Stylized Facts of Patent Litigation

Jean O. Lanjouw and Mark Schankerman

THE DATA

I. Data source to identify litigated patents:

Patent History CD-ROM, Derwent based on information from the US PTO

5,452 cases for the period 1975-91 involving 3,887 patents

Linked To:

II. Comprehensive U.S. Federal Court Data:

Inter-university Consortium for Political and Social Research

22% of Cases Reported (1977-9)

85% of Cases Reported (1985-7)

III. “Matched Sample”

3,887 patents drawn from population controlling for IPC and cohort

CHARACTERISTICS

• Number of Claims

• Set of all 4-digit IPC sub-class assignments

• Nationality of Patent Owner– Domestic U.S.; Non-Japanese Foreign; Japanese

– Based on assignee if there is one, otherwise the inventor

• Corporate versus Individual Ownership– Identified by whether there is an assignee

• (Patent Scan CD-ROM, Micro Patent)

• Backward and Forward Citations with their 4-digit IPC sub-class assignments

Table 1: Litigation Rates and Composition

Panel A: Filed Cases per 1,000 Patents, 1980-1984

By Technology Group and Ownership

Total Domestic Foreign

Drugs & Health 20.1 26.6 6.5

Chemical 5.4 6.1 1.4

Electronic 9.6 12.7 3.3

Mechanical 11.8 20.1 3.4

Other 15.2 23.4 9.9

Total 10.7 16.4 3.5

Other Points Related to Table 1

• Josh Lerner estimates 60 cases per 1000 in biotech

• Individuals have a 16% higher probability of litigation than corporate owners, except for Japanese owners. There, individuals have a rate 3 times that of corporations

Table 2: Forward Citations

Domestic Non-Japanese Japanese

Foreign

Matched Litigated Matched Litigated Matched Litigated

Mean 6.3 12.0 4.8 11.5 5.8 12.0

Citations (0.16) (0.24) (0.19) (0.78) (0.32) (1.55)

Similarity Index:

• Measure of how much the IPC classes of a patent’s forward or backward citation overlap with those of the patent itself.

• Backward vs. Forward Citation?

• Citation by Others vs. Citation by Self?

Table 3: Similarity of Citation

Litigated (L) vs. Matched (M) Patents

BackwardCitations

ForwardCitations

Citation by Others L M L > M

Citation by Self L M L > M

Thus, a patent more likely to be involved in a suit:•if there are others patenting related innovations in the same

technology area.•If it is the base of a cumulative chain where later patents are held

by the same owner.

Table 7

Characteristics Associated with the Probability of a Suit

Infringement Suits Challenge SuitsParameters Marginal Effects Parameters Marginal Effects

(1) (2) (3) (4)

Log Claims 0.405** 0.136** 0.433** 0.058**

(.030) (.010) (.050) (.007)

FWD Cites/Claim 0.256** 0.081** 0.230** 0.029**

(.019) (.006) (.027) (.003)

FWD Cites/Clm^2 -0.0083** -0.005**

(.0011) (.001)

BWD Cites/Claim -0.033-0.010 -0.043-0.005

(.023) (.007) (.040) (.005)

BWD Cites/CLM^2 0.0012 0.003

(.0011) (.002)

NO4IPC -0.062* -0.021* -0.052-0.007

(.036) (.012) (.057) (.008)

SIMFWD 0.278** 0.093** 0.129 0.017

(.087) (.029) (.144) (.019)

SIMFWD*CORP 0.203** 0.162** 0.223 0.047**

(.103) (.020) (.170) (.013)

FWDSELF 0.674** 0.226** 0.585** 0.078**

(.106) (.036) (.165) (.022)

BWDSELF -1.015** -0.341** -0.936** -0.125**

(.173) (.058) (.307) (.041)

DINDOWN -1.419** 0.103** -2.320** 0.022

(.126) (.024) (.205) (.019)

FINDOWN -2.321** -0.214** -2.911** -0.059**

(.158) (.024) (.250) (.014)

JINDOWN -2.305** -0.195** NE NE

(.349) (.071)

DCORPOWN -1.562** 0.195** -2.466** 0.060**

(.123) (.016) (.200) (.013)

FCORPOWN -2.321** -0.181** -2.963** -0.050**

(.129) (.016) (.209) (.011)

JCORPOWN -2.893** -0.287** -3.510** -0.084**

(.156) (.015) (.266) (.008)

Table 8Estimated Litigation

Probabilities for Corporate U.S. Patentees

Atmeans

+ 1 s.d.ln

claims

+ 1 s.d.cites/clm

+ 1 s.d.both

+ 2 s.d.ln

claims

+ 2 s.d.cites/clm

AllTechnologies

0.7% 1.2% 1.4% 2.4% 2.2% 2.5%

Claims 8.5 19.4 8.5 19.4 44.4 8.5Cites/claim 1.0 1.0 2.8 2.8 1.0 4.6

Drugs &Health

1.8% 3.2% 4.3% 7.4% 5.7% 8.2%

Claims 9.0 21.0 9.0 21.0 48.5 9.0Cites/claim 1.5 1.5 4.0 4.0 1.5 6.6

Sample patent with maximum litigation probability in,

Drugs & Health (17 Claims, 132 Citations): 27.6%Chemicals (65 Claims, 164 Citations): 3.5%Electronic ( 4 Claims, 48 Citations): 9.1%Mechanical ( 2 Claims, 39 Citations): 12.8%

Conclusions Related to the Design and Administration of

the Patent System Likelihood of a suit varies markedly with

the characteristics of a patent and its owner, and

For some types the rate of litigation is high

Uncertainty about what is patentable appears to play a role

It appears that individuals are at a disadvantage relative to corporate patentees, which supports related evidence:

Smaller biotech companies tend to avoid doing R&D in same technology areas as large firms

They rely more heavily on trade secrets vs. patents(Lerner)

Larger firms tend to request preliminary injunctions when confronting smaller defendants

(Lanjouw and Lerner)

• Institutional design to lower costs - particularly for smaller firms

• Improvement in the ability to price patent litigation insurance