6 Jan 2011

A Review of United States Patent Validity Jurisprudence

Tracing from the hay days of intellectual property law, as represented by the Patent Act of 1836, Neal Solomon in his paper recently uploaded on SSRN titled "A Review of Patent Validity Jurisprudence" an indeed undertaken an extensive review of Patent Validity Jurisprudence of the law prevailing in the United States. While undertaking the review, the author suggests for a shift in the trend and supports the “clear and convincing standard" as against the “preponderance of evidence standard" for testing infringement of patents. 

Upon the appraisal the author concludes that "in the present regime, injunctions are hard to obtain, which provides a disincentive for infringers to settle matters and moves the patent system to a set of liability rules that provides compensation akin to eminent domain and that appreciably increases transaction costs. The willfulness standard is also hard to show in the present system, giving infringers no expectation of enhanced damages as an incentive not to infringe. If the patent validity standards are changed, infringers will have another tool to attack patents."

The abstract reads as under;
For over a century, the U.S. patent system has held a presumption of patent validity, based largely on the belief in the quality of the U.S. Patent Office examination system. There are several appellate processes to assert patent invalidity, including the patent reexam process, the federal district courts and the Court of Appeals for the Federal Circuit. Because of the presumption of validity in a patent, a standard that has been held since the time of the Civil War, and because of the adversarial nature of litigation, the bar for challenging patents in the courts has been to provide “clear and convincing” evidence. This standard has provided consistency in the U.S. patent system.
A group of patent critics, however, has argued that the bar to show patent invalidity with the “clear and convincing” standard is too high. This group, led by technology industry incumbents, has argued that the “preponderance of evidence” standard should be applied in the courts to invalidate patents, particularly if evidence is introduced after the Patent Office examination process. 
The present essay critiques the view of the patent critics and argues that the “clear and convincing” standard evolved from a coherent and consistent patent jurisprudence that is important to maintain a healthy functioning patent system. The Patent Act of 1952 maintains that patents have a presumption of validity. The case law from 1874 to the present is consistent on this issue of requiring a higher bar to attack patents. Lowering the burden of proof to challenge patent validity would bias the patent system to the infringer and challenge the presumption of validity. This would have the effect of devaluing patents and harming incentives to innovate.
The argument is made that the infringer should have a duty to obtain an “opinion of counsel” to justify an assertion of patent invalidity. In the absence of such a requirement, the infringer has no good faith belief that the patent is invalid and, in fact, no defense from the assertion that the patent is not willfully infringed.
The adverse consequences of maintaining a lower standard of proof in patent validity cases are substantial, with infringers and Asian manufacturers as beneficiaries and pharmaceutical companies, universities, market entrants and innovators adversely affected. In combination with a set of recent judicial opinions unfavorable to patent holders, lowering the bar for asserting patent invalidity would provide a sea change in patent law that may hurt the U.S. economy.
An interesting reading for those interested in this branch of law.

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