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Fall 2013 www.lawtechjournal.com Volume 17, Issue 2 UCLA Journal of Law & Technology THE AIA 500 EXPANDED: THE EFFECTS OF PATENT MONETIZATION ENTITIES Robin Feldman, Tom Ewing, & Sara Jeruss TABLE OF CONTENTS INTRODUCTION ...................................................................................................................................... 1 I. PRIOR LITERATURE .................................................................................................................. 10 II. AIA 500 EXPANDED: METHODOLOGY & DESIGN .............................................................. 16 A. SOURCE OF DATA ...................................................................................................................... 17 B. STUDY DESIGN .......................................................................................................................... 18 1. Existing Data ..................................................................................................................... 21 2. Entity Websites .................................................................................................................. 22 3. Other Factors .................................................................................................................... 24 a. Entity Types ............................................................................................................... 24 b. Case Outcomes ........................................................................................................... 27 c. Additional Limitations ................................................................................................ 30 C. NUMBER OF DEFENDANTS ......................................................................................................... 32 1. Patent Data Expansion ...................................................................................................... 33 a. Patent Age .................................................................................................................. 34 b. Patent Ownership Transfers ........................................................................................ 35 III. RESULTS ........................................................................................................................................ 37 A. NUMBER OF LAWSUITS .............................................................................................................. 37 B. NUMBER OF DEFENDANTS ......................................................................................................... 43 C. CONSIDERING THE EFFECTS OF THE AMERICA INVENTS ACT .................................................... 46 D. OVERVIEW SUMMARY OF RESULTS ........................................................................................... 47 E. NUMBER OF LAWSUITS FILED BY MONETIZERS: MONTH-TO-MONTH ....................................... 49 F. NUMBER OF DEFENDANTS SUED BY MONETIZERS: MONTH-TO-MONTH ................................... 51 G. CASES FILED BY OPERATING COMPANIES: MONTH-TO-MONTH ................................................ 55 H. DEFENDANTS SUED BY OPERATING COMPANIES: MONTH-TO-MONTH ...................................... 56 I. ENTITIES WITH MOST CASES FILED ........................................................................................... 58 J. CASE OUTCOMES ....................................................................................................................... 59 K. LOCATION OF FILING ................................................................................................................. 62 L. PUBLIC NOTICE OF PATENTS ASSERTED IN LITIGATION ............................................................ 64 M. A MARKET FOR PRE-LITIGATION AND POST-LITIGATION PATENT TRANSFERS ......................... 68 N. AGE OF LITIGATED PATENTS ..................................................................................................... 71 O. DATA ANALYSIS ........................................................................................................................ 75 IV. CONCLUSION ................................................................................................................................ 77 APPENDIX A ............................................................................................................................................ 79 APPENDIX B ............................................................................................................................................ 87 THE AIA 500 EXPANDED: THE EFFECTS OF PATENT MONETIZATION ENTITIES Robin Feldman, Tom Ewing, & Sara Jeruss* INTRODUCTION Public attention is increasingly focused on the phenomenon of patent monetization entities. Known colloquially as “patent trolls,” these entities concentrate on generating income by licensing or litigating patents, rather than by producing an actual product. A variety of names and definitions have emerged for these entities, including “patent assertion entity,” “patent monetization entity,” “trolls,” and other less printable appellations. We will explain the terms and their slightly varying definitions below, but for the introduction, we will use the terms “patent monetization” and “patent * Robin Feldman is Professor of Law, Harry & Lillian Hastings Chair, and Director of the Institute for Innovation Law at University of California, Hastings College of the Law. Tom Ewing, J.D., M.S., M.A., Licentiate in Industrial Management & Economics (expected 2014), is founder of Avancept LLC. Sara Jeruss previously performed academic research on patent law and served as Director of Legal Analytics at Lex Machina. While the article was in progress, Sara departed Lex Machina to take a position on the developer policy team at Facebook. She, therefore, had to bow out from further work on the article. Robin Feldman and Tom Ewing wish to express their deep appreciation to Sara for her leadership in the study's design and implementation. The authors also appreciate the guidance in data analysis that we received from Marcus Holgersson, Department of Technology Management and Economics, Chalmers University of Technology, Gothenburg, Sweden. We also wish to thank John Allison, Michael Carrier, Colleen Chien, Dennis Crouch, Robert Harris, Mark Lemley, Brian Love, Michael Risch, David Schwartz and Joshua Walker, for their comments and insights. We are grateful beyond measure to Phil Arredondo, Corey Attaway, Adriana Beach, John Beard, Nicholas Billings, Joseph Bleckman, Hannah Butler, Gavin Carothers, Padmini Cheruvu, Adlah Chista, Nick Costanza, William David, Edelmira Diaz-Weaver, Michael Gregory, Brian Hahn, Winston Hill, Byron Huang, Tasha Iyer, Philip Johnson, Sona Karakashian, Jenna Kelleher, Eun Kim, Rachel Kinney, Umar Khan, Adrian Kwan, Brian Lee, Robert Lennon, Sean Mahsoul, Jason Maples, Shaila Nathu, Nirali Patel, Carla Rydholm, Jalpa Shah, Nicole Shanahan, Shaman Shooshani, Jennifer Simonovich, Nancy Situ, Kevin Smith, Jagtej Sodhi, Michael Thomas, John Tynes, Jake Wexler, Ryan Witthans, Yi Wilkinson, Matt Wilson, Joshua Wolf, Stephanie Wong, and Jacob Zweig for their dedicated research assistance, and to Natalie Feldman for recruiting researchers. We also wish to thank the Chip Robertson Fund for faculty research at the University of California, Hastings College of the Law for financial support of the project. 1 monetization entities.” When quoting others in the initial section, we will use whatever term they have chosen. The activity of patent monetization is coming under increasing scrutiny from a variety of governmental entities. In December of 2012, the Federal Trade Commission (“FTC”) and the Department of Justice (“DOJ”) held a joint workshop on the behavior of “patent assertion entities.”1 The Patent and Trademark Office (“PTO”) held its own workshop a month later on proposed sunshine rules that would provide greater transparency of patent ownership.2 The study and identification of activity by these entities has been hindered by the complex structure and arrangements of many such entities, whose activities are shrouded in complex layers of subsidiaries or revenue- sharing agreements.3 Even the President has entered the conversation. In an online “Fireside Hangout” in February 2013, President Barack Obama responded to a question by acknowledging the problem of patent trolls, suggesting the need for patent reform to address the problem, and noting the following: They don’t actually practice anything themselves. They’re just trying to essentially leverage and hijack somebody else’s idea and see if they can extort some money out of them. Sometimes these things are challenging. Because we also want to make sure that patents are long enough and that people’s intellectual property is protected.4 1 See Antitrust Division List of Public Workshops, UNITED STATES DEPARTMENT OF JUSTICE, http://www.justice.gov/atr/public/workshops/pae/index.html (last visited Nov. 17, 2013). 2 See Roundtable on Real Party in Interest Information, UNITED STATES PATENT AND TRADEMARK OFFICE, http://www.uspto.gov/ip/officechiefecon/roundtable-RPI-agenda.1.pdf (last visited on Nov. 17, 2013). 3 See id. 4 See Mike Masnick, President Obama Admits That Patent Trolls Just Try to ‘Extort’ Money; Reform Needed, TECHDIRT (Feb. 14, 2013), http://www.techdirt.com/articles/20130214/14351821988/president- obama-admits-that-patent-trolls-just-try-to-extort-money-reform-needed.shtml. 2 The increasing attention corresponds