An empirical study of patent litigation timing: could a patent term reduction decimate trolls without harming innovators?
Author | Love, Brian J. |
Position | II. Results B. Timing Per Patent through Conclusion, with footnotes and tables, p. 1331-1359 |
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Timing Per Patent
Figures 2 and 3 below show the relative timing of patent enforcement across NPE status on a per-patent basis. Figure 2 is a histogram of the dates on which patents were litigated for the first time, measured backward from the date each patent's term ended. Figure 3 is a histogram of the dates on which litigation asserting patents ended once and for all, again measured backward from the date of expiration. The results are dramatic. As shown below in Table 5, on average, product-producing companies finish enforcing their patents before NPEs even begin.
Product producing-company litigation and NPE litigation follow opposing trends. On average, product-producing companies overwhelmingly begin litigating their patents early in the patent term, more than twelve years before expiration, (93) and overwhelmingly finish with many years of patent life remaining, more than nine years from expiration. (94) NPEs, on the other hand, begin litigating their patents much later in the term, less than nine years from expiration on average, (95) and overwhelmingly finish in the final few years of the patent term, with an average of 4-4 years (and a median of under three years) remaining. (96)
These opposing trends intersect one another about three to five years prior to expiration. With five years of patent life remaining, product-producing companies have started (and in most cases finished) litigating over 93% of their (asserted) patents, while over 31% of NPE patents have not yet been asserted. With three-and-a-half years of term remaining, product-producing companies have finished asserting more than 86% of their patents, while more than 59% of NPE patents remain in, or will soon enter, the court system. Though they constitute just one-fifth of all patentees, NPEs asserted almost 55% of patents litigated for the first time within five years of expiration and over 53% of patents in litigation resolved within three-and-a-half years of expiration.
Data on the chain of ownership of these litigated patents in Table 5 sheds additional light on NPEs' relatively long delay in filing suit. NPE-asserted patents, particularly those acquired from other firms (failed or otherwise), change hands more frequently over a longer period of time than their counterparts litigated by product-producing companies. Moreover, once NPE-asserted patents reach the patentee who will ultimately assert them in court, they sit on average for another three years before they are litigated.
As a whole, NPE-asserted patents are three times more likely to have changed hands between issue and enforcement than product company--asserted patents. (99) Litigant classes 1, 3, and 4, collectively, are more than four times as likely to be asserting a patent that has been transferred between owners post-issue. And assigned patents asserted by these classes have changed hands roughly 50% more often per patent. Patents do not reach acquisition firms until about 9.5 years after issue, and these firms wait 2.4 additional years on average before filing suit. Other NPEs fare little better. Inventor-affiliated licensing companies generally do not form until about six years after issue and, on average, wait more than five additional years before filing suit. And, on average, patents reach product-producing companies' licensing subsidiaries about eight years after issue and sit for an additional four years before assertion. Individual inventors, by contrast, file suit quickly on almost the exact same timeline as product-producing companies.
Thus, with the notable exception of those claims litigated by individuals, NPE-asserted patents take a long, circuitous path from the PTO to the courthouse that often spans more than a decade and includes multiple prior owners. This finding strongly suggests that it makes little sense to discuss the percentage of NPE litigation among all suits filed. NPEs do not obtain patents until the patent term is half-spent and hold their patents for several years more before filing suit, perhaps while waiting for emerging industries to mature. (100) Thus, the bare statistic that NPEs account for only about one-fifth of all patents litigated obscures the fact that NPEs account for the majority of patents litigated in the final few years of the term--the only portion of the term when NPEs are actively asserting their patent rights.
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Per Suit and Per Assertion
The results above actually understate the true magnitude of late-term NPE enforcement. As shown below in Table 6, NPEs are far more litigious on average than product-producing companies. Overall, NPEs file more than twice as many suits per patent and assert each patent against more than four times as many alleged infringers. (102) Moreover, NPEs are even more litigious late in the patent term. Per patent litigated in the last three years of its term, NPEs file two-and-a-half additional suits against thirteen additional infringers. (103)
Taking into account NPEs' relative litigiousness, NPEs' dominance of late-term patent litigation grows considerably, as does their share of overall enforcement. Figure 4 below is a histogram of lawsuit filing dates for all suits filed within six years of the patent-in-suit's expiration. Figure 5 is a histogram of lawsuit resolution dates for all suits resolved within six years of the patent-in-suit's expiration. Both show a significant increase in NPEs' late-term domination viewed on a per-suit basis. NPEs account for the majority of all new patent filings in each of the last five years of the patent term and account for more than 67% of all patent suits filed within five years of the patent-in-suit's expiration. NPEs similarly account for the majority of patent suits resolved within each of the last four years of the patent term and account for more than 70% of all patent suits resolved within three years of the patent-in-suit's expiration.
Finally, viewed per accused infringer--or per "assertion"--NPEs' domination of late-term patent litigation becomes even more overwhelming. Figure 6 below is a histogram of filing dates for all assertions filed within six years of the asserted patent's expiration. Figure 7 is a histogram of resolution dates for all assertions resolved within six years of the patent-in-suit's expiration. The results in both figures are dramatic. NPEs account for the majority of all new patent assertions in each of the last six years of the patent term and, in particular, account for more than 83% of all patent assertions filed within five years of the patent-in-suit's expiration. NPEs similarly account for the majority of patent assertions resolved within each of the last five years of the patent term and, particularly, for more than 83% of all patent assertions resolved within three years of expiration.
As summarized below in Table 7, by comparing patents litigated at a similar age (rather than all litigated patents), it is clear that NPE-asserted patents are the overwhelmingly dominant source of patent litigation in the final years of the patent term. NPEs assert the majority of new patents, file roughly two-thirds of new suits and file over four-fifths of new assertions in the final five years of the patent term. They are also responsible for almost identical percentages of patents enforced, and suits and assertions resolved, within three years of expiration. Moreover, the lion's share of late-term NPE litigation is brought by patent acquisition firms, firms holding the IP remnants of failed companies, and inventor-affiliated licensing firms. Collectively, these classes account for about 92% of NPE suits active within three years of the patent expiration. Thus, while prior studies may have shown that "NPEs file only a small fraction of all patent infringement suits," (110) my results indicate that NPEs--specifically those NPEs most associated with litigation abuse (111)--are responsible for an enormous fraction of infringement claims brought late in the patent term, precisely when litigation seems most abusive. (112)
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Technology Areas and Litigation Outcomes
The results reported above suggest that the final few years of the patent term primarily benefit NPEs. Compared to product-producing companies, NPEs as a whole--and especially firms that hold patents purely for enforcement--assert more patents, in more suits, and against more accused infringers late in the patent term. In fact, as Table 6 shows, NPEs become more aggressive as their patents age. NPE status and litigiousness, however, are not the only traits commonly associated with patent trolls. In this Section, I investigate the prevalence of two other stereotypical characteristics of patent trolls: a propensity for asserting high-tech patents and a tendency to lose when forced to adjudicate their infringement claims on the merits.
In essence, this analysis further measures the extent to which NPEs take advantage of the tail end of the patent term. Product lifecycles in the high-tech industry are notoriously short. Computing power, after all, doubles roughly every two years. (114) Thus, high-tech patents are the most likely to be grossly out of date--technologically speaking--when asserted nearly two decades after their filing dates. Additionally, the success rate of NPEs in infringement allegations suggests that they are relying on strained claim interpretations to stretch aging patents to cover more advanced technology. (115)
Table 8 below provides a technology-by-technology breakdown of patent litigation filed by product-producing companies and NPEs; the Table also measures changes in the division of patented technology over time. This data reveals that high-tech patents play a disproportionate role in NPE litigation and in late-term litigation generally. Overall, about 65% of NPE-asserted patents cover computer- or electronics-related inventions, and almost 40% cover the narrower category of software-related inventions. (116) By contrast, just over 40%...
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