Monday, March 21, 2016

Douglas Lichtman: Can Courts in Patent Litigation Slow Down?

In a new essay, Patient Patents: Can certain types of patent litigation be beneficially delayed?, Douglas Lichtman makes a provocative and original argument. If, post-Ebay, injunctions are no longer available for patent infringement, then maybe courts can and should take more time on patent litigation cases in order to improve the accuracy of their determinations of validity and infringement. The paper is available here.  For patent scholars in New York City this week, Lichtman will be presenting the paper at the Spring 2016 Innovation Policy Colloquium will take place on Thursday, March 24 from 5:00-6:50pm at NYU School of Law, 40 Washington Square South, room 208.

The Essay is a working paper and has no footnotes. But it's a really clear and engagingly written read. Lichtman bases his beneficial-delay theory on the oft-made observation that courts are exceptionally bad at calculating damages for patent infringement––that "[i]t is almost impossible for a judge or jury to accurately determine how much a given patent is worth"––and that it's therefore better to let the parties do so when possible. Pre-Ebay, when injunctions were virtually automatic, courts had to make these precarious value determinations only for past damages. Once an injunction forced a defendant to stop infringing, this stopped the clock on courts having to assess damages. Thus, under these conditions, "[f]aster decisions meant less time governed by patent law’s damages rules and more time governed by assumedly better private numbers." However, post-Ebay, "where injunctions are not going to be available regardless", "this trade-off disappears. ... [D]elaying a court verdict by one year simply takes a year when prices would have been set by the court under the rubric of court-ordered forward-looking royalties and transforms that into a year where prices will be set by the court under the rubric of court-ordered backward-looking damages."

Although Lichtman notes the potential costs of delayed judgments, he is mainly optimistic about the possible benefits of delay. "For example," he writes, "what better way to decide (under section 103 of the Patent Act) whether a given invention was 'obvious to those skilled in the art' than to wait a few years and see if a sufficiently large number of skilled practitioners independently come up with the same invention? Similarly, would not court decisions on validity be more reliable if they could be delayed long enough for the Patent Office to first run its own re-examination of any disputed patent, for example under the new Inter Partes Review procedure?" Moreover, he contends (again, no footnotes so take this with a grain of salt), that "fast litigations are systematically biased in favor of patent holders because a patent holder can prepare its case long before the complaint is filed, whereas accused infringers will often not even know about the patents at issue until after the complaint is served." So, in theory, slowing down patent litigation would be good for defendants.

The full paper is available here.

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