Building a Better Bounty: Litigation-Stage Rewards for Defeating Patents

Abstract

A patent challenger who defeats a patent wins a prize that it must share with the whole world, including all its competitors. This forced sharing undermines an alleged infringer's rea-son for fighting the patent case to the finish—especially if the patent owner offers an attractive settlement. Too many settlements, and too few definitive patent challenges, are the result. A litigation-stage bounty would correct this defect in patent litigation's basic framework, for it would provide cash prizes to successful patent challengers that they alone would enjoy. After briefly describing the free rider problem with inventions that patent law attempts to solve, this article details how the Supreme Court's decision in Blonder-Tongue creates an equally troubling free rider problem in the context of patent validity challenges. It then critiques two recent pro-posals directed at solving the free rider problem that undercuts patent challenges: an examina-tion-stage bounty proposed by Professor Thomas, and a one-way fee-shifting rule more recently proposed by Professor Kesan. The article next proposes a new bounty, one that offers the bene-fits of the Thomas and Kesan proposals without their respective drawbacks. The proposed bounty would apply at the litigation stage, in an amount that varies as a function of the patentee's net profits from practicing the technology set forth in the asserted patent claims. Finally, the ar-ticle tries to answer the most likely objections to a litigation-stage bounty.

Keywords: patent, intellectual property, bounty, litigation, Blonder-Tongue, patent & antitrust

JEL Classification: K11, K20, K21, K41, L41