Damages awards for NPEs (non-practicing patent owning entities) are on average triple those of practicing entities, according to the 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 does not explain that an increasing number of practicing entities (large operating companies) have been selling infringed patents to NPEs (Bosch, 3Com, Philips, etc.) 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.
Bruce Berman, first published on IP Insider