wasteful procedural maneuvering, hoping their preferred forum will be the first to render a final, binding ruling.
The Federal Circuit has grappled with inconsistent patent validity rulings between a court and the PTO in several recent decisions, including Fresenius v. Baxter and ePlus v. Lawson. In those decisions, the Federal Circuit nullified court awards of damages to patent holders because the patent had been invalidated by the PTO in post-issuance proceedings and the damage award was not, in the Federal Circuit’s view, sufficiently “final” to be immune from reconsideration. The Federal Circuit’s motivation to harmonize rulings by the courts and the PTO is understandable, but its decisions conflict with basic preclusion principles recognized by the Supreme Court and other federal courts. Specifically, the Federal Circuit’s rigid, formalistic view of finality disregards the flexibility that animates modern preclusion doctrine. It also ignores the Supreme Court’s instruction that preclusion should be enforced against parties, such as a court-adjudged patent infringer, who have had a full and fair opportunity to litigate and lost. In addition, the Federal Circuit’s decisions raise serious separation of powers concerns because they allow an executive agency (the PTO) to annul the judgments of Article III courts. The decisions also threaten to dramatically reduce the role of the federal district courts in resolving patent disputes: If their judgments can be nullified by PTO proceedings, district courts have a strong incentive to simply stay litigation in deference to those proceedings.
In view of the expansion of the PTO’s post-issuance review authority in the America Invents Act and of legislative proposals to expand that authority even further, this article considers whether there are there other ways—besides the Federal Circuit’s distortion of preclusion law—to reduce the friction that arises when both the courts and the PTO adjudicate the validity of the same patent. The article’s tentative conclusion is that, as a matter of institutional capability, Congress is best situated to solve these problems. One simple step Congress might take is to mandate that the PTO and the courts apply the same rules of claim construction and standards of proof. In addition, Congress could enact a statute clearly defining the inter-branch preclusive effect of various rulings. Most dramatically, Congress could force litigants to choose one forum or the other for the determination of patent validity.
Five Years to the Biologics Price Competition and Innovation Act (BPCIA): A Stocktaking
In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA). In addition to “Obamacare,” however, PPACA also included numerous other statutory amendments, one of which being the Biologics Price Competition and Innovation Act (BPCIA). Representing the culmination of a long and fervent legislative struggle, BPCIA set up a framework for the approval of follow-on versions of biological pharmaceuticals (a.k.a. biologics), including periods of market, data, and generic exclusivities in such products, as well as an elaborate scheme for the resolution of related patent disputes. And yet, despite the fact that BPCIA was passed in early 2010, it was only in July 2014 that the FDA accepted the first application for the approval of a follow-on biological product and only in January 2015 that an FDA committee recommended approving the first biosimilar product; it was also during this same period that the first litigation involving a patent dispute arising under BPCIA was filed. This article will examine the reasons for this apparent delay in the implementation of BPCIA and, comparing the track record of BPCIA’s implementation to that of the Hatch-Waxman Act, argue that this implementation delay is consistent with earlier predictions regarding the expected failure of the BPCIA framework.
Do Biotech Patent Lawsuits Overwhelmingly Lose: A Response to 'Our Divided Patent System'
According to an October 14, 2014, tweet by Professor Mark Lemley “[m]y new study with Allison & Schwartz shows that software and biotech patent lawsuits overwhelmingly lose.” He was referring to a recently published comprehensive study by these three scholars which “evaluate[d] all substantive decisions rendered by any court in every patent case filed in 2008 and 2009--decisions made between 2009 in 2013.” On its face, their conclusion that biotech patent lawsuits overwhelmingly lose has troubling implications for the biotechnology, given the huge importance conventionally attributed to patents in this sector. In order to better understand the basis for Prof. Lemley’s assertion, I decided to take a look at all of the biotech patent lawsuits identified in their study. My presentation will discuss some of my findings. In particular, while their study concluded that when biotech companies take their patents to judgment they only win “8% of their adjudications,” I found that 7 out of a total of 16 distinct biotech litigations resulted in a favorable outcome for the patent owner. By focusing on favorable outcome rather than per-patent win rate, my analysis takes into account outcomes such as a settlement on favorable terms (including one settlement that resulted in a $1.75 billion patent licensing agreement and another which resulted in the exclusion from the market of a competing biosimilar protein therapeutic). I also found this relatively small data set of biotech litigations a useful lens for examining the role of patents in protecting biotech innovation, providing examples, for instance, of the difficulties encountered by innovators in molecular diagnostics and therapeutics antibodies seeking effective patent protection for their inventions.
The Misinterpretation of eBay v. MercExchange and Why: An Analysis of the Case History, Precedent, and Parties
eBay v. MercExchange, 547 U.S. 388 (2006) is approaching a decade of citation and, in that time, the landscape for injunctions in patent infringement cases has changed dramatically. Can revisiting the case give us a better understanding of how the standards for injunctions should be understood post-eBay, perhaps in contrast to how they are understood? The purpose of this article is to extract that detail regarding the eBay injunction denial from primary sources. This research focuses solely on the injunction issue post-trial to case settlement. The article next assesses the impact of eBay on district courts, inventors, news stories, intellectual property investors, and others over the last decade. Finally, based in part on a review of court opinions considering permanent injunctions since eBay, and court citations to eBay’s concurring opinions by Chief Justice Roberts and Justice Kennedy, the article argues that the case has largely been misinterpreted by district courts and others for various reasons including: improper reliance on Justice Kennedy’s concurrence; misleading media coverage; eBay’s public relations efforts to spin media attention in its favor; a district court judge generally biased against patent owners and uniquely concerned with the wide disparities between the parties, the motives of MercExchange, and the vast consequences an injunction may bring against the world’s largest auction marketplace; and the fact that the case settled after the district court’s second denial of an injunction but before the Federal Circuit could revisit the issues. The article concludes by emphasizing that eBay should be cited for what the Court actually held, and not for how the case has been (mis)interpreted these last ten years.
Rethinking Patent Preemption: The Power to Create is Not the Power to Destroy
The goal of this Article is to determine the extent to which U.S. states may, under the Constitution and the Patent Act, restrict the rights of patent holders to enforce their patents. This inquiry is motivated by the fact that eighteen states have now passed laws prohibiting certain kinds of activity in enforcing patents, including transmitting demand letters and other communications of patent infringement in “bad faith.” These laws place new restrictions on patent enforcement conduct and create new procedures for challenging such conduct that go beyond prior state laws and beyond what the Federal Circuit has held is permitted under either federal patent law or the First Amendment.
The academic community is divided over whether the laws are preempted, but several scholars have argued that First Amendment immunity based on the Noerr-Pennington doctrine does not apply outside the context of antitrust law. Furthermore, they argue the new state laws would survive preemption as a matter of patent law preemption based on cases like Kewanee and Bonito Boats, which address state protections for trade secrets and state “patent-like” rights for unpatentable subject matter, respectively. Observing that in these contexts the Supreme Court applies the most diluted form of preemption analysis (conflict preemption), they argue the new state laws survive this test because they do not conflict with the goals and objectives of federal patent law. If adopted, this recommendation would open the door to a wide range of state laws creating liability for patent assertions – even when they do not meet the bad faith standard currently applied by the Federal Circuit, which generally requires proof the patent assertion was both objectively and subjectively baseless.
As a normative matter, I am sympathetic to these views. However, I disagree with the legal grounds for the conclusion that state laws that place restrictions on enforcement of U.S. patent rights can withstand preemption under the Patent Act and the Constitution. In short, the “purposes and objectives” preemption analysis currently employed by the Federal Circuit, and which academics argue would preserve the state laws absent Noerr immunity, is not the correct standard for deciding whether federal patent law preempts state laws that regulate patent enforcement conduct. This standard was developed in response to state laws that create IP-like protection for intellectual creations, rather than state laws that attack the enforceability or validity of U.S. patents, which are federal rights secured under the Constitution and the Patent Act.
This distinction – between state laws that create IP-like rights, and state laws that interfere with or entirely destroy U.S. patent rights – is crucial as a matter of history, doctrine, and policy. States have significant residual power under the Tenth Amendment to protect intellectual creations in their own territories. Such laws threaten patent rights only indirectly by diverting investment away from inventing and disclosing patentable inventions under the Patent Act. In contrast, state laws that challenge the enforcement or validity of a U.S. patent rest on much weaker constitutional footing. The Tenth Amendment does not leave states with residual authority to restrict U.S. patent rights, which did not exist until the IP Clause was ratified and the first Patent Act passed in 1790. Instead, state restrictions on patent enforcement conflict directly with rights granted under the Patent Act and impede the exercise of the federal government’s constitutional power to “secure” inventors’ exclusive rights in their discoveries under IP Clause.
As I will show, this is indeed the analysis followed in early case law respecting state restrictions on the exercise of patent rights in the jurisdiction— such as state laws requiring labeling of notes given in exchange for patents, state laws requiring “patent peddlers” to obtain a license before selling patents in the state, and state taxation of IP royalties generated in the state. These types of restrictions on the exercise of patent rights were sharply distinguished from state regulations of real property subject to patents, where states were given wide latitude to regulate—for instance, by requiring labeling of patented products for health and safety purposes. Instead, state restrictions on patentees’ rights to sell, license, or profit from the incorporeal inventions protected under their patents were loosely analogized to crippling state taxation of real property belonging to the federal government, such as Maryland’s attempt to tax the new national bank—an action the Supreme Court famously struck down as “hostile to, and incompatible with [Congress’ power] to create and to preserve [that bank]” in M'Culloch v. Maryland (1819).
Although the Federal Circuit has inexplicably ignored it, this line of cases begins as early as 1812 and reaches well into the twentieth century. These cases, and the accompanying analysis, not the analysis applied in the Kewanee/Bonito Boats line, provide the proper doctrinal approach for addressing the scope of states’ constitutional authority to restrict “bad faith” patent assertions in their jurisdictions. The key question in this analysis is not whether the state laws conflict with the purposes and objectives of federal patent law; it is the extent to which state laws directly burden the property right secured under the Constitution. To the extent that state regulations substantially increase the costs and risks associated with enforcing patent rights, they may go beyond this standard.
Camilla Hrdy is the Center for Technology, Innovation & Competition Fellow at Penn Law and a Visiting Fellow at the Yale Law School Information Society Project.
Causal Responsibility and Patent Infringement
This article argues for an increased role for principles of causal responsibility in the law of patent infringement, and its principal contribution is to suggest that notions of causation can help us better deal with longstanding problems in direct and indirect infringement cases. Currently, patent law maintains a rigid distinction between what I term “non-performers”—entities that do not themselves carry out steps of patent claims, and “performers”—entities that do. The former, with few exceptions, can be liable only on indirect infringement theories, while the later, in contrast, are subject to liability for direct infringement. The article argues that this distinction should break down in cases where a non-performer’s level of involvement in ensuring that the steps of a patent claim are carried out, and its intent in reaching that goal, are so high that the non-performer can be said to have caused the performance of the steps. The article draws upon the innocent instrumentality doctrine in criminal law, and related doctrines and theories—including the distinction between causal and non-causal accomplices—to support this approach. More generally, the article sets forth criteria for determining when the acts of a performer should be imputed to the non-performer based on causation principles.
The causation approach has three significant implications for patent law. First, it generally makes it easier to establish infringement liability for manufacturers who provide products that are configured in such a way that their natural utilization by customer results in patent infringement. This is as it should be, for it is the manufacturers, rather than their customers, that are truly responsible for the infringement. Second, this approach provides a way to deal with the vexing problem of divided infringement, which generally entails the lack of any infringement liability in cases where the steps of a patent claim are carried out by two or more entities. Under the causation framework, which avoids the troubled and unsatisfactory “direction or control” test, the divided infringement problem may essentially reduce to the first scenario. If the manufacturer performs some of the steps of the claim, and causes the remaining steps to be performed by a customer, it would be liable for direct infringement. And finally, the causation approach would absolve customers of all liability in certain scenarios. Where the entity that is accused of direct infringement is merely an innocent instrumentality of the manufacturer, it would not be liable in spite of the strict liability nature of the underlying tort.
Intellectual and Regulatory Property
Conventional accounts of the relationship between intellectual property (IP) and public health regulation depict separate regimes working at cross-purposes. By these accounts, IP rights are rewards to medical technology developers that offset the costs of extensive regulatory scrutiny. Yet the standard framing breaks down upon closer examination. Public welfare objectives animate IP, and regulation erects barriers to competition that benefit pioneers. Moreover, a broad conception of innovation encompasses not only the creation of new inventions, but also the accumulation of new information about the safety and effectiveness of existing technologies. Ostensibly conflicting IP and regulatory systems actually are overlapping, complementary components of a composite legal scheme governing information production and distribution. Both systems create incentives to produce intangible goods, albeit different types of goods at different points in technology development timelines. IP pulls inventions into the commercial arena, and public health regulation pushes developers to move nascent discoveries downstream along innovation pathways. Importantly, interplay between IP and regulation creates feedback loops of cumulative technological innovation.
This Article highlights the functional relationships between IP and regulatory laws to advance a holistic approach to medical innovation policy. It introduces the term “regulatory property” to describe how administrative oversight gives rise to the creation of valuable information resources. Regulatory takings and givings involve government redistributions of preexisting goods that transfer wealth among affected members of society. By contrast, regulatory property refers to the process whereby government regulation leads to the production of new information goods. As regulatory property is generated, interacting federal and state laws manage its allocation across private and public domains. The Article proposes strategies to address the unique challenges raised by innovation that is not tied to the creation of new tangible things, such as diagnostic algorithms and newly discovered uses for known products. More broadly, it suggests that understanding the dynamics between intellectual and regulatory property aids in developing coherent governance schemes for all potentially beneficial, risky technologies.
U.S. Patents Are About the Few, the Well-Paid, and Foreign Activities: An Economic Analysis of the Patent Dockets of Prominent Patent Venues
It has now been accepted as an article of faith that patents play a significant role in the national economy and that adjustments to the patent system could lead to improvements in employment. Missing in the discussion is an analysis as to how patents actually relate to the economic activities within the United States.
This article presents a comparison of the patents dockets of the prominent venues of the Eastern District of Texas, the District of Delaware, and the Federal Circuit with the economic and trade data of the nation. The analysis shows that, as a whole, the litigated patents involve only a small fraction of the economic activities of the United States and impact mainly high-wage earners. The primary effect of U.S. patents actually fall on foreign conduct in its regulatory effect on the merchandise imported into the United States.
These conclusions of this article calls into doubt the belief that the patent system, without fundamental changes in its structure, could be used as a policy lever to improve the national economic performance.
The UNRESOLVED Interpretive AMBIGUITY OF PATENT CLAIMS: A Response to Solum and Chiang
For well over a hundred years patent claims have been at the center of every patent related issue. Yet, what exactly does a patent claim claim? Exactly what type of thing is claim language intended to communicate? Despite their importance, patent law is confused about this central question. Some think of claims in the sense of “I claim to have invented the following things” while others think of them in the sense of “I claim exclusionary dominion over the following things.” These two views communicate quite different information and it impacts both substantive and procedural patent law. Generally, there is agreement about the legal effect of patent claims. With either view, patent claims determine a patent’s exclusion. But, how and why we move from claim text to exclusion differs considerably. Patent scholars, the Federal Circuit, and increasingly the Supreme Court are aiming to improve claim clarity yet all those efforts may prove fruitless unless this underlying ambiguity is first acknowledged and resolved. For example in Nautilus and Teva the Supreme Court recently announced new rules for claim indefiniteness and claim construction deference respectively but implementing those rules depends significantly on which view of claims is adopted. There cannot be clear and consistent patent discourse until the fundamental nature of patent claims is resolved. For example, In The Interpretation-Construction Distinction in Patent Law, Lawrence Solum and Tun-Jen Chiang take on the issue of claim clarity. Though I think the linguistic tools they develop are useful contributions, they failed to carefully deploy them in patent law. Most importantly, they missed this unresolved, ongoing ambiguity surrounding the linguistic meaning of claims. They simply presumed that the only way to understand claims is as direct delineations of patent exclusion. As a result their ultimate conclusions are premature if not mistaken. This response aims to first highlight this ambiguity and then it aims to resolve it. Once the confusion is understood, then it is clear that, though the legal effect of claims is to delineate exclusion, the only reasonable understanding of the linguistic meaning of claims is as “I claim to have invented the following things.”
A Proposal for an International Patent System
This article contains a proposal for the implementation of an international patent system. Rather than maintaining the current fragmented and inefficient system by which a multiplicity of separate national patents are applied for, examined and enforced in respect of the same invention, a more cohesive approach is that all participating member states to a new international treaty cease granting national patents and instead recognise the validity of an international patent issued by an international patent office. An essential feature of this proposal is that this International Patent is a unitary patent — not a bundle of national patents like that which results from the European Patent Convention. The main goals of this proposal are to reduce wasteful and unnecessary duplication of effort and expense in patent examination, and to improve patent quality.
There are three principal parts to this proposal. The first is that an International Patent be granted after having been examined by an appropriately resourced and centralized International Patent Office, the aim being to devote sufficient resources (in terms of time, expertise and access to repositories of prior art) to prevent as far as possible the granting of bad patents that are invalid for want of novelty, inventive step, or sufficient disclosure. An element of this aspect of the proposal is a Peer-to-Patent-style third party notification system to allow and encourage community-expert input into the search for prior art. By streamlining the process in this way, it is anticipated that the cost of obtaining an International Patent could be comparable to that of obtaining a single national patent and that the on-going cost of maintaining the International Patent Office be met through patent filing and maintenance fees.
The second part of the proposal is that a review panel of the International Patent Office would, to the exclusion of member states, have power to centrally administer all pre-grant opposition and post-grant revocation challenges (with rights of appeal to an International Patent Court). The exclusion of national courts in this process ensures that the responsibility for determining patent validity remains with the International Patent Office and ensures that the result of any post-acceptance or post-grant challenge to a patent’s validity takes effect in all member states.
The third part differs significantly from other proposals in relation to a global patent system. This part of the proposal is that enforcement remain the exclusive domain of member states and their domestic courts (including the decision as to whether to enforce a valid International Patent within the jurisdiction). As such, it is not proposed that the International Patent Court have a role in patent infringement proceedings. This would seem to be a key element in achieving international consensus as it allows member states to retain control of the divisive (and potentially deal-breaking) issues of patentable subject matter: it allows a member state the freedom to implement domestic laws to the effect that certain patents will not be enforced (say for example patents in respect of business methods, pharmaceuticals, living organisms or methods of medical diagnosis). That is, a patent would be valid in all member states that are signatories to the global patent treaty, but only enforceable in a particular country if that the country permits patents for inventions of that kind to be enforced.
This proposal thus not only removes the difficulties associated with the need for patent applications to be separately examined in each county in which the applicant seeks patent protection. It also purports to address the difficulties a patent holder faces when seeking to enforce patent rights in many jurisdictions. It does not, however, advocate for the creation of an international patent court – which is simply a bridge too far in a world in which nation states cling to national sovereignty.
Any efficiencies to be gained from agreement between nations to implement an international patent system will be the result of compromise and will need to accommodate disparate interests. An international patent system will need to serve the needs of innovative multinationals as well as small independent inventors at an affordable cost. It must also accommodate the needs of technologically advanced developed nations but also developing nations. In this regard, the resulting institutions must be fiercely independent and not seen as being a tool for furthering the interests of a particular constituency.
Does Patent Litigation Diminish R & D?
The overall rate of U.S. patent litigation grew rapidly from the 1980s through the early 2000s, and recent studies estimate that the economic impact of U.S. patent litigation may now be as large as $80 billion per year. Because patent litigation is costly, one might expect that it will diminish R & D expenditures, the very activity patents are designed to spur. Indeed, two recent studies find that (1) public firms sued by non-practicing entities (NPEs) and that settled or lost their cases experienced on average over a $200 million decline in R & D expenditures relative to firms that had their cases dismissed; and (2) that small, publicly traded firms involved in intensive patent litigation experienced a 2.6-4.7% decline in overall R & D following suit. Here, we supplement, extend, and test these studies by performing macroeconomic regressions on the U.S. economy as a whole. Using a time-series, vector autoregression (VAR) model to analyze the impact of patent infringement filings on R & D over the period 1971-2009, our initial results show that until the mid-1980s patent litigation had little or no impact on economy-wide R & D. However, since then patent litigation has had a negative effect on overall R & D—roughly, a 1% increase in litigation has conservatively led to a 0.10% decrease in total R & D expenditures. We obtain these estimates after controlling for a host of other macroeconomic and patent-related variables that can influence overall R & D levels. Because patent litigation rates have increased by about 100% over the last twenty years, this roughly correlates to a 10% drop in total U.S. R & D expenditures (or $40 billion per year) due to increases in patent litigation. Consistent with earlier studies, because these trends accelerated in the 1990s, we suggest that these changes may be due to the rise of licensing-driven suits by practicing entities in the 1990s and even more recently by NPEs.
Are Patent Disclosure and Definiteness Technology Specific? (coauthored with John R. Allison)
In exchange for the rights provided by a patent, § 112 of the Patent Act requires patentees to clearly explain what their invention is (a requirement known as claim definiteness), as well as how to make and use it (the disclosure requirements of enablement and written description). Many concerns about the modern patent system stem from failures to enforce these requirements adequately. Patents cannot serve as efficient property rights if no one can determine the boundaries of those rights, and disclosure failures can lead to patents that cover far more than was actually invented. Better enforcement of § 112 may be the best way to address the problem of “patent trolls” asserting overbroad and unclear patents. But despite the critical importance of § 112 to the functioning of the patent system, there is surprisingly little empirical data about how it has been applied in practice. For example, although the conventional wisdom is that courts have reached different outcomes when applying § 112 to different technologies and industries, these assertions are based on only a handful of prominent cases.
To remedy this reliance on anecdotes, we have created a hand-coded dataset of 1,144 reported court decisions from 1982 to 2012 in which U.S. district courts or the Court of Appeals for the Federal Circuit rendered a decision on the enablement, written description, or claim definiteness requirements of § 112. We coded validity outcomes under these three doctrines on a novel five-level scale so as to capture significant subtlety in the strength of each decision, and we also classified patents by technology and industry categories. We also coded for a number of litigation characteristics that could arguably influence outcomes. Although one must be cautious about generalizing from reported decisions due to selection effects, our results show some statistically significant disparities in § 112 outcomes for different technologies and industries, although fewer than the conventional wisdom suggests, and not always in the direction that many have believed. Just as importantly, our analysis reveals the effects of other variables on § 112 outcomes, including whether a district court or the Federal Circuit made the last decision in a case, whether a patent claim was drafted in means-plus-function format, and whether a case was decided before or after Markman v. Westview Instruments (holding that interpretation of patent claims is for the court, not the jury).
Patent disclosure and definiteness have been the focus of much recent debate about the patent system. Commentators have argued, for example, that the written description doctrine should be eliminated and that the enablement and definiteness requirements should be significantly revised, and the Supreme Court set forth a new test for indefiniteness in 2014, the contours of which remain uncertain. Our results on how § 112 has been applied in practice will be helpful in evaluating current proposals for reform, and our rich dataset will enable more systematic future studies of these critical doctrines.
Secrecy and Innovation
Most innovation is cumulative. The lone inventor’s flash of genius is far less frequent than innovations building incrementally on prior innovation in the field. Trade secrecy poses a major challenge to cumulative innovation. By definition, trade secrecy prevents disclosure, making it much harder for subsequent firms to improve on the initial innovation or to use its insights for other purposes. The barrier to cumulative innovation created by secrecy is not absolute; reverse engineering can reveal aspects of the initial innovation if discernable in a marketed product. However, trade secrecy potently restricts the dissemination of information about innovations, and thus limits the advances of other firms. In addition, measures taken to protect secret information can hinder cumulative innovation even within a firm, as when new inventions are restricted to their home departments and other departments consequently cannot use that information in their own innovations.
These barriers to innovation apply particularly powerfully in the biopharmaceutical industry. Typically, that industry is viewed as a success for innovation policy and patents in particular. Patents work well for some kinds of innovation, but critical areas of the industry are dominated not by patents, but by trade secrecy. Those areas face problematically low levels of innovation. Pervasive secrecy hinders innovation in the development of efficient, high-quality manufacturing techniques, the creation of follow-on biologics, and the identification of new uses for already-approved drugs.
Patents mandate at least some disclosure, but that mandate does not help when firms elect not to pursue patents. Patent law, however, does not have a monopoly on monopolies. Regulator-enforced market exclusivity increasingly provides a complement, and sometimes a substitute, for patent protection, especially in the biopharmaceutical industry. Firms can thus obtain patent-like protection on innovations without the quid pro quo of disclosure.
That quid pro quo could be restored by conditioning regulatory exclusivity on disclosure. For instance, a firm could be granted regulatory exclusivity for a new drug only if it disclosed the full contents of its New Drug Application. This would create significant opportunities for cumulative innovation: shared clinical trial data could drive the development of new uses and manufacturing specifications could lead to industry-wide improvements. A similar requirement for biologics would tremendously speed the development of follow-on biologics. Mandated disclosure would concededly eliminate the possibility of trade secrecy for covered information, but may have both positive and negative effects on the strength of traditional IP protections; while trade secrecy is unavailable, transparency enables easier enforcement of relevant patents.
A key advantage of this approach over patent disclosure—aside from its applicability in areas where firms frequently choose not to patent—lies in incentives for candor. Patent disclosures are often deliberately obscure, but a regulatory disclosure needs, first and foremost, to convince the regulator. Thus, firms disclosing to regulators have a strong incentive to be complete and forthright, which aids cumulative innovation. Ancillary benefits arising from broad disclosure might include easing widespread licensing, enhancing employee mobility by reducing the need for non-compete agreements, and enabling transparency and civilian oversight.
The Selection of Issues for Judicial Resolution
A fundamental assumption of virtually all legal research in the United States is that the decisions of judges, particularly appellate judges, play a central role in shaping doctrine. After all, judicial precedent can legally bind subsequent judges and thus define contours of the law. It is logical that the choices of judges matter.
Yet, judge do not operate in a vacuum, making decisions on whatever issues they believe need to be addressed. Rather, as one jurist observed, “American judges play a limited role; the burden rests on the parties (both private and governmental) to ensure that offenses are prosecuted and relevant issues come to light.” Judges decide cases and, with some exceptions, are largely limited to those issues that the parties present to them. By cultivating issues for judicial resolution, parties to litigation play an important role in the development of legal doctrine.
While a tremendous body of research has explored how parties select disputes for litigation, scholars have paid relatively little attention to how parties select individual issues within those disputes for judicial resolution. In the few instances where scholars considered the question, they tend to simply apply theories about the selection of disputes to the selection of issues.
This paper demonstrates that such an approach is misguided. What is needed is a better understanding of why parties select particular issues for judicial resolution. This paper begins by considering the predominant theory of dispute selection, the Priest-Klein settlement theory, and demonstrates why it cannot operate as a general theory of issue selection. The paper then proposes a novel theory of issue selection, one that is based upon the idea that parties seek to maximize their likelihood of obtaining a favorable outcome of the litigation. In other words, parties do not select close issues for judicial resolution; instead, they focus on those issues that they perceive as being most likely to lead to a desired result. This “winning issues” theory of issue selection has particular applications to empirical research on judicial decisionmaking, in addition to affecting how scholars, practitioners and judges think about precedent more broadly.
 United States v. Fifield, 485 F.3d 1053, 1056-57 (9th Cir. 2007).
Patents: Intellectual Property, Income Inequality and Inter-connectivity in the United States: Transcendence, the Human Calculus of Technology and the Historical Distribution of Wealth
Patents: Intellectual Property, Income Inequality and Inter-connectivity in the United States: Transcendence, the Human Calculus of Technology and the Historical Distribution of Wealth
Critical components in the innovative process include scientific research and economic commercialization of inventions. Patenting differentials between identifiable groups (race and gender) have received some attention in the scholarly literature. Less attention has been paid to the disruptive effect of racialization and property inequalities related to patents, patenting technology and economic commercialization of inventions. Systematic differences in patent related commercialization studies point toward disparities based on race and gender and ultimately economic disparities based on the ability to commercialize the innovations.
Scant attention has been paid towards the historical trajectory and effect of intellectual property regimes (patents) and their implementation as racialized property grants. I argue that the U.S. patenting regime, implemented as racialized property grants, contributes to the extant income inequality and patenting differentials in the United States. By creating roadblocks based on ethnic differentials, providing historic barriers to commercialization of inventions, the U.S. patenting regime created a system of grids and locks which had its origin in a racialized property regime embedded in the United States Constitution and the Intellectual Property Clause. This racialized income based inequality began with its inception in the United States Constitution (Art I, Sec 8, Cl 8) and continues in the current inter-connected and technology driven economy. The current intellectual property regime while purportedly fostering innovation and inter-connectivity simultaneously protects property interests and yet contributes to income inequality in the United States today.
I argue that the United States Constitution was designed as a property, economically driven social compact. Secondly, the intellectual Property Clause was designed to incentivize innovation but also it protected the racialized property interests of the governing elites of the newly established country. This Intellectual Property grant in the Constitution was a part of the social compact which identified property interests as both economic and racialized. This paper explores the historical trajectory of intellectual property projections (patents) as a racialized property grant.
This is the first in a series of papers (3) examining the historical trajectory of intellectual property protections in the United States Constitution; the wage –income differentials created by the technology driven economy and the income-equality resulting from the current calculus of wage deprivations at the expense of capital aggregations for technology.
See, Intellectual Property and Competition: Critical Concepts in Intellectual Property Law (Michael Carrier ed., Edward Elgar 2011) (“Copyrights and patents created under the provision of the United States Constitution which empowers Congress, to promote the progress of ‘Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Rights to their respective Writings and Discoveries.’”) (U.S. Const. art. I, §8, cl. 8); 35 U.S.C. §§ 1-376 (patents, allow inventors to exclude others for a specified period of time from making, using selling and offering for sale any invention covered by the patent); 17 U.S.C. §§ 101-1332,(copyrights, provIde for protection for ‘original works of authorship fixed in any tangible medium of expression’, for the life of the author plus 70 years, against unauthorized copying, distribution, public performance, public display or the creation of derivative works); 15 U.S.C. §§ 1051-1141, (trademarks, the Lanham Act, state statutes, and judicial precedents provIde protection for ‘any word, name, symbol, or device or any combination thereof’ that can be used to Identify the source of products or services. Protections are provIded for words, letters, drawings, objects, product shapes and packaging. Congressional authority to protect trademarks is derived from the Commerce Clause: U.S. Const. art I, Sec 8: “Congress shall have the power…[t]o regulate Commerce with foreign Nations, and among the several states, and with the Indian Tribes…” Collectively, these statutory rights (based on U.S. Const. art I, sec 8, cl 8 and U.S. Const. art I, sec 8) together with trade secrets, comprise what is euphemistically referred to as ‘intellectual property’.
 See Thomas Piketty, Capital in the Twenty-First Century 242 (Arthur Goldhammer trans., Belknap Press 2014). (“By definition, in all societies, income inequality is the result of adding up these two components: inequality of income from labor and inequality of income from capital. The more unequally distributed each of these two components is, the greater the total inequality.”)
 Bill Wasik, Welcome to the Programmable World, Wired at 142, May 14, 2013; (“In [the] future, the intelligence once locked in our devices now flows into the universe of physical objects. Technologists have struggled to name this emerging phenomenon. Some have called it the Internet of Things or the Internet of Everything or the Industrial Internet—despite the fact that most of these devices aren’t actually on the Internet directly but instead communicate through simple wireless protocols. Other observers paying homage to the stripped down tech embedded in so many smart devices, are calling it the Sensor Revolution.”)
See, Lisa D. Cook and Chaleampong Kongcharoe, Working Paper 16331, http://www.nber.org/papers/w16331, MBER The IDEA Gap in Pink and Black, National Bureau of Economic Research September 2010)
The Layered Patent System
The patent system is usually described in terms of opposites, like producers versus trolls or software versus pharma. But the reality is a far more complex set of layers, including enforcers, patentees, and technology. This study of twenty-five years of patent litigation by highly litigious non-practicing entities and randomly selected plaintiffs explores each of these layers and shows ways that each interacts with the others, using patent validity as a primary exemplar.
Data related to more than one thousand patent outcomes in more than two thousand cases leads to some surprising findings. For example, while the litigious NPEs enforced many patents from product companies and public companies, the patents enforced by random companies were more likely to come from larger and better funded companies. Additionally, the data implies that patents obtained by individuals fared worse in litigation, regardless of who enforced them. Most surprisingly, once patentee and enforcer type is considered, software patents are no longer a statistically significant predictor of invalidation.
Reasonable Certainty of Patent Claims After Nautilus
In Nautilus, Inc. v. Biosig Instruments, Inc., 134 S.Ct. 2120, 2129-30 (2014), the Supreme Court substituted a “reasonable certainty” standard in place of the Federal Circuit’s more permissive “insolubly ambiguous” formulation for finding claims indefinite under Section 112(b) of the Patent Act. However, the Court did not attempt to apply its standard to the case at issue and provided virtually no guidance regarding what would make a claim reasonably certain to those skilled in the relevant art. Instead, it simply noted that reasonable certainty reflects a policy balance: “inherent limitations of language” generate “[s]ome modicum of uncertainty … [a]s the ‘price of ensuring the appropriate incentives for innovation.’” Id. at 2128-29. Nor did the Court relate its holding to the developing law of “functional claiming” under Section 112(f).
This article seeks to provide further guidance for the Patent Office and courts by identifying different types of linguistic ambiguity and vagueness that will need to be considered in determining whether claiming language is reasonably certain. It also seeks to clarify how the courts have gone wrong in failing to treat all functional claiming language as subject to the statutory directive in Section 112(f) to construe such language restrictively (as limited to disclosed embodiments and their factual equivalents known at the time of filing). Proper treatment of such functional claiming language may help to reduce some of the concerns with a more robust indefiniteness standard under Section 112(b).
Property vs. Liability Rules in Patent Litigation Post-eBay: An Empirical Study
In this paper, I empirically assess the impact of the Supreme Court’s decision in eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006), on grants of permanent injunctions or, in the alternative, ongoing royalty awards, in patent litigation.
Prior to eBay, the Federal Circuit established a “general rule” granting injunctive relief after entry of a final judgment that the asserted patent was valid and infringed. Id. at 391. Overcoming this presumption required a significant showing of public harm that outweighed the patentee’s irreparable harm. In practice, however, this rarely occurred, and district courts routinely granted injunctions after a finding of infringement.
In eBay, the Supreme Court unanimously rejected the Federal Circuit’s “general rule” in favor of injunctive relief, instead holding that trial courts must apply “traditional equitable principles” in the form of a four-factor test. Id. at 391-94. However, in concurring opinions, Chief Justice Roberts and Justice Kennedy offered seemingly divergent assessments regarding eBay’s likely impact in patent litigation. Chief Justice Roberts suggested that trial courts would continue to grant injunctive relief after a finding of infringement in “the vast majority of patent cases,” id. at 395, whereas Justice Kennedy asserted that injunctive relief may be inappropriate in situations that differed from traditional patent litigation, such as suits by non-practicing entities (NPEs) and cases involving business method patents. Id. at 396.
To test these predictions, as well as several other hypotheses about injunctive relief post-eBay, I am empirically studying all district court decisions where the patentee requested a permanent injunction following a finding of infringement (excluding uncontested injunctions) from the date of the eBay decision through the end of 2013. Each case is being coded for a number of variables that may have affected district courts’ decisions regarding whether to grant or deny injunctive relief, including the technological field of the asserted patent(s), whether the parties are competitors in a product market, and whether the accused infringer was found to have willfully infringed the patent. A summary of the results and data analysis from this empirical study will be presented at the conference.
Deconstructing National Intellectual Property Policies
Formulation of national intellectual property policies (NIPPs) is a recent phenomenon, especially by developing countries. It has still not gained full momentum, but it is expected that more and more countries will have a formal IP policy document in the coming years as IP has already become an important constituent in national economic and development policy. We believe that this paper is the first attempt to comprehensively study the structure and contents of national IP policies. The intention to formulate a NIPP presents policymakers as well as the academics with new challenges. The most obvious in this regard is to decide what makes a good IP policy for a specific country, what should be the goals of such a policy and which policy tools should be used to achieve these goals? Our aim is to provide academics as well as policy makers with a structured tool helpful in formulating new policies and reassessing existing ones. We attempt to identify the various goals of the IP policy and the means to achieve them as stated in the strategic actions outlined in the respective policy document through specific legal and administrative mechanisms. In order to answer this question we have created a framework against which the national IP policies can be analysed. After a thorough analysis of the IP policies that we have found, so far we have identified four goals and five means of achieving them that are common to all IP policies. So far we have analysed more than 500 strategic actions from the IP policies of Malawi, Mozambique, Rwanda and South Africa. In our ongoing study we start with identifying how the envisioned goals are realized by the strategic actions that make up the policy’s implementation plan. We undertake a thorough content analysis of the selected policy documents which congruously revealed four overarching goals and five strategic means to attain them. In part two, we analyse the strategic actions in the implementation plans on the basis of our systematized framework.
Coase 2.0 and the Patent System: Why Policy Makers Need To Look at the Information Sharing Incentives and Mechanisms in Patent Law
Inspired by the Coase Theorem, scholars have for decades explored the impact that transaction costs have on economic activity. The prevailing view holds that imperfect markets give rise to intermediaries capable of lifting the wedge between contracting parties by efficiently facilitating the exchange of information. In this paper, I explore how current laws that address the disclosure of information both help and hinder the transactional ecosystem for patents by either encouraging or discouraging the exchange of information. Using a technique called “Coasean Mapping,”, I show how various private sector services and technologies aid in reducing costs related to the generation, maintenance, and monetization of a patent. Further, I show using econometric modeling how certain hypothetical changes to laws dealing with information disclosure can produce the optimal distribution of patent rights and bargaining over reasonable license terms. Proposed information-forcing rules evaluated in the paper include a mandatory requirement to conduct a prior art search, a penalty default rule for failure to pursue a patent license transaction, and others.. I argue that such legal reform would reduce the need for parties to resort to litigation or inter partes proceedings, and ultimately lead to desirable economic results.
The Practical Model for Calculation of the FRAND Licensing Royalties in Terms of Resolution of Hold-up and Royalty-Stacking Disputes
Patent enforcement has recently been the focus of patent law in various jurisdictions. Patent enforcement may be made through remedies admitted by patent law, mainly inclusive of injunctive relief and damages. Under consideration of equity and public interest, injunctive relief is no longer the necessary remedy the patentee could be freely entitled to. The eBay case of U.S. Supreme Court instructs us that idle patents would produce equitable disadvantages for the patentee to apply for injunctive relief under patent law. The development of judicial cases in the jurisdictions of U.S., Germany, China and Japan also elucidates that the patentees of essential patents(SEPs) embedding a technical standard are bound by the patent pledge of FRAND (fair, reasonable, and non-discriminatory) licensing such that injunctive relief in the cases of patent infringement was usually denied unless the implementers of the technical standard refused to negotiate with the patentees for licensing. When the attitude of the courts on the motion of injunctive relief tends to be conservative, patent damages seems a significant way to secure the patentee's incentives for further innovations. However, the gist of patent law is not to merely benefit the patentee by granting exclusive rights to create market advantages for coverage of R&D expenditures and return of reasonable profits. Simultaneously, patent law also concerns the possibility of technological improvement and cumulated innovation about claimed invention of a patent made by future potential inventors. Patent damage should theoretically correspond to the patent value lost due to infringement. Unlike ordinary tangible property, it is hard to accurately determine patent value because the exercise of a patent is inexhaustible and non-rivalry. On the one hand, we can't merely consider the loss from substitution of patented products caused by patent infringement as the loss of patent value. On the other hand, we can't completely base upon the R&D expenditure made for the claimed invention to explore the patent value, either. As a matter of fact, on calculating patent damages, the assessment of patent value should resort to the gist of patent law. As a consequence, patent damages should be asserted within what a patent goes beyond prior art. Patent damages would be also influenced by that fact if the patentee has done its due diligence on practicing or licensing the patent. In addition, patent damages could be excessive because patent value was distorted by hold-up risk deriving from inappropriate injunctive relief. The problem of royalty-stacking has been frustrated accurate calculation of patent damages when there is no definite criteria for apportionment of patent value that may be applied to the situation where multi-patents converge in an end product or a technological process.
Compared with the property rule which injunctive relief relies upon, patent damages is the production of the liability rule that focuses upon the objective patent value in the market. In accordance with the current development of patent law in various jurisdictions, aside from patent damages, the liability rule is also applied to the situations where the compensation other than damages is allowed in the cases of patent infringement. The compulsory licensing is traditionally representative. The royalty in consideration of compulsory licensing is distinguished from the reasonable royalty as damages admitted by patent law. Recently, the royalty for the FRAND licensing under the standard-setting organization(the SSO) has drawn much attention from judicial practice and academic scholarship. The court usually adopts the approach of reasonable royalties governed by patent law for damages calculation to determine the royalty of FRAND licensing. However, the royalty of FRAND licensing is not considered patent damages by its nature due to patent pledge made by the SEP patentee in the SSO. Such the pledge makes the SEP patentee bear the obligation to negotiate with the implementer of the technical standard according to FRAND licensing. Consequently, when the approach for patent damages is mechanically applied to calculate the royalty of FRAND licensing, the excessive compensation seems unavoidable. This result will seriously contradict with the gist of patent law, and hinder the possibility of technological improvement and cumulated innovation on the claimed invention. While the crucial date for patent damages is established as the date of patent infringement to proceed under the hypothetical negotiation, the date of the hypothetical negotiation should be determined at that time when the technical standard was formed. Since the implementer will use the technical standard embedded with SEPs to manufacture the end products or function the specific technological process by investing extra technical contributions, the entire value of the end products or the aforesaid process, mixing the SEPs with other contributions, shouldn't be taken as a basis for determination of the FRAND licensing royalty. Otherwise, the SEP patentees would catch the value beyond the contribution of SEPs. Moreover, the calculation of the FRAND licensing royalties, like patent damages, is also vulnerable to the threat of patent hold-up and the trouble of royalty-stacking. In order to secure appropriation calculation of FRAND licensing, this article attempts to review the factors traditionally considered for determination of reasonable royalty as damages and modify those factors to accommodate the FRAND licensing royalties for reference of judicial practice in the future. At the same, this article will provide with a feasible model for the FRAND licensing royalties to resolve the disputes about patent hold-up and royalty-stacking.
In this paper, I plan on examining the relationship between patent law’s enablement doctrine and the troublesome rise of “irreproducible” medicine in the United States. Currently, almost all patents for medical diagnostics and uses of pharmaceuticals rely on clinical trial data to prove “enablement,” patent law’s requirement that a person having skill in the patent’s art can make and use the invention without undue experimentation. But work by John Ioannidis and others have demonstrated that an overwhelming number of clinical trials do not have reproducible results. Indeed, in several well-known instances, later clinical trials have come to opposite conclusions from their predecessors. Compounding these difficulties, the reproducibility of clinical trials tends to be more problematic for grave diseases with unknown or poorly known causes—diseases, for which, drugs and diagnostics tend to be the most profitable. Taken as a whole, these issues strongly suggest that medical diagnostic and pharmaceutical use patent applications that rely on clinical trial data do not, in fact, allow users to successfully make or use them. Or, to put it bluntly, consumers of patented medical diagnostics or pharmaceuticals often have no idea whether the patented invention will work “as advertised” in the specification. In medical terms, such diagnostics can be little more than “quack” medicine, akin to “patent” medicine of the 19th century. In patent law terms, such applications would not be “fully enabled” and should therefore be denied.
Assessing such claims on a case-by-case basis, however, would present immense administrative burdens on the PTO as the agency is ill-equipped to assess experimental design, statistical analysis, or the veracity of medical conclusions published in peer-reviewed scientific journals. The solution therefore appears to lie in litigation, where the parties—and courts—are substantially better equipped to challenge the veracity of diagnostic patents’ underlying clinical trials. Astonishingly, however, this strategy is rarely employed in litigation, despite routine, exorbitant spending on experts. I examine why this strategy is rare, where it can be useful, and how to improve it in a litigation context.
Aside from these practical suggestions, the paper also provides some insight into patent law and the enablement doctrine, generally. First, it demonstrates that reproducibility as a distinct concept apart from predictability, a well-studied facet of enablement doctrine. Second, it highlights an odd tension between traditional scientific norms and patent law’s concept of a “person having ordinary skill in the art.” And third, by showing the value of reproducibility, it crystallizes the difference between true invention and mere “abstract idea,” an important distinction given recent doubt over the patent eligibility of medical diagnostics.
Are Patent Trolls 'Opportunistic'?
A recent and widely received study by Lauren Cohen, Umit G. Gurun, and Scott Duke Kominers finds that non-practicing entities (NPEs)—pejoratively known as “patent trolls”—are “opportunistic” because they target defendants that (1) are cash-rich (particularly compared to practicing entity patentees), (2) operate in industries that “have nothing to do with the patent” in suit, (3) are staffed by small legal teams, and (4) are busy with numerous non-IP cases. Additionally, the authors conclude that defendants that lose in patent litigation with NPEs on average have marked declines in subsequent R & D expenditures, on the order of $200 million per year. On this basis, the authors suggest “the marginal policy response should be to more carefully limit the power of NPEs.” Here, I critique in detail the most recent, publicly available version of this study. I conclude that although the authors’ project is admirable in attempting to comprehensively examine the litigation behavior of NPEs, their dataset is incomplete and unrepresentative, their theoretical model is flawed, and their empirical models are unsound. As such, neither their findings nor policy prescriptions are justified.
Standard Value Hold-Up
In the determination of a reasonable royalty for infringement of a standard essential patent (SEP), a consensus has emerged that “the patentee’s royalty must be premised on the value of the patented feature, not any value added by the standard’s adoption of the patented technology.” The same principle was formalized in an influential article by Swanson & Baumol on reasonable and nondiscriminatory (RAND) royalties in the standards context, in which they proposed that a royalty be deemed reasonable for RAND purposes if it approximates the outcome of an ex ante auction in which IP owners competed to be included in the standard. The result is that the value of the patented technology, to which the patentee is entitled, is the incremental value of that technology over the best alternative available ex ante.
In this article, we challenge this consensus. We will argue that it is normally desirable for the patentee to capture some part of the value of standardization. We will make two basic points. First, we will show that the analysis of hold-up in the decided SEP royalty cases, as well as in the literature generally and Swanson & Baumol in particular, conflates two distinct concepts which we will refer to as “standard value hold-up,” and “sunk costs hold-up.” Standard value hold-up occurs when the patentee captures some of the value arising from network effects when the technology is standardized, while sunk cost hold-up occurs when the patentee captures some of value of sunk costs incurred by the user of the technology. Standard value hold-up may occur without sunk costs, and sunk cost hold-up may occur in the absence of standardization. Often both occur together, particularly in the context of standardization, which is why they are often conflated, but the distinction is not purely conceptual, as the two types of hold-up have different economic implications. That leads to our second point. Sunk costs hold-up are a substantial concern and should be avoided; this is the consensus position, and we agree. We will argue that standard value hold-up is of substantially less concern than sunk cost hold-up, and avoiding standard value hold-up should not be a consideration at all when determining a reasonable royalty in the SEP context. We argue in particular that the auction model proposed by Swanson & Baumol is unsound as a matter of policy because it is a purely static model, which ignores dynamic efficiency. In its place we propose a “contingent ex ante negotiation” approach to FRAND royalties, which we will show is as good as the auction model in avoiding sunk costs hold-up, and superior in terms of dynamic efficiency.
Ericsson, Inc. v. D-Link Systems, Inc. (Fed. Cir. 2014) slip op 50-51 (“ the patentee’s royalty must be premised on the value of the patented feature, not any value added by the standard’s adoption of the patented technology.”); Microsoft Corp. v. Motorola, Inc., Case No. C10-1823JLR, 2013 WL 2111217 (W.D. Wash. Apr. 25, 2013), ¶ 74 (“From an economic perspective, a RAND commitment should be interpreted to limit a patent holder to a reasonable royalty on the economic value of its patented technology itself, apart from the value associated with incorporation of the patented technology into the standard.”); In re Innovatio IP Ventures, LLC Patent Litig., Case No. 11 C 9308, 2013 WL 5593609 (N.D. Ill. Oct. 3, 2013) at *9 (“The court's RAND rate therefore must, to the extent possible, reflect only the value of the underlying technology and not the hold-up value of standardization.”); Apple, Inc. v. Motorola, Inc., 869 F.Supp.2d 901, 913 (N.D.Ill., June 22, 2012) (“The purpose of the FRAND requirements, the validity of which Motorola doesn't question, is to confine the patentee's royalty demand to the value conferred by the patent itself as distinct from the additional value—the hold-up value—conferred by the patent's being designated as standard-essential.”)
Daniel G. Swanson & William J. Baumol, Reasonable and Nondiscriminatory (RAND) Royalties, Standards Selection, and Control of Market Power, 73 Antitrust L.J. 1, 5 (2005). An important extension was developed by Anne Layne-Farrar, A. Jorge Padilla & Richard Schmalensee, Pricing Patents for Licensing in Standard Setting Organizations: Making Sense of FRAND Commitments, 74 ANTITRUST L.J. 671 (2007)
Amending Patent Eligibility
The Supreme Court’s recent decisions applying the judicially-created exceptions to the statutory subject matter categories listed in 35 U.S.C. § 101 have had a significant impact on the patent system, including lower courts and the U.S. Patent and Trademark Office as well as attorneys and patent agents drafting patent applications. Some have suggested that this impact is positive, that these decisions have improved the quality of patent applications and issued patents and reduced abusive patent litigation. Others, however, suggest that the impact has been negative, that these decisions have focused on inappropriate policies, created chaos, and unnecessarily reduced the incentive to invent. In this paper, I consider how Congress might amend the patent statute to maintain improvements in patent quality and the reduction in abusive patent litigation, but also to focus on appropriate policies, to provide more certainty, and to ensure the incentive to invent. In particular, I analyze several options for revising the existing statutory language.
Can the Approach to Product Market Definitions in Trade Law be Useful in Antitrust Cases Involving Patented Products?
Generally speaking, it is not rare to use a concept from one field of law and apply it to another field of law. Patent law is not an exception. Fairly recently, for example, the Supreme Court of the United States applied intent concepts from criminal matters in patent cases involving induced infringement. This Article explores whether an approach to product market definitions in trade law can be applied in antitrust cases involving patented products, even though the role of market definitions in the two areas of law is different. The Article first reviews a substantial amount of literature that explores the conceptual interchangeability between approaches to product market definitions in trade law and antitrust law. The Article then explains why an antitrust approach to product market definitions might not be appropriate in patent cases. Finally, the Article illustrates how the approach to product market definitions in trade law can provide meaningful guidance in antitrust cases involving patented products.
Outside the classroom there are numerous rich experiences available to students interested in further pursuing their interests in intellectual property law. Students may join the Intellectual Property Law Student Association, which is run by students for the purpose of encouraging interest in their field by sponsoring interesting speakers and events.
KU Law can also help place students in externships and internships at the KU Center for Technology Commercialization.