A few days ago, Bloomberg Law reported that number of patent litigation cases is rising sharply. This is not surprising. When economy is booming, companies invest significant resources into research and development. This investment often leads to groundbreaking innovation. To protect the fruits of their investment, companies file a large number of patents and build massive patent portfolios. This trend keeps going for as long as the economy stays strong. So what happens when the economy takes a downturn, such as the one we have experienced recently due to COVID-19 pandemic? Those massive patent portfolios become revenue generators.
When normal revenue streams began to slow, companies start seeking additional sources of revenue. Patents are a great economic tool that can provide much needed cash flow when a need arises. There are multiple ways of using a patent portfolio to generate revenue. The most obvious way is enforcing the patent against competitors.
A successful patent infringement lawsuit can help a company take over its competitors’ market share. If the court grants an injunction against a patent-infringing competitor, that competitor will no longer be able to sell infringing products. As a result, the company asserting its patent, will gain market share, and greater market share equals increased revenue. Furthermore, if a company can establish that a competitor infringed its patents, the court may award damages, which could be millions or, in some cases, even billions of dollars. The damages award can be tripled if the infringement is willful. Therefore, companies that have prudently invested into R&D and patent prosecution when economy flourished, can now rely on those patents to boost their revenue and increase market share.
As patent attorneys, we have expected to see a rise in patent litigation cases when the COVID-19 shutdowns began. The numbers show that we were correct.