Our Divided Patent System

John R. AllisonUniversity of Texas McCombs School of Business

Mark A. LemleyStanford Law School

David L. SchwartzNorthwestern University Law School

Empirical Studies of Patent Litigation

Only cases that reach ruling on dispositive motion or trial

John R. Allison, Mark A. Lemley & David L. Schwartz, Understanding the Realities of Modern Patent Litigation, 92 Texas L. Rev. 1769 (2014) (available at http://ssrn.com/abstract=2442451)

John R. Allison, Mark A. Lemley & David L. Schwartz, Our Divided Patent System?, 82 U. Chi. L. Rev. (forthcoming 2015) (available at http://ssrn.com/abstract=2510004)

Background

• Allison & Lemley studied patent validity in 1998• We update that study (now based on cases over 20 years

old)• We also extend it

– Include infringement and enforceability as well as validity

– Include all district court and appellate decisions, not just reported decisions

Our study

• All patent cases filed in 2008-2009 in which there was a decision on the merits, whether SJ, trial, or appeal and whether grant or deny

• Lemley and Schwartz hand-coded outcomes; Allison hand-coded patents

• Each decision on a patent is the unit of observation

• 949 observations—that is, merits decisions on each patent

Our study 2

• Coded for 30 different dependent variables, including various grounds of validity, infringement, and unenforceability as well as the procedural posture of the ruling, technology, industry, etc.

Our Independent Variables

Foreign Origin of Invention-Residences of majority of inventors, assignee domicile as a tie breaker

Adjusted Number of Citations Received

Total Prior Art References

Number of Inventors

Time length of litigation from filing to termination

Age of Patent at Current Litigation Filing in Years

Number of Defendants

Number of Asserted Patents

Reissue Patent? (not yet used)

Federal Districts--Top 13 & All others

Primary Technology Areas and Industry Areas

One or More Secondary Technology Areas

Declaratory Judgment

Technology areas

Technology Frequency Percentage

Mechanical 271 28.7%

Electrical 104 11.0%

Chemistry 154 16.3%

Biotechnology 50 5.3%

Software 329 34.8%

Optics 37 3.9%

Total 945 100.00%

Patent Decisions by Technology

Industry categories

Industry Freq. Percent

Computer and Other Electronics 129 13.7%

Semiconductor 29 3.1%

Pharmaceutical 110 11.6%

Medical Devices, Methods and Other Medical 99 10.5%

Biotechnology 30 3.2%

Communications 123 13.0%

Transportation (Including Automotive) 43 4.6%

Construction 32 3.4%

Energy 21 2.2%

Goods and Services for Consumer Uses 134 14.2%

Goods and Services for Industrial and Business Uses 195 20.7%

Total 945 100.0%

• Litigated patents are likely different from all patents

• Patents with rulings on the merits aren’t necessarily representative of all litigated patents–Less than 10% of cases reach merits

rulings

Statistics

• Summary judgment

• Trials

• Overall definitive winners

Distribution of Technologies

Mechanical; 28.7%

Electrical; 11.0%

Chemistry; 16.3%

Biotechnology; 5.3%

Software; 34.8%

Optics; 3.9%

Definitive Win Rates by Technology

Mechanical Electrical Chemistry Biotechnology Software Optics0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

27.1%

30.9%

52.1%

5.4%

13.5%

16.7%

Invalidity Rates by Technology

Mechanical Electrical Chemistry Biotechnology Software Optics Total0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

52.2%

38.6%

25.6%

80.0%

45.3%

21.4%

42.6%

Infringement Rate by Technology

Mechanical Electrical Chemistry Biotechnology Software Optics Total0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

43.2%

28.8%

68.4%

29.6%

19.7%

15.0%

36.1%

Top row = Coefficient; * = p<.10, ** = p<.05, *** = p<.01; Bottom row = Std. error

Patent Owner Definitive Winner

Foreign Origin of Patent 0.601** (0.0230)

Adjusted Number of Citations Received 0.0932 (0.270)

Total Prior Art References 0.00171* (0.0532)

Number of Claims 0.00950* (0.0563)

Age of Patent at Current Litigation Filing -0.0313 (0.202)

Number of Defendants 0.0518 (0.221)Number of Asserted Patents 0.00525 (0.826)TX ED 1.336*** (0.000149)DE D 0.144 (0.690)CA ND 0.0410 (0.922)

Mechanical (Primary) -0.863***

(0.00300)

Electrical (Primary) -0.851**

(0.0239)

Biotechnology (Primary) -3.444***

(4.99e-05)

Software BM (Subset of Primary) -2.307***

(0.000109)

Software NBM (Subset of Primary) -2.176***

(2.20e-09)

Optics (Primary) -1.490**

(0.0156)

Comparison Dummy = Chemistry

F-Test for joint technology effects 53.34***

(0.000000001)

Observations 616

Distribution of Industries

13.7%

3.1%

11.6%

10.5%

3.2%

13.0%

4.6%

3.4%

2.2%

14.2%

20.6%

Computer and Other Electronics 13.7%

Semiconductor 3.1%

Pharmaceutical 11.6%

Medical Devices, Methods and Other Medical 10.5%

Biotechnology 3.2%

Communications

Transportation (Including Automotive) 4.6%

Construction 3.4%

Energy 2.2%

Goods and Services for Consumer Uses 14.2%

Goods and Services for Industrial and Business Uses 20.6%

Definitive Win Rates by Industry

Compute

r an

d Oth

er E

lect

ronic

s

Semicon

ductor

Pharm

aceu

tica

l

Med

ical

Dev

ices

and M

ethod

s

Biote

chnol

ogy

Comm

unicat

ions

Tran

spor

tation

(Incl

uding A

utom

otiv

e)

Const

ruct

ion

Ener

gy

Goo

ds an

d Ser

vice

s fo

r Con

sum

er U

ses

Goo

ds an

d Ser

vice

s fo

r In

dustrial

and B

usines

s Use

s0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

17.1%

26.3%

51.6%

30.3%

8.3%

14.8%

34.3%

15.0%

40.0%

15.1%

24.8%

Invalidity by Industry

Compute

r an

d Oth

er E

lect

ronic

s

Semic

onductor

Pharm

aceu

tica

l

Med

ical

Dev

ices

and M

ethods

Biote

chnolo

gy

Comm

unicat

ions

Transp

ortat

ion-(

Incl

uding A

utom

otive

)

Constru

ctio

n

Energy

Goods

and S

ervi

ces

for Consu

mer

Use

s

Goods

and S

ervi

ces

for In

dustrial

and B

usines

s Use

s

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

46.8%

21.4%25.7%

53.2%

72.7%

43.3%

59.1%

80.0%

11.8%

47.9%42.9%

Infringement by Industry

Compu

ter & O

ther

Elect

ronics

Sem

icon

duct

or

Pharm

aceu

tical

Med

ical D

evices

and

Met

hods

Biote

chno

logy

Comm

unicat

ions

Tran

spor

tatio

n (In

clud

ing

Autom

otive)

Const

ruct

ion

Ener

gy

Goods

and

Ser

vice

s fo

r Con

sum

er U

ses

Goods

and

Ser

vice

s fo

r Ind

ustrial a

nd B

usines

s Use

s

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%

26.3%22.2%

68.0%

29.4%36.4%

16.7%

53.6% 52.2%47.1%

18.1%

40.4%

Top row = Coefficient; * = p<.10, ** = p<.05, *** = p<.01; Bottom row = p-value

Patent Owner Definitive Winner

Foreign Origin of Patent 0.621** (0.0295)Adjusted Number of Citations Received 0.0475 (0.551)Total Prior Art References 0.00172* (0.0820)Number of Claims 0.00714 (0.130)Age of Patent at Current Litigation Filing -0.0228 (0.432)Number of Defendants 0.0449 (0.165)Number of Asserted Patents 0.00380

TX ED 1.473*** (3.14e-07) DE D 0.241 (0.440) CA ND -0.158 (0.727)

Computer and Other Electronics -0.0968

(0.858) Semiconductor 1.157 (0.111) Pharmaceutical 1.755*** (0.000149)

Medical Devices, Methods, and Other Medical 0.934*

(0.0685) Biotechnology (industry) -0.229 (0.760) Communication -0.352 (0.499) Transportation (Including Automotive) 1.439**

(0.0117) Construction 0.433 (0.578) Energy 1.289** (0.0235)

Goods and Services for Industrial and Business Uses 0.369

(0.421) Comparison Dummy = Consumer Goods and Services

F-Test for joint industry effects 41.03***

(1.12e-05) Observations 632

Potential Implications• If our results are representative of all litigated patents (or all patents)

– Fits the traditional narrative• Pharma patents

– Appear strong– Industry needs strong patents

• Software patents– Appear weak – Industry doesn’t need strong patents

– But biotech patents?• Appear weak• Conventional wisdom is that industry needs strong patents