By: Roslyn Layton (ProMarket)
America’s vital system of patent protections, a crucial catalyst for economic vitality, is currently facing significant challenges. Patents incentivize individuals and companies to innovate by granting them exclusive rights over their inventions for a limited time. However, this system is being exploited by patent litigants who target innovative firms utilizing proprietary technologies as inputs, forcing them into settlement payments and disrupting research, development, and product sales until the legal matters are resolved.
These litigants, often referred to as “patent trolls,” collaborate with hedge-funded patent assertion entities (PAEs) or non-practicing entities that do not engage in innovation or manufacturing but instead amass patents to create portfolios for aggressive legal action. Employing data mining techniques, they identify patents deployed by third-party suppliers within complex supply chains, ultimately suing the final manufacturers for infringement. Leveraging Section 337 investigations at the United States International Trade Commission (ITC), they pressure targeted firms into hefty settlement payments. While the ITC was established in 1916 to combat counterfeit imports, it was never intended to handle patent litigation, despite the reality of today’s global supply chains.
The direct costs of litigation initiated by non-practicing entities (NPEs) were estimated to amount to $29 billion annually in out-of-pocket expenses for defendant firms in 2012, with overall costs depleting approximately $60 billion in firm value each year. Since then, the number and proportion of NPE lawsuits have surged, with cases now totaling 400 per year, quadrupling over the past decade. NPEs accounted for 63% of all patent litigation cases in 2022.
These considerable costs are shouldered by American inventors and innovative companies, constraining their capacity to invest in research, expand their workforce, and establish new facilities. American consumers are adversely affected by reduced availability of innovative products and inflated prices.
Thankfully, the bipartisan “Advancing America’s Interest Act” (AAIA), reintroduced and updated in the 118th Congress, aims to curb patent abuse by modernizing the ITC and restoring its original mission. The proposed legislation includes provisions mandating that litigated patents are utilized in actual U.S. products (rather than being solely part of a patent portfolio) and implements public interest standards to safeguard health, welfare, and competitive conditions.
Featured News
Lawmaker Probes FTC and EU’s Role in Amazon’s Failed iRobot Acquisition
May 2, 2024 by
CPI
FTC to Approve Exxon’s $64 Billion Deal with Pioneer Resources, Excludes
May 1, 2024 by
CPI
UK Competition Watchdog Raises Alarm Over Nvidia’s ARM Takeover
May 1, 2024 by
CPI
Sen. Klobuchar Urges Regulators to Probe Collusion in Healthcare Pricing
May 1, 2024 by
CPI
Multiple States Join Tennessee’s Antitrust Lawsuit Against NCAA Over NIL Rules
May 1, 2024 by
CPI
Antitrust Mix by CPI
Antitrust Chronicle® – Economics of Criminal Antitrust
Apr 19, 2024 by
CPI
Navigating Economic Expert Work in Criminal Antitrust Litigation
Apr 19, 2024 by
CPI
The Increased Importance of Economics in Cartel Cases
Apr 19, 2024 by
CPI
A Law and Economics Analysis of the Antitrust Treatment of Physician Collective Price Agreements
Apr 19, 2024 by
CPI
Information Exchange In Criminal Antitrust Cases: How Economic Testimony Can Tip The Scales
Apr 19, 2024 by
CPI