“Given the incredible number of active patents, the question is not ‘why are there so many lawsuits?'” but “why so few?”
The simplest facts can be the most difficult to understand. Patent litigation is not as prevalent as it is portrayed by the media and defendants. Surprisingly few patents have been filed compared to the number of active patents.
The need to litigate patent disputes to attract the attention of potential infringers and to have meaningful licensing discussions may have increased the total number of lawsuits filed. If so, it has not had a significant impact on the net total.
The numbers are even more dramatic when you exclude about 40% of lawsuits attributed primarily to volume filers, the work of three NPEs. Patent litigation is not an uncontrollable, innovation-eating epidemic perpetuated by the villains we are led to believe.
It is not surprising that patent grants have increased as technology offers opportunities for innovation and invention. With the number of active U.S. patents increasing, the number of patent lawsuits filed annually in U.S. district courts, including those filed by Volume Filer, has remained flat since 2017, with the Patent Trial Board (PTAB) year 2012. Despite the increasing number of US patent grants, patent litigation is dominated by a smaller and smaller percentage of active patents.
Today, many potential technology licensees only consider obtaining a license if compelled to comply with a lawsuit. You need to be prepared to do it.
On average, 3,800 patent lawsuits are filed each year. There were only about 200 attempts, only about 5% of the annual filings. 97% of patent lawsuits are settled. Unfortunately, we are told today that any would-be licensor must first file a lawsuit to show that it is serious. Otherwise there would be even fewer suits.
Given the incredible number of active patents, the question is not “why are there so many lawsuits?” But “why so few?”
4 million and countless
Based on 2020 figures, there are approximately 3,340,000 active US patents. In 2021, the USPTO has granted a total of 327,798 utility patents. 325,445 will be issued in 2022, bringing the estimated total number of patents currently in force to 4 million.
The average number of lawsuits filed each year since 2017 is approximately 3,800. The number of people sued by valid people is 0.00113772, about one-tenth of 1%. About 200 of the cases filed are heard each year. This equates to his 0.00005988% of active patents. That’s 6/1000 of active patents based on 2020 figures. Excluding the so-called bulk plaintiffs (see line graph below), of which he has three of his NPEs responsible for the bulk of the activity. The trend is down from his 10-year highs in 2013 and his 2015, and at just over 2,200 he’s been flat since 2018.
Patent Litigation Excluding Mass Applicants, 2013-2022
Beyond Shareholder Value
These figures show the relatively low number of disputes in the United States compared to the growing number of patented inventions. Of course, if you’re a defendant facing potential damages of $100 million or more, the lawsuit figures are high, especially if you’re exposed to frequent and routine infringement from those who can afford to sue. If you’re a plaintiff, it’s probably dangerously small. license.
If the senior defendants were to pay damages for each alleged infringement (which they shouldn’t), the balance sheet rounding error would likely be less than billions of dollars. So why are they fighting so hard to avoid paying anything?
Patent defendants, including some of the largest and most respected technology companies, are focused on shareholder value. They equate weakness with a willingness to settle for overhead. They are reluctant to appear easy targets for licensing, regardless of ethics, and litigation can be more expensive in legal fees than licensing. Shutting them down is important. Incumbent leaders have territories they must protect.
Defendants fear that material damages or settlements will ultimately erode market dominance, even though even the largest and most successful companies can easily absorb the costs of maintaining market dominance. increase. More frequent licensing will open the door to higher plaintiff expectations and more lawsuits and even larger licensing demands. Nobody likes a target painted on the back.
As AI and search technology are positioned to better match patent claims to probable infringement, many companies will pay more for their inventions unless the licensing hurdles get higher. It seems inevitable that we will have to pay
Companies certainly have a right to defend themselves when patents are weak and dubious and infringement is ambiguous. But the lack of injunctive relief for plaintiffs and indecisive courts resulting from a lack of innovation policy is a recipe for dysfunction.
It’s no surprise that the most frequently targeted defendants in patent litigation – Apple, Samsung, Amazon, Google and Microsoft – are the largest and most resolved technology companies.
There are only 13 non-financial companies in the S&P 500, mostly including giants such as: apple (AAPL), parent of Google alphabet (GOOGL) and long-term leader in IBD microsoft (MSFT) has more than $1 trillion in cash and investments, one expert said. Investor Business Daily 2022 analysis of updated data from S&P Global Market Intelligence and MarketSmith.
Confusion beats clarity
As of early 2022, Apple had $202.5 billion in cash on hand, or 7.4% of the S&P 500. While that number has dropped significantly, likely due to share buybacks and market conditions, the market value of the consumer electronics business remains at $2.5 trillion. A staggering number higher than the GDP of many countries. The economic impact of settling an infringement claim is negligible. But that’s not what Apple and others are arguing.
Defending against patent disputes at all costs is more than the law. It’s iconic, it’s a smart, daringly efficient business from a shareholder perspective, with no injunction that can stop it from selling its products. For this reason, confusion is better than clarity.
When disputes are slow and costly, many questionable villains walk away. The problem is that many of the good people who deserve recognition for their contributions are also gone. There could be many of them. While it may not seem so at first, this creates problems for innovation and commerce.
Next time you read an article about too many patent lawsuits and NPEs, it’s a good idea to check the facts. Apparently, not everyone cares.
