Courting specialization: an empirical study of claim construction comparing patent litigation before federal district courts and the International Trade Commission.

• Author: Schwartz, David L.

ABSTRACT

The United States International Trade Commission (ITC) has recently become an important adjudicator of patent infringement disputes, and the administrative law judges (ALJs) on the ITC are widely viewed as experts on patent law. This Article empirically examines the performance of the ITC in patent claim construction cases. The Article also compares the performance of the ITC on claim construction with that of federal district courts of general jurisdiction. This study does not find any evidence that the patent-experienced ALJs of the ITC are more accurate at claim construction than district court judges or that the ALJs learn from the Federal Circuit's review of their decisions. When considered in the context of previous studies, the results of this study hint at three possible explanations for the lack of evidence: (1) trial judges (including the ALJs of the ITC) cannot master claim construction, especially without a technical background; (2) the Federal Circuit's claim construction case law is poorly articulated; or (3) claim construction is inherently indeterminate.

TABLE OF CONTENTS INTRODUCTION I. PATENT LITIGATION BEFORE THE U.S. INTERNATIONAL TRADE COMMISSION A. Patent Litigation and Claim Construction B. Patent Litigation in the ITC II. STUDY DESIGN AND METHODOLOGY III. RESULTS A. ITC Claim Construction Reversal Rates B. Claim Construction Experience and Reversal Rates C. Claim Construction Modifications by the Commission IV. ANALYSIS AND IMPLICATIONS A. Explanations for the ITC Reversal Rate 1. The Small Number of ITC Appeals 2. Potential Differences in Adjudication of Patent Disputes 3. Potential Differences in Cases that Are Brought in the ITC 4. Potential Differences in the Disputes that Are Appealed B. Repercussions if the ITC's Reversal Rate Is Comparable CONCLUSION APPENDIX A. The District Court Claim Construction Appeals B. The ITC Appellate Decisions C. The ITC Investigation Database INTRODUCTION

The bulk of patent cases are litigated in federal district courts of general jurisdiction. Most district court judges are generalists who never hear enough patent cases to become experts in that area of law. (1) District court decisions concerning patent claim construction (2) have a very high reversal rate before the Federal Circuit. (3) Because of district courts' lack of judicial expertise and the high commercial stakes involved in patent litigation, lawyers, judges, and academics have argued for dramatic change to lessen that reversal rate. (4) They have asserted that a different set of trial court judges is needed to hear patent cases. Instead of generalists, some have advocated for specialized patent trial courts. (5) As a result of this growing opinion that specialized patent judges are necessary, Congress is currently debating a proposal for specialized patent trial courts called the Patent Pilot Program. (6) The Patent Pilot Program would segregate quasi-specialized patent trial judges from the general pool of district court judges. (7) District court judges who participate in the Patent Pilot Program would hear all of the patent cases brought in their districts. (8) At first blush there seems to be no downside to the Patent Pilot Program. Presumably the expertise of judges should reduce litigation uncertainty, including uncertainty from the always-contested issue of claim construction. On further reflection, however, that may not be the case. First, existing empirical literature suggests that district court judges with more patent experience are reversed at roughly the same rate as judges with less experience. (9) Second, specialized patent trial courts already exist within the U.S. legal system--at the U.S. International Trade Commission (ITC)--and an empirical comparison between the ITC and general district courts suggests that specialized patent judges would not yield any more certainty than the more generalist district court judges. (10)

In an effort to predict the effectiveness of the Patent Pilot Program, this Article compares ITC patent claim construction decisions to those of district courts of general jurisdiction. Although the ITC was established in 1916, only recently has it become a popular forum for adjudication of patent infringement claims. Administrative law judges (ALJs) serve on the ITC as arbiters of cases that almost exclusively involve patent issues. (11) Colleen Chien's recent article Patently Protectionist? An Empirical Analysis of Patent Cases at the International Trade Commission studied, among other things, whether the ITC is biased against foreign defendants. (12) Following up on Professor Chien's work, this Article examines a different assumption about the ITC.

Given the ALJs' extensive experience with patent infringement litigation, they are widely reputed as experts (13) in patent law. (14) It is commonly assumed that these ALJs are reversed at a lower rate on appeal. (15) This assumption, however, has never been tested. (16) Two significant questions beg for an empirical answer. First, how do the ALJs of the ITC perform in claim construction cases, as measured by the reversal rate from the Federal Circuit? And second, how does their performance compare with the performance of generalist district court judges? The answers to these questions will shed light on the effectiveness of specialized patent trial courts, ultimately informing the decision of whether to implement the Patent Pilot Program.

This Article explores these issues using a database containing all Federal Circuit claim construction appeals of decisions from the ITC from 1996 through 2008. Using a previously designed methodology, (17) the Article provides an extensive analysis into the reversal rates of the ALJs. The data is then compared to previously collected data concerning the claim construction reversal rates of district courts. Standing on its own, this data must be viewed with caution because the universe of ITC cases is very small. When considered alongside other evidence, however, the data provide another piece of evidence in the study of claim construction reversal rates. The data do not reveal any evidence that the patent-experienced ALJs of the ITC are more accurate at claim construction than generalist district court judges or that the ALJs learn from the Federal Circuit's review of their rulings. These results provide important new information in the study of claim construction. Because the specialized ALJs performed similarly to the generalized district court judges, the district court judges' high claim construction reversal rates may not be primarily due to the generalized jurisdiction of the district courts. Rather, when considered in the context of previous studies, (18) the results of this study hint at three possible causes of the high reversal rate: (1) trial judges (including the ALJs of the ITC) cannot master claim construction, especially without a technical background; (2) the Federal Circuit's claim construction case law is poorly articulated; (19) or (3) claim construction is inherently indeterminate.

This Article has four parts. Part I expounds on the law of patent claim construction. It explains the requirements and particularities of litigation before the ITC. Part II sets forth the study design and methodology. Part II also provides a brief discussion of important limitations in the data. Part III sets forth the empirical results of the study. Part IV provides various explanations for the results of the study, including that the actual performance of the ITC is not apparent through the study of reversal rates. This Part also discusses the repercussions of the study to the patent system. The Appendix describes the data collection process in more detail. Particularly, it describes the process of locating and selecting the population of ITC investigations, as well as the district court lawsuits. It also reports a measure of reliability of the data.

1. PATENT LITIGATION BEFORE THE U.S. INTERNATIONAL TRADE COMMISSION

   The ITC is authorized to investigate complaints of U.S. patent infringement by goods imported into the United States (20) and has rapidly become a favored venue of patent holders. (21) This Section provides a quick primer on patent claim construction, followed by a description of patent litigation before the ITC.

   1. Patent Litigation and Claim Construction

      Patent litigants square off in several possible fora, with the bulk of the litigation occurring in the federal district courts. The recurring theme of patent litigation is simple. The owner of a patent asserts that a product of another infringes upon at least one claim of the patent. The accused infringer ordinarily both denies infringement and argues that the patent is invalid. (22) In other words, the accused infringer contests whether the product falls within the patent right and also argues that the patent is defective. The infringement and validity issues normally hinge upon the scope and reach of the patent. Determining the patent's scope is called claim construction. (23)

      Claim construction involves interpreting the phrases and words used in the claims (24) of the patent. The court has responsibility as a matter of law for construing claims (25) and must construe them before determining infringement and validity. (26) Although ascertaining the meaning of the phrases and words in patents may appear to be simple, in reality claim construction is perhaps the most difficult aspect of patent litigation. (27) Claim construction has both a legal and a technical component. (28) Claim construction requires an understanding of both the governing law and the vernacular of the underlying technology. A patent for a medical needle assembly, for example, might use the term "slot" to describe a portion of the invention. (29) During litigation, the judge will be called upon to construe the precise meaning of the term "slot." Construing the term "slot" requires both use of the proper legal...