This week, our colleague Joe Mullin, who writes the Patent Litigation Weekly for IP Law and Business, guides readers through a new PricewaterhouseCoopers study on patent litigation. What grabbed Mullins's attention was the significant role played by "non-practicing entities," the polite term for patent trolls. (Patent trolls are entities that bring or threaten litigation to enforce patent rights, without any intention of making or marketing the product at issue.) "Patent trolls aren't just surviving, they're thriving," Mullin observes. "Patent-holders are starting to delve into previously untouched economic sectors, suing small retailers and even photographers."
The PwC study looked at more than 1,400 patent cases that reached a decision by a judge or jury. Depending on the district, between 15 and 45 percent of those disputes were brought by non-practicing entities. In fact, Mullin thinks PWC is undercounting these suits because it takes a conservative view of what constitutes an NPE. Mullin, for example, would count litigation brought by Alcatel-Lucent against Microsoft, since A-L was trying to monetize the patent portfolio it inherited from Bell Labs, not compete with Microsoft.
As Mullin points out, the study shows that non-practicing entities have consistently won larger damage awards than operating companies since 2002. Of the top ten patent judgments reached between 2005 and 2008, seven went to companies or individuals that aren't competitors in the relevant market.
"So what's going on here?" Mullin asks. "It's possible that a split is emerging, with a small, select group of industries--including medical device, pharmaceutical, and chemical companies--using patents as tools to fight over market share, while across a broader swath of the economy, patents are used mainly (or even solely) to generate revenue for those who hold them. Falling into the latter category are classic "patent trolls," but also research universities and big companies with standalone patent-licensing operations."
Here's another surprising tidbit that Mullin highlights from the PwC study: The district with the highest rate of NPE litigation isn't the Eastern District of Texas, as you might expect. It's Washington, D.C., which had 46 percent of the identified decisions from NPEs.
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