Patent News

Oct. 28, 2014

Bloomberg: Patent Suits Drop as Rule Changes Favor Tech Companies, by Susan Decker

This article originally appeared in Bloomberg on October 28, 2014.

Technology companies have been the target of fewer patent lawsuits since a U.S. Supreme Court ruling and new government polices made it less profitable for licensing firms that create no products to file questionable cases against those that do.

The number of suits filed in the third quarter of the year dropped by 23 percent from the second quarter, according to a study by industry coalition Unified Patents. About 88 percent of the decline is because of fewer cases by companies that make more than half their revenue from patent licensing and who sue companies in the computer, electronics and software fields.

That business model of making money from royalty payments and litigation instead of manufacturing products had been lucrative until the Supreme Court in June limited what types of software is eligible for legal protection. Combined with changes in how the U.S. Patent and Trademark Office reviews disputes and pending legislation in Congress, licensing firms and their lawyers are finding fewer opportunities to sue.

“They’re not going to be very incentivized to do it if they think the chances of recovery are low,” said Shawn Ambwani, chief operating officer for Los Altos, California-based Unified Patents. “Software patents are a large percentage of litigation in high tech and there’s a lot of uncertainty as to whether the patents are valid or not.”

The Unified Patents study showed that 1,537 patent suits were filed in the third quarter, 343 fewer than the second quarter. By comparing the types of suits, the group said 301 could be attributed to declining suits by licensing firms, also known as non-practicing entities, or NPEs.

Unified Patents is a group where companies pool resources to invalidate patents asserted against them.