Recalibrating Patent Venue

For most of patent law’s 200-plus year history, patent holders could sue only in the district inhabited by the defendant. In 1990, the United States Court of Appeals for the Federal Circuit decided that the scope of permissible venue extended to all districts with personal jurisdiction over the defendant. In recent years, patentees have flocked to certain districts, fueling the widespread perception that patentees, particularly those that do not practice their patents, called non-practicing entities (“NPEs”), are abusing forum. Responsive to these concerns, Congress and the courts have moved to reinstate a more restrictive rule, culminating in the Supreme Court’s 2017 TC Heartland LLC v. Kraft Foods Group Brands LLC decision to limit venue to locations of the defendant. Yet, incredibly, to date there has been no measure of the overall pervasiveness of forum shopping and whether TC Heartland or any other venue reform will change this phenomenon. We address this gap by estimating the differential impacts of reform on filing patterns. We find, based on an analysis of approximately 1500 patent and non-patent cases filed in 2015 that about 86% of patent cases—a striking share—were brought outside of the defendant’s home district. This practice is not limited to non-practicing entities, however; corporations, universities, and individuals all filed outside of defendant districts. Things would have been different if venue were reformed, but much depends on how reform is implemented. If the Supreme Court’s decision to restrict venue to where the defendant resides or has an established place of business were already in effect, an estimated 58% of 2015 cases would have had to have been filed in a different venue. If the Congressional proposal to change venue to include home districts with research or manufacturing connections to the case had been in effect, about half the NPE cases in our sample would have needed to be refiled in another district, but only 14% of the operating company cases would. Cases would have become less concentrated in a single district, with the top district, Delaware, capturing 20–24% of cases, but the top three districts, the District of Delaware, the Eastern District of Texas, and the Northern District of California, would still have the majority of cases. Regardless of the reform, we expect smaller defendants to get more from venue relief than larger defendants because of their relatively smaller footprints. Among NPEs, universities, individuals, and small companies should be impacted to a lesser extent than patent assertion entities (“PAEs”), considerably so if the VENUE Act were enacted

How can Congress Prevent the Issuance of Poor Quality Patents? Questions for the Record for Colleen V. Chien

This is a submission of responses by Prof. Colleen Chien to questions for the record posed by Sen. Thom Tillis (R-N.C.) and Chris Coons (D-Del.) at a October 30th hearing of the Senate Judiciary Committee’s Subcommittee on Intellectual Property, entitled, Promoting the Useful Arts: How can Congress prevent the issuance of poor quality patents

Of Trolls, Davids, Goliaths, and Kings: Narratives and Evidence in the Litigation of High-Tech Patents

While each patent dispute is unique, most fit the profile of one of a limited number of patent litigation stories. A dispute between an independent inventor and a large company, for instance, is often cast in David v. Goliath terms. When two large companies fight over patents, in contrast, they are said to be playing the sport of kings. Some corporations engage in defensive patenting in order to deter others from suing them. Patent licensing and enforcement entities who sue have been labeled trolls. Finally, observers of the patent system call the use of patent litigation to impose or exploit financial distress patent predation. These stories, routinely invoked by the press, advocates, and academics, shape public understanding of the patent system. In this Article, I describe, then match, these stories to data on patent litigations to determine which types of suits are most prevalent. I focus exclusively on the litigation of high-tech patents-covering hardware, software, and financial inventions-using data from the Stanford Intellectual Property Clearinghouse for cases initiated in U.S. District Courts from January 2000 through March 2008. The data shows that the reality is more complicated than the rhetoric regarding patent litigation suggests. For instance, many problems with the patent system. But they bring only a minority of patent suits: 17% of high-tech patent suits in the last eight years. However, NPEs often name multiple defendants and sometimes, rather than sue, are sued, for declaratory judgment ( DJ ). Counting suits based on the number of defendants and including DJ cases, the NPE share rises to 28% of all high-tech patent suits. This average reflects an increase in NPE suits as a proportion of all suits over an eight-year period, from 22% in 2000-2001 to 36% in 2006 to March 2008, counting defendants, or from 10% to 20%, counting cases. I also report the variation by industry based on the absolute number of suits-the share of hardware patent NPE suits (26%) was nearly triple that of financial patent NPE suits (9%). These numbers provide a richer context for understanding the NPE phenomenon. Another widespread perception of the patent system is that large companies dread going to court, carefully constructing portfolios of patents to avoid doing so. The practice of defensive patenting has been well-documented and theorized. Yet, I found that public and large private companies initiated 42% of all lawsuits studied, 28% of the time against other large companies-the largest single category. They also defend against many other suits, brought by NPEs, small inventors, and individuals. These data suggest that defensive patenting, which is supposed to keep large firms out of court, is at least an incomplete-and perhaps a failing-strategy for many companies. This Article also reports on the other major narratives of patent litigation. 4% of the suits were initiated by individual inventors (David v. Goliath), 18% of the suits were brought by small private companies against public or large private ones (small v. large), 16% pit one small- or medium-sized company against another (limited stakes), and in 8% of the suits, a large firm sued a small one (predation profile). These and other findings provide a snapshot of patent litigation that should both inform current efforts to reform the patent system and serve as a basis for further investigation into its functioning

Holding Up and Holding Out

Patent “hold-up” and patent “hold-out” present important, alternative theories for what ails the patent system. Patent “hold-up” occurs when a patent owner sues a company when it is most vulnerable—after it has implemented a technology—and is able wrest a settlement because it is too late for the company to change course. Patent “hold-out” is the practice of companies routinely ignoring patents and resisting patent owner demands because the odds of getting caught are small. Hold-up has arguably predicted the current patent crises, and the ex ante assertion of technology patents whether in the smartphone war, standards, or patent “troll” context. Hold-up theory has been embraced by thought leaders and fueled the current drive by Congress and President Obama to reform the patent system. This Article makes the counterintuitive case that hold-up theory is wrong—or at least incomplete—because it is missing is full consideration of the other side—the side of hold-out. When large companies systematically “hold out” on patentees, they have no choice but to work with efficient patent enforcers, or “trolls.” When small inventors are unfairly disadvantaged in the marketplace, jurors may give them relief in court. Considering hold-out and hold-up together provide a more complete picture than focusing on either theory alone. This perspective reveals surprising pathways to a better patent system, focused on the design, rather than the doctrine, of patent law. Instead of trying to eliminate all technology patents, or to enforce all of them, we should try to price them appropriately and reduce the distortions they produce. Instead of trying to make patent law perfect, we should make it cheaper, more streamlined, and more equitable. To do so, lawmakers should prioritize improving coordination across courts and agencies, reducing costs through early dispositive rulings and valuation, and promoting symmetry between parties and proportionality about the value of a patent through fee- and cost-shifting. Each of these steps would go a long way to curbing both hold-up and hold-out

Contextualizing Patent Disclosure

One of the main justifications for a patent system is that patents disclose useful technical information that others can learn from. However, patents are not performing this function well. The average patent is written in legalese, uses vague language, and is hard to connect to commercial activity. Legal scholars have responded with calls to improve the patent document through better writing, more examples, and better enforcement of patent doctrines. The courts have sought to ensure that patent specifications are robust and justify the grant of a monopoly. This follows from the Supreme Court\u27s characterization of technical teachings within a patent as the quid pro quo for the patentee\u27s exclusive rights. The problem with these approaches is that they focus exclusively on patent content, and overlook the many ways in which patent context matters to the dissemination of technical information. A review of the ways in which patents truly promote the progress reveal that patent information beyond, not just within, a patent\u27s four corners, can shape the extent to which the subject invention of the patent spreads beyond the inventor. Whether a patent is in force, is commercially important, is subject to licensing or other commitments, or is held for defensive or offensive reasons, for example, can determine whether and how the teachings within the patent spread. In this Article, I argue that we need to rethink the concept of patent disclosure. Rather than focusing only on the content of the patent, we should keep in mind the context of the patent, and how the greater availability of contextual information about the patent can promote the progress. This contextual information represents not only the final product of a patent as issued, but the process by which it is made and used, the timing and terms on which it is provided to the world, and the publicly reported transactions in which the patent is involved. Making contextual information more accessible would do much to reinvigorate the disclosure function of the patent system-in many cases, using already existing information

The Inequalities of Innovation

Over the last few decades, the United States has become more innovative, but the gains have been distributed unequally. In 2020, over 50% of new U.S. patents went to the top 1% of patentees, and more than 50% of all patents of U.S. origin were generated by just five states, all coastal. Less than 13% of inventors were women. The economic, geographic, and demographic concentration of innovation highlight how the intersections between two traditionally discrete topics—innovation and inequality—have become increasingly relevant. But rather than any single inequality, this Article argues, multiple inequalities—of income, opportunity, and access—have relevance to innovation. Examining the inequalities of innovation, separately and together, exposes the tensions, at times surprising, between notions of equity. When mapped onto patent law, an inequalities framework also reveals how patent law can exacerbate inequality by providing enhanced returns to “invention capital”—the role models, trust, know-how, and networks required to take advantage of inventing. But an inequalities framework also shows how patented innovation can improve conditions for the worst-off, by providing paths to prosperity and hastening the creation and diffusion of innovation across classes, even as it makes the rich richer. Building on the “inequalities” framework described above, this Article offers a set of legal and administrative proposals grounded in patent law for addressing inequality concerns. To ensure equal opportunities to participate, this Article proposes the creation of an Independent Office of the Small Inventor Advocate, akin to the National Taxpayer Advocate, that would have responsibility for outreaching to and increasing invention capital and know-how among first-time, underrepresented, and under-resourced inventors, and leveling up the inventing playing field, for example through universally accessible patent-quality technology. To expand access to innovation through partnerships and expand public understanding and oversight of the patent system, by other agencies, for example, this Article proposes the introduction of an independent Office of Public Interest and Partnerships in Innovation. Finally, introducing and centering equity metrics, like the number of first-time innovators and gaps in the rates, can support equitable growth in innovation

Holding Up and Holding Out

Patent “hold-up” and patent “hold-out” present important, alternative theories for what ails the patent system. Patent “hold-up” occurs when a patent owner sues a company when it is most vulnerable—after it has implemented a technology—and is able wrest a settlement because it is too late for the company to change course. Patent “hold-out” is the practice of companies routinely ignoring patents and resisting patent owner demands because the odds of getting caught are small. Hold-up has arguably predicted the current patent crises, and the ex ante assertion of technology patents whether in the smartphone war, standards, or patent “troll” context. Hold-up theory has been embraced by thought leaders and fueled the current drive by Congress and President Obama to reform the patent system. This Article makes the counterintuitive case that hold-up theory is wrong—or at least incomplete—because it is missing is full consideration of the other side—the side of hold-out. When large companies systematically “hold out” on patentees, they have no choice but to work with efficient patent enforcers, or “trolls.” When small inventors are unfairly disadvantaged in the marketplace, jurors may give them relief in court. Considering hold-out and hold-up together provide a more complete picture than focusing on either theory alone. This perspective reveals surprising pathways to a better patent system, focused on the design, rather than the doctrine, of patent law. Instead of trying to eliminate all technology patents, or to enforce all of them, we should try to price them appropriately and reduce the distortions they produce. Instead of trying to make patent law perfect, we should make it cheaper, more streamlined, and more equitable. To do so, lawmakers should prioritize improving coordination across courts and agencies, reducing costs through early dispositive rulings and valuation, and promoting symmetry between parties and proportionality about the value of a patent through fee- and cost-shifting. Each of these steps would go a long way to curbing both hold-up and hold-out