Wednesday, May 16, 2018
Mark A. Lemley, Stanford Law School and Timothy Simcoe, Boston University - Questrom School of Business; NBER ask How Essential are Standard-Essential Patents?
ABSTRACT: Courts, commentators, and companies have devoted enormous time and energy to the problem of standard-essential patents (SEPs) – patents that cover (or at least are claimed to cover) industry standards. With billions of dollars at stake, there has been a great deal of litigation and even more lobbying and writing about problems such as how if at all standard-setting organizations (SSOs) should limit enforcement of patent rights, whether a promise to license SEPs on fair, reasonable, and non-discriminatory (FRAND) terms is enforceable in court or in arbitration, what a FRAND royalty is, and whether a refusal to comply with a FRAND commitment violates the antitrust laws.
In this study, we explore what happens when SEPs go to court. What we found surprised us. We expected that proving infringement of a SEP would be easy – they are, after all, supposed to be essential – but that the breadth of the patents might make them invalid. In fact, the evidence shows the opposite. SEPs are more likely to be held valid than a matched set of litigated non-SEP patents, but they are significantly less likely to be infringed. Standard-essential patents, then, don’t seem to be all that essential, at least when they make it to court.
At least part of the explanation for this surprising result comes from another one of our findings: many SEPs asserted in court are asserted by non-practicing entities (NPEs), also known as patent trolls. NPEs do much worse in court, even when they assert SEPs. And the fact that they have acquired a large number of the SEPs enforced in court may bring the overall win rate down significantly.
Our results have interesting implications for the policy debates over both SEPs and NPEs. Standard-essential patents may not be so essential after all, perhaps because companies tend to err on the size of over-disclosing patents that may or may not be essential. The failure of NPEs to win cases even with what seem like they should be a strong set of patents raises interesting questions about the role of NPEs in patent law and the policy efforts to curb patent litigation abuse.