Proxy Patent Litigation
In the last decade or so, patent litigation in the United States has undergone enormous changes. Perhaps most profound is the rise in enforcement of patents held by people and entities who don’t make any products or otherwise participate in the marketplace. Some call these patent holders ‘non-practicing entities’ (NPEs), while others use the term ‘patent assertion entities’ (PAEs), and some pejoratively refer to some or all of these patent holders as ‘trolls.’ These outsiders come in many different flavors: individual inventors, universities, failed startups, and holding companies that own a patent or family of patents.
This post is about a particular type of outsider that is relatively new: the mass patent aggregator. The mass patent aggregator owns or controls a significant number of patents – hundreds or even thousands – which it acquired from different sources, including from companies that manufacture products. These mass aggregators often seek to license their portfolios to large practicing entities for significant amounts of money, sometimes using infringement litigation as the vehicle. Aggregators often focus their portfolios on certain industries such as consumer electronics.
Mass aggregator patent litigation and ordinary patent litigation appear to differ in one important aspect. Mass aggregators sue on a few patents in their portfolio, which serve as proxies for the quality of their entire portfolio. The parties use the court’s views of the litigated patents to determine how to value the full patent portfolio. By litigating only a small subset of their portfolio, the aggregator and potential licensee avoid the expense of litigating all of the patents. But the court adjudicates the dispute completely oblivious to the proxy aspect of the litigation. Instead, the court handles it like every other case – by analyzing the merits of the various claims and defenses.
If the court understood the underlying dispute was litigation-by-proxy, would it (or could it) proceed any differently? I will discuss my thoughts on this question in another blog post. For now, I have a question: does proxy litigation occur in other areas of law?