Litigation and IPRs: More Dangerous Than You Thought?

This is part 5 of a 6-part series on our 2016 Patent Market Report. To begin reading from the beginning please see 2016 Patent Market Report: An Overview.

Litigations and inter partes reviews are always a risk when dealing with patents. That’s why it’s so important to always have a strategy in place to combat such risks. Of all packages sold, 10.2% have at least one US patent litigated after the listing date. We have a much better data set this year and the rates are much higher than previously reported. We strongly recommend revising any models based on the old data.

We analyzed all of the packages in our database to look at the use of the assets after receipt of the package by the broker. Because we used a better source of US litigation and inter partes review data this year, it makes it impossible to compare our results to our previous year’s analysis. Focusing on package-level analysis for packages received in the market years from 2012 to 2016, and looking for packages with at least one litigation or inter partes review as of October 2016, we found that the sold packages are litigated and inter partes reviewed to a greater degree than packages generally (Table 9). For inter partes reviews, Table 9 focuses on packages listed in the market years 2014 to 2015, since we wanted to account for full implementation of the America Invents Act.

Table 9 suggests that purchased patents are used in either litigations or perhaps private assertions (not all inter partes reviews have corresponding litigations) with much greater frequency than previously found. When analyzed on a per-US patent basis, about 1.2% of US patents presented are litigated.

Our new data source allows us to better analyze the timing of the first litigation for the sold packages (Figure 18). Surprisingly, the filing of litigations is somewhat delayed after a purchase. Litigations start in earnest around four months from the sales date, with around half of all first litigations filed around one year. The tail is long, though – nearly 20% of litigated sold packages are not first litigated until more than two years from the sale (43 months is the longest delay from sale to first litigation in our data set).

When developing a strategy for addressing the risk of litigation from packages listed on the brokered patent market, it is important to look at which packages get litigated. Figure 19 examines the proportion of litigations that came from sold and unsold packages. All of the packages in this dataset have at least one US-issued asset which was litigated after the listing date, while 56% of all litigations after a listing are from sold patents. This highlights the importance of a robust risk clearance function for the in-house team. A combination of cross-licenses, license on transfer agreements and membership of defensive aggregators can reduce these litigation risks. Similarly, the remaining 44% of litigations came from assets that never changed hands – the original owner could not sell the patents and sued. This suggests that monitoring the brokered patent marketplace and defensive purchasing can be valuable as well.

CLICK HERE to CONTINUE READING… In Part 6 of our 2016 Patent Market Report, we’ll look at the current market size and conclude with our key findings and action items for the year.