Now that I've had time to read through Brian J. Love, Christian Helmers, Fabian Gaessler & Maximilian Ernicke's article Patent Assertion Entities in Europe, which I mentioned here on Monday and which will be a chapter in a forthcoming edited volume titled Patent Assertion Entities and Competition Policy (D. Daniel Sokol ed., Cambridge University Press, 2016), I can say that it's one of the more interesting papers I've read in a while. The authors have compiled a database of "all patent suits filed between 2000 and 2008" in Mannheim, Düsseldorf, and Munich, "as well as all invalidity challenges filed with the Bundespategericht" (collectively accounting for about 90% of all German patent litigation during this period). For the U.K., their database consists of all cases filed before the Patents Court from 2000-13 and all cases before the Patents County Court (now the Intellectual Property and Enterprise Court) from 2007-13, collectively accounting for over 90% of all U.K. cases. They hand-coded the data to determine if the patent owner was an NPE and if so what type (IP licensing company, university, start-up or failed start-up, etc). Principal findings:
* "NPEs and PAEs account for about 19 percent and 9 percent, respectively, of the patent suits in our database" (p.5).
* "[M]ore than half of all PAE actions filed in Germany and the U.K. during the period of our study were initiated by an accused infringer, not the patentee," either by way of revocation action (Germany) or a counterclaim for invalidity (U.K.) (p.9). Nevertheless, "despite their relative eagerness to initiate litigation, we also find that those accused of infringing in Germany and the U.K. are less likely than their U.S. counterparts to challenge the validity of patents asserted against them." This seems to me to be consistent with the authors' conclusions (see below) regarding the role of fee shifting. In the U.S., almost every accused infringer raises invalidity as a defense when sued for infringement, even though they may succeed only 40% of the time or so, because on balance it's probably worth it. In the U.K. and Germany, you raise invalidity when there is a sufficiently good chance of winning, because otherwise you risk being on the hook for the other side's fees.
* "[L]ess than 70% of NPE cases in [the] database ended in settlement" (p.11), a much lower rate than in the U.S. But "when cases did reach a decision on the merits, German and U.K. PAEs were reasonably successful in proving infringement." The PAE win rate in the U.S. is much lower (pp.11-12).
* "NPE suits—and really all patent suits—filed in Germany and the U.K. have relatively little at stake by U.S. standards," with "the overwhelming majority estimated their case value below the equivalent of $1 million" (pp. 12-13).
* Finally, the authors comb through various possible explanations for the lower rate of PAE activity in Europe, including stricter standards for software patents (not very convincing, in their view); a lower bar for proving invalidity (also not very convincing); higher enforcement costs due to fragmented jurisdictions (somewhat relevant); limits on the use of contingency fee agreements (ditto); and lower damages (ditto, though offset by the greater likelihood that the prevailing patent owner will get an injunction). They conclude that mandatory fee-shifting is probably the most important factor, stating that "the high rate of infringer-filed actions and low rate settlement tend to suggest that fee-shifting acts to deter patent monetization by changing the behavior of both plaintiffs and defendants" (p.18).
Read the paper and see what you think--the analysis seems fairly persuasive to me.