1. Stylized Facts of Patent Litigation Jean O. Lanjouw and Mark Schankerman

2. THE DATA I. Data source to identify litigated patents: Patent History CD-ROM, Derwent based on information from the US PTO 5,452 cases for the period 1975-91 involving 3,887 patents Linked To: II. Comprehensive U.S. Federal Court Data: Inter-university Consortium for Political and Social Research 22% of Cases Reported (1977-9) 85% of Cases Reported (1985-7) III. “Matched Sample” 3,887 patents drawn from population controlling for IPC and cohort

3. CHARACTERISTICS Number of Claims Set of all 4-digit IPC sub-class assignments Nationality of Patent Owner –Domestic U.S.; Non-Japanese Foreign; Japanese –Based on assignee if there is one, otherwise the inventor Corporate versus Individual Ownership –Identified by whether there is an assignee (Patent Scan CD-ROM, Micro Patent) Backward and Forward Citations with their 4-digit IPC sub-class assignments

4. Table 1: Litigation Rates and Composition Panel A: Filed Cases per 1,000 Patents, 1980-1984 By Technology Group and Ownership TotalDomesticForeign Drugs & Health20.126.6 6.5 Chemical 5.4 6.1 1.4 Electronic 9.612.7 3.3 Mechanical11.820.1 3.4 Other15.223.4 9.9 Total10.716.4 3.5

5. Other Points Related to Table 1 Josh Lerner estimates 60 cases per 1000 in biotech Individuals have a 16% higher probability of litigation than corporate owners, except for Japanese owners. There, individuals have a rate 3 times that of corporations

6. Table 2: Forward Citations Domestic Non-Japanese Japanese Foreign Matched Litigated Matched Litigated Matched Litigated Mean 6.3 12.0 4.8 11.5 5.8 12.0 Citations (0.16) (0.24) (0.19) (0.78) (0.32) (1.55)

7. Similarity Index: Measure of how much the IPC classes of a patent’s forward or backward citation overlap with those of the patent itself. Backward vs. Forward Citation? Citation by Others vs. Citation by Self?

8. Table 3: Similarity of Citation Litigated (L) vs. Matched (M) Patents Thus, a patent more likely to be involved in a suit: if there are others patenting related innovations in the same technology area. If it is the base of a cumulative chain where later patents are held by the same owner.

9. Table 7 Characteristics Associated with the Probability of a Suit Infringement SuitsChallenge Suits Parameters Marginal EffectsParameters Marginal Effects (1) (2) (3) (4) Log Claims 0.405** 0.136** 0.433** 0.058** (.030) (.010) (.050) (.007) FWD Cites/Claim 0.256** 0.081** 0.230** 0.029** (.019) (.006) (.027) (.003) FWD Cites/Clm^2-0.0083**-0.005** (.0011) (.001) BWD Cites/Claim-0.033-0.010-0.043-0.005 (.023) (.007) (.040) (.005) BWD Cites/CLM^2 0.0012 0.003 (.0011) (.002) NO4IPC-0.062* -0.021*-0.052-0.007 (.036) (.012) (.057) (.008)

10. SIMFWD0.278** 0.093** 0.129 0.017 (.087) (.029) (.144) (.019) SIMFWD*CORP 0.203** 0.162** 0.223 0.047** (.103) (.020) (.170) (.013) FWDSELF0.674** 0.226**0.585** 0.078** (.106) (.036) (.165) (.022) BWDSELF-1.015** -0.341**-0.936** -0.125** (.173) (.058) (.307) (.041) DINDOWN-1.419** 0.103**-2.320** 0.022 (.126) (.024) (.205) (.019) FINDOWN-2.321**-0.214**-2.911** -0.059** (.158)(.024) (.250) (.014) JINDOWN-2.305**-0.195** NE NE (.349) (.071) DCORPOWN-1.562** 0.195**-2.466** 0.060** (.123) (.016) (.200) (.013) FCORPOWN-2.321**-0.181**-2.963** -0.050** (.129) (.016) (.209) (.011) JCORPOWN-2.893**-0.287**-3.510** -0.084** (.156) (.015) (.266) (.008)

11. Table 8 Estimated Litigation Probabilities for Corporate U.S. Patentees Sample patent with maximum litigation probability in, Drugs & Health (17 Claims, 132 Citations):27.6% Chemicals(65 Claims, 164 Citations): 3.5% Electronic( 4 Claims, 48 Citations): 9.1% Mechanical( 2 Claims, 39 Citations): 12.8%

12. Conclusions Related to the Design and Administration of the Patent System  Likelihood of a suit varies markedly with the characteristics of a patent and its owner, and  For some types the rate of litigation is high  Uncertainty about what is patentable appears to play a role

13.  It appears that individuals are at a disadvantage relative to corporate patentees, which supports related evidence: Smaller biotech companies tend to avoid doing R&D in same technology areas as large firms They rely more heavily on trade secrets vs. patents (Lerner) Larger firms tend to request preliminary injunctions when confronting smaller defendants (Lanjouw and Lerner) Institutional design to lower costs - particularly for smaller firms Improvement in the ability to price patent litigation insurance