Interesting take on patent validity suits. Suggests that TM's foot-dragging in this case is a sign of their weakness.
University of Illinois College of Law
Law and Economics Working Papers
Year 2006 Paper 52
How Are Patent Cases Resolved? An
Empirical Examination of the Adjudication
and Settlement of Patent Disputes
Jay P. Kesan Gwendolyn G. Bally
University of Illinois College of Law, kesan@illinois.edu
yUniversity of Illinois, gball@uiuc.edu
V. Conclusions
This work is part of a growing empirical effort among economists and patent law scholars
to understand the patent system and its workings. In this article, we attempt to answer some
fundamental questions regarding the role played by the courts in the patent system by examining
a set of patent cases in great detail. To this end, we have constructed a new database based on
court docket reports for all patent cases filed in 1995, 1997 and 2000, and tracked the evolution
of these cases (about 6300 cases) through to settlement or adjudication on the merits. The focus
of this effort is on keeping track of a number of variables to understand the precise disposition of
each case.
We have also tracked different characteristics in order to estimate patent litigation costs
in each case. For instance, we note the amount of time taken by each case through to final
disposition. In addition, we have devised a new proxy for measuring costs: the number of
documents filed by all the parties in each case, which we believe is more closely correlated with
actual litigation costs than the traditional measures of time expended and the stage of termination
in each case.
Our results show that many more patent cases are adjudicated on the merits (either at the
pre-trial stage through a grant of summary judgment or at trial) than is commonly thought. This
work is one of the few scholarly efforts in empirical litigation scholarship that can actually
estimate this amount, because most other papers rely exclusively on the imprecise categorization
of the Administrative Office of U.S. Courts to determine case outcomes. Our results
demonstrate that, in addition to the small number of patent cases going to trial (about 5%),
another significant percentage of cases (about 6-9%) are resolved on the merits through summary
judgment.
Consequently, summary judgments are important in patent cases for determining patent
validity and infringement, and the summary judgments related to patent validity occur earlier in
the litigation compared with summary judgments related to patent infringement. This result is
somewhat encouraging given the important role played by the courts in revoking patent rights
improvidently granted at the outset by the PTO. Nevertheless, despite the fact that such rulings
occur “early” in the proceedings compared to patent trials, we should still be concerned about the
huge transaction costs associated with patent litigation, because summary judgments, in general,
and summary judgment, based on invalidity in particular, are expensive compared with summary
judgments granted on other grounds.
In addition, there is a significant difference in duration and number of documents filed in
cases resolved through summary judgment for the 1997 filed cases compared with the 1995 filed
cases. This is consistent with the changes brought about by the Markman decision, which
invigorated claim construction as a threshold legal issue in patent litigation. The increased
importance placed on first construing the claims before addressing infringement or invalidity
after Markman necessitates that significant resources be allotted to the step of claim construction
before (or concurrent with) filing motions for summary judgment.
Hence, it is not surprising that
in the 1997 filed cases more resources were expended earlier in the litigation compared with the
1995 filed cases.
Overall, our results show that transaction costs associated with patent litigation loom
large, and rulings on the merits by the courts concerning patent validity, patent infringement, and
remedies for infringement (i.e., injunctive relief or damages) are rare, expensive, and not pursued
to completion by most litigants. Instead most patent cases settle fairly quickly (about 12-15
months) after the filing of the complaint, thereby reducing the actual cost of patent litigation
considerably.
This work has significant implications for all civil litigation in general, and for recent
efforts to reform the patent system by either improving patent quality through new administrative
procedures at the PTO or for substantive patent law reform. Our results strongly suggest that
patent litigation is largely a settlement mechanism, and, hence, any proposed change in the
patent laws should be analyzed in terms of the incentives generated for prompt settlement of
patent disputes. In addition, entities and interest groups seeking cheaper and/or a greater number
of patent rulings concerning validity and infringement will be wise to look elsewhere, perhaps at
other patent institutions such as the PTO or at other alternative dispute resolution (ADR) mechanisms which complement the courts.
