Third Party Studies
Below are links to recent studies carried out by the European Commission, legal researchers and academics that provide detailed evidence of how PAEs can harm innovation and are increasingly exploiting Europe’s legal system to the detriment of European innovators and Europe’s digital single market ambitions.
This report provides a factual overview of non-practicing entity (NPE) related litigation and patent enforcement activities across the EU, Member States, including opposition and nullity actions filed before the European Patent Office (EPO) and the Bundespatentgericht. Studies on the activities of NPEs have predominantly focused on the United States. Conversely, studies on NPEs in Europe have been limited, mostly using anecdotal evidence or samples of litigation data limited to specific courts or parties, without a comprehensive overview of the EU as a whole. In this context, Darts-ip has contributed additional, invaluable data with the most comprehensive EU-wide report specific to NPE litigation to date. Darts-ip’s coverage of all major jurisdictions on a global scale allowed for unparalleled data gathering and analysis. IP specialists extracted, compiled and analyzed, quantitatively and qualitatively, all available information from case documents.
Recognizing that patent disputes have become truly global disputes, this books looks at injunctive relief in major patent jurisdictions around the world. The journey starts with a chapter on the United States, which is followed by chapters on EU law and selected jurisdictions of EU Member States: Germany, the United Kingdom, France, the Netherlands and Poland. Professor Rafal Sikorski emphasises in it’s the chapter on patent injunctions in EU law that the Trade Secrets Directive might be of help in determining what factors should be taken into account when deciding on the proportionality of injunctions. He is of the opinion that the majority of these factors could also be applied in the contact of granting or denying injunctions in patent infringement cases.
Christophe Caron, “Wrongful Infringement Proceedings”, April 2019
Sometimes wrongful infringement proceedings are initiated, such as those concerning patent trolls in patent law. Looking at European Union and French law, positive law and also prospective law, this study aims to present the concepts that enable or could enable to counter these wrongful infringement proceedings that tarnish the image of intellectual property. The study concludes that the phenomenon of patent trolls is a reality and can also be illustrated, in a more or less different form, in other areas of intellectual property law. Admittedly, to this day, decisions are not widespread in France but this may change with time, the study points out. This is why it is appropriate to consider how to counter this trend, which cannot be followed. The purpose of this article is precisely to bring some ideas to the discussion and to trigger some reflection in order to discourage the use of wrongful infringement proceedings.
Most of the available evidence on patent assertion entities (PAEs) is coming from the United States, while little is known for Europe. The up-coming unitary patent and the Unified Patent Court (UPC) system are considered to be game-changing elements for strategic patent options and for patent assertion activity in Europe. Many patent practitioners are watching Europe as the future market place for patenting. PAE activity in Europe is increasing and one reason for this trend is that PAEs originating from the United States are becoming more active in Europe. The intention of the article is to provide an overview of ongoing PAE activity in Europe and to assess the future strategic options of PAEs in Europe based on the design of the new UP and UPC system.
The recent upsurge of patent litigation cases initiated by patent assertion entities (PAEs) in the U.S. has led to an intense debate about their effect on innovation performances and on the IP system functioning. This paper contribute to this debate by providing original evidence based on the patenting activity of PAEs in Europe, a region where the patent assertion landscape is growing rapidly while the imminent introduction of the Unified Patent Court (UPC) and the unitary patent will upset the current schemes. Relying on data from the European Patent Office on patent transfers and patent citations, the results show that after a transfer occurs, patents transferred to PAEs receive significantly fewer citations. This suggests that producing companies whose business makes their technologies close to the ones acquired by PAEs may perceive an augmented risk of being sued. As a consequence, they reduce their innovative effort in fields populated by PAEs and this reflects into lower citations flowing towards PAEs’ acquired patents.
Roya Ghafele, Charles Dennery, “Patent licensing in the shadow of the Directive on the Enforcement of Intellectual Property Rights”, Journal of Intellectual Property Law & Practice, Volume 13, Issue 8, August 2018, Pages 633–643
With reference to dynamic game theory, the paper discusses the effects of automatic injunctions granted by a Court ex-post on the ex-ante negotiation of patent licensing. By relying on Nash bargaining theory, the paper finds that a regime, whereby injunctive relief is granted nearly automatically, is likely to bring the licensor an arbitrary remedy as an injunction is not linked to the economic value of the patent. By consequence, it leads to licensing negotiations that depend primarily on the financial distress of either party to the case, and thus the nuisance of the dispute. This inconsistency is not pronounced in damage awards as damages can be linked to the value of the patent. Rather than abolishing the discretionary usage of injunctions, the paper hence recommends to increase damage awards in Europe and promote further IP valuation guidelines as a way to assess the economic value of damage awards.
Christian Osterrieth, “Technological Progress: A Challenge for Patent Law? The Principle of Proportionality Applied to Injunctive Relief in Patent Law”, 2018
Technological progress brings about not only the development of individual innovative products but also, supported by digitisation (e.g. Industry 4.0, the internet of things, artificial intelligence), cross-linked products and processes of high complexity and inter-operability. Faced with such complex systems, asserted patents often confine themselves to addressing only a single component. In order to avoid undue hardships in the legal enforcement of such patents, processes of weighing interests and examining proportionality on a case-by-case basis may well be in order, since the granting of “over-compensation” may cause the patent system to adversely affect technological progress.
The study aims to provide support for an ex-post evaluation of Directive 2004/48/EC [IPRED] and for an Impact Assessment in view of a possible review of the IPRED to modernise the enforcement of IPR. The study builds on the results of the public consultation carried out in 12016 and expert legal knowledge to obtain a detailed analysis how the main articles were being implemented in the Member States. In addition, interviews and quantitative evidence on court cases were used to underpin the evidence base for the study. In short, the study finds that IPRED proved to be effective on a very general and conceptual level, allowing for a common legal European framework, the development of pan-European IP enforcement strategies, and the productive exchange of intelligence among judges cross-border. However, higher order effectiveness is hampered by the actual application of IPRED in the Member States, the study concludes.
Jorge L. Contreras, “Patent Assertion Entities and Legal Exceptionalism in Europe and the United States, a Comparative View”, Max Planck Institute for Innovation & Competition, Research Paper No. 17-11, September 2017
Patent assertion entities are playing an increasing role in patent policy and patent litigation, both in the U.S. and Europe. Analyzing the resulting case law, mainly in the SEP/FRAND context, this article shows similarities as well as differences in the approaches taken by U.S. and EU courts.
Patent assertion has become a common practice in shaping the balance between technology creation and technology dissemination in the ICT industry. The importance of this practice for the functioning of ICT markets has given rise to new entities that enforce patents but do not utilise the patented technology, commonly referred to as patent assertion entities (PAEs). This study provides an overview of patent assertion practices and of PAEs in Europe, taking into consideration their impact on innovation and technology transfer in European ICT markets.
Patent Assertion Entities (“PAEs”) are playing a growing role in the United States, but also in Europe. Their activities are controversial in that while they may be a source of efficiencies, they may also create anticompetitive harm. Given the growing trend of operating companies transferring patents to PAEs in order to increase their licensing revenues, the risks of anticompetitive harm created by PAE activities must be taken seriously. When analysing the impact of PAE activities on competition, a distinction must be drawn between “pure” PAEs, which acquire patents from a variety of sources and generate revenues by asserting them, and “hybrid” PAEs, which acquire patents from operating companies and maintain a relationship with these companies post-acquisition. While pure PAEs create risks of exploitation, hybrid PAEs create exclusionary concerns as such PAEs may be used by operating companies to harm their rivals on downstream product markets. These exclusionary concerns are particularly serious when the operating company retains a significant degree of control over the activities of the PAE following the transfer of the patents. As there is currently no EU competition case-law on the activities of PAEs, this paper attempts to show through hypotheticals that depending on the circumstances of each case, privateering may lead to exclusion.
This book chapter presents the findings of an empirical study of German and U.K. patent litigation involving patent assertion entities (PAEs). Overall, the study finds that PAEs account for about 19 percent and 9 percent of patent suits filed in Germany and the UK respectively during the time periods covered by the study: 2000-2008 for Germany and 2000-2013 for the U.K. The study also presents a variety of additional data on the characteristics of European PAE suits and PAE-asserted patents and, finally, considers what its findings suggest are the most important reasons PAEs tend to avoid European courts. The study concludes that, while many factors likely contribute to the relative scarcity of PAEs in Europe, the continent’s fee-shifting regimes stand out as a key deterrent to patent monetization.
This paper presents the first full empirical study of the effect of patent licensing demands on the US economy. The paper finds that NPE licensing demands almost never lead to innovation by the target firm. None of the indicia we would expect of real technology transfer are common in patent licensing demands. Patent licensing demands almost never result in technology transfer or new innovation in the computer industry, particularly when NPEs are doing the asserting, the paper concludes.
The 2006 Supreme Court ruling in eBay vs. MercExchange removed the presumption of injunctive relief from infringement and marked a sea change in U.S. patent policy. Subsequent legal and policy changes reduced the costs of challenging patent validity and narrowed the scope of patentable subject matter. Proponents of these changes argue that they have made the U.S. patent system more equitable, particularly for sectors such as information technology, where patent ownership is fragmented and innovation highly cumulative. Opponents suggest the same reforms have weakened intellectual property rights and curtailed innovation. After reviewing the legal background and relevant economic theory, the paper examines patenting, R&D spending, venture capital investment and productivity growth in the wake of the eBay decision. Overall, the papers finds no evidence that changes in patent policy have harmed the American innovation system.
Non-practicing entities (“NPEs”) as well as product-producing companies can sometimes provide innovation, either directly, through working the patent or transferring technology to others who do, or indirectly, when others copy the patented innovation. The available evidence suggests, however, that patent licensing demands and lawsuits from NPEs are normally not cases that involve any of these activities. Some scholars have argued that patents can be valuable even without technology transfer because the ability to exclude others from the market may drive commercialization that would not otherwise occur. The paper demonstrate that even if various commercialization theories can sometimes justify patent protection, they cannot justify most NPE lawsuits or licensing demands
This paper empirically investigates the statistical relation between levels of patent litigation and venture capital (“VC”) investment in the U.S. The paper finds that VC investment, a major funding source for entrepreneurial activity, initially increases with the number of litigated patents, but that there is a “tipping point” where further increases in the number of patents litigated are associated with decreased VC investment, which suggests an inverted U-shaped relation between patent litigation and VC investment. Strikingly, the paper finds evidence that litigation by frequent patent litigators, a proxy for PAE litigation, is directly associated with decreased VC investment with no positive effects initially.
Using a survey of defendants and a database of litigation, this paper estimates the direct costs to defendants arising from NPE patent assertions and finds that firms accrued $29 billion of direct costs in 2011. Although large firms accrued over half of the direct costs, most of the defendants were small or medium-sized firms. Moreover, an examination of publicly listed NPEs indicates that little of the direct costs represents a transfer to small inventors.
This paper presents a study of patent demands against venture-backed startups. The results of surveying 200 venture capitalists and their portfolio companies provide strong indications of the impact that patent demands are having on the venture-backed community. Both the companies and the venture capitalists overwhelming believe that patent demands have a negative impact on the venture-backed community, with all or most of those assertions coming from entities whose core activity involves licensing or litigating patents.