Tracking PAE Activity: A Post-script to the DOJ Review
January 23, 2013
Last month, the US Department of Justice sponsored a daylong workshop on the economic impact of patent assertion entities (PAEs). Participants included large operating companies, professors, and large licensing entities, so it is no surprise that the opinions expressed were very diverse. On one particular point, however, there was consensus: the urgent need for more data and information about the activities of PAEs.
To that end, using our database, we have pulled together a few pertinent statistics that we feel should be part of the ongoing discussion.
(Regular readers of this blog, by the way, will notice that we are using the term “patent assertion entity” in this post rather than the usual “non-practicing entity”. This reflects the fact that the DOJ opted to call the subject of the workshop PAEs and focused the discussion only on entities that make patent monetization a primary business function, and did not include universities and non-competing entities. The data below follows this emphasis. It includes all suits filed by individual inventors and traditional NPEs. Transferred suits, declaratory judgments, false marking and ownership disputes have been removed from both counts.)
PAEs Filed 62% of all Patent Suits in 2012
For the first time, in 2012, PAEs filed the majority of patent suits: 2,921 of 4,701 suits, representing 62% of all patent suits. This was up from 45% only a year earlier. The growth in PAE suits was unsurprising as Section 299(a) of the America Invents Act, which went into full effect during the year, forces PAEs to file separate suits rather than including unrelated defendants in the same litigation. As Mallun Yen, Executive Vice President at RPX, explained during the DOJ hearing, the NPE business model does not change and is very simple. NPEs can continue to name the same number of defendants and seek approximately the same financial returns when asserting a particular patent portfolio; they simply need to file more suits to do so.
PAEs Comprised 59% of All Patent Defendants
Of the 6,934 total defendants named in patent cases last year, 4,125 (59%) were named by PAE plaintiffs. This compares to a PAE defendant share of 63% in 2011 and 55% in 2010. Total defendant counts in all patent cases were down in 2012 from 2011, and thus the number of PAE defendants declined accordingly. It is still difficult at this point to determine if the 2012 decline in total defendants was due to an impact of the AIA or simply a change in PAE tactics.
It is also interesting to consider that 2011, the largest year to date for PAE activity, could have been in part a pulling forward of PAE defendants that would have otherwise been named in 2012. This seems plausible since the number of 2012 defendants is in line with those named in 2010.
Finally, it is worth noting that plaintiff tactics may be evolving. For example, many 2012 campaigns economized on litigation costs by naming few defendants in suits but sending letters to an “industry”. According to one presenter at the DOJ-FTC hearings, the ratio of letters to suits is estimated to be anywhere from 25-50 letters to 300 letters+ per single suit.
Source: RPX Litigation Database and Pacer