Former Operating Company Patents Have Been at Issue in the Majority of NPE Litigation

One of the most significant ongoing drivers of NPE litigation has been the assertion of operating company patents. As RPX has extensively reported, and as RPX’s data confirm, the acquisition of such assets by NPEs—either directly from their companies of origin or indirectly, from other entities—has spurred the vast majority of NPE litigation filed over the last fifteen years.

RPX’s analysis indicates that approximately 85% of the patent litigation filed in any given year from 2005 onward has concerned at least some operating company patents. Operating company litigation (shown in dark blue below) comprises about 30-40% of defendants added in recent years. NPE litigation, on the other hand, is far more often based on patents originating with operating companies (shown in light blue) than on homegrown NPE assets (shown in orange).

While the sheer magnitude of the share of litigation over operating company assets is rather dramatic, the reasons are not unexpected. Most NPEs simply do not have the resources or strategic inclination to develop their patents in-house, and some of the most notable plaintiffs in that category started out as operating companies in the first place (such as Finjan, Inc., an NPE recently acquired by Fortress Investment Group LLC). Moreover, operating companies sometimes turn to their patent portfolios as revenue sources when facing economic pressure, either by selling those patents to NPEs or even by monetizing their own assets directly through licensing or litigation. This trend may accelerate as a result of the recession triggered by COVID-19, as businesses under financial distress seek to stay afloat—while patent litigation has increased during the pandemic.

For more on how operating company patents have driven NPE litigation, see RPX’s third-quarter review.