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Abstract: While the theory of the patent system is premised on the idea that patents will be used to exclude competitors, only a tiny fraction of patents are ever enforced. Legal and economic scholars have theorized as to how to identify valuable patents based on their individual characteristics. In this paper, we present the results of the largest empirical study ever conducted of the patent system. We compare the characteristics of litigated patents to those of issued patents generally, and we find important differences in a range of dimensions. These data confirm some predictions in the literature regarding patent value and refute others. New patents are more likely to be litigated than old patents. Foreign patent owners are less likely to litigate than domestic patent owners. Patents that issue to individuals or small companies are much more likely to be litigated than those that issue to big companies, though many of those patents have changed hands by the time they are brought to court. Patents that cite more prior art are more likely to be litigated, and those that are litigated tend to be cited more elsewhere. Most significantly, there are substantial differences between industries in the likelihood of patent litigation. Patents in the mechanical, computer, and medical device industries are significantly more likely to be litigated, for example, than patents in the chemical and semiconductor industries. In the paper, we explore the implications of these findings in detail. Taken together, the data give a profile of a few valuable patents that stand out from a field of ordinary ones. They are the patents that their owners spend the most time and money in prosecuting. They are the ones that competitors recognize as most important. They are concentrated in a few industries in which patents play a more significant role in encouraging innovation. And they are patents that issue to individuals or small companies with asymmetric stakes in patent litigation, not to large companies. These conclusions in turn have significant implications for the design of the patent system, patent reform efforts and patent valuation theories - implications we consider at the end of the paper.
patents, patent valuation, patent litigation, intellectual property
Abstract: One of the oddest things to an outsider about the United States patent system is that due to continuation practice it is impossible for the U.S. Patent and Trademark Office (PTO) ever to finally reject a patent application. Continuation applications have led to abuse of the patent prosecution process. They serve very little useful purpose, and what benefits they confer may be outweighed by their potential for mischief. In an effort to study the pervasiveness of continuation practice, we compiled an original dataset comprising 2,224,379 patents, every patent issued from 1976 through 2000. We found that while continuations are filed in 23% of all patent applications, patents based on continuation applications represent 52% of all litigated patents. Although continuations are used in a minority of all patents, it is the most important minority because it is the minority most likely to end up in litigation. We examine the efforts undertaken to control the problems associated with continuation patents (changing the patent term, publishing applications, prosecution laches) and find them insufficient. The world would probably be a better place if they were abolished. Recognizing, however, that the abuse of continuation practice is not as pervasive as some might think, we propose a number of means by which Congress and the courts could strengthen existing rules designed to limit their abuse while preserving the practice. At a minimum, the empirical data we present can provide litigants and judges with a baseline for assessing the reasonableness of delay caused by the filing of multiple continuations by the patentee in determining the applicability of equitable remedies such as prosecution laches.
patent law, empirical studies, intellectual property
Abstract: This article presents the first empirical analysis of patent value by examining renewal rate data for nearly 100,000 patents. Finding that 53.7% of all patentees allow their patents to expire for failure to pay maintenance fees confirm common perceptions of patent issuance being a poor measure of innovation value. Even more interesting is the finding that patents which expire for failure to pay maintenance fees share some common identifiable characteristics. In particular, we found that renewed patents had more claims, cited more prior art, received more citations, had more related applications, had more inventors, and spent longer in prosecution. We also found that renewal rates varied both by assignee (individual versus corporation) and (foreign versus domestic) and by technology. By providing a means of systematically identifying worthless patents and their ex ante characteristics, this article compliments the author's earlier work on identifying valuable patents by comparing litigated and issued patents. Renewal rate data, however, seems a better predictor of value than litigation data as renewal rate data captures the many ways a patent may be of private value to its owner such as revenue generation via licensing or litigation, defensively, or for signaling purposes. Hence, rather than analyzing a subset of really valuable patents (those that are litigated) which may or may not be representative of all valuable patents, analysis of renewal rate data captures the population of valuable patents.
Patent law, intellectual property
Abstract: A game-theoretic analysis of forum shopping reveals how opportunities for strategic choices can influence the behavior of plaintiffs and defendants. If neither party has the opportunity to make strategic choices about participation or forum choices, we should expect no adverse selection or moral hazard problems. By contrast, if only one of the parties can control both the participation and forum selection choices, then we could expect pervasive adverse selection and moral hazard problems. In this paper we build on this simple game-theoretic framework, to analyze Dreyfuss and Ginsburg's (2001) Draft Convention on Jurisdiction and Recognition of Judgments in Intellectual Property Matters. We suggest that if the parties are faced with a bilateral strategic problem (i.e., if one party has control over one strategic choice and the other party has control over the other strategic choice), the extent of opportunistic behavior by either party, and the resulting deadweight losses, are likely to be minimized. In this respect, the Dreyfuss-Ginsburg proposal sensibly minimizes the strategic problems of forum shopping and creates an enforcement scheme which leaves intact the innovation incentives underlying intellectual property rights.
Abstract: In recent years, the ubiquitous body of literature falling under the general header of "rational choice" has come under fire. Drawing upon economics and experimental psychology, a body of literature has emerged in which legal scholars and economists operationalize formal games under laboratory conditions, and then compare the resulting play against rational choice predictions. Because the experiments often fail to unfold in the manner predicted by formal theory, scholars have relied upon these studies to challenge both the underlying assumptions of rational choice and rational choice prescriptions for law and public policy. Rational choice scholars have responded by arguing that rationality is necessarily bounded, that the empirical studies must account for the costs of acquiring information, and that rationality is not inconsistent with attaching a consumption value to certain forms of cooperative behavior. Most importantly, theorists have argued that low stakes games are of limited value in assessing rational play in high stakes legal and policy settings. This past summer, CBS ventured into the world of real life voyeuristic programming. In Survivor, CBS effectively structured a true high-stakes game. The ultimate cash payoff of $1 million was of sufficient magnitude that for those players who best positioned themselves to win, the apparent benefits of playing strategically outweighed the potential costs of appearing uncooperative or even unpleasant. To the extent that Survivor offers a glimpse into how stakes affect interactive human behavior under carefully defined conditions, and into how success might well result from careful strategy rather than inherent merit, Survivor offers an important antidote to the emerging literature critical of rational choice. When we compare Survivor with three fairly simple rational choice games, the theory comes out a winner.
Abstract: Lawyers and other commentators often remark that American courts, and particularly American juries, are biased against foreign litigants. No research, however, has ever confirmed this suspicion. Indeed, an exhaustive previous empirical study, published seven years ago in the Harvard Law Review, concluded that foreign litigants are successful in litigation more often than their domestic counterparts. In this Article, Professor Kimberly Moore reexamines the issue by reporting the result of research on an original dataset of over 4000 patent cases. The results cast substantial doubt on the hypothesis that foreign and domestic parties are treated identically in jury trials of intellectual property rights. In patent jury cases between domestic and foreign parties, the domestic party won 64% of the time, with the foreign party winning in the remaining 36% of cases. Domestic and foreign parties won at equal rates with judges. Marshaling a range of other evidence, Professor Moore explains that these results are likely to understate the degree of bias, placing a floor but not a ceiling on the impact of xenophobia. The discrepancy between these results and those of the Harvard Law Review study finding xenophilia may be attributable to the complexity of patent law or to problems that Professor Moore identifies in the data on which that study was based.
Intellectual property
Abstract: Despite skepticism regarding a lay jury's ability to comprehend and adjudicate patent cases, parties have increasingly called upon juries to resolve patent disputes. The absence of data on jury demands and their impact on patent litigation has handicapped analysis of reforms aimed at jury adjudication of patent cases. This Article's empirical study on jury demands attempts to correct that problem. This Article presents the empirical results of an original dataset of all patent cases adjudicated in the two-year period, 1999-2000. It uses party characteristic data and data about the litigation itself to examine two important questions: 1) who is demanding the jury; and 2) what impact this demand has on the litigation. The study measures only perceptions of relative jury bias - i.e., bias relative to a judge's decision-making. For example, even if juries are thought to be biased against foreign corporations, those foreign corporations would still demand a jury if they believed that judges are even more biased against them. This Article does not attempt to prove or disprove the accuracy of these perceptions by looking at case outcomes. Instead, it focuses on how the parties incorporate these perceptions into their strategic decision-making about the case. If juries seem biased in favor of patent holders, then it should not surprise anyone that patent holders disproportionately request jury trials. Similarly, if juries appear to favor individuals over large corporations, domestic over foreign parties, and local, in-state folk over out-of-state companies, we would expect these characteristics to influence the circumstances in which jury demands are made. By examining these factors I can report how they influence the parties' perceptions of jury competence and bias. Jury demands thus reflect perceptions of the patent process and are useful as a way of gauging that process.
Abstract: Lawyers and other commentators often remark that American courts, and particularly American juries, are prejudiced against large corporate entities. Existing empirical research attempting to confirm this suspicion is contradictory and suffers from a number of shortcomings. In this Article, Professor Kimberly Moore reexamines the issue by reporting the results of research on an original dataset of over 4000 patent cases and more than 2 million patents. The results cast substantial doubt on the hypothesis that individuals and corporations are treated identically in jury trials of patent property rights. In jury trials of patent cases between corporations and individuals, the individual won 78% of the time, with the large corporation winning in the remaining 12% of cases. Corporations and individuals won at nearly equal rates with judges. Marshaling a range of other evidence, Professor Moore explains that these results may understate the degree of bias, placing a floor but not a ceiling on the impact of anti-corporate prejudice. Although differential case quality may explain some of the win rate disparity it is unlikely to account for magnitude of the difference. Moreover, analysis of patent cases permits the exploration of related phenomena - the heroic iconization of the American inventor. As the injured tort victim is sympathetic, the American inventor is idealized for her ingenuity, productivity, and creativity. The inventor puts a face on one of the corporate entities, humanizing or personalizing the party. Hence, even in corporate versus corporate litigation, there is an individual component to every patent case and therefore an opportunity for bias to impact decision-making.
Patent law
Abstract: In response to widely held perceptions of bias against foreign parties in the U.S., this Article tests the hypothesis that foreign and domestic parties are treated identically in adjudication of property rights. It does so by comparing patent acquisition data with patent enforcement and win rate data for foreign and domestic parties. There are two significant findings which this paper establishes and explains. First, although foreign inventors acquire 45% of patent rights annually, they enforce their patent rights in only 10% of the litigated cases. Second, domestic parties win 63% of the cases in which their adversary is foreign. These data suggest that people underestimate the extent of the prejudice against foreign parties. Because of selection effect theory, win rate data cannot predict the magnitude of the bias, but it does substantiate its existence. This empirical research has placed a floor, but not a ceiling, on the impact of the bias.
Abstract: Can the patent system flourish if the scope of the patentee's property right is wrongly assessed almost forty percent of the time? This Article presents the results of an empirical study which shows that district court judges improperly construe patent claim terms in 38% of the cases appealed to the Federal Circuit. This is problematic for two reasons. First, it raises concerns about the efficiency of an adjudication system where no appellate review of these decisions is permitted until all issues are resolved by the trial court applying its claim construction. Because claim construction is the touchstone for any infringement or validity analysis, an erroneous claim construction impacts most liability decisions. The data show that errors in district court claim constructions require reversing or vacating judgments in 82% of these cases. In the absence of a route for expedited appeal of claim construction, district courts are forced to proceed with lengthy and expensive patent litigation based on their frequently erroneous claim construction. Second, the 38% error rate for claim construction creates doubt about the abilities of district court judges to adjudicate complex technical patent cases. Although there has been considerable commentary criticizing the practical limitations of juries adjudicating patent cases, little attention has been given to whether district court judges are the appropriate alternative. Can district court judges determine the meaning of patent terms to one of skill in the art when the terms are "memory selection second switch means" or "contact arrays being adapted to interchangeably connect?" What about seemly simple patent claim terms such as "between," "a" or "when?" This Article questions the process of having district court judges decide complex issues of patent infringement and validity based on their claim constructions when these constructions prove incorrect in 38% of the cases. The Article concludes that the most efficient way to balance the need for certainty and accuracy in patent claim scope determinations is not with increased deference to inaccurate district court decisions or by waiting for improvement in the quality of the district court decisions, but rather by providing expedited appeal of these issues to the Federal Circuit in limited circumstances.
Abstract: This Article undertakes the first large-scale empirical analysis of patent enforcement in the district courts. My database includes every patent case that was terminated from 1995 to 1999 (5 years of data) in every district court (9615 cases). This Article is organized around three major questions. Can variation in patent case resolution among jurisdictions be substantiated? Is jurisdictional variation and the resulting forum shopping good or efficient? Can forum shopping be reduced or eliminated? The empirical results demonstrate that despite the creation of the Federal Circuit, choice of forum continues to play a critical role in the outcome of patent litigation. The data indicate that patent cases are not evenly dispersed throughout the 94 judicial districts or dispersed according to the relative size of the court's civil docket generally, but rather consolidated in a few select jurisdictions. The ten most frequently selected fora are examined in detail to ascertain their appeal for patent holders. There is no single explanation why each of these ten jurisdictions hosts large numbers of patent filings. The empirical results substantiate procedural and substantive differences in adjudication of patent cases by these top ten jurisdictions. The lack of uniformity in patent enforcement is problematic. With increasingly national and international competition among products, the patent jurisdiction and venue statutes allow plaintiffs to bring their patent suits in virtually any district in the country. Providing plaintiffs with many potential venues for bringing suit increases the ability of parties to forum shop. The Article concludes by considering whether the patent system might benefit from the increased predictability that could be achieved by a specialized trial court or a more limited venue statute.
Abstract: There has been a recent surge in demand for jury trials in patent cases which has caused many commentators to question the ability of the jury to comprehend and accurately resolve complex patent cases. This Article examines this phenomena and presents the first large-scale comparison of patent holder win rates and recoveries in judge and jury trials. The data set includes all patent cases that went to trial in the United States from 1983-1999. At first blush, the results of my analysis suggest that complaints about juror bias and incompetency are unfounded. Judges and juries do decide some issues such as infringement and willfulness differently. However, the magnitude of the difference is not as profound as many would have suspected. Moreover, judges and juries are affirmed with equal frequency on appeal. The lack of significant difference in adjudication is likely attributable to the selection of cases that proceed to trial. Tried patent cases is not a random or a representative sample of all patent disputes and therefore may not permit accurate measurement of bias. Perceived adjudicator bias and incompetence is factored into the selection of cases for trial which would mitigate its appearance in the outcome data. A closer look at the data indicates that there are differences in judge and jury adjudication that may not be sufficiently transparent or intelligible for appellate correction. Juries significantly more than judges decide whole suits rather than individual issues. In addition, who files suit is a significant predictor for win rate when the jury in adjudicator. In jury cases, the patent holder win rate in infringement suits is 65%; in declaratory judgment actions the patent holder win rate is 42%. Patent holder win rates are nearly identical (50%) in judge cases regardless of who brings suit. This Article concludes that there are some significant differences in judge and juror resolution of patent cases and there may be problems with juror decision-making which are masked by the adjudicative process. However, the outcome data does not substantiate the pervasive juror incompetence and bias the popular perception suggests exist.
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