Enforcing patent rights: an empirical study

We study the determinants of patent suits and settlements during 1978-1999 by linking information from the U.S. patent office, the federal courts and industry sources. Litigation risk is much higher for patents owned by individuals and smaller firms. Patentees with a large portfolio of patents to trade, or other characteristics that facilitate “cooperative” resolution of disputes, are less likely to litigate. But post-suit outcomes do not depend on these characteristics. These findings show that small patentees are at a disadvantage in enforcing their patent rights since their greater litigation risk is not offset by more rapid resolution of their suits. Our empirical estimates of the heterogeneity in litigation risk can help develop private patent litigation insurance to mitigate the adverse affects of high enforcement costs.