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JOHN W. SCHLICHER |
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PATENTS, PATENT LITIGATION, PATENT DISPUTE RESOLUTION AND SETTLEMENT, LICENSING, ANTITRUST, LAW AND ECONOMICS |
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John W. Schlicher, Settlement of Patent Litigation and Disputes: Improving Decisions and Agreements to Settle and License, American Bar Association (2011) Link to ABA Store Summary Table of Contents, Table of Contents PREFACE (excerpts) Why Lawyers and Business People Should Read This Book Patent Disputes Are Resolved by Settlement Far More Often than Litigation. From 1987 through 2008, 85 to 90 percent of patent infringement actions were terminated in the district courts every year by agreement instead of a judge or jury decision. About half of the actions a district court did decide were settled without an appeal. For every patent infringement action litigated through appeal, the parties settled at least nineteen. And for every dispute that resulted in litigation, many others were resolved without filing a complaint, often through a license. Agreements Determine the Effects of Patents Far More than Litigation. Business people overwhelmingly prefer settlement and licensing to litigation. The consequence of this preference is that the effects of patents on people and businesses are largely defined by the terms of settlement and license agreements. Businesses use or do not use inventions based on agreements, not judgments. The money paid to patent owners under agreements dwarfs the money paid as damages. The operation of the patent system depends far more on agreements than judicial decisions. Existing Books on Patents Largely Ignore Settlement. The subject of patent settlements has not received the attention it deserves. There are many books on litigation of patent infringement disputes. They devote little if any attention to settlement. See for example Patent Litigation Strategies Handbook (2000 BNA Books) and Anatomy of a Patent Case (2009 BNA Books). There are many books on licensing, the predominant way disputes are settled before litigation and a common feature of settlements during litigation. These books typically say little about settlement. See for example, Drafting Patent License Agreements (6th Ed. 2008 BNA Books). Until now, there was no book directed to the settlement of patent actions and disputes. What Is In This Book Organization. Part 1 describes the standard economic model of settlement decisions adapted to fit patent actions and the settlement options most commonly used in the patent context. One important settlement option includes a license for the future. Therefore, part 1 also describes an economic model of licensing decisions Part 2 shows how these models are applied to help make settlement and licensing decisions in particular situations and how the results of the analysis may be summarized in easily understandable charts. Part 3 describes data the author developed on how patent litigation works. Part 4 describes the law that people involved in settlement need to understand. Economics of Settlement and Licensing. Business people deal with patents primarily based on economic results. They decide between litigation and a variety of possible settlements based on which is more efficient, that is, provides the largest gains at the lowest cost given a considerable amount of risk and the importance of time. Hence, Part 1 describes the generally-accepted economic model of settlement decisions adapted to fit patent actions and the settlement options most commonly used in the patent context. Part 1 also describes a model of the decision to license, one possible method or component of settlement. Applying the Economic Model to Particular Situations.. Part 2 shows how these models are applied to help make settlement and licensing decisions in particular situations. It explains how to identify the specific facts and estimates that shape each party’s settlement and licensing decisions and translate that information into dollar amounts showing whether various types of agreements are in the economic interests of the parties. Part 2 contains many examples. Example. It shows how to prepare understandable, informative charts showing the dollar magnitudes of the controlling factors from the perspectives of each party, whether the conditions for settlement or licensing are likely to be satisfied, and either the financial gap preventing an agreement or the range of financial terms within which settlement or licensing is possible. The charts are also useful in managing litigation. See Example. Data on Patent Litigation. Part 3 describes the data Mr. Schlicher developed on how patent litigation works. This data will help people form reasonable expectations about litigation. How frequently are patent actions resolved by trial, pretrial motion, or settlement? How long does it take for patent actions to be resolved by trial, motion, or settlement? When does settlement usually occur? Who wins and loses on trials and motions? Are patent owners as successful as often reported? Did the Court of Appeals for the Federal Circuit really make much difference? Are damages in patent actions as large as advertised and large enough to explain the large number of actions the parties litigated rather than settled? Part 3 also describes data developed by others. Legal Issues and Settlement. Part 4 describes the law that people involved in settlement need to understand. Law governs the consequences of various ways of resolving patent disputes before litigation and the ways litigation may be terminated. Law defines when potential infringers and licensees may commence declaratory judgment actions, creating barriers to negotiations and agreements. Antitrust law defines the legality of settlement and cooperation among patent owners, accused infringers or potential licensees regarding litigation, settlement and licensing. Part 4 describes these laws and ways to adapt settlement practices to the constraints of the law. |