Lex Machina Releases “The America Invents Act 500″

Study Mandated by Congress Shows Steep Rise in Patent Infringement Lawsuits filed by “Patent Monitization Entities”

PALO ALTO, CA – October 10, 2012 – Patent infringement lawsuits filed by plaintiffs whose primary business is patent licensing and litigation have increased from 22% in 2007 to 40% in 2011. This finding emerged in a study released today by Lex Machina, a Silicon Valley start-up that provides intellectual property litigation data and analytics to companies, law firms, consultants and public interest users.

In the 2011 American Invents Act (AIA), Congress directed the nonpartisan General Accountability Office (GAO) to conduct a study on the consequences of patent lawsuits brought by non-practicing entities. The GAO, in turn, contracted with Lex Machina to compile data on a random sample of 500 cases filed 2007-2011 (100 per year) and to describe key characteristics of the plaintiffs and defendants.

Lex Machina also teamed up with Hastings Law School Professor Robin Feldman to conduct its own detailed analysis of this GAO data. Feldman and Lex Machina co-authors Sara Jeruss, Director of Legal Analytics^®, and Joshua Walker produced The America Invents Act 500: Effects of Patent Monetization Entities on U.S. Litigation, which was released today in draft form and is publicly available at ssrn.com. The article will be published later this year in the Duke Law and Technology Review.

The authors chose the term “patent monetization entity” (or “monetizer”) to refer to plaintiffs that the AIA calls “non-practicing entities” (or “NPEs”) and that are sometimes more colorfully referred to as “patent trolls.” They assert that the behavior of these patent holders is distinct from the behavior involved in creating products and services based on innovation covered by a patent.

The study confirms in dramatic fashion what many scholars and commentators have long suspected: Patent monetization entities play a dominant role in a substantial portion of patent lawsuits.

The study noted that, among the five litigants who filed the most claims, four were patent monetizers (Jens Erik Sorensen, Arrivalstar, Acacia, Guardian Media Technologies) while only one (Abbott Laboratories) was an operating company.

The study also revealed that cases filed by monetizers rarely proceed to trial, usually settling early in the litigation process. Of the 500 cases studied 325 of them settled, including almost 90% of all cases filed by a patent monetization entity.

The results are especially striking because they only include filed lawsuits. Much monetization behavior, such as bargaining, posturing and payment, concludes without any party filing a lawsuit. As a result, the authors state that “one can only imagine the magnitude of the impact that patent monetization has on the patent system, and the economy, as a whole.”