Coase-Sandor Working Paper Series in Law and Economics

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Coase-Sandor Working Paper Series in Law and Economics


When judges change the legal rules governing patents, those changes are always retroactive. That is, they apply equally to patents that have already been granted and patents that do not yet exist. There are benefits to making a change in the law retroactive, particularly if the new legal rule is an improvement over what preceded it. But there are costs as well. Retroactive changes in the law upset reliance interests. This can be particularly harmful when those reliance interests involve rights or entitlements that form the basis for substantial financial investment, as is often the case with patents. What is more, judges are aware that their decisions can do violence to existing reliance interests. This makes judges wary of making changes to patent law in the first place, which can lead to the law becoming stultified. Reducing the rate of legal change is not an adequate solution. Neither is takings law, which is commonly applied to solve similar problems that arise in the context of real property but is a poor fit for intellectual property. Rather, to ameliorate the reliance concerns generated by legal change, federal judges should be afforded the latitude to make their rulings purely prospective. And patent judges should exercise this discretion in the many cases where forward-looking change is called for but backward-looking change would do more harm than good.



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