The Economics of a Centralized Judiciary: Uniformity, Forum Shopping and the Federal Circuit†

In 1982, the US Congress established the Court of Appeals for the Federal Circuit (CAFC) as the sole appellate court for patent cases. Ostensibly, this court was created to eliminate inconsistencies in the application and interpretation of patent law across federal courts, and thereby mitigate the incentives of patentees and alleged infringers to “forum shop” for a preferred venue. We perform the first econometric study of the extent of non-uniformity and forum shopping in the pre-CAFC era and of the CAFC’s impact on these phenomena. We find that in patentee-plaintiff cases the pre-CAFC era was indeed characterized by significant non-uniformity in patent validity rates across circuits and by forum shopping on the basis of validity rates. We find weak evidence that the CAFC has increased uniformity of validity rates and strong evidence that forum shopping on the basis of validity rates ceased several years prior to the CAFC’s establishment. In patentee-defendant cases, we find that validity rates are lower on average, but do not find either significant non-uniformity of validity rates across circuits or significant forum shopping. JEL Codes: K2, K4 †Atkinson: Department of Economics, Brooks Hall Fifth Floor, Athens, GA 30602-6254, email:[email protected], tel:706-542-3691. Marco: Department of Economics, Blodgett Hall 133, Poughkeepsie, NY 12603 e-mail:[email protected] tel:845-437-7669. Turner (corresponding author): Department of Economics, Brooks Hall Fifth Floor, Athens, GA, 30602-6254, e-mail:[email protected]; tel:706-542-3682, fax:706-542-3376. We thank Jim Bessen, Mike Meurer, Cecil Quillen, Matthew Weinberg and seminar participants at the London School of Economics Managerial Economics and Strategy Group, the 2007 American Law and Economics Association Conference, the 2007 Southern Economic Association meetings, the 2006 International Industrial Organization Conference and the 2006 Boston University School of Law Seminar on Law and Economics for very helpful comments.