Reining in Remedies in Patent Litigation: Three (Increasingly Immodest) Proposals

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TABLE OF CONTENTS  INTRODUCTION I. INJUNCTIONS AND STANDARD-ESSENTIAL PATENTS II. AWARDS OF PROFITS IN DESIGN PATENT CASES III. JURIES AND REASONABLE ROYALTIES CONCLUSION 

Introduction

Notwithstanding the passage of the America Invents Act in 2011, (1) and nearly a decade's worth of Supreme Court and Federal Circuit cases that have cut back on some of the latter court's earlier, more expansive, interpretations of patent rights, (2) criticism of the U.S. patent system only seems to intensify with every passing year. (3) Much, though hardly all, of the criticism centers on the conduct of patent assertion entities (PAEs)--otherwise known more pejoratively as "patent trolls"--those patent-holding entities which, according to Professor Colleen Chien, filed over 60% of all civil actions for U.S. patent infringement in 2012. (4) Many of these actions involve patents relating to software, business methods, telecommunications, and information technology (IT). (5) Only a small percentage of these lawsuits are believed to involve deliberate copying on the part of accused infringers; most result from independent invention on the part of companies that were, at least initially, unaware of the patents in suit. (6) To be sure, most pending patent applications are published eighteen months after filing, (7) and all of them become public records once the patent is granted. (8) Nevertheless, high-tech firms in particular generally ignore patents, (9) due both to the sheer quantities of patents granted and to the opacity with which they are drafted, which sometimes turns the "notice" function of patents into something of a joke. (10) Not surprisingly, U.S. patent litigation is also enormously expensive, (11) and the risk of crippling liability ever-present; in 2011 alone, there were six patent damages verdicts in excess of $100 million. (12) As a result, patent critics argue that, in many fields of technology, patents no longer serve their intended purpose of providing an incentive to invent and disclose but rather operate as, essentially, a tax on innovation. (13) Anyone who produces--or, in some instances, simply uses--a high-tech product or service automatically becomes an attractive target for patent litigation. (14)

In this environment, calls for further reform of the patent system have taken many forms, ranging from outright abolition of the patent system (15) to more targeted efforts directed at matters such as claim drafting and claim construction, disclosure, and patent prosecution, (16) and further reforms to areas such as patentable subject matter (17) and nonobviousness. (18) others have called for the introduction of new defenses to liability, such as an independent invention defense (19) or a broader experimental use defense; (20) or for "tailoring" certain aspects of the patent system, including the patent term, to the characteristics of different fields of technology. (21) Yet other suggestions go to the issue of patent enforcement, such as proposals for instituting specialized patent trial courts (22) or competing patent appellate courts; (23) or for switching over to some version of the "English Rule" under which the losing party would be responsible for the winner's attorney's fees in all or most, not just "exceptional," cases. (24)

My own scholarship has focused to a large extent on remedies and other aspects of patent enforcement, both in the United States and in other major patent systems, so it should come as no surprise that the ideas for reform that most readily occur to me tend to center on modifications to this area of patent law. (25) This essay will argue in favor of three reforms in particular, arranged in order of their likely political feasibility. The first, which has received the most attention thus far and appears to have the best prospect for making its way into mainstream U.S. (if not foreign) patent practice, is the adoption of a general presumption that a patent owner's commitment to license assertedly standard-essential patents (SEPs) on fair, reasonable, and nondiscriminatory (FRAND) terms disqualifies the patent owner from obtaining injunctive relief in any judicial or administrative forum. …