The first patent litigation explosion.

• Author: Beauchamp, Christopher
• Position: II. Inside the Patent Litigation Explosion B. Drivers of the Patent Litigation Explosion 2. Multiple Litigation and Mass Enforcement through Conclusion, with footnotes, p. 894-946

2. Multiple Litigation and Mass Enforcement

   Patent stretching did not take place in isolation. Much of the rise and fall of the litigation explosion may be explained by another set of litigation practices. As suggested by the survey of national campaigns in Part I, it is clear that repeat suits by certain patent owners went a long way toward driving quantitative trends in nineteenth-century patent litigation. This was especially true in the early part of the period sampled here. In 1850, just twenty-nine plaintiffs brought the 227 suits filed in the Southern District of New York and Eastern District of Pennsylvania. In later years the ratio was not as dramatic, but multiple litigation still accounted for a large share of all suits. Across the whole sample, nearly three-quarters of plaintiffs appearing brought only a single suit, while the twenty-nine plaintiffs filing the most suits accounted for a third of all the litigation (Table 2).

   The dataset almost certainly understates the incidence and scale of multiple litigation in this period. Major enforcement campaigns were lumpy, typically producing sudden bursts of litigation spread across two, three, or more adjacent years, meaning that sampling at decade intervals often captures only a slice of any given effort. For example, sixty-five suits brought by the Goodyear Dental Vulcanite Company appear in the sample years, but the company's overall footprint was still larger: docket entries show that it brought more than 400 suits in Philadelphia alone between 1867 and 1880. (222) In addition, such campaigns regularly spanned several states, so that what appear to be isolated suits in the sample were in fact part of larger operations. Thomas Blanchard, for example, appears here as a one-off plaintiff with a single suit in New York in 1850, when he was actually one of the more prolific patent enforcers of his generation. (223)

   Even so, some of the mass enforcement of the age is captured by the sample. The plaintiffs appearing most frequently (Table 3) are familiar from the survey of large-scale litigation in Part I.

   Oliver H.P. Parker (the Pennsylvania assignee of the Parker water wheel patent), the Goodyear Dental Vulcanite Company, Charles Goodyear, and American Bell were all engaged in national campaigns. These four plaintiffs collectively accounted for around fifteen percent of all the suits in the Southern District of New York and Eastern District of Pennsylvania sample. Beneath them, however, were a variety of other multiple litigants across a wide range of industries. The repeat-litigation pattern seems to have been a broad-based one.

   If multiple litigation had a large impact on the aggregate number of suits, then what explains the frequency of such repeat enforcement? One way to get at this question is to look at the characteristics of the most- and least-litigated patents. Table 4 describes two groups: "high-volume" patents, meaning those appearing in ten or more suits in the sample, and "single-suit patents that were litigated only once in the sample years. The former group is relatively small, comprising just thirty-nine patents, but accounts for a large share of the overall litigation in the sample.

   At least two areas of systematic difference are visible between the two populations. First, multiple litigation during the boom was closely associated with practices of patent stretching. For as long as term extensions were available, the patents in the high-volume category were much more likely to have been extended than were the single-suit patents. A significant fraction of the single-suit patents had been reissued before litigation--around twenty-five percent to thirty-five percent in the 1840-1880 samples--but again, the high-volume patents were generally more likely to have been reissued. Overall, it was the high-volume group that accounted for the pattern, discussed above, of older patents being asserted over established technologies. The average age of once-litigated grants generally remained in the five- to seven-year range, while the average age of the high-volume patents stood at over ten years through 1890, before converging with that of the single-suit population in 1900 and 1910.

   Second, high-volume patent litigation seems to have reflected particular enforcement strategies. As with the nationwide mass-enforcement campaigns discussed in Part I, the sample high-volume patents suggest a tendency toward "end-user" litigation--that is, large numbers of suits directed against downstream users of the patented item, rather than against larger manufacturers or other intermediaries. Suits brought on high-volume patents were generally more likely than single-suit patent cases to name individuals as defendants, rather than naming partnerships or corporations (Figure 7). Case titles are an imperfect measure of defendants' end-user or small-entity status--named individuals could be officers or agents of companies, for example--but the most active litigants in the sample did indeed sue small-scale users. Oliver Parker sued individual millers and millwrights; the Goodyear Dental Vulcanite Company targeted dentists; American Bell sued users of infringing telephones and drugstore owners who provided pay-telephone services to the public. Further down the list of the most prolific plaintiffs: refrigerator-patent owner George C. Roberts sued infringing butchers; photography patentee Jehyleman Shaw sued individual photographers. (226)

   (227)

   Two years in the sample presented an exception to this pattern of divergence between the high- and low-litigation patent groups. One anomaly occurred in 1860: that year saw a much higher rate of high-volume patent suits against companies, as a result of two patent owners suing clusters of railroad companies in Philadelphia. That episode serves as a reminder that multiple litigation against larger and more deep-pocketed infringers was a possibility, although it was less widespread at that time than downstream litigation against smaller users. 1910 presented a different situation. In that year, the two groups' respective rates of litigation naming individuals were almost identical at under twenty percent. End-user litigation had waned across the board by this point, and the most-litigated patents were now no more likely to target individuals than the least-litigated patents.

   Distinguishing between repeatedly litigated and seldom-litigated patents highlights both differences within the patent litigation system and change over time. The most-litigated grants up until 1880--that is, during the height of the boom--were qualitatively different from the bulk of litigated patents. They represented maximum exploitation of the patent-stretching tools available as well as highly aggressive strategies of public enforcement. To the extent that multiple litigation powered the patent litigation explosion, that explosion clearly grew in part from the law's willingness to provide expansive (and often self-expanding) patent rights. Conversely, the explosion ebbed when extension and reissue were curbed. By 1900 and especially by 1910, the patents involved in multiple litigation looked a lot more like those enforced only once in the sample: they were of similar age and were enforced against individuals and companies at more similar rates.

   Why the practical strategy of mass enforcement flourished in midcentury and then diminished after the 1880s is a separate and more opaque question. Explaining why mass suits against small-scale infringers constituted an appealing enforcement strategy must turn in part on the business models of the patent holders that conducted that type of litigation. Unfortunately, it is unclear exactly why, or to what extent, suing small entities was profitable in and of itself. Data on monetary awards are spotty in the circuit court dockets and case files, and information about aggregate licensing revenues, either in litigation filings or elsewhere, is rare. Any changes in the financial return on suing, for example, hundreds of farm households, remain a little mysterious.

   That leaves two more visible explanations for why the mass-enforcement model flourished. One, as mentioned in Section II.C, (228) is that litigation in the federal circuit courts was relatively cheap for patentees and relatively expensive for some defendants, thus establishing a balance of power that was crucial to the patentees' principal aim of selling licenses. As U.S. Senator William Windom of Minnesota explained,

   [B]y the authority of the United States you may go to the capital of a State and for a claim of $5 each you may send the United States marshal to a thousand men, or ten thousand ... and compel them to travel hundreds of miles to defend against your claim, or, as more frequently occurs, to pay an unjust demand as the cheapest way of meeting it. (229) This problem of distance was by no means an issue peculiar to patent law, but was a characteristic feature of litigation in the federal courts in the nineteenth century. Railroads fought for decades to remove accident cases and other conflicts with the general public to federal jurisdiction, largely in order to gain favorable settlements from individuals who could not easily travel to a federal court to pursue their claim. (230) Patent law happened to be a particularly stark example of the phenomenon: as an area of purely federal jurisdiction, there was no tug-of-war regarding removal from state court. And unlike the defensive litigation of the railroads involved in tort suits, patentees could actively seek out accused infringers for whom the time and cost of responding to a suit could be prohibitive.

   The second crucial feature underpinning the large-scale patent enforcement effort was the organization of the campaigns themselves. One reason that certain patents generated widespread litigation may be that their enforcement operated on a franchise model. To pick the largest example...