Only one tenth of 1% of patent suits are litigated, the plan will have no effect

The simplest facts are sometimes the most difficult to comprehend. Patent suits are not as pervasive as they are portrayed in the media or by defendants. Remarkably few are filed relative to the number of patents that are active.

The necessity to litigate patent disputes to get the attention of potential infringers and hold a meaningful licensing discussion has likely increased the total number of suits filed. If it has, it has not had much of an impact on the net total. This suggests that many patent holders who should be suing are not.

Factoring out some 40% of suits that are attributed to volume filers, the work of primarily three NPEs, the figures are even more dramatic. Patent litigation is not the out-of-control, innovation-eating epidemic perpetuated by bad actors we have been led to believe.

As technology provides more opportunities to innovate and invent, it is no surprise that patent grants have grown. With the number of active U.S. patents increasing, the number of patent suits brought annually in U.S. district courts, including those brought by volume-filers, has been flat since 2017 and down since the introduction of the Patent Trial and Appeal Board (PTAB) in 2012. Despite the increased number of U.S. grants, patent suits are an increasingly smaller fraction of active patents.

Many potential tech licensees today will consider taking a license only if forced to in response to litigation. Plaintiffs must be prepared to wait as many as five years for a resolution and invest anywhere from a few million dollars to more than $10 million.

On average, 3,800 patent suits are filed each year. The number tried is only about 200, or about 5% of annual filings. As many as 97% of patent suits settle. Unfortunately, I am told, a potential licensor today must sue first to show it is serious. If that were not the case, there would likely be even fewer suits.

Given the incredible number of active patents, the question is not “why are there so many suits?” but “why are there so few?”

Four Million and Counting

There are approximately 3,340,000 active U.S. patents based on 2020 figures. In 2021, the USPTO granted a total of 327,798 utility patents; 325,445 were issued in 2022, bringing the estimated current total of active patents in the range of 4 million.

The average number of filed suits each year since 2017 is about 3,800. The number of those litigated to those in force is 0.00113772, or about one-tenth of 1%. Of the suits filed, annually, approximately 200 are tried, or 0.00005988% of active patents. That’s 6/1000 of active patents based on 2020 figures. Excluding so-called volume plaintiffs (see line graph below), of which three NPEs are responsible for most of the activity, patent suits are running at only about 2,300 per year since 2017, or about 1,500 (39%) less than the suit total. The trend is down from 10-year suit highs in 2013 and 2015 and flat since 2018, at a little over 2,200.