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Patents - Which Ones Are More Likely to Be Asserted in Litigation
Tuesday, August 23 2011 @ 09:00 AM EDT

This likely won't be everyone's cup of tea, but there is an interesting academic paper by Professor Colleen Chien of Santa Clara University School of Law entitled "Predicting Patent Litigation." You can download a free copy of the paper here [PDF] on the Social Science Research Network.

The paper is interesting because Prof. Chien identifies a number of objective markers that identify a patent as being more likely of being asserted in litigation than the general population of patents. The really useful aspect of her analysis is that many of these markers can be discerned prior to the patent actually being asserted.

Some of these markers are what Prof. Chien refers to as "intrinsic characteristics," i.e., characteristics that are in inherent in the patent itself. Such intrinsic characteristics include:

  • they have more claims than unlitigated patents;
  • they have more prior art citations (indicating that they have been more thoroughly vetted at examination);
  • they are typically found in families of related patents;
  • they are more likely to be originally assigned to the inventor or to a small company; and
  • they are more likely to be issued to a domestic U.S. company than a foreign company.
More important than intrinsic characteristics for predicting the likelihood of assertion are the patent's acquired characteristics - those things that happen to the patent after it issues. These include:
  • the number of times the patent is reassigned to another party other than by merger or acquisition of the company holding the patent;
  • successful completion of a reexamination, particularly a reexamination sought by the patent holder;
  • continued payment of maintenance fees on the patent;
  • whether the patent holder has borrowed against the patent (securitization); and
  • forward citations to the patent (the more later issuing patents that cite to the patent, the more important the patent is likely to be).
Many of these characteristics are indicia of the perceived value of the patent and are not surprising.

Having identified these numerous characteristics, Prof. Chien then tests them against a random sample of litigated and non-litigated patents. What she found is that these characteristics dramatically distinguished between the two groups. The one problem is that some of these characteristics only show up after the litigation has ensued. The information is not of much use at that point.

So Prof. Chien worked her way back through the data to determine what could have been known before the litigation commenced. What she found was the markers were still just as dramatic and statistically significant in identifying patents likely to be litigated.

The model is not perfect. It still only correctly predicted a patent's likelihood of being asserted in litigation about 54% of the time, but that compares to only 25% with no model and 35% when only looking at intrinsic characteristics.

While more research into this subject is needed, I found the paper useful and thought-provoking.


Patents - Which Ones Are More Likely to Be Asserted in Litigation | 90 comments | Create New Account
Comments belong to whoever posts them. Please notify us of inappropriate comments.
Authored by: Anonymous on Tuesday, August 23 2011 @ 09:22 AM EDT
Having identified these numerous characteristics, Prof. Chien **than** -->
**then** tests them against ...

[ Reply to This | # ]

than - then
Authored by: Anonymous on Tuesday, August 23 2011 @ 09:23 AM EDT
At the end

[ Reply to This | # ]

Authored by: hans on Tuesday, August 23 2011 @ 10:29 AM EDT
blah blah blah.

[ Reply to This | # ]

Off Topic
Authored by: Tufty on Tuesday, August 23 2011 @ 10:53 AM EDT
Orf tropic too

Linux powered squirrel.

[ Reply to This | # ]

Comes Documents
Authored by: Tufty on Tuesday, August 23 2011 @ 10:54 AM EDT
Keep the good work coming in

Linux powered squirrel.

[ Reply to This | # ]

Perceived value.
Authored by: Ian Al on Tuesday, August 23 2011 @ 11:29 AM EDT
If a manufacturing company needs an invention for key products they are likely
to hang on to the relevant patents. If, on the other hand, the patent is just
viewed as a source of revenue, then it is likely to pass from hand to hand.

The reassignment of a patent is a good sign that it has passed away from
manufacture into the realm of patent pools held for revenue (aka trolling).

Borrowing against the revenue value of the patent is also the sign of the troll
and would be used to increase the pool of patents and thereby the revenue
stream. Companies borrowing for manufacture don't need to use patents as the
security against borrowing.

See, I have cut through the research data to show that patents owned by trolls
are more likely to lead to litigation and patents owned by manufacturers are
less likely to lead to litigation. At least, that is the case unless their core
manufacturing business model revenue is under threat (e.g. Apple, Microsoft,
Sony and Oracle).

If my analysis is correct then we might expect more patent-based litigation from
Nokia, HP and Motorola.

Ian Al
Patented inventions must be obvious. You could never work them out from the
patent disclosures.

[ Reply to This | # ]

Patents - Which Ones Are More Likely to Be Asserted in Litigation
Authored by: Henning Makholm on Tuesday, August 23 2011 @ 01:00 PM EDT
The model is not perfect. It still only correctly predicted a patent's likelihood of being asserted in litigation about 54% of the time
That seems rather marginal. I can predict correctly 50% of the time, using only a coin and no knowledge about the patent at all.

[ Reply to This | # ]

The problem of false positives
Authored by: Anonymous on Tuesday, August 23 2011 @ 09:57 PM EDT
(Note - I haven't read the paper, just the Groklaw summary.)

When trying to predict a very rare event, a prediction method which looks good
on paper can fail in practice, due to the number of false positives overwhelming
the number of true positives. For example I have a 99% accurate terrorist
detector. (It identifies 99% of actual terrorists as being terrorists, and 99%
of non-terrorists are identified as non-terrorist.) For the sake of argument,
there are 400 million people in the USA and 100 of them are terrorists. I apply
my detector to the entire population. It identifies 4 million people as
terrorists (1% chance a non-terrorist is identified as a terrorist) of whom only
99 really are.

If I wanted to do an experiment and (somehow) got a sample of 100 terrorists and
100 non-terrorists, my test would look very good. My worry is that this paper
falls into this trap - they have (say) 100 litigated patents and 100
non-litigated patents and can see clear differences in the aspects discussed
above. This looks good - like my terrorist detector.

However to take those 'litigation indicators' and apply them to the entire
patent pool in an attempt to predict which patents will be litigated in future
(the equivalent to applying my terrorist detector to the entire US population)
is likely to select a very large number of 'litigation-prone' patents, of which
only a small fraction may actually go to litigation.

The problem comes when the event you're looking for is very rare. In my
terrorist example, one person in 4 million is a terrorist. What proportion of
patents are ever litigated? I have no feeling for this. If it is 5%, then false
positives should be manageable. If it is 1 in 10,000, then likely not.

[ Reply to This | # ]

Interesting in the context of other issues with the patent system
Authored by: Anonymous on Wednesday, August 24 2011 @ 04:41 PM EDT

The attempt to identify patents with a higher probability of being litigated could be considered even more valuable when taking into account some other aspects of the patent system that are not so widely known and/or understood by the public.

One concerns the apparent inability of the USPTO to perform high-quality screening of patent applications to weed out many patents that should never be issued. While many people see this as a serious flaw, there is actually a foundation for believing this is at least partly the result of a conscious decision about how to rationally allocate scarce resources within the USPTO. The reasoning was expressed in a paper written by Prof. Mark Lemley in 2001.

Rational Ignorance at the Patent Office

It is common to assert that the Patent and Trademark Office does a bad job of examining patents, and that it should spend more time and money weeding out bad patents. In this article, Professor Lemley challenges that conventional wisdom. Using available data regarding the cost and incidence of patent prosecution, litigation, licensing and other uses of patents, he demonstrates that strengthening the examination process is not cost effective. The core insight is that very few patents are actually litigated or licensed; most simply sit on a shelf unused, or are used only for noncontroversial purposes like financing. Because of this, society would be better off spending its resources in a more searching judicial inquiry into validity in those few cases in which it matters than paying for a more protracted examination of all patents ex ante. In economic terms, the patent office is "rationally ignorant" of the objective validity of the patents it issues.

His argument is that spending extra resources on nearly 100% of patent applications to weed out more bad ones may not be cost effective when only about 1% are ever going to be involved in litigation that requires greater scrutiny. Prof. Chien's approach could be useful if it could help predict ahead of time which patent applications were going to fall into that 1%, thereby potentially allowing better use of limited resources to eliminate patents that caused the vast majority of problems.

A second aspect is one that is even raised in Prof. Chien's paper. While excessive patent litigation seems to have the potential to seriously retard innovation in some areas, in practice the technical business world seems to have largely avoided the worst of the problems by adopting several informal practices.

Others have a more sanguine view, however. The problem of clearance is really a “nonproblem,”30 because innovators and firms have found ways to head off patent conflicts and carry on with their work. In the biomedical field, academic researchers do not appear to be aware of or concerned about patents.31 Although clearance is viewed as both “mandatory” and “manageable,” in commercial biotech,32 in other areas, search is largely not done. Companies systematically ignore patents, notes Mark Lemley, yet still manage to make and sell products.33

They can do so, Rebecca Eisenberg has explained, by relying on “widespread nonenforcement.”34 Though many patents are likely infringed, the transaction and information costs associated with enforcing them are high.35 Not only must the right patents be identified and then asserted, but there is a risk that the patent will be invalidated. A lawsuit may invite a countersuit.36 The awkwardness of suing a company that is also a partner makes companies less likely to pull the trigger.37 Practically speaking, the benefits of patent litigation may be limited. Short life-cycles and the ability to design around patents in the IT sector contribute to what Henry Chesebrough characterizes as a “weak appropriability” regime in which it is more difficult for innovators to exclusively benefit from their innovations.38

This view is supported in part by an essay written by Paul Graham in 2006. Among many other things, Paul has direct knowledge of start-up companies and how they interact with investors and venture capitalists.

Are Software Patents Evil?

What does that mean in practice? We tell the startups we fund not to worry about infringing patents, because startups rarely get sued for patent infringement. There are only two reasons someone might sue you: for money, or to prevent you from competing with them. Startups are too poor to be worth suing for money. And in practice they don't seem to get sued much by competitors, either.
In other words, no one will sue you for patent infringement till you have money, and once you have money, people will sue you whether they have grounds to or not. So I advise fatalism. Don't waste your time worrying about patent infringement. You're probably violating a patent every time you tie your shoelaces. At the start, at least, just worry about making something great and getting lots of users. If you grow to the point where anyone considers you worth attacking, you're doing well.

What he seems to be saying is that small start-up companies will almost inevitably infringe on some patents, but that practically it doesn't matter much until you have some money. Once you have some money, you can expect to be sued by others regardless. The approach seems to be another take on Lemley's view of rational ignorance, taken from the vantage of innovators.

Besson and Meurer make a case in their book, Patent Failure - How Judges, Bureaucrats, and Lawyers Put Innovators at Risk, that one of the primary problems with patents today is poor notice. From the first chapter of their book:

We can identify one very important difference between the way property rights and patent rights are implemented. This difference concerns the “notice function” of property. An efficient property system notifies non-owners of property boundaries.
Poor notice causes harm because it subjects technology investors to an unavoidable risk of disputes and litigation. The expected cost of inadvertent infringement imposes a disincentive on technology investors. Potential innovators consider not only the reward that they might reap from owning patents, but also the risk of being sued for infringing upon the patents of others. Clearly, if the risk of inadvertent infringement is too great, the net incentives provided by the patent system will be negative, and patents will fail as a property system.

Besson and Meurer identify four areas in particular that contribute to poor notice in patents:

  1. Fuzzy or unpredictable boundaries
  2. Public access to boundary information
  3. Possession and the scope of rights
  4. The patent flood

Besson and Meurer also don't think other patent reforms, such as attempting to improve the quality of patent examinations an re-examinations, will work well unless the problems with notice are addressed.

Moreover, we think that attempts to improve patent quality, including review procedures involving third parties, will not be very effective unless there are broader improvements in patent notice. This is because patent examination depends on clear, predictable patent boundaries.

Along with pointing out where they think flaws in the patent system exist, Besson and Meurer also present some suggestions for improved performance of patent notice as. Two of those are:

  • Make patent claims transparent. We recommend changes in the way patent claims are defined, published, recorded in the application process, and used for subsequent determinations so that innovators have clear, accessible, and predictable information on patent boundaries. This includes strong limits on patent “continuations,” a procedure used to keep patent claims hidden from the public for extended periods. We also consider a new role for the Patent Office where, for a fee, innovators can obtain opinion letters on whether their technology infringes a patent.
  • Make claims clear and unambiguous by enforcing strong limits against vague or overly abstract claims. This includes a robust “indefiniteness” standard that invalidates patent claims that can be plausibly interpreted in multiple, fundamentally different ways. Also, we recommend reforms to limit overly abstract patents in software and other technologies. At the very least, patent law should prevent software patents from claiming technologies far beyond what was actually disclosed as the patented invention. If this proves inadequate, then we suggest subject-matter tests to limit the range of software inventions that can be patented, tests similar to those used during the 1970s and 1980s.

Combining the ideas of using better prediction of which patents are more likely to be involved in litigation (thereby deserving more scrutiny) with the idea of improving the notice function of patents should reduce uncertainty in current practices. When almost everyone resorts to a form of rational ignorance to deal with the enormity of a problem, I think it's time to consider ways to help shrink the problem down to a more manageable size.


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