Patent thickets turn the case – companies will weaponize thickets to block competitors and collapse innovation

Could patent density in the United States explain the hesitancy of companies to center their R&D in the states? The chance of litigation mounts when the market is saturated with patents—known as a patent thicket.160 This is because, as a primary concern, a large volume of patents in an industry increases the odds that an inventor may accidentally infringe one of them.161 For example, approximately 250,000 active patents are used in the modern smartphone, ignoring the dormant patents that can also form the basis of an infringement lawsuit.162 Even if an inventor detects each blocking patent, the existence of a thicket raises the costs of innovation by forcing the inventor to design around the anticommons.163

Patent thickets also create troublesome incentives to wage meritless litigation.164 Some bad faith litigants have overwhelmed practicing entities by acquiring thousands of patents regardless of the patents’ quality. This type of action allows an entity to essentially weaponize their own patent thickets:

Their scale often enables them to license without litigation because defendants are reluctant to challenge an entire portfolio of patents. The patent aggregation model depends on patent intensity in an industry; it works because the patent aggregator has so many patents that read on a particular target that a challenge to the validity of the patents makes little sense.165

And because patent infringement is a strict liability tort, the question of whether an inventor accused of infringement was aware of the preexisting patent, or made a good faith effort to find it, has no exculpatory value.166 As a result, patent thickets can ex ante and ex post raise the costs of innovation, thereby discouraging R&D investment.167

The countries with the most patents in force are the most likely to be burdened by patent thickets. Historically, the United States has issued the most patents, which is attributable to the size of the American market; since both domestic and foreign inventors sell their technologies in the United States, inventors have sought to guard their market share by obtaining U.S. patents. Indeed, there are no requirements—in the United States, China, Japan, Europe, Korea, and most other nations—that a patent applicant reside in the country where the applicant seeks protection. As one may imagine, firms have not been bashful in applying for patents in their non-resident jurisdictions.168 Despite the alarm expressed in some corners that the United States no longer receives the most patent applications, there are substantially more patents currently in force in the United States than anywhere else, sitting at a little over 2.5 million.169

As a result, firms intending to innovate in the United States face the largest existing base of patents blocking the item’s potential use. In many situations, the patents in force create patent thickets that make entry into those markets risky and costly. If a company primarily intends to sell its invention abroad, developing technology where relatively fewer patents are in force makes sense. The next Part tests not only whether inventors prefer to innovate in countries that offer less costly and risky patent schemes, but also whether firms even care about foreign patent laws when making innovation decisions.