Invalid but infringed? An analysis of the bifurcated patent litigation system

TLDR

In bifurcated patent litigation systems, claims of infringement and validity are decided independently in separate courts, whereas in non‑bifurcated systems they are decided jointly in the same court. The authors build a model that illustrates the trade‑off between bifurcated and non‑bifurcated systems and how it shapes plaintiffs’ and defendants’ incentives in patent infringement cases. Using detailed data from German (bifurcated) and U.K. (non‑bifurcated) patent litigation, the study shows that bifurcation can result in a patent being found infringed and later invalidated.

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.