Changing the Rules in the Middle of the Game: How the Prospective Application of Judicial Determinations Related to Intellectual Property Can Promote Economic Efficiency

Abstract:     
The judiciary's influence on the economic and social environment in the United States in creating and revising legal rules has been the subject of considerable examination. One of the most important ways in which the courts have such an impact is when their modifications to existing legal rules are applied retroactively and affect actions and decisions made in reliance of the prior rules. Although the concern over the retroactive application of judicial determinations has waned in recent years, the issue is as important today as ever in the context of property rights, and in particular, intellectual property rights.

In this paper, Professor Daniel R. Cahoy takes an in-depth look at how judicial retroactivity can negatively affect efficiency in the economic environment of intellectual property rights. He explains that the special sensitivity to retroactivity exhibited by intellectual property interests make a compelling case for prospective decision making in certain circumstances. Professor Cahoy reviews the general law of retroactivity in the civil law context, and notes that intellectual property rights may provide the incentive to test the continued viability of prospective judicial decision making and preserve the useful remnants of the Chevron v. Huson doctrine. He concludes that courts should give increased consideration to prospective limitations and proposes a more workable and specific version of the Chevron test for intellectual property interests. To demonstrate the practical use of his Enhanced Chevron Test, Professor Cahoy applies his recommendations to three recent and important cases in the field of patent law, including the closely-watched case of Festo Corp. v. Shoketsu Kinzoki Kogyo Kabushiki Co.

Keywords: intellectual property, patent, copyright, trademark

JEL Classifications: 034, 038

Accepted Paper Series