Patent Litigation Report Released

April 6, 2016

pic-contract-patentThe White House Council of Economic Advisors recently released a report entitled, “The Patent Litigation Landscape: Recent Research and Developments”. The report summarizes a number of developments and trends in the U.S. patent environment.

The report focuses in large part on the role of non-practicing entities (NPE’s) and practicing entities (PE’s). NPE’s generally include all patent holders who are not actively producing their patented product while PE’s generally are producing their patented products.

NPE’s can include companies or universities who focus solely on research and development and then license their patents to others for production. However, they also include patent assertion entities (PAE’s) which may acquire or produce patents largely so that they may bring litigation against other companies for infringing those patents. While many of those lawsuits are meritless, because of the high cost of patent litigation, many companies facing litigation of this type simply settle the lawsuit rather than taking on the high cost and risk associated with going to court. The extent to which this practice is having an impact on the U.S. patent system, innovation, and entrepreneurship is a point of contention among the many stakeholders involved.

The report found that:

  • Annual patent grants have increased over the past 40 years from approximately 50,000 annually to almost 250,000;
  • NPE’s appear to be parties to an increasing proportion of patent litigation cases over the past ten years;
  • Patent litigation by NPE’s appear to have a negative effect on innovation, although more research is required on this topic;
  • Damages awarded to NPE’s have been increasing while damages for PE’s have been declining.

The report noted that while one of the consequences of recent changes to the patent system is that patent holders with valid claims and limited resources may decide to settle cases rather than attempt to fully enforce their property rights. In sum, the report ultimately concludes that while there have been several distinctive trends emerging in patent litigation, given the numerous legislative, regulatory, and judicial changes that have recently taken place in the U.S. patent system it is difficult to assess the need for further reform at this time.

Patent reform litigation has been introduced into the 114th Congress in several forms. NSBA opposes the Innovation Act (H.R. 9) and the PATENT Act (S. 1137). Those bills are largely seen as an attempt to limit the ability of PAE to sue legitimate patent holders, unfortunately would introduce changes into the system that would also make it more difficult for small businesses to protect their patents. NSBA supports smaller, more targeted bills including the Strong Patents Act (S. 632) and the TROL Act (H.R. 2045) which deal more directly with the issues presented by meritless PAE litigation and don’t make the patent system unworkable for small businesses.