I would like to end the empirical part of this dissertation with a dialogue on the characteristics patents involved in infringement and invalidity type cases. The following discussion sets out to answer Research Question 6: Are there differences between patents in infringement and invalidity cases?
Results from Publication five have found that infringement type suits are much more likely to settle than invalidity types (at least for the chemical and pharmaceutical industries). This is mainly because it is easy to identify if a chemical or pharmaceutical composition comprises (or infringes) the subject matter of the patent in question. Both litigants therefore agree on the expected outcome of the case. This, in turn, leads to higher chances of settlement.
Pure invalidity cases are few because third parties usually do not have enough incentives to attack a patent unless there is a direct conflict. When faced with an infringement claim, a defendant typically has two counterarguments, in the form of non-infringement and counter-invalidity. Most invalidity challenges are an outcome of a counterclaim to an infringement suit. Ford (2013) presents theoretical arguments that favor non-infringement as a counterclaim over counter-invalidity. To prove invalidity, the defendant will have to prepare clear and concise evidence that might include a prior art search. Moreover, the preparation of the counter-invalidity argument may have to be done within a time limit as the case remains pending. In an infringement suit, the defendant will typically have better access to information about their allegedly infringing product, while the patent holder (plaintiff) will have better access to information regarding the underlying technology and prior art (Meurer, 1989). Another reason why defendants may not choose counter-invalidity is that a successful invalidity challenge renders the patent right as a public good (Farrell and Merges, 2004). This means that any competitor can use the technology without infringement or royalties, thus reducing the benefit of privileged players (patent holders and licensees) in a market economy. This again reduces the incentive to invalidate a patent and encourages mutual settlement of a dispute. Table 15 below shows the breakup in our sample.
Table 15 Total cases and case type (Source: Publication 5) Total cases Only infringement
cases
Only invalidity cases
Both infringement and invalidity cases
893 549 109 235
I ran the regressions within the sample of litigated patents in order to compare infringement versus invalidity suits. The regression output (Table 16) shows that invalidity patents are significantly weaker than patents involved in infringement suits.
Moreover, there are certain differences in the type of references they make. Patents involved in invalidity suits lack A citations (backward references that are non-blocking in nature) and make more X and Y citations (references that are blocking in nature). Patents involved in invalidity suits are also seen to be belonging to larger divisional chains. No differences are seen in terms of procedural variables.
Table 16 Logistic regression - Invalidity versus Infringement cases
(1) (2) (3) (4)
VARIABLES Invalidity Invalidity Infringement Infringement
Forward citations -0.0545*** Number of claims -0.0077
(0.00670) Size of divisional chain 0.161***
(0.0411)
7 Conclusion
This dissertation is an attempt to advance the field of patent statistics. We live in a pro-patent era as firms make substantial efforts in the management of their technology portfolios. Patent databases have been improving with time by becoming bigger and faster. Intelligence can be drawn from these databases even before a patent is granted by the patent office. Patent departments of firms are monitoring their competitors’ patents and so are the investors. This is relevant in a world where product life cycles are shortening and diffusion of information is seamless. The patent system itself is under pressure as the numbers of applications grow. New technological fields like software and business methods are slowly opening up for patenting that requires the patent system to evolve.
Consequently, this dissertation first explored patent value indicators throughout the life cycle of a patent application. This was done by means of interviews with experts who were part of the innovation life cycle. Publication 1 presents the views of these patent value indicators along with the corresponding market-based measures available during different stages of technology commercialization. Publication 5 presents hypotheses on certain procedural instruments used by applicants and their rivals. Latent aspects, or the thought processes, behind actions and reactions of parties are uncovered in order to build hypotheses.
The second task was to look at firm competition in the form of technological overlap.
Studying technological overlap is the key to understanding the friction between parties as the boundaries of a patent right are often fuzzy. Boundaries and scope of a patent are determined by examiners who assess each claim based on prior art, in light of the patentability criteria established by the patent system. They build a list of prior art and assign relevance to them based on the effect they have on the boundaries and scope of a patent. This means that all citations are not similar. Citations of the blocking type are used to study technological overlap between top wind power firms. Measures are introduced that can show blocking power and vulnerability of patent portfolios at the firm level and industry level.
Patent disputes are usually a result of technological overlap in shared markets. The third aim was to delve into the dynamics of patent disputes in Europe. Using patent information in different stages of the patent life cycle, drivers that lead to disputes and their settlement are unearthed. The importance of uncertainty during the patent life cycle is uncovered. It is the presence of uncertainty that influences many of the choices made by applicants and third parties. A typical patent that ends up in court is a relatively small and focussed patent, but exists within a chain of divisional applications. Uncertainty over patent validity is one of the biggest impediments towards dispute settlement.
7.1
Managerial implicationsMeasures of encroachment and hindrance introduced in this dissertation are useful for managers to assess their technological portfolios relative to their competitors. Use of citation categories can be extended to identifying potential infringement at individual patent level. A landscape analysis based on citation categories is also helpful in scouting for potential collaborators. Since skilled examiners assign categories to citations they are a fairly good resource to identify closely related patents. Relevance of citations deserves greater attention of researchers and practitioners alike. Most patent landscaping tools offering citation analysis do not separate citations according to type that leaves out important information potentially useful for practitioners.
By studying the impact of procedural indicators on litigation, this dissertation validates procedural indicators as a strong proxy for commercial patent value (as proxied by an incidence of litigation). In unreported comparisons, procedural indicators explained the incidence of litigation better than citation indicators based on regression model fit and R2 values. Stakeholders interested in commercial value of patent applications may look into the self-selection of important patents by patentees and their rivals through patent office actions. Since procedural indicators are strong predictors of disputes, results can contribute toward developing models for patent litigation insurance.
Research into competition and disputes can have some policy implications at the industry level and for the patent system. One of the objectives of patent offices should be to reduce the amount of uncertainty during patent pendency and beyond grant. We saw that uncertainty during pendency likely drove some of the actions and reactions of patentees and their rivals. In face of an uncertain commercial and technical scope of their inventions, applicants file multiple divisional applications to isolate the most important (perhaps litigious) part of their applications. This leads to patent office overload along with uncertainty for competitors who are kept guessing about the exact extent of claims that might be allowed. The EPO tried to address the issue of divisional applications by introducing a 2 year moratorium on filing divisional applications from the date of the first examination report. This was later rescinded in April 2014 due to apparent pressure and lobbying from patent applicants and their representatives. In praise for the EPO opposition system, we saw that its outcome significantly reduces uncertainty, which in turn leads to higher likelihood of settlement. Courts usually do not overturn a decision of the opposition division. Parties are aware of this and usually settle among themselves as there is no risk of divergent expectations. In this regard, it is possible that more certainty can be introduced by pre-grant measures rather than post-grant opposition. The answer to reduced uncertainty could be found in encouraging amendments and third party observations. Early decision on acceptance or refusal for straightforward cases can help reduce the number of pending applications. The EPO is indeed looking at achieving
pre-grant certainty for all stakeholders as they have ambition to produce search reports with opinion within 6 months8.