Publication Date
10-1-2024
Abstract
Over the past decade, patent invalidation has become easier and more common. Because invalid patents fail the statutory requirements, should not have issued, and impose significant costs, many observers have celebrated this development. Yet an undercurrent of concern exists among scholars, patent system participants, and even Supreme Court Justices. Though sometimes motivated by the self-interest of patent owners, this concern partially reflects a legitimate problem: even properly invalidating a patent years after its issuance imposes costs on patent owners, costs that would not exist if the Patent Office had rejected the patent during examination. The costs of invalid patents are well recognized, but scholars have largely overlooked the costs of invalidating patents, giving this phenomenon only passing attention as part of larger criticism of new invalidity proceedings in the Patent Office’s Patent Trial and Appeal Board. This Article brings invalidation costs into the mainstream of patent scholarship and provides the balanced analysis missing from modern patent debates. In doing so, it complicates the typical depiction of patent invalidation as an unabated public good. Invalidation costs include four distinct types: reliance costs from investments and other decisions made based on patent protection, uncertainty costs from insecure patent rights, in terrorem costs from the threat of invalidation, and adjudication costs from repetitive invalidity determinations. Yet the benefits of eliminating improper monopolies often will outweigh these costs. And valid reasons exist to doubt the significance of invalidation costs variable reliance among patent owners, patent owners’ own responsibility for their invalidation costs, predictability of invalidation costs, and the exclusivity period and monopoly profits realized before invalidation. Therefore, some ways of addressing invalidation costs (making patents incontestable, limiting invalidity proceedings, making patent invalidation prospective-only, or requiring government invalidation payments) are not warranted. Instead, an existing patent law lever—the presumption of validity and its heightened burden of proof—can be repurposed to address invalidation costs. A presumption of validity rooted in invalidation costs would neither apply universally to all patents nor be limited to district court litigation. Rather, it would apply regardless of the invalidation forum but only upon proof of invalidation costs or proxies for them.
First Page
103
Recommended Citation
Greg Reilly, Patent Invalidation Costs, 102 Denv. L. Rev. 103 (2024).