Lex Machina Releases “The AIA 500 Expanded”
Study Shows “Patent Monetization Entities” Filed 56% of All Federal Patent Lawsuits in 2012, Up from 24% in 2007
PALO ALTO, CA – April 9, 2013 – Plaintiffs whose primary business is patent licensing and litigation filed the majority of all federal patent infringement lawsuits in the United States in 2012. The number of lawsuits filed by these patent monetization entities increased from 24% of cases filed in 2007 to 56% in 2012.
These findings are contained 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.
The AIA 500 Expanded: The Effects of Patent Monetization Entities will be published later this year in the UCLA Journal of Law and Technology. The authors are Sara Jeruss, Director of Analytics at Lex Machina, U.C. Hastings Law School Professor Robin Feldman and patent attorney Thomas Ewing.
This study expands on earlier research conducted by Lex Machina pursuant to the 2011 America Invents Act (AIA). In the AIA, Congress directed the nonpartisan General Accountability Office (GAO) to conduct a study on patent lawsuits brought by non-practicing entities. The GAO, in turn, chose Lex Machina to compile data on a random sample of 500 patent cases filed 2007-2011 (100 per year) and to describe key characteristics of the plaintiffs and defendants.
The study released today reviewed every case filed in 2007, 2008, 2011, and 2012 – a total of over 12,000 cases. It 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.
Among the five litigants who filed the most claims, four were patent monetizers (Arrivalstar, TQP Development, GeoTag Inc, Pragmatus AV) while only one (Brandywine Communications Technologies) was classified as an operating company. And while the authors conservatively classified Brandywine as an operating company, several patent commentators have noted Brandywine’s aggressive, “troll” tactics. Of the top ten litigants, nine were patent monetizers.
The study also confirmed that cases filed by monetizers rarely proceed to trial, usually settling early in the case. 75% of terminated cases filed by monetizers ended in a settlement, as did 72% of terminated cases filed by operating companies. Less than 1% of monetizer cases were decided at or after trial, and less than 2% of monetizer cases were decided on summary judgment. Of the summary judgment cases, the authors did not find a single decision in which the monetizer prevailed. Of the trial determinations, monetizers won half of the time, though this represented only 0.3% of all terminated monetizer cases.
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 conclude that “Increasing anecdotal evidence suggests that patent litigation represents only the tip of the iceberg, and that the vast majority of patent monetization activity never progresses to the point at which a patent infringement lawsuit is filed.”
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 of operating companies that create products and services based on innovation covered by a patent.