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Friday, December 21, 2007

Patent Litigation Run Amok

Back in early October I looked at the Fortune 100 and looked at who got sued the most (Part 1, Part 1a, Part 2). To nobody's surprise, the companies in the high tech/telecom industry have been the most sued, especially by non-practicing entities. Well, the last three months haven't changed any of that. With patents valued at an all-time high and the threat of patent reform around the corner, the onslaught of cases -- especially in plaintiff-friendly jurisdictions like the Eastern District of Texas -- is unbelievable.

I decided to take my top 20 list from the end of September, and add the last three months' cases. Below is my revised list. For the hell of it, I added in Apple and Google. I actually did three lists: the number of patent cases filed against these companies since October 1, the total in 2006-2007, and the number of patent lawsuits by non-practicing entities in 2006-2007.

(Note that, of course, this does not include cases filed December 19-31, even though I did see a huge multi-defendant case today involving Google. Also, this does not include cases where companies' customers were sued - I have no idea who's indemnifying whom).

Before I give the list, my conclusions: patent litigation is out of control. Out of the top third of the companies in the Fortune 100 sued for patent infringement over the last two years (plus adding in Apple and Google), these 35 companies were sued 500 times in that two-year period! That's an average of over 14 times per company.

Out of those 500 lawsuits, you would expect roughly 60 in the last 3 months. But, in fact, there were almost double that number of lawsuits in the last 3 months aimed at those top 35 companies. Moreover, in the 21-month period from January 2006 through September 2007, cases filed by entites that don't make any products accounted for around 50% of the cases filed against those top 35 entities, which comprised companies in the High Tech, Financial, Retail, Automotive, Health Care, and Bio/Pharma sectors. Sure, some sectors (High Tech, Financial) had more NPEs than others, but the overall percentage was 50%.

But looking at the last 3 months, the percentage of NPE cases among these 35 leading American companies has shot from 50% up to nearly 70%. And if you look at the High Tech/Telecom and Financial sectors only over the last 3 months, a full 80% (63 out of 78) were cases brought by these non-practicing entities. (And note, I did not include individual inventors or universities in the "non-practicing entity" category, or else the numbers would have been even more shockingly higher)

(And what about Microsoft, being sued almost twice per month over the last two years? Every month. For two years!)

Without further adieu, here are the lists:

Defendants Sued The Most, October-December 2007 (through December 18)

1. Microsoft (12)
2t. Apple (7)
2t. HP (7)
4t. Cisco (6)
4t. Google (6)
4t. Wal-Mart (6)
7t. AT&T (5)
7t. Dell (5)
7t. Motorola (5)
10t. Intel (4)
10t. Johnson & Johnson (4)
10t. Sprint Nextel (4)
10t. Target (4)

Defendants Sued The Most, 2006-2007 (through December 18)

1. Microsoft (43)
2. Verizon (29)
3t. Target (28)
3t. Dell (28)
5t. Wal-Mart (24)
5t. HP (24)
7. Apple (23)
8t. Motorola (20)
8t. Sprint Nextel (20)
10. AT&T (19)
11. Johnson & Johnson (18)
12t. GE (16)
12t. Google (16)
14t. General Motors (15)
14t. IBM (15)
16. Cisco (14)
17. Sears (12)
18t. Best Buy (11)
18t. Time Warner (11)
20t. Comcast (10)
20t. Lowe's (10)
20t. Honeywell (10)
23. Walgreen (9)
24. Intel (8)

7 patent lawsuits
Bank of America
Procter & Gamble

6 patent lawsuits
Home Depot

5 patent lawsuits
Federated Department Stores

Defendants Sued The Most By Non-Practicing Entities, 2006-2007

1. Microsoft (23)
2. Verizon (22)
3. Sprint/Nextel (19)
4. Dell (18)
5. Motorola (17)
6. AT&T (16)
7t. Apple (15)
7t. HP (15)
9t. Cisco (13)
9t. Google (13)
11. Time Warner (11)
12. General Motors (10)
13t. Comcast (9)
13t. IBM (9)
15t. Bank of America (7)
15t. FedEx (7)
15t. Wal-Mart (7)
18. Best Buy (6)
19t. General Electric (5)
19t. Intel (5)


Anonymous said...

It has been said before, but these stats you've compiled show why there is a huge rift in the patent reform debate - the bio/pharma companies (who self-report as needing strong patents for their antiquated blockbuster business model) aren't being eviscerated by trolls like the high-tech/software companies. Getting rid of software and business method patents would cut down on a lot of this activity, but I think the reform bill is all-in-all a great idea. Hopefully the tech lobby can push it through in 2008.

Anonymous said...

The problem is that there are too many low quality patent applications filed in the electronics and software industries. Fewer applications would resolve this issue quickly.

Anonymous said...

"The problem is that there are too many low quality patent applications filed in the electronics and software industries."

Yep, you got it right, dude

And who is filing those "low quality patent applications" ?

Certainly not mom-and-pop workshops

Hint: Look at IBM, MShit, Intel, Cisco, HP, Apple etc. etc. etc.

I recently read in some article that the most prolific patent "inventor" in 2006 or 2005 was some guy working for IBM filing on average 1 patent app (with co-inventors) every 6(!) days for a few years in a row ...
makes you wonder if this guys some kind of new Einstein ...
Nope, just an IBM "reseracher: some kind of division menager flooding poor PTO folks with garbage patent filings, as told by his corporate masters and in-house legal councel

Stop polluting US patent system with garbage !!!

Leopold Bloom said...

I'm not so sure that your stats prove that things are out of control. For one thing, some of these defendants are truly huge. Yes, Microsoft gets sued a lot, but its business is quite comprehensive. If it were possible to scale these numbers by business size, you might see some surprising trends.

I'm more concerned about the less visible impact of these "out of control" lawsuits on smaller, perhaps more innovative companies. Each time a Sprint, Verizon, Motorola, etc., gets sued, I bet some supplier is roped in because of indemnification clauses. Even if these companies never have to actually step up and defend, the associated costs can be enormous.

Anonymous said...

I wish you had put the names of the plaintiffs under each of the defendants.