Patent reform is once again in the air. A few days ago, Congressman Bob Goodlatte and others re-introduced the Innovation Act, which was passed by the House in the last Congress but died in the Senate. It has several good ideas, including fee shifting, clearer pleadings, patent ownership disclosure requirements, combatting discovery abuse, clarity in ownership of patents, protection of downstream users, and others. Some of these could improve the chances for businesses facing attacks by patent assertion entities (PAEs, aka patent trolls).
But in preparing for a talk last week, I came upon an idea that could go as further than any pending legislative proposal towards undermining the business of patent trolling. Professor Mark Lemley of Stanford Law School titled his paper with becoming modesty: Why Do Juries Decide if Patents Are Valid?. This caught my eye, because I’ve long wondered the very same thing. The risk of a runaway jury is one that costs all patent defendants (including most every innovative technology company) some sleepless nights. Even when a patent claim seems clearly without basis, the possibility of a jury trial gives us pause.
Why? Patent cases are often complicated, involving technology that is exceedingly difficult for non-specialists to grasp. In order to decide a case, jurors are typically asked to master graduate-level science and technology in a matter of just a few days. They are also regularly asked to award millions of dollars in damages. There is always a concern that a silver-tongued plaintiff’s attorney will tell an appealing story that excites a jury’s emotions, and lead them to ignore a valid defense based on true-but-hard-to-understand actual science.
In other words, juries in patent validity cases are given an almost impossible task, and it is to be expected that they will make some big, costly mistakes. According to a 2014 Patent Litigation Study by PWC, patent plaintiffs are more likely to be successful before juries than judges, and the median award in a jury trial was almost 37.5 times the median award in a bench trial. In considering whether to fight or settle with a patent aggressor, defendants can hardly avoid considering the very real possibility that the jury will grievously err. It’s not surprising, then, that companies settle cases for amounts that sustain the business of patent trolling.
Most patent cases today are tried by juries, and I had assumed that this was required by the Constitution. Professor Lemley argues persuasively that there is no such requirement. Under the long-settled test for determining whether there is a constitutional right to a jury, the question is whether the issues at bar were tried by juries in 1791, when the Seventh Amendment was ratified. It turns out that many patent cases were tried to judges in that time period.
Interestingly (at least for students of legal history), challenges to patent validity were done by a writ of scire facias, which were heard by a Chancery court, which did not have juries. There were, it seems, situations where a Chancery court could seek the advice of a jury, but Chancellor rendered the judgment. There were also some cases involving juries where damages were sought, but these apparently were not cases involving the validity of the patent. Indeed, there are important dimensions of the patent right as we understand it that did not exist in the 18th century, and so could not have been tried to a jury.
In the early part of the 20th centuries, juries were seldom used in patent cases. This began to change in the late 1970s. As plaintiffs learned that they were much likely to prevail before juries, they began to ask for them as a matter of course. There is some shaky authority from the Federal Circuit supporting a jury trial right, but the Supreme Court has never ruled on the issue.
So what if patent defendants started challenging the jury demands of patent aggressors? One way to do so would be to make a motion to strike the jury demand in a case involving patent validity. The District Judges may not grant the motion, but this could set up the issue for appeal, and possibly a ruling by the Supreme Court.
Eliminating jury trials on patent validity would be a major shift. It would remove much of the inherent leverage of PAEs. If they cannot get to a jury, they cannot terrify defendants with the possibility of a jury error and an outsize damages award. Their model would be substantially undermined, and they might look for an easier way to make a living.
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