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Patent Monetization Entities Filed 58% of Lawsuits in 2012


Written by Sara Jeruss, Robin Feldman & Tom Ewing
Posted: April 15, 2013 @ 6:30 am
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Public attention is increasingly focused on the phenomenon of patent monetization entities. Known colloquially as “patent trolls,” these entities concentrate on creating income from licensing or litigating patents, rather than producing a product.

The activity of patent monetization is coming under increasing scrutiny from a variety of governmental entities. In December of 2012, the Federal Trade Commission and the Department of Justice held a joint workshop on the behavior of patent assertion entities.[1] The Patent and Trademark Office held its own workshop a month later on proposed sunshine rules that would have the effect of providing greater transparency of patent ownership. The study and identification of activity by patent monetization entities has been hindered by the complex structure and arrangements of many such entities, whose activities are shrouded in complex layers of subsidiaries or revenue-sharing agreements.[2]

In an effort to better understand the nature of patent monetization, Congress directed the nonpartisan Government Accountability Office (GAO) to study “the consequences of patent infringement lawsuits brought by non-practicing entities.”[3]  The directive was passed as part of the 2011 patent reform legislation, the America Invents Act. At the request of the GAO, two of the authors provided data on patent monetization entities using a database from Lex Machina.

The GAO requested production and coding of a random sample consisting of 100 of the patent infringement cases filed each year for a period of five years from 2007-2011. Lex Machina co-authors Sara Jeruss & Joshua Walker joined Professor Robin Feldman of UC Hastings Law to code the 500 cases in order to establish the types of entities involved in each of the lawsuits, as well as to examine additional details of the suits. The Agency requested only the coded data without analysis, and the authors provided this with the understanding that they would publish their own analysis of the data at a later time.

The authors published that analysis in the fall of 2012, and key conclusions were the following:[4] First, based on the sample, lawsuits filed by patent monetizers increased significantly over the five-year period. Lawsuits filed by monetizers increased from 22% of the cases filed five years before to almost 40% of the cases filed in the latest year of the study. Monetizers were also heavily represented in the list of those who filed the greatest number of lawsuits. Of the 5 parties in the sample who filed the greatest number of lawsuits during the period studied, 4 were monetizers and only one was an operating company. The authors also noted that universities were almost invisible in the dataset, accounting for only 0.2% of the first named plaintiffs. Finally, the authors noted some additional observations about case outcomes, although the data sample was too small to reach any conclusions.

100 cases a year is a small sample, however, and we were curious to see what the data from the full set of cases would look like. Would the dramatic rise in litigation by patent monetization entities hold true when we looked at all of them? Would enough of the cases reach definitive outcomes that we could form conclusions about case outcomes, rather than mere observations? And how would passage of the America Invents Act, which included provisions intended to reduce the amount of litigation by monetization entities, affect the picture?

In addition to these questions, we also looked at the history of the patents asserted in each of the litigations. What could we tell about the effects of monetization by looking at the trail of each of the patents?

To answer these questions, we looked at all of the patent litigations filed in four years, 2007-2008 and 2011-2012. This involved analyzing roughly 13,000 cases and almost 30,000 patents asserted in those cases. In this process, we were able to identify almost 99% of the entities in our dataset.

Our analysis of the full set of cases across the chosen years confirms what we saw in the smaller sample: patent infringement litigation by patent monetization entities has risen dramatically over a remarkably short period of time. One of the most striking results is the following: in 2012, litigation by patent monetization entities now represents a majority of the patent litigation filed in the United States. Specifically, patent monetization entities filed 58% of the patent lawsuits in 2012. This is a sharp rise from 2007, when patent monetization entities filed only 24% of patent infringement litigations.

The number of defendants sued by patent monetization entities decreased slightly from 2011 to 2012. This may suggest that changes in the joinder rules from the America Invents Act had at least some initial success in pushing patent monetization entities not to cast the net so broadly. Even with this reduction however, the number of defendants sued by patent monetization entities is much higher than in 2007 and 2008. In fact the number has doubled, even with the reduction.

Our data also show that the parties who file the highest number of patent lawsuits are generally monetizers. Of the parties who filed the greatest number of patent litigations in the years we studied, 10 out of 10 are patent monetization entities and only one is an operating company. Additional observations and conclusions can be found in the full study, which is forthcoming in the UCLA Journal of Law & Technology. A draft is available at:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2247195

 


[1] See United States Department of Justice, Antitrust Division List of Public Workshops, available at http://www.justice.gov/atr/public/workshops/pae/index.html

[2] See United States Patent and Trademark Office, Roundtable on Real Party in Interest Information, available at http://www.uspto.gov/ip/officechiefecon/roundtable-RPI-agenda.1.pdf

[3] 157 CONG. REC. S5441 (daily ed. September 8, 2011) (statement of Sen. Patrick Leahy).

[4] See Sara Jeruss, Robin Feldman & Joshua Walker, The America Invents Act 500: Effects of Patent Monetization Entities on US Litigation, 11 Duke Tech. L. Rev. 357 (2012).

 

About the Authors

Sara Jeruss, Director of Legal Analytics at Lex Machina; Robin Feldman, Professor of Law and Director of The Institute for Innovation Law at UC Hastings Law; Tom Ewing, JD, MS, MA, Licentiate in Industrial Management & Economics (expected 2013).

 


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  1. I am left with the impression that a single word may cover: scapegoat.

    When an entire article does not mention who pushed for the AIA, who benefits from the focus on these “Trolls,” who, in fact, coined the pejorative “Troll” in the first place, I am left to wonder about the balance in coverage, and think to myself, how sad.

    Of course, monitizers are likely to file suit – that is the purpose of an entity that is charged with enforcing a patent. Patents are enforced by suit. And yet, somehow, the perfectly legal action of enforcing a patent is painted as some stain upon society, and those who benefit most: the would be infringers at will, hide in plain sight.

    Much like patents themselves, the business model of an entity that cannot be silenced with a nuclear retaliation of patent suit reprisal (since no products are being made) is disruptive to the Big Corp’s and their patent thickets. Instead of the virtue of thicket-busting, what we see are article after article picking the low fruit of attempting to shame those would actually enforce their rights. This is classic Heckler’s Veto stuff. And it saddens me that people cannot see who really benefits most are those who are not innovative, but who are afraid of innovation and the tendency of that innovation to upset the status quo and the established market leaders.