Public Interest Considerations in Private Resolution of Patent Disputes
© 1999 John Berryhill, Ph.D.
Patent litigation can be exceedingly expensive and time consuming. It has been estimated that the median fees and costs associated with the pre-trial phases of patent suits are about $500,000, with full trials regularly costing between two and five million dollars .(1) If taken to trial, the time required for patent litigation can readily exceed the time span during which the commercial value of the underlying technology diminishes through obsolescence.(2) Alternative dispute resolution techniques have gained popularity in many areas of law in order to avoid or reduce the time and expense of trials. While increased use of ADR in patent disputes offers similar advantages, the peculiar nature of patent rights mitigates against private resolution of patent issues affecting a public interest. These public interests include knowledge of the validity or invalidity of issued patents, and protection from anti-competitive patent misuse under the Sherman Act. This paper explores certain characteristics of patent rights and patent disputes that bear upon appropriate resolution of those disputes, and suggest that reform is required in patent law and procedure to protect the public's interest in public determinations of patent validity while expanding the opportunities that alternative dispute resolution offers in the patent field.
II. Relevant Attributes of Patent Rights and Patent Suits
Patent rights are not natural rights. A patent is a federal grant to the patentee of exclusive rights against all others. Unlike a grant of real property, a patent does not confer upon its owner a right to use and enjoy the subject matter of the grant. The value of a patent grant derives solely from the right to exclude others from making, using, selling, or offering to sell the patented invention. Patents are popularly misconstrued as granting a positive right to exploit an invention. It often occurs, however, that the patent owner is prevented from making the invention by previous patents granted to others on components, sub-assemblies or constituent elements of the invention. While a patent may have ancillary advantages to the patent owner in attracting investors or for advertising purposes, it should be understood that owning a patent puts the patentee in no better a position with respect to exploiting an invention than not owning a patent. The situation is as if a party were granted the right to lease or to prosecute trespassers upon a parcel of real property, but were not necessarily herself entitled to enter, occupy, or otherwise benefit from the property in any way. Hence, a patent is merely an offensive weapon, providing its owner with no benefit other than the power to enjoin the actions of others or to deprive them of the fruits of their efforts.
Patent suits typically fall into one of three broad categories, with differing implications as to an appropriate form for resolving them. A first category is where a patentee-manufacturer asserts the patent against an accused infringing competitor. A second category is where a patent licensee seeks to terminate the license on grounds of invalidity or an assertion that a newly developed or modified product falls outside of the scope of the patent. A third category is where a patentee-non-manufacturer seeks to obtain the profits of an accused infringing manufacturer.
The most commonly sought form of relief in a patent dispute is an injunction against the accused infringer. Preliminary injunction motions are frequent, and patent suits are often settled shortly after a preliminary injunction is granted, since the decision on the preliminary injunction provides at least an initial indication of the likely outcome, and may provide a sufficient economic impediment for the enjoined party to continue with the suit.(3) Between rival manufacturers, the measure of damages in such a suit will typically be the greater of the patentee's lost profits due to the infringer's sale of the patented product (along with "convoyed" sales of related non-patented products, e.g. the replacement blades for a patented razor). In the pre-existing license category of dispute, the patentee may seek the royalties due under the licensing contract. In the patentee-non-manufacturer category of dispute, the patentee will seek to obtain the infringer's profits from the sale of the patented product and convoyed non-patented products. These forms of damages are available in instances where the infringer had no knowledge of the patent's existence, and may have independently developed the invention.(4) Where it can be shown that infringement occurred with knowledge of the patent, monetary damages can be trebled and attorney's fees can be awarded.
III. Potential Advantages of ADR in the Patent Context
Patentees and accused infringers alike are often horrified upon being informed that their dispute, which may involve highly technically sophisticated subject matter, will be decided by a jury chosen at random from the general population. The technical background required to render a decision in patent disputes is one of the two primary reasons for the inordinate expense of patent litigation. Not only must the attorneys spend considerable time becoming knowledgeable in the relevant technical subject matter, but they must then expend resources in obtaining expert witnesses who will educate the judge and jury in the scientific discipline to which the patent pertains. Confronted with complicated lectures on esoteric subjects from opposing experts, a jury is likely to make a determination based on the apparent credibility or other personal characteristics of the experts as they are upon an understanding of the technology.(5) Compounding the daunting task of explaining the technical subject matter of the dispute is the fact that patent law itself consists of a body of doctrines and principles that are as unfamiliar to most federal district judges as they are to the jury.(6) After being confronted with a parade of often unintelligible experts on the technological aspects of the case, another regular feature of a patent trial is the enlistment of patent attorneys as legal experts to explain the canons of patent interpretation and to opine, based on the technical expert testimony, as to whether infringement has occurred or whether the patent in suit is valid. Aside from the unreasonable expectation that judges and juries will properly evaluate the technical and legal subject matter of the suit, reliance upon technical and legal expert testimony is susceptible to "junk science" as well as "junk law."
The expense and uncertainty of trying obscure legal and technical issues is a key factor in the desirability of adopting alternatives to trial. Rather than to educate disinterested, and likely uninterested, judges and juries, a tremendous amount of time and effort can be saved by selecting a neutral party who already possesses the requisite background in patent law and the relevant technology.(7) An expert neutral, or panel of experts, can more readily understand the technical issues, and can engage the parties witnesses in a dialogue likely to illuminate the subject matter in a more meaningful way than can be accomplished in traditional courtroom examination. While it may not take a rocket scientist to decide many other disputes at law, they are sometimes quite literally what is required in a patent dispute (and, on occasion, brain surgeons).
Another undesirable aspect of traditional patent trials is the occasional difficulty in obtaining an unbiased finder of fact. Patent disputes are frequently international in scope, and non-U.S. litigants are loath to have their cause determined by a jury of U.S. citizens. Japanese companies in particular are averse to trying patent cases in the U.S. because of a perceived anti-Japanese bias of U.S. juries in addition to the traditional Japanese preference for cooperatively resolving commercial disputes. Finally, venue is typically laid in the judicial district where the infringing activity takes place. In a patent suit against a large industrial manufacturer, it is not unreasonable to expect that a jury may improperly consider the fate of their neighbors when rendering a decision that may result in a factory-closing injunction.
Critical evidence in patent disputes often involves confidential information, such as research notes, methods of manufacture, and sales data, which neither party to the dispute desires to be made public. Although protective orders are regularly obtained in patent litigation, disclosure of even the most basic information that is required to assess damages for example, such as the marginal cost and profit per unit of production, is generally undesirable. While the factors of trial cost and potential bias may be of greater importance to one side or another in a patent dispute, the desire to protect confidential information is one factor which is likely to equally motivate both parties to the dispute to find an alternative to public disclosure of that information in a formal proceeding.
IV. Disadvantages of Private Dispute Resolution of Patent Disputes
The primary form of relief suggested by the very nature of patent rights is injunctive. Injunctive relief is often cited as one of the attributes of a dispute in general that may mitigate against ADR. Where the dispute is submitted to arbitration, however, the parties may agree to provide the arbitrator with injunctive power. In the licensor-licensee category of dispute, such an agreement can be included in the license, prior to development of a disagreement under the license. In the other two categories, however, the parties do not come to the table with a pre-existing relationship, and litigation is avoided only if the parties agree to another form of resolution only after the actual dispute has arisen.
Since the decision of an arbitrator will not be set aside but for "manifest disregard of the law," an accused infringer may be reluctant to submit preliminary injunctive relief to an arbitrator in the absence of any practical opportunity of appeal. On the other hand, it is not clear whether the "manifest disregard of the law" standard applied to arbitrators differs significantly from the "abuse of discretion" standard of review applied in appeals of preliminary injunctive relief, which is equitable and discretionary. A greater incentive exists on the part of the patentee-plaintiff for reserving the opportunity for a judicial preliminary injunction. Even if the parties agree in principle to arbitration, "preliminary" relief of any sort would be contingent upon the parties agreeing on the various particulars pertaining to how the proceedings are to be conducted and the manner of appointing an arbitrator. Particularly in the non-licensee categories of patent dispute, the time required to negotiate and agree to a procedure for resolving the dispute and for commencing proceedings can exceed the time required to obtain a judgment on a motion for a preliminary injunction. Despite the provisions of the Federal Arbitration Act (9 U.S.C. §1 et seq.) under which a court is required to stay proceedings on issues submitted to arbitration, it has been regularly held that preliminary injunctive relief remains available even where the parties have agreed to arbitrate all arbitrable issues.(8)
Among the advantages commonly cited in favor of ADR techniques are the preservation or promotion of mutually beneficial relationships among the parties to a dispute, and the creative flexibility to forge "win-win" outcomes of disputes. In the context of patent disputes between rival manufacturers, however, establishing cooperative "win-win" relationships is exactly the sort of behavior that the anti-trust statutes were designed to prevent. Indeed, settling patent disputes of the rival manufacturer category through various forms of pooled license arrangements and multi-party non-enforcement covenants have been held to be violative of anti-trust statutes, because such private agreements between competitors in possession of exclusive rights can effectively prevent market entry or competition from non-parties to the dispute. In the category of dispute where the patent is not owned by a market participant, however, exclusive licensing is perfectly acceptable.(9)
Unlike the relationships between parties to a labor dispute, a construction contract, a commercial transaction between seller and buyer, or even divorcing parents raising children, the parties to a patent dispute of the first type are not engaged in a mutual enterprise where cooperation is socially desirable. In some instances, what may be considered a "win-win" resolution of a civil patent dispute between economic competitors can result in criminal liability for conspiracy to violate the Sherman Act. While it is perfectly acceptable for one party to obtain a sufficient number of patents to control production of a product in a single industry, it is criminally illegal for competitors to "pool" their patents to the exclusion of other parties to accomplish precisely the same practical result.(10) The conflict between "good" patent monopolies and "bad" trust monopolies is well known, but has not been definitively resolved. Whether a particular patent licensing arrangement would run afoul of the Sherman Act depends upon extrinsic conditions of the relevant market and the market role occupied by the parties to the agreement. Hence, the creative flexibility available that ADR techniques offer in other areas of law is considerably dampened by the tension that exists between the socially beneficial right of exclusion provided the patent system, and the socially detrimental effects of commercial monopolies.
The anti-trust considerations attendant to patent pooling among erstwhile competitors complements the undesirability of parties to a patent dispute to seek a mutually beneficial settlement under at least one theory of why patents are considered socially useful. Patents are ostensibly granted "[i]n order to promote the progress of science and the useful arts." (11) In one view, a patent grant encourages development of yet further novel and non-obvious methods of solving the same technological problem in the efforts exerted by others to avoid liability to the patentee. This theory of fostering technological advancement via the threat of legal action presumes that the patentee will exert her right of exclusivity, or at least that the cost of licensing or litigation exceeds the cost of developing a technological alternative. If licenses are available on favorable terms, or if the cost of litigation is low, then the incentive for technological development is reduced, thus undercutting the express aim of the patent system. Thomas Jefferson, the scientist, believed that creative minds would flourish without the need for a commercial incentive. Benjamin Franklin, the frequently-duplicated stove inventor, disagreed.
Because a patent is a grant of rights against all others, there is a public interest in the validity of patents. Patent applications are examined for novelty by the United States Patent Office, and issued patents are presumed valid.(12) However, of the several conditions of novelty required for issuance of a patent, examination of a pending patent application in the United States Patent Office is primarily based on a search and review of previously-issued U.S. patents. Patent Examiners are not provided with sufficient resources or time to conduct an in-depth search of technical literature, such as is ordinarily done by a defendant to a patent action. The public interest in patent validity arises from the fact that adjudications of patent validity and invalidity are not symmetric in their collateral estoppel consequences. When the validity of a patent is challenged, and the patent is determined to be valid, the presumption of validity remains intact, but the judgment is not preclusive of a later challenge to the patent's validity on other grounds.(13) A finding of invalidity, however, is conclusive and is one of the few instances where collateral estoppel will be applied despite non-mutuality.(14) Therefore, when a judgment of invalidity has been rendered against a patent, the judgment affects not only the parties to the dispute, but extends to allow all others to use the invention without authorization by the patentee.
The application of non-mutual collateral estoppel to invalidity judgments is economically significant. Before investing in new product development, it is commonplace for manufacturers to conduct a study of issued patents in order to determine the risk of patent infringement. Prior adjudications of patent invalidity or other results of litigation such as a judicial interpretation of the scope of the patent can determine whether product development may or may not proceed. The record of proceedings before the Patent Office is available after the patent issues but, as noted above, the scope of examination in the Patent Office relating to validity is limited. Aside from prior publications and patents, other grounds of patent invalidity, such as derivation from others or commercial use of the invention more than one year prior to filing the application, are beyond the reach of ex-parte examination of patent applications in the Patent Office. These additional grounds of invalidity regularly surface only as a result of civil discovery.
The ability to conduct "streamlined discovery" under non-judicial procedures is a double-edged sword. As noted above, the desirability of preventing public disclosure of confidential information is a motivating factor for both the plaintiff and the defendant to consider private resolution of the dispute. On the other hand, either the patentee or the accused infringer may possess confidential information that bears upon the validity of the patent. For example, determining whether the invention was in public use by the patentee more than one year prior to the application filing date can require extensive review of invoices, purchase orders, correspondence, contracts, experimental data, engineering diagrams, etc., in addition to deposition testimony from the relevant technical employees. It is the rare patentee who willingly provides "smoking gun" evidence of patent invalidity, but it is also difficult to hide the paper trail left by early commercialization of the invention or to convince preternaturally honest engineers to provided shaded testimony under oath.
The fact-intensive nature of an investigation of patent validity has led some commentators to suggest retaining the attributes of evidentiary rules and civil discovery under the Federal Rules as a desirable mechanism in alternative resolution of patent disputes.(15) While retaining full discovery rights may greatly reduce resistance toward ADR among patent litigators, it would correspondingly reduce the major advantage of ADR, i.e. cost reduction. Of the various cited figures for the cost of patent litigation that one finds in the literature, the largest component is associated with the discovery phase of the proceedings. If the cost incentive for ADR is reduced, so is the corresponding disincentive to litigation.
V. Structural Disincentives for ADR
A series of statutory reforms were undertaken in the early 1980's with the intent to provide a greater degree of predictability in resolving patent disputes. One of these reforms was enactment of 28 U.S.C. §1295, which vested exclusive appellate jurisdiction in the U.S. Court of Appeals for the Federal Circuit for cases arising under the patent statutes. Prior to 1982, patent appeals from the District Courts were taken to the regional circuit courts of appeal, with the result that forum selection had become practically determinative of outcome. The Federal Circuit bench is composed of judges with particular expertise in the arcana of patent law as well as scientific or engineering backgrounds, and has provided an enhanced measure of consistency in determining patent appeals. Significantly, the Federal Circuit has ruled that most of the key issues common to patent disputes are questions of law subject to de novo review.(16) The corresponding increased resolution of patent suits on summary judgment motions is believed likely to reduce the time and expense that has been traditionally associated with patent trials.
Also in 1982, President Reagan signed into law 35 U.S.C. §294, providing for voluntary arbitration of patent disputes. Section 294 was intended to reverse a historic line of cases establishing that patent validity, which is one of the primary defenses to infringement, was non-arbitrable(17), and provides in pertinent part:
(a) [T] he parties to an existing patent validity or infringement dispute may agree in writing to settle such dispute by arbitration. Any such provision ... shall be valid ... except for any grounds that exist at law or in equity for revocation of a contract.
(c) An award by an arbitrator shall be final and binding between the parties to the arbitration but shall have no force or effect on any other person.
Two apparent structural inconsistencies flow from these provisions. First, "grounds that exist at law or in equity for revocation of a contract" include contract provisions that are contrary to public policy. Secondly, the provision in section (c) that an award, in which invalidity may be found between the parties but not as to others, shall have "no force or effect on any other person" completely misses the point that a continued presumption of validity for what has been privately agreed to be an invalid patent most certainly does have an effect on other people.(18) Section 294 essentially codifies collusion between market competitors to maintain invalid patents in force in order to deter other parties from entering or competing in the market. The Federal Circuit, however, continues to cite Lear for the proposition that there is a public interest in determinations of validity or invalidity, and has carefully trod a path under which subsequent disputes arising under patent arbitration agreements are denied federal jurisdiction as being matters of state law(19), or by which the terms of the private agreements are carefully scrutinized to allow a licensee to challenge validity despite an express clause to the contrary(20).
Foster arose under a consent judgment and license in which Foster acknowledged validity of the patent in suit and later developed a modified product for which it sought termination of the license on non-infringement and invalidity grounds. The Federal Circuit found that the "language of the decree is ambiguous with respect to barring the defense of invalidity with respect to different devices charged to be infringements."(21) When one considers that patent validity or invalidity is determined by facts having no relationship whatsoever to the accused infringement, it is clear that the Federal Circuit appears willing to limit the operability of private agreements on the subject of validity. The degree to which the Federal Circuit is willing to undercut the aim of Section 294 is uncertain, and this uncertainty in the operation of Section 294 has been enough to deter parties from employing arbitration to resolve patent disputes.(22) There is little point in "binding" arbitration of issues that may nonetheless ultimately require litigation. Furthermore, in view of the Federal Circuit's efforts to provide greater certainty in patent law, there is also little appetite in the patent bar for having patent scope or validity issues be determined by state courts having jurisdiction under contract law.
VI. Reducing Time and Expense for Contesting Validity While Protecting the Public Interest
Matters affecting a public interest have been historically resistant to private resolution, and patent validity rightly belongs in this category of issues where a valid public interest can be jeopardized by private contractual agreements. However, one need not search far to find a body of neutral and inexpensive experts in both technical subject matter and patent law. Such a body resides in the United States Patent Office. While the Patent Office does not intervene and cannot be called to account in an infringement action, any person may submit a request for reexamination of a patent under 35 U.S.C. §302. Although courts are not required to stay proceedings where a reexamination request has been made, it has been the traditional practice of courts to do so.
Like Section 294, Section 302 has been used infrequently, and is generally disfavored by patent practitioners. The main drawback is that while a re-examination may be requested by any person upon submission of a $2250 fee and a statement of reasons why the patent is believed invalid, the subsequent proceedings are conducted ex parte between the patentee and the Patent Office, during which the patentee may amend the claims in ways that were unanticipated by the reexamination requester, and present arguments and expert affidavits in response to the re-examination order. Further submissions by the requester will not be considered, and no further re-examinations will be ordered on the same evidence. Consequently, re-examination is not only seen as being too deferential to the patentee, but if the patentee successfully persuades the examiner that the claims as patented, or as amended during re-examination, are valid, then a court will defer to the administrative expertise of the Patent Office upon submission of the same evidence in a later action.
Companion patent reform bills had been introduced in the 105th Congress (H.R. 400 and S. 507), which included provisions for inter partes re-examination proceedings in the Patent Office, and for a pre-issue publication and opposition procedure for pending applications . These bills unfortunately also included provisions for removing the Patent Office from the Commerce Department and establishing it as a government-chartered corporation similar to the United States Postal Service. Such provisions were viewed by certain vocal elements of the "paranoid right" as an attempt by foreign interests to undermine American technology superiority.(23) In their view, which prevailed, the re-examination provisions were seen as a technique by which foreign corporations would subject the noble breed of independent American inventors to endless validity challenges. It can be observed without comment that this view was widely promoted by "serial licensors" such as Jerome Lemelson, who has become notorious in the patent community for obtaining patents of dubious validity via skillful manipulation of Patent Office procedures, and then demanding licenses from industry at royalty rates considerably below the threshold cost of a declaratory judgment action. The real threat posed to such individuals by reformed re-examination is a threatened reduction in the amount of royalties that they can extort in this manner.
In the 106th Congress, bills are being drafted in order to parcel out the disparate provisions of the reform bills that had been defeated in the 105th Congress. Because the primary objections to the prior bills were concerned with the proposed corporate status of the Patent Office, it is more likely that the strongly industry-supported provisions for pre-issue opposition and enhanced administrative invalidity procedures will pass. Consequently, a much less costly alternative to litigation of one of the two main defenses in patent disputes w be made available on terms that are more likely to protect the public interest than private non-appealable contractual arrangements. In such an environment, private resolution of infringement in the absence of the invalidity defense would be considered more reliable and final than the uncertainty with which the Lear doctrine may or may not influence the Federal Circuit's strained interpretation of 35 U.S.C. § 294.
1. Judith A. Szepesi, Note, Maximizing Protection for Computer Software, 12 Santa Clara Computer & High Tech. L.J. 173, 200 (1996). In patent litigation relating to instant photography between Polaroid and Kodak, the combined costs of litigation have been estimated at $200 million. Tom Arnold, Fundamentals of Alternative Dispute Resolution: Why Prefer ADR, in 2 Patent Litigation 1993, at 661 (PLI Patents, Copyrights, Trademarks & Literary Property Course Handbook Series No. G-376, 1993).
2. Tom Arnold, Suggested Form of Contract to Arbitrate a Patent or Other Commercial Dispute, Annotated, 2 Tex. Intell. Prop. L.J. 205, 208 (1994). Arnold estimates that the average patent suit lasts about six years, which is a significant portion of the enforceable life of a patent. Patents issued before 1995 have a lifetime of only 17 years from issue, while patents issued in 1995 are enforceable from the date of issue until of 20 years from the filing date of the application.
3. Although relative economic harm to the parties is one of the factors considered in a motion for preliminary injunctive relief, the disadvantage to the enjoined party is usually outweighed by the degree to which infringement appears likely. Where a preliminary injunction has been issued in an area of rapidly-developing technology, the sheer length of time required for ultimate judgment can render it worthwhile for the accused infringer to abandon manufacture and sale of the product.
4. Independent creation is not a defense to patent infringement, unlike copyright infringement which, by definition, requires action on the part of the defendant amounting to "copying."
5. Francis Flaherty, ADR: Low Cost for High Tech., CPR's Alternatives to the high Cost of Litigation, Jan. 1993, reprinted in Center for Public Resources Institute for Dispute Resolution, CPR Model ADR Procedures and Practices: Technology Disputes I-5 (1994). Flaherty estimates that the chances are about 1 in 5 that a jury's decision based on expert testimony in a patent suit will be "totally off the wall."
6. Of particular note is Judge Friendly's lament in General Tire & Rubber Co. v. Jefferson Chemical Co. 497 F.2d 1283 (2d. Cir. 1974), "[T]his patent appeal is another illustration of the absurdity of requiring the decision of such cases to be made by judges whose knowledge of the relevant technology derives primarily, or even solely from explanations by counsel and who ... do not have access to a scientifically knowledgeable staff." See also Harries v. Air King Prods. Co., 183 F.2d 158, 164 (2d Cir. 1950) ("Congress sees fit to set before us tasks which are so much beyond our powers . . . that we shall resort to the testimony of experts ....").
7. E.g. American Arbitration Assoc., Patent Arbitration Rules (1993). The AAA additionally maintains a National Panel of Patent Arbitrators for administration of the AAA Patent Arbitration Rules. Despite this effort on the part of the AAA, patent disputes represent a very small portion of the AAA caseload. While a survey of patent attorneys indicated that 50% preferred the idea of having their disputes resolved by expert neutrals, only 36% indicated that they would trust the AAA to appoint such a neutral. PTC Research Found., PTC Research Report: Alternatives to Court Litigation in Intellectual Property Disputes: Binding Arbitration and/or Mediation--Patent and Nonpatent Issues, 22 Idea 271 (1982).
8. E.g. Performance Unlimited, Inc. v. Questar Publishers, Inc., 52 F.3d 1373, 1375 (6th Cir. 1995); Ortho Pharm. Corp. v. Amgen, Inc., 882 F.2d 806, 812 (3d Cir. 1989); Teradyne, Inc. v. Mostek Corp., 797 F.2d 43, 51 (1st Cir. 1986).
9. There is no requirement in the U.S. that the patentee or anyone else actually manufacture or use the invention after the patent issues, nor can the patentee be compelled to grant a license to manufacture the invention. United States v. General Electric Co., 272 U.S. 476. Hence, the non-manufacturing patentee can demand what the market will bear if others desire to produce the invention. Most foreign countries impose a "working requirement" under which the patent will be subject to compulsory licensing at an administratively-determined royalty rate if the patentee does not commercialize the invention within a period of typically three years from the patent grant. On the one hand, it is argued that the non-licensing patentee is restraining progress by preventing commercialization. The counter-argument is that working requirements dampen the incentives for independent inventors. A curious outgrowth of this policy is the recent effort by certain biotechnology policy activists to seek patent protection upon techniques they find ethically repugnant, for the express purpose of preventing use of such techniques once patented.
10. Automatic Radio Mfg. Co. v Hazeltine Research, Inc., 339 U.S. 827 (1950) ; Standard Oil Co. v. United States, 283 U.S. 163 (1931).
11. U.S. Const. Art.VIII, § 8. While the patent enabling clause empowers Congress to establish time-limited exclusive rights in inventions, there is no requirement for Congress to do so.
12. 35 U.S.C. § 282 (A patent shall be presumed valid).
13. Patent validity is defined as a negative proposition, or more accurately as a series of negative propositions defined in 35 U.S.C. § 102(a)-(g) and 35 U.S.C. § 103(a) (i.e. the invention was not known or published prior to the inventor's development, the invention was not sold more than one year prior to the application date, etc.). While a negative proposition can be disproved by a single counterexample, the lack of a counterexample does not prove the proposition according the principle that absence of evidence is not evidence of absence.
14. Blonder-Tongue Lab. v. University of Ill. Found., 402 U.S. 313, 331 (1971).
15. See Patrick Johnston, Civil Justice Reform: Juggling Between Politics and Perfection, 62 Fordham L. Rev. 833, 878 (1994); Gregg A. Paradise, Arbitration of Patent Infringement Disputes: Encouraging the Use of Arbitration Throughout Evidence Rules Reform, 64 Fordham L. Rev. 247, 270-78 (1995) . The AAA Patent Arbitration Rules empower the arbitrator with the ability to subpoena documents and witnesses, but provide no guidance on whether and how such subpoenas are to be issued at the request of the parties. It thus appears that such action is entirely within the discretion of the arbitrator.
16. See e.g. Markman v. Westview Instruments, Inc., 52 F.3d 967 (Fed. Cir. 1995) (en banc) (Claim interpretation is a matter of law exclusively for the court). Having removed interpretation of claim scope from the hands of the jury, patent trials are now preceded by a "Markman hearing" in which the judge hears arguments for differing construction of the patent claims, and decides what the governing interpretation of the patent claims will be. The result of the Markman hearing is practically outcome determinative, since there is little left for the jury to do other than to connect the dots. In the ordinary patent infringement situation, there is no factual dispute as to what the infringer is manufacturing or selling, hence the ordinary course of proceeding after the Markman hearing is summary judgment. The Markman hearing procedure unburdens the court and the litigants from a detailed factual explanation of the workings, methods, or composition of the infringing article since the interpretation of patent claims is independent of the alleged infringing activity. Once the claims have been judicially interpreted, the parties to the dispute are capable of applying the interpretation and reaching settlement on their own. In effect, the Federal Circuit has, perhaps intentionally, already reduced most patent infringement suits to "mini-trials".
17. See e.g. Lear, Inc. v. Adkins, 395 U.S. 653, at 677 (1969) (Black, J., concurring) ("The national policy expressed in the patent laws, favoring free competition and narrowly limiting monopoly, cannot be frustrated by private agreements among individuals, with or without the approval of the State."). Lear arose when a licensee sought termination of a license based on invalidity of the patent despite an express provision of the license prohibiting the licensee from challenging or disputing the patent's validity, with the Court favoring the public interest in patent validity over the private right of contract. For similar reasons, several foreign countries, for example France, Japan, and Brazil, disallow or impose significant limitations on the arbitrability of patent disputes.
18. But see, Arbitration and Other Alternative Procedures, Committee Report, 1983 ABA Sec. Patent, Trademark & Copyright Law Rep. 201. The Report wistfully states, "while it is clear that an award favorable to a patent owner would have no legal bearing against any 'other person', the statute does not specifically foreclose the possibility that an unfavorable award might have a collateral estoppel impact since the 'effect' might be characterized as being on the patent owner, and not on the 'other person'," but goes on to note that such an interpretation "would be contrary to the intent of Congress in passing this legislation to promote arbitration as an alternative to litigation." It would be remarkable indeed for non-mutual collateral estoppel to apply to an arbitration award.
19. See e.g. Ballard Medical Products v. Wright, 823 F.2d 527 (Fed. Cir. 1987) ("The scope of a licensed patent may control the scope of a license agreement, but that rule of contract law cannot possibly convert a suit for breach of contract into one 'arising under' the patent laws as required to render the jurisdiction of the district court based on section 1338 [which provides exclusive federal jurisdiction in patent matters].)
20. See Foster v. Hallco, 947 F.2d 469 (Fed. Cir. 1991).
21. Id. at 482
22. Thomas L. Creel, Factors in Deciding Whether to Use ADR in Patent Disputes, in Donald A. Rowe, Issues re ADR Procedures, in Alternative Dispute Resolution Guide at 33 (American Intellectual Property Law Association Alternative Dispute Resolution Committee ed., 1995) (noting that arbitration under Section 294 has been utilized much less than had been anticipated)
23. See appendix.