The Effect of an Economic Downturn on NPE Litigation

Historical data on the rate of patent litigation following an economic downturn suggest that the volume of NPE patent assertions and litigations could significantly increase in 2009.

A study of the top ten U.S. and Asian technology companies* shows that the average growth rate in the volume of NPE litigations against U.S. and Asian technology companies from 1999-2002 was 48% and 1%, respectively. In the four-year period following the dot-com market crash from 2003-2006, the average growth rate in the volume of NPE litigations against U.S. technology companies slowed to 16%, while the comparable figure for Asian technology companies jumped to 38% (a 3700% increase).

The study also shows that the gap in the number of patent infringement cases asserted by NPEs against U.S. and Asian technology companies has grown 42% in the four-year period following the dot-com crash. For example, from 2003-2006, Asian technology companies faced 210 NPE lawsuits, whereas their American counterparts faced only 123 during the same period.

Early results for 2007 and 2008 show a similar pattern to what happened after the dot-com downturn, suggesting that the ensuing economic downturn could see an even greater acceleration in the frequency of NPE litigations.

*Study Groups:

U.S. –  IBM, Microsoft, Cisco, Oracle, Intel, Qualcomm, Sun Microsystems, Apple, HP and Western Digital

Asia – Canon, Toshiba, Sony, Panasonic, Hitachi, Fujitsu, Sharp, Samsung, Seiko-Epson and NEC Corp.