Patent Litigation Research Articles

Manufacturer’s Strategic Decision on Supplier’s Technology Infringement in Co-opetitive Supply Chain

We examine a manufacturer’s strategic decision to its supplier’s potential technology infringement behavior within a co-opetitive supply chain, where the supplier serves as both the manufacturer’s production partner and market competitor. Our study investigates four potential reactions for the manufacturer when faced with the supplier’s possible infringement: no response, initiating patent litigation, entering a cross-licensing contract, or establishing a pure licensing agreement with the supplier. The supplier possesses the choice to decide whether to infringe on the manufacturer’s technology. By comparing equilibria among these models, we find that when the lawsuit winning rate is high, a lawsuit can demonstrate effectiveness, and a pure licensing contract can further fortify the positions of both parties. Surprisingly, a cross-licensing contract does not yield a similar effect and is absent from the equilibrium strategy in this scenario. Conversely, in cases where the lawsuit winning rate is low, litigation may not reach equilibrium. Instead, both parties could opt for either a pure licensing contract or a cross-licensing contract. Interestingly, while both types of licensing agreements significantly enhance outcomes for both parties in most instances, the no response model can still represent the equilibrium strategy under specific circumstances.

Intellectual capital forecasting for invention patent through machine learning model

PurposeThis research explores support vector machine (SVM) with Gaussian radial basis function kernel (RBF) as the model and Analysis of Variance (ANOVA) for forecasting the invalidation re-examination decisions of China invention patents, it is beneficial to support patent monetization for corporate intellectual capital.Design/methodology/approachThere were 8,666 China invention patents with their existing invalidation re-examination decisions during 2000∼2021 chosen to conduct classification model training and prediction for the accuracy of invalidation re-examination decisions through SVM with RBF. Statistical significance was performed by ANOVA to identify indicators for these invention patents selected in this research. These selected 8,666 China invention patents were divided into two groups based on their invalidation re-examination decisions during 2000∼2021 in Table 1, which Group 1 included 5,974 invention patents with all valid or partially valid claims, and Group 0 included 2,692 invention patents with all invalid claims. Thereafter, each group was further divided into sub-groups based on 13 major regions where the applicants filed invalidation re-examination. The training sets for Group 1, Group 0 and the sub-groups were selected based on the patent issued in January, February, April, May, July, August, October and November; while the prediction sets were selected from the invention patents issued in March, June, September and December.FindingsThe training and prediction accuracies were compared to the existing invalidation re-examination decisions. Accuracies of training sets were ranged from 100% in region 7 (Beijing) and region 9 (Shanghai) to 95.95% in region 1 (US), and the average accuracy of invalidation re-examination decisions was 98.95%. While the accuracies of prediction sets for Group 1 were ranged from 100.00% in region 7 (Beijing) to 90.78% in region 13 (Overseas-others), and the average accuracy of classification was 95.96%, this research’s outcomes confirmed the purpose of applying SVM with RBF to predict the patentability sustainability.Originality/valueThis research developed an empirical method through SVM with RBF to predict patentability sustainability which is crucial for corporate intellectual capital on patents. In particular, the investments on patents are huge, including the patent cultivation and maintenance, developments into products or services, patent litigations and dispute managements. Therefore, this research is beneficial not only for corporation, but also for research organisations to perform cost-effective and profitable patent strategies on intellectual capital.

EXPRESS: Strategic Patent Disclosure: Unraveling the Influence of Temporal Preferences

We examine how the temporal preferences of a firm’s management and shareholders affect the textual properties of patent documents. We argue that low patent readability decreases imitation concerns due to lower information disclosure but increases concerns of patent invalidation or litigation. These concerns are likely to materialize at different points in time, implying that decision-makers with different time horizons prefer different levels of patent readability. Building a theory on the time horizon of institutional owners and CEOs, we hypothesize a positive relationship between institutional ownership and textual readability of patent documents. Our analysis of over 200,000 US patents provides empirical support for our theoretical contentions. Our findings suggest that the temporal preferences of firms’ decision-makers influence not only the extent of innovation activities but also the way in which firms craft and disseminate information about such activities.

Impact of patent infringement damages on firms' innovation performance: the moderating effects of patent-intensive industries

PurposeThe patent thickets exacerbate patent infringement, especially in patent-intensive industries. Damages are a crucial remedy for patent infringement, upholding innovation incentives in the patent system. This paper aims to examine the impact of damages on the subsequent innovation performance of plaintiff and defendant firms and the moderating role of patent-intensive industries in these effects.Design/methodology/approachBased on data from 1,062 Chinese firms involved in patent infringement litigation, this paper uses Poisson panel regression models to examine the dynamic impact of damages on incremental and breakthrough innovation performance for plaintiff and defendant firms and further validates the moderating role of patent-intensive industries on the impacts. Additionally, this paper conducts heterogeneity analysis by categorizing the sample into micro and small enterprises (MSEs) and medium and large enterprises (MLEs).FindingsThis paper shows that MLE plaintiffs skew toward incremental rather than breakthrough innovations after awarding damages, whereas MSEs transiently engage in high-level innovation activities. (2) Plaintiffs with higher payout ratios are more inclined toward undertaking breakthrough innovations. (3) Awarded damages significantly inhibit the innovative output of defendants at varying levels of innovation. (4) Plaintiff firms in patent-intensive industries show more innovation after awarding damages than those in other sectors, but damages do not effectively encourage MSEs to innovate. Defendants in patent-intensive industries are also more reluctant to innovate after damages.Originality/valueThis paper empirically investigates the relationship between patent damages and firms' subsequent innovation performance in terms of litigation status, organizational scale and level of technological innovation. Besides, this paper reveals the differences in the impact of patent protection on firms' innovation in patent-intensive industries versus other industries.

Predicting patent lawsuits with machine learning

We use machine learning methods to predict which patents end up in court using the population of US patents granted between 2002 and 2005. We show that patent characteristics have significant predictive power, particularly value indicators and patent-owner characteristics. Furthermore, we analyze the predictive performance concerning the number of observations used to train the model, which patent characteristics to use, and which predictive model to choose. We find that extending the set of patent characteristics has the biggest positive impact on predictive performance. The model choice matters as well. More sophisticated machine learning methods provide additional value relative to a simple logistic regression. This result highlights the existence of non-linearities among and interactions across the predictors. Our results provide practical advice to anyone building patent litigation models, e.g., for litigation insurance or patent management more generally.

Patent infringement litigation, executive team risk appetite and corporate innovation

ABSTRACT Comprehensively deepening the trial mechanism of patent infringement litigation is important for optimizing law environment for scientific and technological innovation. However, the growing frequency for patent infringement lawsuits significantly impacts the corporate innovation. The existing literature focuses on the direct relationship between patent infringement litigation and corporate innovation without exploring the mechanisms. Based on this, this paper analyzed the effect between patent infringement litigation and innovation and heterogeneity using a fixed effects model on the theoretical model basis. The study found that patent infringement litigation has a positive impact on innovation investment; patent infringement litigation promotes innovative activity through foreign direct investment; executive team risk appetite negatively moderates the relationship between patent infringement litigation and firms’ innovation investment. Patent infringement litigation has a more significant incentive effect on the innovation activities of state-owned enterprises, more open regions, and in the northeast and east regions. This paper not only reveals the mechanism that judicial litigation affects innovation activities but also provides a reference basis to solve patent disputes.

Royalty rate determination in standard essential patent litigation in China - from regional rate to global rate

Standard essential patent (SEP)-related disputes frequently involve parallel litigation cases in various jurisdictions in the world. With the rapid advancement of the telecommunication industry, Chinese companies are more and more embroiled in such global dispute, particularly with the issue of fair, reasonable, and non-discriminatory (FRAND) rate determination by the courts. Chinese courts are actively asserting jurisdiction over global FRAND disputes. It is important to note that within the framework of Chinese court practice, the court should further improve its trial procedures to ensure that parties have reasonable expectations regarding rate determination result on the merits and the procedural due process. This article reviews the judicial practice in China regarding the cases of FRAND rate dispute, summarizing the characteristics and recent development in the court practice. The article outlines how Chinese courts apply comparable license and top-down approach to calculate the FRAND rate. Notably, Chinese courts have taken a more flexible and pragmatic approach when addressing this issue, tailoring their decisions based on the circumstances in individual case. Additionally, it discusses the possibility of Article 24 in the Judicial Interpretation II as the legal basis for determining the global FRAND rate, as well as how the requirement for good-faith negotiation is interpreted by the court and whether the regional discount is reasonable in the context of the global FRAND rate. Consequently, the article argues that the courts should consider harmonizing its practice with prevailing norms in international jurisdictions. Several recommendations for optimizing the trial procedure also proposed, thereby ensuring scientific rigor and transparency of the rate calculation.

The Exposure of Emerging Market MNCs to Patent Litigation Abroad

The Exposure of Emerging Market MNCs to Patent Litigation Abroad

Inter-firm patent litigation networks: a study of network motif analysis

Despite the recent complex intertwining of firms in fierce intellectual property disputes, the formation mechanisms of patent infringement litigation relationships between firms have been little studied from a network science perspective. We construct an inter-firm patent litigation network using longitudinal data on patent infringement litigation and the firms involved in the US, and examine its structural characteristics and the mechanisms of tie formation through network motif analysis, linking it to existing knowledge on negative ties. The results reveal the significant influence of mechanisms such as homophily, popularity, and activity on network formation, with reciprocity emerging as a pivotal factor. The absence of triadic closure is also observed. This distinct structural pattern is consistent across different technological fields and throughout the 20-year period. Furthermore, our analysis delves into the rapid countersuit strategies common within this network and provides valuable insights into patent litigation strategies between firms.

Are non-practising entities opportunistic? Evidence from litigation of standard essential patents

Are non-practising entities opportunistic? Evidence from litigation of standard essential patents

The effects of foreign patent litigation on firms’ patent strategies: evidence from Chinese litigants in the US court

ABSTRACT The internationally orientated market leads to a surge of cross-border patent litigations. Despite the growing literature on patent litigations, research on the impact of patent litigation on firms’ patent strategy is sparse, especially on the impact of foreign patent litigations. Using US patent infringement lawsuits in which Chinese public firms act as defendants, this paper investigates the effect of foreign patent litigation on firms’ subsequent patent outputs and patent trajectories. We find that the experience of foreign patent litigation increases the accused firms’ subsequent patent filings, and those firms tend to apply exploitative patents instead of exploratory patents. We further find that such promoting impact is more pronounced for firms with a high level of international intensity and firms in the ICT industry. These findings highlight the role of foreign patent litigation in future patent creation, thus enriching the literature on patent litigation and international business. According to the results, firms should take foreign patent litigation as an opportunity to build a strong patent portfolio and improve patent strategies.

The anti-suit injunctions in patent litigation in China: what role for judicial self-restraint?

Abstract Starting from 2020, the Chinese courts have actively participated in the jurisdictional battles for the standard essential patent (SEP) disputes, a pivotal development marked by the Supreme People’s Court’s inaugural SEP-related anti-suit injunction (ASI) in Huawei v Conversant. Subsequently, lower courts in China have emulated this approach by issuing ASIs targeting SEPs in the domain of information and communication technology. The present study highlights the features of the Chinese ‘act preservation measures’ by comparing them with the typical ASIs originally developed in the common law jurisdictions. This comparison reveals significant divergence in the factors considered by Chinese courts issuing ASIs, particularly in the context of cross-border patent litigation. The study aims at elucidating potential defenses that the respondents in SEP litigation may employ to contest the issuance of ASIs in Chinese judicial proceedings, with particular attention accorded to the principles of comity and public interest. The article concludes that the invocation of international comity and public interest in SEP litigation will encounter a formalistic assessment by the Chinese judiciary due to potential conflicts with statutory provisions and the lack of a more context-specific analysis. As a result, in the absence of supra-national mechanisms that would address the problem of parallel litigation, there appears to be little room for judicial self-restraint.

Understanding the Rivalry Among Telecommunication Companies in the Cross-Border Patent Infringement: An Evolutionary Social Network Analysis

Understanding the rivalry in infringement-litigation dynamics is critical for firms in the telecommunication industry. While the number of cross-border patent disputes in these years has surged owing to the globalized economy, the existing literature primarily focuses on patent disputes among telecommunication companies in the national jurisdiction. Hence, to capture the rivalry in the telecommunication industry more comprehensively, we utilize the evolutionary social network to explore the patent dispute data in the International Trade Commission (ITC), which is a crucial legal battleground for enterprises with international business. Through developing a dynamic litigation network and discussing the possible role of the positions in compliance with their interacting relationship, we illustrated that companies involved in ITC investigations can be segmented into key players, frequent respondents, strategic applicants, as well as peripheral enterprises, and the litigation strategies implicated behind four groups of firms stress the strategic nature of ITC investigations. According to the findings, this study contributes to the literature on patent litigation in the telecommunication field and social network relationships. In addition, this paper suggests that telecommunication companies should develop litigation strategies based on their positions and roles in the competition network, and policymakers need to have a deeper understanding of the competition practices in the global legal context.

Executives' Legal Expertise and Corporate Innovation

ABSTRACTResearch QuestionThis study investigates whether and how executives with legal expertise impact corporate innovation.Research FindingsUsing a sample of listed firms in China, we have the following findings: (1) Firms that hire executives with legal expertise are associated with more corporate innovation. (2) These firms talk about potential legal risks and legal advisors more often in their annual reports and have lower chances of being sued in patent litigations. (3) The innovation‐promoting effect is stronger when the firms are state‐owned enterprises, have more overseas revenue, operate in high‐tech industries, have prior patent litigation experience, and are in strong legal environments.Theoretical/Academic ImplicationsThe findings indicate that executives with legal expertise bring more attention to legal risks and help the firm to shape a stable environment, which can effectively promote innovation activities. Also, the innovation‐promoting effect of lawyer executives complements the role of in‐house legal counsels and the external legal environment. This paper adds to the literature on the value of executives with legal background.Practitioner/Policy ImplicationsOur results emphasize the important role played by executives with legal expertise in corporate innovation. Given the continuing shortage of legal talents and the gradual improvement of the legal system in China, firms need to employ more legal talents to avoid potential legal risks and maintain sustainable growth.

Study on the Injunction System of China's Standard Essential Patent Litigation

In the context of the digital age, disputes arising from standard-essential patent (SEP) licensing are becoming more frequent. At the same time, parallel litigations due to the SEP litigations are also increasing, and courts in various countries are now more inclined to adopt the injunction system to deal with this problem. In this paper, this article will review the origin, development, classification and role of injunction, analyse the implementation of the injunction of standard-essential patents in China, and point out the deficiencies of the current injunction system of standard-essential patents in China. At the same time, this article will put forward suggestions including improving the issuance requirements and procedural propriety of the injunction, as well as countermeasures in the face of foreign restrictions on China's jurisdiction, hoping that the injunction system will play a more effective and fair role in China's standard-essential patent litigation dispute resolution.

Round-up of English patent litigation 2023

Abstract 2023 saw 15 decisions, concerning 22 patents, in inter partes proceedings in which patent infringement and/or validity was in issue. 6 patents were held to be valid and infringed, 9 not to be infringed and 9 to be invalid, all but 3 on the ground of obviousness. 2023 also saw 6 Court of Appeal decisions in such proceedings, in 3 of which the trial judge was reversed on validity - in two cases in favour of the patentee.

Statute of limitations rules in patent infringement litigation in China

Abstract This article examines the statute of limitations applicable to patent infringement actions in China, highlighting open questions that will require legislative and judicial clarification over the coming years. In 2020, the fourth amendment to the Chinese Patent Law introduced a 3-year limitation period, resolving the pre-existing discrepancy with the Civil Code. However, several issues remain open to interpretation and in need of further clarification. These include the commencement of the limitation period, proof of actual or constructive knowledge of the infringement and of the identity of the infringer(s) and the applicable statute of limitations for acts of infringement occurred before the 2020 amendment.

The Simple Math of Royalties and Drug Competition During the 180-Day Generic Exclusivity Period

Abstract In drug patent litigation settlements, the plaintiff brand commonly licenses the defendant generic to sell before patent expiry. Some agreements require the generic to pay the brand royalties. Despite the superficial flow of payments, royalty terms may function as part of an anticompetitive “reverse payment” made to the generic in exchange for delayed entry. Typically, the brand launches its own authorized generic (AG) during the first-to-file generic’s 180-day exclusivity period so initially there are two generic competitors. A royalty structure that deters the brand’s AG launch reduces the number of entrants to one, conveying net value to the generic by allowing it to capture the entire generic market, potentially inducing it to delay its entry. Royalties usually have no place in a brand–generic agreement between rational actors. However, our simple model shows that when royalties are conditioned on the brand’s AG launch, a range of royalty rates exists that conveys net value to the generic by deterring the brand from rationally introducing an AG. Royalty terms that are conditioned on the brand’s AG launch thus raise a red flag that the agreement is a pay-for-delay. Although the numbers are small, publicly available materials on industry experience corroborate this conclusion.

A Multi-Aspect Neural Tensor Factorization Framework for Patent Litigation Prediction

A Multi-Aspect Neural Tensor Factorization Framework for Patent Litigation Prediction

Bargaining power in the market for intellectual property: Evidence from licensing contract terms

AbstractWe study a novel database of intellectual property (IP) licensing agreements sourced from filings made by publicly listed corporations, a large fraction of which firms (initially) disclose with redacted terms. In contrast to the benchmark that IP quality alone determines the pricing of IP, we argue that bargaining power between licensing counterparties plays a critical role in explaining several patterns in observed royalty rates. Licensors with differentiated technology and high market power charge higher royalty rates, while larger‐than‐rival licensees pay lower royalty rates. Licensors command premium royalty rates for contract exclusivity, especially in competitive markets. Finally, we employ this framework and setting to understand the pricing implications of nondisclosure: licensors redact payment terms when they transact at lower royalty rates, consistent with preserving bargaining power for future negotiations. Our findings offer a new explanation for innovator secrecy and have several practical takeaways for transfer pricing and patent litigation.