The first patent litigation explosion.

Author:Beauchamp, Christopher
Position:Introduction through II. Inside the Patent Litigation Explosion B. Drivers of the Patent Litigation Explosion 1. Patent Stretching, p. 848-894

ARTICLE CONTENTS INTRODUCTION I. THE RISE OF LARGE-SCALE PATENT LITIGATION A. Antebellum Patent Wars B. Postwar Patent Campaigns C. The Dynamics of Mass Enforcement II. INSIDE THE PATENT LITIGATION EXPLOSION A. The Quantity of Litigation B. Drivers of the Patent Litigation Explosion 1. Patent Stretching 2. Multiple Litigation and Mass Enforcement 3. From the Artisanal to the Corporate Economy III. CASES, CONTROVERSIES, AND THE DEVELOPMENT OF PATENT LAW A. The Formation of Patent Law B. The Rise of Equity C. The Politics of the Patent System Under Pressure CONCLUSION INTRODUCTION

The twenty-first century has witnessed a so-called "explosion" in patent litigation. (1) The number of patent suits filed each year doubled during the 1990s and continued to increase steadily during last decade, growing from around 2,500 in the year 2000 to over 3,500 in the year 2011. (2) Since 2011, a change in joinder rules has propelled the number of suits still higher to over 5,000 in 2012 and over 6,000 in 2013, before falling back to around 5,000 in 2014. (3) Although its precise nature and causes are contested, (4) the rising volume of litigation in the last fifteen years has generated criticism of the patent system as a whole. Detractors point to such problems as burdensome litigation and uncertainty costs, (5) patent portfolio arms races among large technology companies, (6) and the opportunistic enforcement of patent rights by speculative and/or unscrupulous actors--the dreaded, if ill-defined, "patent trolls." (7) A political response to the perceived crisis is in full swing, with legislation proposed at the federal and state levels aimed at mitigating abusive practices in. patent assertion. (8)

Despite the attention devoted to the modern surge in patent filings, this development is not as unprecedented as recent coverage presumes. (9) In fact, the patent system of the mid-to-late nineteenth century was in some ways more litigious than that of the early twenty-first. Relative to the size of the patent system, the gap is considerable: the national rate of litigation per patent in 2013 was less than one-third of the rates in 1860 in New York City and Philadelphia alone. Those two cities had ten times more patent suits filed in 1850, per U.S. patent in force, than did the entire United States in 2013. (10) Even in absolute terms, the scale of patent business in some nineteenth-century courts bears comparison to modern levels. In 1880, 381 infringement suits were filed in the U.S. Circuit Court for the Southern District of New York, a number which would have ranked third on the list of districts with the most patent infringement litigation commenced in 2014 and would have headed that list as recently as 2010. (11) Federal courts in New York State in 1880 recorded more than 650 infringement suits filed, more than any single state in 2011. (12) At least one year in the late nineteenth century saw as many as a thousand suits filed in a single judicial district. (13)

To put these numbers in still broader context, between the Patent Act of 1952 and the creation of the U.S. Court of Appeals for the Federal Circuit in 1982, the number of patent suits filed nationwide averaged just over eight hundred per year. (14) In the 1920s and 1930s, this number was slightly higher, with an average of just under one thousand annual filings. (15) Before the post-2011 spike in filings, the modern peak of patent litigation was around two thousand eight hundred suits filed across the entire United States in 2004. (16) There is as yet no national-level data for the number of patent suits filed each year in the United States during the nineteenth century. But it seems likely that the volume of patent litigation in the late nineteenth-century United States routinely exceeded the number of suits filed during most of the twentieth century. And it is even possible that there were years in the nineteenth century when the absolute quantity of patent litigation approached or matched the levels of that during the early twenty-first.

This Article is a historical study of the first patent litigation explosion. Its principal thesis is a novel descriptive claim: there was a surge of patent litigation in the middle part of the nineteenth century, the dimensions of which have not previously been recognized and the causes and effects of which have consequently not been explored. Using hitherto-untapped sources, the Article begins to sketch the outlines of the litigation boom and advances some theories about its composition, causes, and effects.

The picture that emerges is of a world where patent law and litigation were even more legally and politically salient than they are today. Almost every high-profile new technology of the nineteenth century passed through the courts. Patent battles broke out over water wheels, machine tools, mechanical harvesters, sewing machines, railroad equipment, rubber goods, the telegraph, telephone, and electric light, to say nothing of the phonograph, bicycle, automobile, and many other inventions. At the same time, the total litigation generated sometimes took place on a scale that was enormous for its day. As early as the 1840s, a few patent owners launched multistate enforcement efforts involving suits being filed by the hundreds. (17) By the years after the Civil War, some individual enforcement campaigns produced thousands of suits, over inventions ranging from oil-well blasting to rubber dentures. (18)

This phenomenon deserves exploration on its own terms. Despite the startling numerical comparisons between nineteenth- and twenty-first-century patent litigations, the aim of this Article is neither primarily to compare the two periods nor even to insist that they represent quantitatively parallel experiences of patent litigation. It would be misleading to assume that a patent case in the nineteenth century was the same phenomenon as a patent case in the twenty-first century. Patent litigation in the nineteenth century was much cheaper: it operated under different procedural rules; namely, the scale and organization of business, the legal profession, and the federal courts were all profoundly different. (19) Simply placing past and present litigation statistics alongside each other tells us little. Nevertheless, what was happening in the patent law of the mid-to-late nineteenth century belies the conclusion that patent litigation has not "exploded" before. Indeed, one can believe in the magnitude of the first patent litigation explosion even if one thinks that reports of the modern version are sorely exaggerated. (20)

Determining the overall size and composition of the first patent litigation explosion is a still unfinished task. Until now, the only quantitative source used to gauge nineteenth-century patent litigation has been the published record of reported judicial decisions. The leading empirical work in this area, undertaken by the economic historian Zorina Khan, gathered all 795 reported opinions in patent cases that were issued in the period 1790-1860. (21) Khan used these numbers to gauge the litigiousness of the patent system generally and to analyze the geographical distribution, industry breakdown, and outcomes of suits. (22) Khan was reasonably careful about acknowledging the limitations of reported decisions as a source, but her results have been widely cited as indicating how much patent litigation there "was" in nineteenth-century America. (23) Unfortunately, nineteenth-century case reporting is a deeply flawed measure of actual litigation. First, cases litigated to a decision were only a small subset of all lawsuits filed, and reported decisions were a further, unrepresentative subset of that. Second, reporting coverage varied wildly over time and across different courts and was heavily affected by the practices of the individual reporters and judges. Published judicial opinions may be a good way to track the development of case law, but as a proxy for the actual number of historical patent disputes they are so problematic as to be nearly useless.

As a result, the history of the litigation explosion must be found in other sources: in contemporary journalism, congressional reports, the histories of individual technologies, and, above all, the records of case filings preserved by the courts. Part I draws on these sources to sketch the most visible kind of patent litigation--the large-scale enforcement campaigns that did the most to shape the politics (and perhaps the law) of patents. This Part offers only the highlights of the patent litigation system during the nineteenth century, but it suggests the scale of enforcement and points to some of the dynamics that made patent law a high-profile legal battlefield. Part II then uses sampled data from the archives of two important federal courts, located in New York City and Philadelphia, to reconstruct the landscape of patent disputes and to get at the fme-grained detail of the litigation. The deep-dive approach confirms the existence of the litigation boom more generally and offers insights into the patents and parties involved.

The effects of the first litigation explosion on patent law range from the obvious to the subtle. On the more visible side are the political consequences of the great patent fights. Large-scale patent conflicts were live and controversial issues in federal and state politics during the mid-to-late nineteenth century. This state of affairs eventually provided the impetus for proposals to curtail patent litigation--to deter nuisance suits, to limit suits against small-scale users of patented technology, and on the state level, to institute consumer protection-type measures regulating the conduct of patent owners. As far as the courts are concerned, the doctrinal effects of the litigation explosion are harder to capture. That said, this period covered the classic formative era of American patent jurisprudence, and the mark of heavy...

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