Invalid but infringed? An analysis of the bifurcated patent litigation system

- Theoretical and empirical analysis of benefits and costs of bifurcated vs. non-bifurcated patent litigation systems using data for Germany and the UK.
- In German bifurcated litigation system, in 12% of infringement cases where infringement was found by the courts, the infringed patent was eventually invalidated.
- Alleged infringers are significantly more likely to challenge validity in the non-bifurcated U.K. system.
- In German bifurcated system, smaller defendants are significantly less likely to challenge the allegedly infringed patent's validity.
- Alleged infringers are significantly less likely to settle before challenging validity in the non-bifurcated U.K. system whereas in the German bifurcated system smaller defendants are significantly less likely to settle.

In bifurcated patent litigation systems, claims of infringement and validity of a patent are decided independently of each other in separate court proceedings at different courts. In non-bifurcated systems, infringement and validity are decided jointly in the same proceedings at a single court. We build a model that shows the key trade-off between bifurcated and non-bifurcated systems and how it affects the incentives of plaintiffs and defendants in patent infringement cases. Using detailed data on patent litigation cases in Germany (bifurcated) and the U.K. (non-bifurcated), we show that bifurcation creates situations in which a patent is held infringed that is subsequently invalidated. We also show that having to challenge a patent's validity in separate court proceedings under bifurcation implies that alleged infringers are less likely to do so. We find this to apply in particular to more resource-constrained alleged infringers. Finally, we find parties to be more likely to settle in a bifurcated system.