Patent Validity and Litigation: Evidence from US Inter Partes Review

We analyze how new information about the validity of a patent impacts the settlement of patent infringement litigation. A party accused of patent infringement in the United States may—in parallel with defending itself in court—challenge the validity of the allegedly infringed patent by petitioning the Patent Trial and Appeal Board (PTAB), an administrative tribunal in the US Patent and Trademark Office. Review by PTAB generates new information about the validity of challenged patents, and we study empirically the resulting effect on settlement of an accused infringer’s decision to file a petition to challenge a patent’s validity and, conditional on the filing of a petition, the PTAB’s initial decision to grant or deny the petition on the basis of its assessment of a reasonable likelihood of invalidity. We find that both decision points have large, positive effects on the settlement of parallel court proceedings.