The Near Certainty of Patent Assertion Entity Victory in Portfolio Patent Litigation

Patent assertion entity litigation is increasingly being viewed as a pathological condition of the patent system. The large damage awards and settlements that PAEs have been able to extract raise the issue of whether PAEs are particularly good at identifying high-value patents. This paper, based on previous work, argues that these are rather a function of the portfolio theory of patent value. Further, this paper shows that, under reasonable conditions applying to the current form of patent litigation in the United States, a PAE asserting a portfolio of patents having some nexus to the accused target product or product line will almost always prevail. Moreover, errors in estimating probabilities of winning on the material issues in litigation will have little or no impact on this result as the number of asserted patents increases. As a result, most reform efforts, directed to measures such as limitation of injunctions, modest restrictions on obtainable damages and modestly raising patentability thresholds, will likely have little or no impact on the PAE litigation problem