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Department ofEconomics

Papers

Invalid but Infringed?! An Analysis of the Bifurcated Patent Litigation System

Christian Helmers, Katrin Cremers, Fabian Gässler, Dietmar Harhoff, and Yassine Lefouili

Journal of Economic Behavior and Organization 131 ( Part A), pp. 218–242, November 2016

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Abstract

In bifurcated patent litigation systems, claims of infringement and validity of a patent are decided independently of each other in separate court proceedings at different courts. In non-bifurcated systems, infringement and validity are decided jointly in the same proceedings at a single court. We build a model that shows the key trade-off between bifurcated and non-bifurcated systems and how it affects the incentives of plaintiffs and defendants in patent infringement cases. Using detailed data on patent litigation cases in Germany (bifurcated) and the U.K. (non-bifurcated), we show that bifurcation creates situations in which a patent is held infringed that is subsequently invalidated. We also show that having to challenge a patent's validity in separate court proceedings under bifurcation implies that alleged infringers are less likely to do so. We find this to apply in particular to more resource-constrained alleged infringers. Finally, we find parties to be more likely to settle in a bifurcated system.

LSB Research, ECON, 2016, Christian Helmers