Leveraging Information about Patents: Settlements, Portfolios, and Holdups

28 Pages Posted: 13 Sep 2012

Date Written: July 19, 2012

Abstract

Much recent scholarship focuses on the problems posed by uncertainty regarding intellectual property rights. In patent law, this uncertainty relates primarily to the scope and validity of patents, which plays an important role in litigation decisions. With assessment of the likelihood of litigation success difficult and the cost of defending a patent infringement suit high, alleged infringers may choose to settle or to cease the allegedly infringing conduct, even if the suit would ultimately show that the challenged conduct was permissible. In some patent cases, however, and particularly in some patent cases in the antitrust area, uncertainty plays an arguably more fundamental role. In these cases, including cases involving Hatch-Waxman pharmaceutical settlements and deception in the standard-setting process, the patentee gains its competitive advantage not just from its exclusive control over information about its patented invention, or even from the cost of challenging the patent, but directly from the unavailability of information about the patent. That is, much of the patentee’s power derives directly from the uncertainty.

Courts typically approach these cases as if they involved the same sorts of rights to exclude as in typical infringement cases. But the cases discussed in this essay are not typical infringement cases, because the patentees’ innovations are basically irrelevant. For example, in the cases alleging failure to disclose patents before standard-setting bodies and later use of patent rights to “hold up” producers of the standardized products, there generally is no dispute that the standardized products infringe the patents at issue; instead, the dispute centers on the significance of the patentee’s failure to disclose the existence of the patent. And in the cases regarding “reverse payment” settlements in the pharmaceutical industry, although validity and infringement are the underlying issues, the cases do not involve any evaluation of the inventions, prior art, or allegedly infringing products; instead, both the patentee and the alleged infringer use settlement agreements to prevent consideration of those issues, preserving the uncertainty from which they both benefit.

The purpose of this essay is twofold. First, it serves to emphasize the role played by uncertainty in three otherwise very different categories of cases, involving “reverse payment” settlements, patent portfolios and package licensing, and deception in standard-setting. The source of the uncertainty at issue in each of the cases is different, but in each the unavailable information is not protected by patent law. Second, the essay points out that in these cases the courts nevertheless apply rules that are more appropriate for the information about inventions that patent law is intended to protect. Patent law grants patentees the exclusive right to make, use, or sell their inventions, but it gives them no exclusive control over information about the existence, validity, or other characteristics of those patents. When cases turn not on the technical information in patents, but on the availability of information about those patents, courts should not apply rules that favor patents and patentees. Uncertainty may be inherent in patent law, but it does nothing to promote innovation, so efforts to exploit uncertainty should not be protected.

Suggested Citation

Patterson, Mark R., Leveraging Information about Patents: Settlements, Portfolios, and Holdups (July 19, 2012). Houston Law Review, Forthcoming, Fordham Law Legal Studies Research Paper No. 2145403, Available at SSRN: https://ssrn.com/abstract=2145403

Mark R. Patterson (Contact Author)

Fordham University School of Law ( email )

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