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Against Settlement of (Some) Patent Cases

Posted by on Monday, March 24, 2014 in Articles, Volume 67, Volume 67, Number 2.

2 – La Belle_67_Vand_L_Rev_375

For decades now, there has been a pronounced trend in civil litigation away from adjudication and toward settlement. This settlement phenomenon has spawned a vast critical literature beginning with Owen Fiss’s seminal work, Against Settlement. Fiss opposes settlement because it achieves peace rather than justice, and because settlements often are coerced due to power and resource imbalances between the parties. Other critics have questioned the role that courts play (or ought to play) in settlement proceedings and have argued that the secondary effects of settlement␣␣especially the lack of decisional law␣are damaging to our judicial system. Still, despite these criticisms, settlement remains the norm in civil litigation today.

This Article considers the settlement phenomenon in the context of patent litigation. In recent years, courts have seen an explosion of patent litigation. Consistent with the general trend in civil lawsuits, most of those patent suits have been settled. While scholars have studied and debated “reverse payment” or “pay for delay” patent settlements in depth, what is missing from the literature is a comprehensive treatment of the normative questions raised by the widespread settlement of conventional patent cases. Do conventional patent settlements necessarily promote the public good? Should courts encourage these patent disputes to settle? Are there certain types of patent cases that should be adjudicated rather than settled?

This Article sets out to answer these questions. It begins by contextualizing the antisettlement arguments of Fiss and other scholars within the framework of patent litigation. The Article then identifies some of the unique problems that patent settlements create, namely that settlement allows potentially invalid patents to remain in force in contravention of the public good. Next, the Article canvasses the case law and literature, and it concludes that the judiciary systematically encourages patent litigants to settle. The final part of the Article argues that, from a social welfare perspective, settlement is not the best way to resolve all patent disputes. Rather, the Article proposes, trial judges should serve as protectors of the public interest. It then concludes by recommending various factors to inform the decision whether a particular patent case should be settled or be adjudicated, and by offering suggestions for how trial courts might influence outcomes in patent litigation.