Analysis Group Supports in the Study of the Economic Impact of Patent Assertion Entities Litigation

July 07, 2014

An Analysis Group team led by Managing Principal Lau Christensen and Manager Greg Rafert assisted academic affiliate and MIT Sloan School of Management professor Catherine Tucker in a study of the economic impact of patent assertion entities (PAEs) on entrepreneurial activity. The study, which was funded by the Computer and Communications Industry Association, found that venture capital investment would likely have been at least $8.1 billion higher over the course of a five-year period but for litigation brought by frequent patent litigators, a proxy for PAE litigation.

The study also estimated that the direct costs of the legal fees and settlement costs associated with PAE activities were between $3.8 billion and $18.9 billion in 2012 alone, and stressed that this likely underestimated the total costs of such litigation. Because the study focused entirely on the effect of patent litigation on innovation that reaches U.S. courts, its findings do not account for the numerous cases in which demand letters of threatened patent litigation resulted in settlements covered by nondisclosure agreements, suggesting that the true direct and indirect costs of PAEs may be much larger than existing estimates.

The study offered recommendations for policymakers to address the troubling impact of PAE litigation, including:

  • The U.S. Patent and Trademark Office should consider adopting some of the more stringent patent review approaches employed by the Japanese Patent Office and the European Patent Office.
  • The allocation of costs in the patent litigation system should be changed to address the potentially negative effects of litigation on innovation by reallocating more of the risks and costs of litigation away from defendants to plaintiffs.

Read the report

Read the CCIA press release