How do practicing and non-practicing entities differ in when they initiate patent litigation? Brian Love, a fellow at Stanford Law School, empirically addresses this question in his draft paper, An Empirical Study of Patent Litigation Timing: Could a Patent Term Reduction Decimate Trolls Without Harming Innovators? Based on a random sample of recently expired patents, Love reports that "the average product-company patent has been shelved by its owner before the average NPE patent has even been asserted."
Love identified the 1,143 litigated patents that issued between May 11, 1993 and May 10, 1994, and he then randomly selected 450 of these patents to study in depth, which were classified by variables like entity class and technology category. Figures 2 and 3 of Love's paper show that on average, product companies begin litigation 12 years before expiration and finish over 9 years before, while NPEs begin fewer than 9 years before expiration and finish in the final few years of the patent term. Love also finds that NPEs tend to assert high-tech patents and to lose when they adjudicate their claims on the merits—characteristics described as "classic 'troll-like' behavior." Interestingly, suits brought by product companies late in a patent term also "bear the hallmarks of troll litigation."
What does this mean? Love argues that "the suspect quality of litigation brought by NPEs and product companies late in the patent term suggests that Congress might enhance innovation by shortening the patent term by three years, or even longer." This legislation "could exclude practicing patentees in the biotech, pharmaceutical, and medical device industries," whose patents "cover well defined and well known products approved by the FDA, and are frequently litigated at the very end of the patent term against generic manufacturers." This term reduction "would disrupt less than 4% of 'legitimate' product company patent suits."
Because a patent term reduction is unlikely, Love notes that "[a] less drastic reform, and one that has the added benefit of not violating the U.S.‘s obligations under GATT/TRIPS, would be to increase the frequency and magnitude of maintenance fee payments in the final years of the patent term." He suggests high (and increasing) annual fees after year 13, and he notes that renewal rates would help us determine the private value of these older patents.
Love's work is a valuable empirical addition to previous scholarship on NPEs/trolls, and I look forward to reading his future scholarship based on this dataset.
