Patent Litigation and the Internet

Abstract

Using both univariate comparisons and multiple regression techniques, we find that: (1) Internet patents and their two subtypes, broad Internet business models and narrower Internet business techniques, were litigated at a far higher rate than other (non-Internet patents, or NIPs) — they were between 7.5 and 9.5 times more likely to end up in infringement litigation, depending on the model we used. (2) Within the category of Internet patents, those on business models were litigated at a significantly higher rate than those on business techniques. (3) Across both Internet patents and NIPs, patents issued to small entities, especially individuals and small businesses, were much more likely to be litigated than those issued to large entities. (4) Patents of all kinds with more independent claims were significantly more likely to be litigated than those with fewer independent claims. (5) Including both Internet patents and NIPs, litigated patents received many more forward citations — citations received from later patents — than did unlitigated patents. (6) Patents issued to foreign entities were significantly less likely to be litigated than patents issued to U.S. entities. (7) The more time that an application for an Internet patent or NIP had spent in the PTO prior to issuance, the more likely it was that the patent granted from that application was to be involved in infringement litigation. (8) There was no difference in the ages of Internet patents and NIPs when they became the subject of litigation — both kinds were about 4.5 years old. (9) Once patent infringement litigation was initiated, the owners of litigated Internet patents were significantly more likely to settle before judgment than the owners of litigated NIPs (especially when probable settlements were taken into account along with obvious settlements, which we believe is the more accurate metric). (10) Across both sets of patents, the larger the number of potential infringers involved in a case (defendants in infringement actions and plaintiffs in declaratory judgment actions), the less likely the case was to settle. (11) Internet patents and NIPs went to trial at about the same rate. (12) When failing to settle, the owners of NIPs won on the merits at a significantly higher rate than did owners of Internet patents — although the win rate for NIP owners was quite low at around 16%, the win rate of Internet patents was even lower by a substantial margin. This finding did not hold up in regression analysis, however; when the effects of other variables were taken into account in a logistic regression analysis, there was no significant difference in the win rate for accused infringers between Internet patents and NIPs. Accused infringers did win more often when Internet patents were asserted against them than win they defended against NIP complaints, but the relatively small number of observations prevented the difference from being statistically significant. (13) Surprisingly, owners of both kinds of patents were significantly more likely to win as the number of inventors on the patents increased. (14) The longer that applications for Internet patents and NIPs had spent in the PTO before issuance, the less likely accused infringers were to win. (15) Accused infringers were less likely to win on the merits when the Internet patents or NIPs asserted against them had been litigated previously. (16) Across both sets of patents, the larger the number of potential infringers involved in a case, the more likely these potential infringers were to win a judgment on the merits. That is, the more infringement defendants per case, they more likely these defendants were to win. (17) There was no difference between the different types of patents in the percentage of cases that were terminated for procedural reasons. We also discussed several other findings of interest.