More Patents Valid, But Not Infringed Under the Federal Circuit

In "The Court of Appeals for the Federal Circuit's Impact on Patent Litigation," Matthew D. Henry and John L. Turnery of the Department of Economics, Terry College of Business, University of Georgia present evidence that since the inception of the Federal Circuit in 1982, district courts have invalidated patents less often, patentees have appealed invalidity decisions more often, and infringement has become the more frequently decisive inquiry in patent cases.

According to James Bessen, summarizing their article for the Technological Innovation and Intellectual Property blog,

Figure 1 (below) shows the annual share of district court cases where the patent was
determined to be invalid and the rate of affirmation by the appellate courts of
those “invalid” decisions that were appealed.

Both series show a dramatic and permanent drop in 1982, the year the CAFC was created, confirmed by statistical tests for “structural breaks.” After 1982, district courts have been roughly half as likely to issue an “invalid” decision, patentees have been 22 percent more likely to appeal these decisions, and the appeals court has been nearly three times more likely not to affirm an “invalid” decision.

The series for “not infringed” (in Figure 2, below) exhibits a markedly different pattern. While the CAFC did not appear to change the affirmation rate (from previous appeals courts) on patents judged “not infringed” by district courts, district courts gradually began to find a higher percentage of patents “not infringed.”

Henry and Turner conclude that the CAFC has, in fact, shifted the law in favor
of patent holders, but only with respect to patent validity, not infringement
(see also Lunney, “Patents, the Federal Circuit, and the Supreme Court: A Quiet
Revolution,” 11 Sup. Ct. Econ. Rev. 1). They suggest that this may explain part
of the increase in litigation and patenting seen since the 1980s. Indeed, some
people may find it surprising that invalidity rates have remained low over the
last decade while there has been rapid growth in patents for software, business
methods, and others that many believe to be of “low quality.”