Risch on NPE Litigation; Buccafusco and Masur, Manta and Wagner on Criminal Sanctions

1.  Michael Risch has posted a paper on ssrn titled A Generation of Patent Litigation:  Outcomes and Patent Quality, San Diego L. Rev. (forthcoming).  Here is a link to the paper, and here is the abstract:

This study compares twenty-five years of litigation and patents of the ten most litigious NPEs (as of 2009) with a random group of cases and patents in the same yearly proportions. All cases involving every patent was gathered, allowing the life cycle of each asserted patent to be studied. The data includes litigation data, patent data, reexaminations, and other relevant data. This paper considers outcomes and patent quality. A future paper will examine innovation and markets.

Unsurprisingly, the data shows that the studied NPE patents were found invalid and noninfringed more often than the comparable nonNPEs. The policy takeaway is inconclusive because 97% of the cases did not involve an invalidated patent. Thus, one’s view of the data will depend on views of these untested cases; the paper presents data about settlements, consent judgments, defaults, and the like to aid interpretation.
More surprisingly, the analysis found the following: 1. NPE cases are of much shorter duration than nonNPE cases, even though they are transferred and consolidated more often. Even with transferred cases, NPE cases are shorter. 2. A patent’s likelihood of being invalidated has almost nothing to do with objectively observable patent metrics – including reexamination data. Instead, the odds of invalidation are driven by those cases that are more likely to have a challenge, like the number of defendants or number of patents in the case. Once variables that indicate challenges are considered, a party's status as NPE added no explanatory power. 3. One patent metric was statistically significant in predicting invalidation: backward citations, or the number of prior patents that a patent refers to. But the sign was surprising: the more citations in the patent, the more likely it was found invalid. This may mean that backward citations are another selection variable – patents citing many other patents may be more likely to be highly controversial and thus challenged. This finding implies, however, that “gold plating” patents may not be as beneficial as first thought. 

On the topic of damages, Professor Risch states (p.56) that "This data set provides more information than available before: that a number of cases ended in default judgments and consent judgments. The damages sought in many of these cases were quite small – as low as $7,500; this implies that the suits may not have even been to extract a settlement based on litigation costs."  Interesting.

Professor Risch also published a guest post on his research on the Patently-O Blog this past Tuesday.

2.  Christopher Buccafusco and Jonathan Masur have published Innovation and Incarceration:  An Economic Analysis of Criminal Intellectual Property Law in 87 Southern California Law Review 275 (2014).  Here is a link to the paper, and here is the abstract: 

The scope and enforcement of intellectual property (“IP”) laws are becoming salient, for the first time, to a wide cohort of U.S. and international communities. National and international legislation, including the Stop Online Piracy Act (“SOPA”), the PROTECT IP Act (“PIPA”), and the Anti-Counterfeiting Trade Agreement (“ACTA”), have generated protests online and in the streets by people who are concerned about the expansion of IP rights. Common to each of these proposals was an expansion of the use of criminal sanctions to deter IP violations. Many copyright owners and the associations that represent them support criminal enforcement of IP rights, including the use of imprisonment, to combat the threat of increased IP piracy on the internet and throughout a globalized economy. Others, including a heterogeneous coalition of scholars, activists, and internet-based companies like Google and Wikipedia, fear that using criminal sanctions to protect IP will expand already overgrown rights and chill valuable expressive and inventive behavior.

I'm a little surprised at the authors' statement at pp. 278-79 that "The economic case for criminal sanctions is usually treated as unassailable. . . .  We do not think that the case for criminal sanctions in IP as nearly as strong as many have treated it."  I for one have never thought there was much reason for criminalizing patent infringement, and in fact it is rarely prosecuted as a crime even in countries (unlike the U.S.) where that is a possibility.  (See my post here, introducing Sarah Burstein's guest post critiquing the recent U.K. law criminalizing the infringement of registered designs.)  But they may be right that few people have made this point before.  Anyway, I'm inclined to agree with the authors' conclusion that ". . . there is a limited and tentative case for the use of criminal liability, including imprisonment and alternative sanctions, for only some types of copyright infringement—and none at all for patent infringement."

3.  Relatedly, Irina Manta and Robert Wagner have just posted a paper on ssrn titled Intellectual Property Infringement as Vandalism.  Here's a link to the paper, and here is the abstract:

Defenders of strong intellectual property rights often maintain that intellectual property infringement is theft, and that the sanctions associated with it ought to be high. Others are skeptical of the property comparison and think that much lower sanctions are appropriate. We argue that a careful analysis demonstrates: 1) that intellectual property infringement can be analogized to a property crime, but 2) that the more analogous crime is vandalism or trespass rather than theft. This categorization takes the rhetorical punch out of the property comparison.

In addition to analyzing the natures of the various offenses, this Essay investigates the sanction regimes for different property violations and finds that not only are maximum statutory sanctions generally higher for intellectual property infringement than for vandalism and trespass, they are usually also higher than for theft. Bringing intellectual property infringement in line with property offenses, therefore, would actually surprisingly result in a lowering of sanctions.