Patents Are Not Probabilities: Refuting the Probabilistic Patent Theory

The probabilistic patent theory espoused by Carl Shapiro and Mark Lemley suggests that the lawful term of a patent is limited by the probability that the patent will be held valid and enforceable. For example, under this theory a patent with a 60% chance of being held valid and enforceable would lawfully grant 60% of a statutory patent term; any enforcement beyond that point would risk violating the antitrust laws. This article explains that Shapiro and Lemley’s theory has at least three fatal flaws: First, it depends on a “judicially-created” view of patents the Supreme Court has since rejected in Oil States Energy Services v. Greene’s Energy Group. Second, it mistakes a decrease in the value of property in light of litigation risk for a decrease in the ownership or scope of the property; as with all other forms of litigation regarding property, patent litigation may be “probabilistic” but the property in dispute is not. Third, because no patent is without some (often undefinable) level of risk, this theory would shorten the enforceable term of every patent—and would moreover do so to an un undeterminable extent. Finally, the article refutes the suggestion, adopted by the California Supreme Court, that the U.S. Supreme Court adopted the probabilistic patent theory in its 2013 decision in FTC v. Actavis, Inc. As the article demonstrates, Actavis instead applied a theory based only on the probabilities of litigation, not the probabilities of a patent.