Patent Fraud by Design
31 Pages Posted: 15 Feb 2021
Date Written: June 15, 2020
Patent law is supposed to offer property-right protection to inventors in order to promote and incentivize innovation. Yet current patent law doctrine effectively incentivizes patentees to defraud the patent office, allowing them to secure undeserved legal protection. What is worse, once such protection is fraudulently obtained, patentees can use it to stop downstream innovation, harm competitors, and charge supracompetitive prices to consumers. The current patent system generates all of these harms because it offers strong legal protection while failing to impose equally strong sanctions against those who attempt to abuse it. Indeed, the current system rarely sanctions patentees who have defrauded the patent office, and even when it does, it typically allows them to retain huge profits reaped from their fraud. The patent system thus creates a strong incentive to commit patent fraud, thereby inhibiting, rather than promoting, innovation and competition. To combat these problems, this Article suggests a novel enforcement mechanism designed to uncover patent fraud and to sanction meaningfully patentees who commit it. It argues that because competitors of those patentees are best situated to identify the fraud, they should be allowed to lead class action lawsuits against wrongdoers. The Article further argues that patentees found to have engaged in patent fraud must be required to give up all profits derived from the fraud to make sure that fraud is no longer economically beneficial. It demonstrates that existing legal doctrines, such as the remedy of disgorgement, Walker Process antitrust claims, and class action procedures, can be invoked to offer such legal solutions.
Keywords: patents, IP, disgorgement, remedies
JEL Classification: K11
Suggested Citation: Suggested Citation