A small claims court for patent litigation?

On February 28th, I took an early flight to Chicago to participate in a special, day long conversation with law professors, judges, and other IP colleagues: about creating a “small claims” proceeding for patent matters.  This event was jointly hosted by the American Intellectual Property Law Association (AIPLA), and the University of Illinois at Urbana-Champaign College of Law.

The inspiration for this discussion is the desire to both allow redress for smaller dollar amount patent infringement, and to provide increased access for small and medium-sized enterprises (SMEs).  SMEs and individuals with small dollar amount infringements are often stalled by the high cost of patent litigation, where legal fees typically run in the millions.

The notion of a small claims patent court is not entirely new; it ignited spirited discussion when raised by Robert Benson at a meeting of IP leaders at Franklin Pierce Law Center in 1989.  The notion was raised again by Robert Greenspoon in 2009, in his paper, Is the United States Finally Ready for a Patent Small Claims Court? (MINN. J.L. SCI & TECH 2009; 549-566).

Adding new life to the discussion about a small claims patent court, the United States Patent and Trademark Office (USPTO) recently published a notice in the Federal Register seeking comments from people throughout the IP field about creating such a patent court.

At the Chicago symposium, USPTO General Counsel Bernard Knight indicated the motivation at the Patent Office to propose such a small claims system: “We will not be incentivizing creativity and innovation if it is too expensive to use existing litigation.”  He discussed research that was conducted by the Chief Economist at the USPTO. The research revealed that small businesses are the drivers of job growth.  Accordingly, he said “If small businesses do not have the ability to enforce IP rights, it will hurt small business, it will hurt job growth, it will hurt the economy.”

Through a variety of conversations that considered the mechanics, constitutionality, and impact of the proposal, there was significant discussion of the mechanics of how such a small claims patent court would operate.  One major issue is whether injunctive relief would be available.  Another issue is, once a case is litigated in the small claims forum, what would be the preclusive effect of a judgement obtained there.

Judge Rebecca Pallmeyer, (U.S. District Court, Northern District of Illinois) indicated that she has not seen a reason why patent cases should be treated differently (so as to require creating a small claims court). My response: Because the federal courts have exclusive jurisdiction in patent cases, litigants don’t have access to lesser state courts.

A counter response was that it is no less expensive to litigate in state courts than in federal courts.  I agree that it might not be any less expensive to litigate large dollar amount (high stakes) cases in state courts.  A $10M contract case is state court might still involve $1M in fees on each side.  But when the amount in controversy is lower, the legal fees and everything else naturally adjust.  That is, when there are civil cases with $50,000 in controversy, there is an industry of lawyers that will handle a case from start to finish for $10,000.  There are lawyers who will figure out how to make a living litigating such cases.  Once everyone knows that the maximum recovery is, for example, $500,000, it will be clear that the attorneys fees for such a case should be, perhaps, in the $100,000 range.  My thought then is, with lower jurisdictional limits set, everything will adjust—including the cost of litigation.

So my own thought for setting up a small claims patent court is this:

  1. Keep the court rules the same; just lower the jurisdictional limits (maximum dollar amount for recovery).  Allow injunctions and other remedies available in District Court.
  2. Allow the case to be re-litigated in District Court.  This is especially important if what is initially a small dollar amount infringement eventually becomes a big dollar amount infringement.
  3. Allow appeals, just like District Court cases.

 

What do you think?

 

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