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Wednesday, October 10, 2007

A Look at the Fortune 100 and Patent Litigation, Part 1 of 2

Fortune Magazine publishes its list of the top 100 companies in America by revenue - the "Fortune 100." I wondered about how much those companies have been sued for patent litigation, and whether some sectors of the Fortune 100 got hit harder than others. Today and tomorrow I present my findings.

First, like everything else, I took data and applied some level of subjectivity to it. Second, I don't know all of the subsidiaries of all of these companies - my investigation may have missed some. Third, I had to choose an arbitrary time period. I chose from January 1, 2006 until September 30, 2007. 21 months. Fourth, even though Fortune has its own industry sectors, it was too fragmented to me. I combined some sectors, renamed others, and came up with my own groupings. Fifth, I only counted cases where these companies were defendants. Some (cough, cough, Johnson & Johnson) filed many many more cases as plaintiffs than as defendants.

Note that the Fortune 100 can be broken into 14 sectors. In the 21 months I studied, the Fortune 100 companies were sued 430 times for patent infringement - over 20 times per month. Here is how that breaks down by sector:

Aerospace/Defense: 7 companies, 10 lawsuits
Automotive: 4 companies, 21 lawsuits
Chemicals/Food Processing: 9 companies, 7 lawsuits
Energy: 8 companies, 7 lawsuits
Entertainment: 2 companies, 5 lawsuits
Equipment/Machinery/Metals: 3 companies, 3 lawsuits
Financial/Banking/Securities: 13 companies, 16 lawsuits
Grocery/Drugstore: 5 companies, 19 lawsuits
Health Care: 9 companies, 13 lawsuits
High Tech/Telecom: 13 companies, 192 lawsuits
Insurance: 12 companies, 12 lawsuits
Pharma/Consumer: 4 companies, 28 lawsuits
Retail: 9 companies, 87 lawsuits
Transportation/Freight: 2 companies, 10 lawsuits

The High Tech/Telecom and Retail companies account for less than a quarter of the Fortune 100, yet account for roughly two-thirds of all patent litigation.

Now, let's look a bit closer at what kinds of lawsuits these were. Overall, out of the 430 patent cases filed against Fortune 100 companies, 138 were filed by competitors (32.1%), 54 were filed by Universities, individual inventors, or research organizations ("U/II/R") (12.6%), and 238 were filed by non-practicing entities, which I will call patent trolls for the sake of this study (55.3%).

But how did it break down by industry?

Pharma/Consumer: 28 lawsuits, 24 competitor, 4 U/II/R, 0 trolls (0%)
Chemicals/Food: 7 lawsuits: 6 competitor, 1 U/II/R, 0 trolls (0%)
Aerospace/Defense: 10 lawsuits: 7 competitor, 1 U/II/R, 2 trolls (20%)
Retail: 87 lawsuits: 44 competitors, 17 U/I/RR, 26 trolls (29.9%)
Automotive: 21 lawsuits: 4 competitor, 6 U/II/R, 11 trolls (52.4%)
Grocery/Drugstore: 19 lawsuits: 9 competitor, 10 trolls (52.6%)
Health Care: 13 lawsuits, 5 competitors, 8 trolls (61.5%)
Equipment/Machinery/Metals: 3 lawsuits: 1 competitor, 0 U/II/R, 2 trolls (66.7%)
High Tech/Telecom: 192 lawsuits, 35 competitors, 24 U/II/R, 133 trolls (69.2%)
Energy: 7 lawsuits: 1 competitor, 1 U/II/R, 5 trolls (71.4%)
Insurance: 12 lawsuits: 2 competitors, 10 trolls (83.3%)
Entertainment: 5 lawsuits: 0 competitor, 0 U/II/R, 5 trolls (100%)
Transportation/Freight: 10 lawsuit, 10 trolls (100%)
Financial/Banking/Securities: 16 lawsuits, 16 trolls (100%)

Now does anybody wonder why Pharma and the Chemical companies are on one side of the patent reform debate, with High Tech, Insurance and Financial on the other? The two groups are seeing completely different patent litigation. The Pharma and Chemical companies are seeing lawsuits by their competitors, at the rate of about 1 per company every 3 months. High Tech, on the other hand, is seeing primarily patent trolls, and at a much faster rate. The High Tech industry is seeing far more patent litigation, too.

Note that many of the "competitors" in the retail industry were small companies, selling the new and improved stapler, or something of that ilk. I listed those companies as competitors despite the fact that in many cases, the damages being sought far outweighed what these companies are making from selling their products.

Tomorrow, in part 2 of this 2-part series, I'll look at where these lawsuits are happening. Meanwhile, in case anyone is interested, here are the companies that made each of my reformated Fortune 100 sectors:

Aerospace/Defense: Boeing, United Technology, Lockheed, Honeywell, Northrup Grumman, General Dynamics, Raytheon

Automotive: GM, Ford, Johnson Controls, Delphi

Chemicals/Food: Altria Group, Dow, ADM, Pepsi, DuPont, Tyson Foods, International Paper, Coca-Cola, 3M

Energy: Exxon/Mobil, Chevron, ConocoPhillips, Valero, Marathon Oil, Sunoco, Hess, Haliburton

Equipment/Machinery/Metals: Caterpillar, Alcoa, Deere

Financial/Banking/Securities: Citigroup, Bank of America, J.P. Morgan Chase, Morgan Stanley, Merrill Lynch, Goldman Sachs, Wells Fargo, Wachovia, Lehman Brothers, Freddie Mac, American Express, Washington Mutual, Countrywide Financial

Grocery/Drugstore: Kroger, Walgreen, CVS/Caremark, Safeway, Sysco

Health Care: McKesson, Cardinal Health, UnitedHealth Group, Amerisource Bergen, WellPoint, Medco Health Solns, CaremarkRx, Aetna, HCA

High Tech/Telecom: General Electric, Verizon, HP, IBM, AT&T, Dell, Time Warner, Microsoft, Motorola, SprintNextel, Intel, Cisco, Comcast

Insurance: AIG, Berkshire Hathaway, State Farm, MetLife, Allstate, Prudential Financial, New York Life, TIAA-CREF, Hartford Financial, Travelers Cos., Mass Mutual Life, Liberty Mutual

Pharma/Consumer: Procter & Gamble, Johnson & Johnson, Pfizer, Merck

Retail: Wal-Mart, Home Depot, Costco, Target, Sears, Lowe's, Ingram Micro, Best Buy, Federated Dept. Stores

Transportation/Freight: UPS, FedEx


zoobab said...

where did you get the data?

Troll Tracker said...

My own research, using tools like Google, ECF/PACER, and Microsoft Excel. Or, as some have called it, mindless rote data entry. Which it is not.