This is what our legal system aspires to be and do.










This is the very different purpose for which patent litigants are using the legal system.








What’s wrong with patent litigant’s use of the courts is explained in the RPX Blog:

Today, NPEs and operating companies are transacting [patent] value transfer primarily through the legal system – an inefficient, imprecise, time-consuming and highly risky way to price any asset.

Thus it will always be.  Our legal system strives – as it should – to deliver blind and impartial justice premised upon discovering all possible relevant and competing viewpoints and then weighing the competing viewpoints against one another in a public forum.  John Locke’s notion of discerning truth through a competing marketplace of ideas is a far cry from the markets required to efficiently monetize patents.

Nonetheless, the recent high-profile patent litigations Oracle v Google and Apple v. Motorola manifest a desire on the part of their respective trial judges to remake the litigation process into a more rational marketplace for transacting in patent assets.

Judge Posner has aggressively managed the ongoing patent litigation between Apple and Motorola (1:11-cv-8540 N.D. Ill.), including, for example:

  • Bifurcated trial into liability, equitable defenses and damages phases (order);
  • Directed the parties to “winnow” the number of patents or defenses to be tried under threat of further bifurcation (order);
  • Not satisfied with the parties’ proposed “winnowing’, bifurcated the case even further into two liability trials and appointed two liability experts to testify at trial “as experts selected by the court ” (order);
  • Appointed a neutral expert on damages (order);
  • Scheduled Daubert hearings requiring live testimony by the parties’ damage experts, after which the court excluded the great majority of their opinion testimony (order); and
  • Approximately two weeks later tentatively decided to dismiss the entire case “because neither party can establish a right to relief” (order).

Likewise, Judge Alsup, in the patent litigation between Oracle and Google (3:10-cv-3561 N.D. Cal.):

  • Encouraged early vetting of Oracle’s damages evidence, ultimately excluding the original report submitted by Oracle’s damage expert purporting to calculate billions of dollars of damages resulting from Google Android’s alleged infringement of Oracle copyright and patent rights (order);
  • Not only appointed a neutral damage expert to testify on behalf of the court at trial, but also required the parties to jointly submit and agree upon an economist that could testify to the specific issue whether the infringement claims related to features that constituted the basis for demand for Android (order);
  • Broke the trial into three phases: copyrightability, copyright infringement and equitable defenses; patent infringement; and damages (order); and
  • Effectively ended Oracle’s case by ruling that Google’s use of 37 Java application program interface (API) packages was not actionable under the copyright laws (order).

The significant actions taken by Judges Posner and Alsup to streamline their respective patent cases manifest a desire to make the courts into a more rational and cost-effective means of  transacting in patent assets – perhaps in recognition that the courts are in fact being used in this fashion by patent litigants.  These are laudable but ultimately unobtainable goals.  The core focus of the courts on delivering what are perceived to be just and fair results prevents them from becoming an effective market mechanism for efficiently monetizing patent assets.  Resolution of disputed private rights is inherently an inefficient, time-consuming and risk-laden process.

Furthermore, not that Judge Alsup and Judge Posner got it wrong in their cases – time and Federal Circuit appeals will answer that question – but if we strive too hard to deliver efficient, lower cost and fast results, we might compromise a court’s ability to deliver on its fundamental public compact of providing, or at least appearing to provide, fair and just results.