Joff Wild

More actions for patent infringement were filed in the US in 2011 than in any previous year, according to PWC’s 2012 Patent Litigation Study, which was published last week. The report states that the number jumped to 4,015, representing a 22% increase on the 2010 figure. Overall, patent litigation has grown by 6.4% year on year since 1991, PWC states, as compared to an annualized increase in USPTO grants of 4.5%. That said, the median damages awards for the period between 2006 and 2011 are historically low. When adjusted for inflation, the median awards made in the periods 1995-2000 and 2001-2005 were significantly higher, at $5.3 million and $8.7 million respectively.

A lot of the attention in the report will focus on NPEs, which PWC defines as entities which do “not have the capability to design, manufacture and distribute products with features protected by the product”. Obviously, that will encompass a huge variety of business models and types – though I doubt whether that will prevent many reports of this study labeling all of them trolls (even the universities and other non-profits); after all, it has been done regularly enough up to now. Anyway, back to the stats: while median awards for successful NPEs are significantly higher than those awarded to operating companies, their overall success rates are lower. Those wondering why some types of NPE are rather fond of the Eastern District of Texas need only to look at the tables on courts. Put simply, NPEs have more chance of winning there than they do elsewhere, with an overall success rate of 46.5% in cases that go to trial; Delaware comes in second at 41.2%, with Minnesota third at 40% (though it hears relatively few cases). But in all the courts in which NPEs are most active, the percentage of cases they account for is below 50%. Overall just 361 of the 1,751 full patent trials heard in the district courts which hear most cases involved NPEs.

Some will take PWC’s findings as further evidence the US patent system is out of control and doing huge damage. And it is worth remembering that many disputes are settled before any actions are filed – so this study does not provide the full picture. However, it is also important to bear in mind that each year hundreds of thousands of patents are granted in the US and that it is quite probable that over one million are currently in force. On any reasonable measure, therefore, the patent litigation to patent ownership ratio is remarkably low. That the number of cases being filed is going up is no great surprise. Indeed, it may well climb further as more companies and their investors look to monestise the rights they own.

As for the NPEs, I remain very uncomfortable making moral judgements about what they do – especially when based on potentially skewed information. There are undoubtedly bad players out there, but I wonder if they are any greater in number than the companies which deliberately and knowingly appropriate other people’s patented inventions without any intention of paying for doing so. Maybe someone needs to look more carefully at that side of the equation and how much damage would be done by denying inventors the means of taking action should it happen to them.