Patent assertion entities (PAEs), more colloquially referred to as patent trolls, focus their attention primarily on high-tech and software companies. By one estimate, PAEs have been responsible for more than 84% of U.S. high-tech patent litigation.
As medical technology and imaging companies become more reliant on technology, they increase their risk of being sued by PAEs. Throughout the last 10 years, several PAEs have aggressively attacked Olympus with threats of patent infringement cases. These lawsuits are a distraction and divert time and money away from innovation-driving activities such as research and product development. Unfortunately, we are seeing an upswing in such activity. Unified Patents reported that in 2019 alone, patent litigation was up 4% across all industries.
Patent assertion entities problem
PAEs are companies that acquire patents to monetize them by suing other companies. In 2013, RPX Corp. reported that only about 2% of medical-based companies were targets of PAEs. By the end of last year, IAM found there was “a big jump in healthcare and pharma transactions with evidence of growing patent activity in the medtech space in particular.” Our industry will likely see more patent transactions that could ultimately lead to more infringement litigation – especially during an economic downturn when distressed companies are looking to offload assets or up their patent monetization plans.
In 2014, Massachusetts Institute of Technology (MIT) management science and marketing professor Catherine Tucker conducted a study showing that a patent troll’s litigation led to a decline of nearly one-third of medical imaging technology sales. Her research showed how product innovation also declined during the period of litigation.
In her study, she found that:
“An explanation for this lack of innovation is that the vendors didn’t want to run the risk of being found guilty of willful infringement in the patent suit and being held liable for treble damages. Therefore, one explanation of the slow-down in sales is that the product release and attendant sales cycle was halted because of litigation. This emphasizes that even if patent assertion entities don’t prevail in the courtroom, their actions can have significantly negative consequences for incremental innovation while litigation is ongoing.”
It’s clear that companies defending against PAEs spend less on innovation and other business strategies, and as Tucker’s study found, product sales can decline rapidly or halt.
Some estimates suggest that patent trolls are associated with more than $80 billion a year in lost wealth for defendants and on average, firms forced to pay patent trolls spend $211 million less on research and development (R&D).
As a company that has been the target of several patent trolls, Olympus is well aware of the high costs associated with litigating, defending, and paying licensing fees – all of which have affected our own efforts to further our life-saving innovations and safeguard the overall health of the company.
These costs can derail most R&D efforts and often can only be recouped by increasing prices, which is unfair to medical customers working hard to stretch resources to best serve their patients.
Defense against infringement
Recently, Olympus decided to immunize ourselves from patent trolls by aligning with other global companies that have the same goal in mind: protect innovation from the threat and high cost of PAE litigation.
Olympus joined LOT Network, a non-profit community of more than 1,000 companies. All agree if, and only if, a member company’s patent falls into the hands of a patent troll, that company will grant the network’s other members a license to that patent. Therefore, the patent can no longer be used by trolls to sue community members, while the usual uses of patents, buying and selling and suing companies who infringe on company IP, are still preserved.
At Olympus, we believe that every penny spent fending off PAEs harms innovation – and the single focus of LOT is to preserve the traditional uses and value of patents – while immunizing companies from the escalating costs associated with PAE litigation.
In addition to the protections afforded through the LOT Network, we are now community members of like-minded companies collectively recognized as global IP thought leaders, including innovators IBM, Toyota, Canon, Tesla, and Microsoft.
LOT Network is a community that grows stronger and becomes more valuable as membership increases. We encourage other medical technology companies to join us in protecting critical IP.