Jack Ellis

Recent research from IP analytics firm Darts-ip has identified China and Germany as the two major patent jurisdictions in which NPEs enjoy the most success in infringement proceedings. However, the relatively low volume of cases being filed by NPEs in China suggests that significant monetisation activity is still some way off – though there are already signs that it is picking up.

The Darts-ip study looks at lawsuits filed by NPEs in several major jurisdictions outside of the United States from 2011 to 2016. The researchers pinpointed just over 250 non-US NPE cases over that period, compared to more than 12,000 US cases. While the number may seem “trivial”, as Darts-ip concedes, it is the trend over the five-year timeframe that is telling.

In 2012, the US courts experienced a 170% increase in NPE-filed cases, while the selected foreign jurisdictions saw a 27% drop. Over the following four years, however, non-US cases grew steadily, while US case volume gradually decreased. In 2016, the number of non-US NPE cases grew by 87%; while US cases decreased by 38%.

Overall, almost three-quarters of the analysed non-US cases occurred in either 2015 or 2016, indicating the rapid growth of non-US NPE litigation in the past couple of years. This dovetails with the available evidence from sources such as Lex Machina, RPX and Unified Patents suggesting that NPE-instigated litigation is tumbling in the United States.

In terms of success, NPE plaintiffs appear to fare best in China, where the patentee win rate is about 71%. This even beats Germany’s 64% win rate for patentees, and compares quite favourably to the United States’ 53%-54%.

However, this does not mean a simple conclusion can be drawn to the effect that China is now the world’s premier dispute resolution venue for NPEs. China’s high plaintiff win rate is based on the very small number of NPE cases that are known to have been filed in the country over the past five years.

When it comes to which foreign jurisdictions that have hosted the most NPE patent cases, Germany is the out-and-out leader. Between 2011 and 2016, Darts-ip identifies a total of 153 suits filed by NPEs in German courts – close to half of all non-US NPE cases over the studied period.

The second most popular venue among NPEs was France, with 21 cases; followed by Japan, with 18 (Japan’s positioning may come as something of a surprise considering the country’s anti-patentee reputation, which was reinforced recently by new statistics suggesting that Japanese courts drop almost three-quarters of the patent complaints they receive).

The full Darts-ip list of non-US NPE cases by jurisdiction is as follows:

  • Germany – 153
  • France – 21
  • Japan – 18
  • United Kingdom – 11
  • European Patent Office (EPO) – 8
  • China – 6
  • Australia – 5
  • India – 4
  • Others – 14

It should be pointed out that these numbers do not necessarily give the full picture when it comes to patent litigation that has taken place in each of these jurisdictions during the analysis period, as the researchers themselves make clear when they state that the “data… should be considered a proxy as the completeness and availability of information varies by each country”. In many civil law countries, for example, not all cases are reported - so it may well be that many more actions have taken place than we know about.

And, of course, the statistics do not tell us anything about situations in which transactions have been concluded prior to a suit being launched. It stands to reason that if a minimum of 153 NPE actions have been filed in Germany, for instance, there are going to have been a number of occasions when it was not deemed necessary to go that far because talks progressed to a satisfactory end. It is at least arguable that the more pro-plaintiff a jurisdiction - and the more likely its courts are to grant winning plaintiffs an injunction - the more incentive there is for those approached as prospective licensees to sit down to get a deal done.

Another shortcoming of the Darts-ip report is that it does not explicitly define what types of entities were considered as NPEs for the purposes of the analysis, saying only that it has gone through a “rigorous process of collecting organisations that meet the characteristics of an NPE” (it is also unclear whether or not the figures for the EPO, which relate to its Opposition Division, refer to NPEs that successfully defended their rights against third-party opposition, or something else).

All in all, though, the evidence presented in the report indicates that it is too early to say that China has already become a key jurisdiction for NPE patent assertion. Nevertheless, the signals coming out of the country at the moment suggest that NPEs are seeing more and more opportunity to monetise patents in the country. Infringement damages remain pitifully low, but perhaps the possibility of an injunction covering a market of nearly 1.4 billion people more than makes up for that.

Some North American NPEs have already taken the plunge; late last year, WiLAN filed suit against Sony in Nanjing, while last month Longhorn IP felt confident enough in China’s licensing market to purchase a portfolio consisting of China-only patent families. The country’s courts are also showing a clear interest in taking on standard-related disputes. It is still early days for NPEs in China; but as more and more of them look to the country to generate licence revenue and are inevitably drawn into litigation, it will be worth keeping an eye on those win rates.

Additional reporting by Joff Wild