Patent Law

Practice Makes Perfect?

By Gary Odom and Jordan Kuhn

Statistics is a craft; running the numbers is the easy part. The tough bit comes down to data quality: how reliable is the base of data employed? Heterogeneity is the bane of statistical reliability: comparing apples to oranges tells you nothing about either apples or oranges.

By definition, every patent is supposedly novel. So, statistically comparing patent litigations inherently prances into a minefield. Only prudence, that numbers can lie, but that the smell test of sensibility grants good guidance, makes numbers truly meaningful.

Straight faced, Dave Schwartz concluded: "data do not reveal any evidence that district court judges learn from prior appeals of their rulings. There is no suggestion of a significant relationship between experience and performance." Schwartz, by example, empirically reminds that statistically inclined and logically challenged are stochastically independent.

Schwartz drafted an essay: "Practice makes perfect? An empirical study of claim construction reversal rates in patent cases."

Schwartz surveyed district and appellate court patent cases for claim construction reversal. Reversal rate averaged around 30%, with the top ten most active districts having a low of 22% in Delaware and East Virginia, to 44% in Central California.

Many have criticized district court judges for the high claim construction reversal rates. This empirical study of the Federal Circuit's review of district court judges indicates that the reversal rate may be essentially constant, regardless of the prior claim construction experience of the district court judge. All judges have access to the universe of reported decisions. If district court judges are supposed to learn from appellate court review of their cases above and over the background learning from the universe of reported cases, one would expect some improvement of the reversal rate as experience increases. Contrary to theory, district court judges do not appear to improve based upon various measures of experience. As to the specific problem in patent law, the article points to three possible explanations for the lack of improvement: (1) an indeterminate nature of claim construction; (2) a failure of the Federal Circuit to teach properly how to construe claims; and (3) a failure of district court judges to learn claim construction. The data suggests that quasi-specialized patent trial judges, as proposed in pending legislation, will not automatically reduce the reversal rate.

What one would reasonably surmise is what everyone knows: patent litigation is intrinsically complex. Contrary to Schwartz nonsensical conclusion, if claim construction is difficult, it cries out for specialization. Economics is founded upon the bedrock of the wisdom of division of labor based upon the quality gained from specialization. While drawing the opposite conclusion, Schwartz himself makes the argument.

Patent law is difficult. Not only is the law intricate and ever-changing, but the patents themselves describe complex and often cutting-edge technology. District court judges are typically legal generalists, with no training in patent law. They also commonly lack scientific training or a technical background.

In a sense, each patent case is as unique as the patent asserted, as unlimited in variation as the technologies brought forth. The rulebook for claim construction continues to evolve. Hence, for all judges, multi-faceted, learning curves are constantly mounted.

Schwartz did dust his data with doubt, but heavily laced that with sordid speculation, unfounded by fact or logic.

Notwithstanding the high validity and reliability of both the appellate decision and district court lawsuit databases, there were several internal shortcomings for which the study was unable to account. Both databases are affected by the nature of litigation because the merits of the cases, the parties and their resources may not be spread equally across cases. There is reason to believe that forum shopping is another significant problem in patent litigation. For example, it may be that a particular judicial district may hear more cases brought by entities that own a patent, do not produce any products and only desire to settle the lawsuit for a licensing arrangement. Or, more patent disputes between Fortune 100 companies may be filed in a particular judicial district. Thus, it is highly likely that the types of parties involved are not randomly distributed throughout the judicial districts. The skewed distribution across judicial districts means that district court judges are not assigned a random sample of the total pool of patent lawsuits. This is because district court judges are assigned cases within the judicial district in which they sit.

The lack of random distribution of patent cases may be particularly profound if the types of parties to the lawsuits have some relationship to the difficulty or closeness of the claim construction issues. If, for example, lawsuits brought by non-practicing entities whose business goal is to license an entire industry are weaker suits, we would expect those cases to be easier to resolve correctly by district court judges. Thus, district court judges that hear a higher proportion of those cases would have inflated affirmance rates. In addition, different types of parties to patent lawsuits may be correlated to appeal rates. For example, generic drug manufactures or non-practicing entities may be more likely to appeal adverse decisions than lawsuits involving competitors. A higher appeal rate of certain types of parties would magnify the effect of any selection bias.

However Schwartz may have faulted his data base, he was unwilling to treat it with the caution that sense would dictate. Even at the appellate level, as any regular reader of the Patent Prospector knows, claim construction case law fluxes. One might naively think, after all these years, claim construction would be cleanly codified. But dissent in CAFC claim construction rulings is common. Would one then reasonably surmise that appellate court judges are unable to learn from their own experiences and precedents? Emphatically no.

Schwartz' bias against forum shopping is nothing short of a non-sequitur serving of tripe. Admittedly non-random distribution of patent cases indicates that plaintiffs select district based upon criteria. Unless everyone is an imbecile, as Schwartz' statistics may show, forum shopping involves rational selection.

Plaintiffs with patents of merit would want courts where the merit could be discerned, particularly for complex technologies where the case could be highly contentious and close-fought. If your patent is weak, the last thing you'll want to do is rush to a patent-savvy district, where the judge will blow through the smoke. Just as patents vary, so too the quality of the district.

History gives the best example. A centralized patent appeals court became law in 1982 because of scandalous disarray: certain appeal circuits were anti-patent and others pro-patent, thus churning radically different case law, so forum shopping was rife. Now, at least, the dissent and flip-flopping is centralized.

Schwartz capsulated the irony of his article by his preamble quotation.

"Experience is the name everyone gives to their mistakes." - Oscar Wilde

The problem is seeing the mistake in the first place. Obviously, Schwartz didn't see his, however apparent it was: assuming statistical homogeneity in an heterogeneous reality is a fool's game.

Schwartz was so hasty to publish that he slopped a draft out with the pathetic plea: "Please do not distribute or quote without permission of the author," then touted his results in Patently-O in multiple installments.

Full post as published by The Patent Prospector on March 02, 2008 (boomark / email).