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