Allison, Lemley & Walker: Repeat Patent Litigants

Do repeat patent plaintiffs have stronger patents? Are they more likely to settle to prevent these patents from being invalidated? John Allison (UT Austin Business), Mark Lemley (Stanford Law), and Joshua Walker (Lex Machina, Inc.) empirically address these questions in Patent Quality and Settlement Among Repeat Patent Litigants, which was just published in the March issue of the Georgetown Law Journal.

The study was based on the Stanford IP Litigation Clearinghouse, which links all patent suits since 2000 with their corresponding patents (and is "free to academicians, public interest researchers, judges, policymakers, and the media" and run by Lex Machina). The authors compare the 106 patents that were litigated 8 or more times with 343 patents that were litigated only once. Among their findings:

• The most-litigated patents do worse in litigation than once-litigated patents (winning 10.7% vs. 47.3% of cases), and are more likely to settle (90.5% vs. 84.0%).
• Plaintiffs for patents initially owned by small entities are equally likely to settle and much less likely to win than large patent plaintiffs (winning 12.3% vs. 53.1% of cases on the merits).
• Non-practicing entities (NPEs) (some of which might be considered "trolls") are more likely to own the most-litigated patents, slightly more likely to settle, and much less likely to win than product-producing entities (winning 8% vs. 40% of cases on the merits).
• Software patents are overrepresented among the most-litigated patents, and owners of software patents are slightly more likely to settle and much less likely to win (winning 12.9% vs. 37.1% of cases on the merits).

Part III explores "possible reasons why the most-litigated patents turn out to be weaker than other-litigated patents, as well as some reasons why the owners of those patents nonetheless seem willing to let the cases go to judgment more often than they should." Some of these possible reasons:

• The most-litigated patents tend to have more defendants, and more defendants is correlated with fewer plaintiff wins (results are mixed on whether more defendants means less settlement). "But this just pushes the puzzle back a level": why aren't repeat plaintiffs suing fewer defendants or dropping cases against defendants who won't settle?
• Hidden license agreements with nonparties or higher potential value for the most-litigated patents might affect the stakes, but this cannot be tested empirically.
• Multiple lawsuits may be evidence of obviousness, as the need for multiple lawsuits may result from "widespread, near-simultaneous invention." But the authors "do not believe this can explain [their] results" because (1) the most-litigated patents tended to be older (predating industry adoption) and (2) patentee loses were rarely based on obviousness.
• The most-litigated patents may be overclaiming, a hypothesis supported by the higher number of continuation applications filed for these patents (because continuations may be used to change claims over time to cover later-developed technologies).
• The problem might be software patents or NPE patents, which "are both taking disproportionate resources in patent litigation [while] social benefit from those cases appears to be slight."

The authors conclude by noting that these results challenge "the evidence economists have long relied upon to demonstrate patent value" as well as models of litigation.

For those interested in more details, the papers is clearly organized and well written. I'm generally a fan of empirical work, so I enjoyed this data-driven paper, and I look forward to seeing what others have done with this dataset.