A study of Patent Thickets (1.31Mb) - UK Intellectual Property Office

A Study of Patent Thickets 25
2.1.1.6 Defensive Patenting
Now we turn to review defensive patenting. Shapiro (2004) provides the following definition:
“Defensive patenting refers to the practice of seeking patents in order to defend oneself from
patent infringement actions brought by others. Under this strategy, the company does not plan
to assert its patent proactively against others, but it can counterattack with its own patent
infringement claims if sued for infringement”.
Defensive patenting is a strategy pursued by firms seeking to defend themselves against holdup
– the attempt to extract payments through the threat of legal action and the leveraging of
injunctions – by patent mining firms. Defensively patenting firms are reluctant litigants,
strategically constructing portfolios of patents to avoid going to court. A commonly adopted
defense against hold-up is the threat of countersuits and subsequent cross-licensing. This
strategy is less effective when firms are faced with patent assertion entities (PAEs), as these are
not susceptible to the threat of hold-up themselves.
Ziedonis (2004) demonstrates that semiconductor firms patent more aggressively, if their patents
cite a more dispersed set of rival firms. This effect is particularly pronounced, if firms have
themselves invested heavily in technology-specific assets (e.g. manufacturing equipment, which
can be a large partially sunk cost for semiconductor firms). This finding shows that firms which
were likely to be negotiating with a larger set of rivals for access to their patents sought to build
larger patent portfolios, in order to strengthen their bargaining positions. This logic was also
supported by a number of submissions from industry representatives to the 2003 study of the
Federal Trade Commission into the balance of Competition and Patent Law (Federal Trade
Commission, 2003).
Chien (2009) also studies defensive patenting. Her data suggest that the strategy, which is
supposed to keep large firms out of court, is at least an incomplete strategy. She finds that
public and large private companies initiated 42% of all lawsuits studied, 28% of the time against
another large company. Defensively patenting firms also defend against other suits, brought by
individuals, small inventors and non-practicing entities.
While defensive patenting is clearly not always effective, it is most likely the main strategy in
generating the large increases in patent filings and grants we have documented above (Hegde
et al., 2009). Such a patent portfolio strategy requires an enduring strategic commitment and is
often then exploited by firms offensively when they have seen other sources of revenue dry up
(Rubinfeld and Maness, 2004; Clarkson and De Korte, 2006). However, it is not likely that the
majority of patent applicants are actively pursuing this kind of patent mining; rather the majority
are defensive patent applicants seeking to protect themselves against litigation while contributing
to the overloading of the patent system in equal measure.