Some New Papers on Wrongful Enforcement

I continue to collect materials on wrongful patent enforcement in preparation for what I hope eventually will turn into a book project.  Here are some recent papers relevant to the subject:

1.  Paul  Gugliuzza has posted a paper on ssrn titled Patent Trolls and Preemption.  Here is a link to the paper, and here is the abstract:

Patent law is usually thought to be the domain of the federal government, not state governments. Yet eighteen states have recently passed statutes outlawing false or bad faith assertions of patent infringement. The statutes are aimed at fighting so-called patent trolls, particularly those who send letters to thousands of users of allegedly infringing technology—as opposed to the manufacturers of that technology—demanding that each user purchase a license for a few thousand dollars or else face an infringement suit. The Federal Circuit, however, has held that state-law claims challenging acts of patent enforcement are preempted by the federal Patent Act unless the patent holder made  infringement allegations with knowledge that the allegations were objectively baseless. No court has yet applied this rule to the new state statutes, but it will likely provide patent holders with nearly absolute immunity from liability under the new laws.

Although the Federal Circuit has called this immunity a matter of “preemption,” a close examination of the court’s decisions reveals that the rule is not grounded in the Supremacy Clause but in the First Amendment right to petition the government. Unlike the Supremacy Clause, the First Amendment limits the power of the federal government, not just state governments, so patent holders will also be able to invoke this immunity to thwart impending federal initiatives to fight patent trolls, such as unfair competition proceedings brought by the Federal Trade Commission and proposals in Congress to outlaw false and misleading statements made in patent demand letters.

This article argues that the broad immunity the Federal Circuit has conferred on patent holders is wrong as a matter of doctrine, misguided as a matter of policy, and inconsistent with a long history of courts enjoining unfair and deceptive acts of patent enforcement. Accordingly, the article suggests a reimagined immunity standard that would not shield extortionate schemes of patent enforcement but would still respect a patent holder’s right to make legitimate allegations of infringement.

2.  David Lee Johnson has published a student note in volume 71 of the Washington & Lee Law Review review titled Facing Down the Trolls:  States Stumble on the Bridge to Patent-Assertion Regulation.  Here is a link to the published paper, and here is a portion of the introduction:

To determine the proper relationship between state and federal regulation of the patent system, it is first helpful to identify the patent uses that states are attempting to regulate. To that end, Part II introduces the players in the patent ecosystem. Part III describes the Vermont and Oregon bad-faith patent assertion laws and similar state bills. To assess whether state bad-faith patent-assertion legislation is preempted by federal patent law, Parts IV and V develop the general doctrine of federal preemption and its specific application to patent law. Part VI applies this preemption analysis to the Vermont law to reach the conclusion that much of the law is likely dead letter because it is preempted by federal patent law. Part VII argues that the inoperability of the law is normatively justified, especially in light of the potential value of preempted law, described in Part VIII.

 3. Another recent paper (not specific to patent law) is Thomas J. Miceli & Michael P. Stone, "Piggyback" Lawsuits and Deterrence:  Can Frivolous Litigation Improve Welfare?, 39 International Review of Law and Economics 49 (2014).  Here is a link to the paper, and here is the abstract:

Previous literature on frivolous lawsuits has focused on litigation costs and the optimal settlement-trial decision of defendants, but has not examined how they affect deterrence. This paper considers whether there are circumstances under which frivolous suits might actually increase deterrence, and thereby possibly improve welfare. The reason this is possible is that in a costly legal system, injurers will generally be underdeterred because they will ignore the litigation costs of plaintiffs. The fact that some uninjured plaintiffs will succeed in obtaining settlements may therefore affect the care and activity choices of injurers in a socially valuable way.

The authors caution, however, that "[t]he fact that frivolous suits may, in some circumstances, improve welfare should not . . . be interpreted as a justification for curbing efforts to discourage meritless cases," and they suspect that, "as a matter of public policy," the negative consequences of frivolous litigation "would overwhelm any of the considerations raised in this paper."