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Abstract

The Supreme Court promoted private challenges to patent validity in various cases from the 1940s to the 1960s, culminating in 1969. That year in Lear v. Adkins, the Court overturned the traditional rule prohibiting patent licensees from challenging the validity of licensed patents. Lear and its ilk were premised on the important public benefits of patent validity challenges, as well as the belief that a patent licensee or assignee has uniquely powerful reasons to challenge a patent. Case law culminating in Lear upset a century-old set of patent-specific rules that had been adopted from—and reflected the values of—common law private ordering principles. Licensee estoppel, the rule jettisoned by Lear, was a logical application of ancient doctrines promoting consistent dealing among contracting parties, most notably estoppel by deed. The long pedigree and evident sense of these rules formed the basis for early resistance to Lear, but since 1969, the courts have held true to the pro-patent-challenge rationale of the 1940s-1960s cases.

This should end. Today, patent challenges are much easier than in the 1940s or 1960s (or 2000s for that matter). Thanks to the America Invents Act of 2011 (AIA), the Patent Office is now home to an administrative court whose sole purpose and function is to expertly and efficiently consider the validity of any outstanding patent. Primarily through the Patent Office challenge procedure called Inter Partes Review (IPR), patent invalidations have increased over 400 percent since adoption of the AIA. Widely available and effective patent challenges are now an established part of the US patent landscape.

While the AIA undermines the foundation of Lear and other cases premised on scarce patent challenges, fresh academic research recognizes the crucial role of patents as a basis of efficiency-enhancing private ordering. Patents in some cases support firm specialization, but only insofar as firms can reliably transfer to others technology or technology-heavy product components. Regulation and restriction of patent licensing blunts the effectiveness of patents as the centerpiece for technology-intensive transactions. This, in turn, wastes the potential for patents to promote the viability of smaller firms, and thus to contribute to a variegated industry structure free of domination by a few large firms. Lear makes the patent challenge right inalienable: this right vests in a licensee and cannot be waived or traded away by contract. The newer literature on the importance of patents in the context of private ordering counsels against such a rule, and so provides an additional reason to end the reign of Lear. I conclude this Article with a set of normative suggestions about how to readjust patent law in an era of easy patent challenges and renewed interest in patent-based private ordering.

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