Tag Archives: PwC

“NPEs generate higher damages awards,” 2017 litigation study finds

The disparity in patent damages awards between non-practicing and practicing entities favors NPEs and is growing wider. 

These findings, counter-intuitive to some, are part of the useful, just-published report from PwC, 2017 Patent Litigation Study – Change on the Horizon.

PwC’s analysis shows the continuation of a trend that began in the early 2000s: significantly higher damages awarded to NPEs relative to practicing entities.

The median damages award for NPEs was significantly higher than PEs in the last 15 years. While this disparity had narrowed to about 1.6x in the 2007–2011 period, in the most recent five-year period, the NPE median damages award climbed to 3.8x the median for practicing entities.

It is not clear if the findings are a result of NPEs owning better quality, more highly infringed patents than PEs, or that NPEs are simply more adept at enforcing them.

“The disparity has perplexed us for some time,” stated Chris Barry, one of the 2017 Litigation Study’s authors and a partner in PwC’s Forensics Practice. “Operating business that asserts patents typically are more interested injunctive relieve – halting a competitor’s product sales – than in generating revenue. Most patent cases are dismissed on summary judgment or settled.”

Higher Success Rate

Over a 20 year period from 1997 to 2016, PE’s have a higher success rate at trial than NPEs at trial, 36% vs. 25%, but a significantly lower recovery rate, $4.9 million vs. $11.5 million. For the 2012-2016 period, NPEs out generated PEs in damages by almost 4 to 1 (see above infograph). 

Among NPEs, universities fare best at trial with median damages awards of $16.3M, as opposed to $13M for NPEs and just $6.7M for individual inventors who enforce.

No information on trial costs was provided, although AIPLA tracks them by the size of the case. There also was no tracking of PTAB results or influence on patent litigation. Many law firms address this, as does Unified Patents.

Despite a handful of large, headline-grabbing patent damages awards – most of which are never paid – patent trials have been flat for almost three decades, with a little more than 100 disputes going to trial annually.

There are an estimated two million plus active U.S. patents.

For the full 2017 patent litigation report, go here.

 

Image source: PwC

 

Top Plaintiffs are Operating Cos Not NPEs, New Study Shows

Seven of the top ten plaintiffs with the most patents asserted in cases open in 2013 are operating companies.

Data presented in a report released this morning by Lex Machina, the legal analytics firm based in Silicon Valley, indicate that businesses that sell products are much more likely to be involved in active patent litigation than so-called patent “trolls.”

This may come as a surprise to many trying to weaken the patent system because of NPE activity. “2013 Patent Litigation Year in Review” presents a host of timely facts, among them plaintiffs with the most patents enforced. Only two NPEs Intellectual Ventures (twice) and RAK Technology Licensing, are among the top ten companies.

LM Ericsson and Ericsson, Inc. were the most litigious, with a total of 176 active cases open. Motorola Mobility, owned by Google, and Apple, also were on the top ten list, each with 52 active cases.

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Figure 20:
Plaintiffs With Most Patents
Asserted in Cases Open During 2013

1. Telefonaktiebolaget LM Ericsson 103
2. Intellectual Ventures I 100
3. Intellectual Ventures II 81
4. Ericsson, Inc. 73
5. Finisar 59
6. Ronald A. Katz Technology Licensing 65
7. Motorola Mobility 52
8. Apple 52
9. Philips Electronics 41
10. Pfizer 30

*Intellectual Ventures I and II and Ronald A. Katz Technology Licensing are NPEs.
The remaining seven plaintiffs are operating companies.

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Suits, Trials, Damages 

Some of the most frequently asserted patents originated at Xerox, AT&T and Stamford University. Five of the top ten damages awards were in the life sciences, not IT. Average awards were up 28%, “dragged higher,” the report states, by “healdline-stealing damages.”

The median patent damages award for 2013 was still slightly over $1 million, at $1,256,920. It is up but remains relatively low given the hoopla surrounding patent awards and the increase in suits filed. (Much of the increase in suits filed can be attributed to “joinder” provisions in the America Invents Act, which make it more difficult to enforce against multiple parties in a single suit.)

There were just 128 patent trials last year, a number which has varied little for more than 20 years. This is amazing given the explosion in patents granted (a total of 302,948 in 2013 alone), increasing complexity of innovation and the number and importance of IP rights in consumer and other products.

The entire Lex Machina report can be found here. It compares favorably with those patent litigation reports from RPX and PwC.

Illustration source: lexmachina.com 

PwC to Wall Street: Largest Patent Damages Awards are Seldom Paid

Consulting Firm’s 2012 Study Shows the Most Active Venue for Patent Plaintiffs is Now Delaware, not Texas

While it may appear in the media that anyone with a two-sentence patent claim and contingency agreement is racking up huge infringement awards without trying, the facts show that NPEs and operating companies alike are winning much smaller median litigation awards, and when they win big they frequently are not getting paid at all.

According to a recent PwC patent litigation study, with regard to the ten largest, headline-grabbing patent verdicts from 1995-2011: “most of these awards have since been vacated, remanded, or reduced, while some remain in the appellate process.”

The two largest awards of all time, Centocor (J&J) v. Abbott, $1.8 billion, and Lucent v. Microsoft, $1.5 billion (won by John Desmarais when he was still at Kirkland & Ellis), both were overturned. Both also received enormous media coverage and what lingers in the memory is the initial verdict not the final payout. (IP managers and lawyers are well aware that even some awards that are upheld are never fully paid.)

Median patent holder damages awards were less than half in 2006-2011 than what they were in 2001-2005, down to just $4 million. NPE awards are still almost double those of practicing entities (chart. 2b), however, typically they do not reach even tens of millions of dollars. Hundred million dollar cases are extremely rare.

While patent suits were up in 2011 more than in recent years, trials remained essentially flat at about 100. patent trials are down relative to the dramatic increase in filings and patent grants.

The PwC study does not examine why NPE awards are higher than those of practicing entities. It could have to do with (1) the higher quality of the patents being enforced and the resulting amount of damages, and (2) the commitment on the part of NPEs to litigate for the highest awards and royalties, not freedom to operate.

Additionally, perhaps NPEs are better equipped than operating companies to manage the risky business of patent enforcement. The PwC study does not specifically address patent privateers, businesses that monetize patents on behalf of operating companies, which either sell the patents outright to them or, sell them for some upfront cash while retaining a percentage of potential damages, settlements or future licensing revenues. Privateers are a smart solution for many operating businesses who would rather collect a little something now and lay-off the risks associated with enforcement, especially if they may involve customers or leave them vulnerable to counter claims.

 District Courts Emerge 

The study’s district court data is very interesting. Delaware has beat out Texas for the most popular fast track patent court, 105 cases to 91, both with about a two-year time to trial (chart 7d).

Florida is now higher than Texas in terms of over all plaintiff success rate, 57.1% to 55.7%. As far as median damages are concerned, Virginia’s Eastern District is by far the best, coming in at $36 million. It is followed by Delaware, New Jersey and then Southern (not Eastern) District of Texas, at approximately $20 million, $17 million and $11 million respectively (chart 8). Industry issues, such as which businesses are in a particular district (e.g. several pharma companies are headquartered in NJ) may be a factor. Also, getting a case heard in a particular venue is not always as easy as it might appear.

Of the ten largest adjudicated patent awards between 1995 and 2011, most have been “vacated, remanded, reversed or reduced, while some remain in the appellate process.” Microsoft was a defendant in five of them (chart 2c) .

As much as I don’t like admitting it, MS has done an exemplary job of IP management over the past ten years. It has been successfully filing, licensing, defending, buying and (in the case of Facebook), re-selling patents. MS’ Android license gives it approximately $3-$6 of almost every Android phone sold, or, at last count, about a half billion dollars in annual royalties. This strategy is reminiscent of IBM’s success in licensing the early PC makers, while a laggard with its own desktops.

The 2012 litigation study does not take into account that for some practicing entities licensing patents can be far more lucrative than manufacturing and selling products. It simply the economics of some industries, like semiconductors. Unlike operating companies, NPE licensing frequently requires that a suit be filed first to get the attention of management, as well as to avoid a declaratory judgment action that could shift a case to an unfavorable venue.

Disclosure: Exclusive of Abbott the author does not own any shares of the companies mentioned above.

Illustration source: PwC 2012 Litigation Survey

New Patent Litigation Survey Confirms NPE Growth

What’s Fueling Higher Awards?

Damages awards for NPEs (non-practicing patent owning entities) are on average triple those of practicing entities, according to handy 2010 Patent Litigation Study from PwC, recently made available.

For some reason the report does not acknowledge that the higher quality and increased value of patents asserted by NPEs may be influencing damages award size, as well as NPE’s growing determination to prevail.

Better access to capital and enhanced patent analysis are the other factors affecting NPE commitment.

“Patent litigation continues to be used as a protection and monetization path for patent holders,” said Chris Barry, PriceWaterhouseCoopers Advisory Partner for Forensic Services. “IP will continue to play an important role in the economy, and represents an important competitive advantage for companies to realize value.”

Another key finding: NPEs have been successful in patent litigation 31 percent of the time overall versus 40 percent for practicing entities, due to the relative lack of success for NPEs at summary judgment.

Interestingly, both have about a two-thirds win rate at trial. Win rates increase when the alleged infringer is a plaintiff and asserts a declaratory judgment action against an NPE.

If a defendant does not win a summary judgment, and the NPE is prepared to go to trial, it (the defendant), the survey indicates, stands a good chance of losing. Many still choose to battle on.

NPEs are now involved in almost 20 percent of decisions since 1995.

The report titled, The Continued Evolution of Patent Law (click here), does not explain that an increasing number of practicing entities (large operating companies, e.g. Bosch, 3Com, Philips) have been selling infringed patents to NPEs so they can monetize them without having to go up against competitors, customers and/or suppliers in a law suit and can be spared the time and cost of enforcement.

Some are selling them outright and others are doing so with a retained interest whose value depends upon the outcome of the enforcement.

*    *     *

Operating companies increasingly have refused to discuss patent licensing with potential licensers and threaten to bring declaratory judgment actions against those who suggest they may be infringers, forcing many NPEs to sue first and negotiate potential licenses later.

Illustration source: PwC

Patent Litigation Trends

NPE Impact is Focus of PwC Study

A very useful study was recently released from PwC.  “A Closer Look –Patent litigation trends and the increasing impact of nonpracticing entities” is an in-depth look at patent litigation in the U.S. The research was completed in August but distributed last week.

PwC includes a wealth of litigation trends and statistics, as well as data on which courts are more favorable to plaintiffs and defendants. Aron Levko led the PwC team that conducted “A Closer Look.”

Among the key findings:

• Damages awards for NPEs have averaged more than double those for practicing entities since 1995.

• NPEs have been successful 29 percent of the time overall versus 41 percent for practicing entities, due to the relative lack of success for NPEs at summary judgment; however, both have roughly a 2/3 win rate at trial.

• The disparity between jury and bench awards has widened and is likely the contributing factor in the significant increase in use of juries since 1995.

• While the median time-to-trial has remained fairly constant since 1995, significant variations exist between jurisdictions.

I wonder why PwC waited so long to release the study broadly?


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