Patent lawsuits involving NPEs have increased substantially over the last decade, especially since 2004.

In 2010, as the first chart below shows, there were more than 2,600 occasions when a company found itself in litigation with an NPE, an increase of 48% over the average of the previous 3 years.

Operating Company Parties in NPE Lawsuits Over Time

Source: PatentFreedom © 2011 Data captured as of January 1, 2011

As shown in the chart below, the total number of NPE litigations actually declined in 2010. Taken together with the data above, this indicates that the growth in the number of companies facing NPE litigation results from a substantial increase in the average number of defendants per litigation in 2010.

Patent Lawsuits Involving NPEs Over Time

Source: PatentFreedom © 2011 Data captured as of January 1, 2011

Note – Except where explicitly noted to the contrary, PatentFreedom’s litigation data contains administrative duplicates such as venue transfers, related cases between parties, etc. While such administrative duplicates are present in most statistics summarizing patent litigation, they do underscore the importance of caution in drawing conclusions from such summary data. In addition, this data and the data shown elsewhere is drawn from PatentFreedom's current database of NPEs, which has been built “from the ground up” and is thus necessarily incomplete. It will continue to grow and develop over time as we discover more entities that are reasonably classified as NPEs. For purposes of PatentFreedom's classification, we define a NPE as any entity that derives substantial revenue from the licensing or enforcement of patents and for which we have been unable to obtain verifiable evidence that the entity sells products or services that would make it vulnerable to patent counter-assertion.

The continued growth in NPE litigation has been fueled by the significant increase in the numbers of patents awarded over the last several decades and financial investors who speculate on potentially massive returns on the relatively modest cost of purchasing patents on the open market (where the median price for a patent is approximately $100,000 and the mean is approximately $400,000). In addition, the now often-cited payment of $612 million in 2006 by NTP in its patent assertion victory over Research in Motion (the supplier of the popular Blackberry device) was a significant – but by no means exceptional – catalyst to the growth in investment in and by NPEs.

The increase in patents issued by the USPTO over the last few decades is illustrated in the chart below. Ironically, much of this increase was the result of operating companies seeking to build patent portfolios to enable counter-claims against patent assertions from other operating companies. Note the surge in 2010.