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“Who’s Suing Whom over What?”

“Who’s Suing Whom over What?”. Patent Litigation in the Semiconductor Industry, 1973-2001 Rosemarie Ziedonis STEP Board IP Meeting Washington, DC October 22, 2001. Motivation.

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“Who’s Suing Whom over What?”

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  1. “Who’s Suing Whom over What?” Patent Litigation in the Semiconductor Industry, 1973-2001 Rosemarie Ziedonis STEP Board IP Meeting Washington, DC October 22, 2001

  2. Motivation • Role of patents in “cumulative” technologies (Cohen, Nelson & Walsh, 2000; Hall & Ziedonis, 2001; Merges and Nelson, 1990) • Value of patents tied to patents owned by others • Broader incentives to innovate • Patents as “bargaining chips” • Cross-licensing in semiconductors, yet “patent portfolio racing” and active patent litigation since mid-1980s

  3. Objectives • Track patent litigation histories of firms within an industry characterized by cumulative innovation (semiconductors) • Complement cross-industry studies of patent litigation (e.g., Lanjouw & Schankerman, 2001; Moore, 2000; Somaya, 1999) • Determinants of conflict (and cooperation)? • Variation within an industry (manufacturers v. design firms)? • Effects of patent system on cumulative innovation? (pre and post-CAFC)

  4. Limitations • A sample of firms in one industry • A view from the “iceberg’s tip” • Observe filed patent cases (not case outcomes) • Describe events (for now)

  5. Approach 1: Select sample of semiconductor firms 2: Identify patent lawsuits that involve these firms (and their subsidiaries), 1973-2001 3: Assemble information about each case filed: • Type of case (infringement, validity) • Role of semiconductor firm • Characteristics of other parties involved • Characteristics of patents involved 4: Answer simple questions 5: Examine broader trends

  6. 1. Sample Firms Dedicated US semiconductor firms (SIC3674 + design; publicly-traded, 1973-2000) • Annual R&D, sales, employees, etc. (Compustat) • Specialized Design firm? Founding/Exit Years • US Patents Granted (1996 ownership status) • 136 firms (95 of which in Hall-Ziedonis study) • 81 manufacturers (e.g., Intel, Texas Instruments, Micron) • 55 specialized design firms (e.g., Altera, Xilinx, Rambus) • in 2000, combined sales=$88B, R&D=$12B, owned ~31,000 US patents

  7. Number of Sample Firms: Mfg and Design

  8. 2. Linking Firms to Lawsuits 136 Firms Litalert data: Patent cases filed in US District Courts, 1973-June 2001 USITC website: Section 337 cases filed, 1973-June 2001 Annual 10-K reports, trade press, 1973-84 (legal proceedings) • 346 cases (287 “clean”) • 674 patents (504 unique) • 292 entities (260 firms, 30 Ind. Inventors) • 272 unique plaintiff/defendant pairs

  9. 3. Cases identified (by forum) Both (12 cases)

  10. 3. Cases identified (by type)

  11. 3. Observation • The market for semiconductor IP seems quite active before lawsuits are filed • 118 cases involve patents not originally assigned to the plaintiff or defendant (“unclassified”) • Of these, 82 (70%) involve patents that were reassigned (almost always to the plaintiff in an infringement suit) • Implication: at least 30% of our cases involve “purchased” patents

  12. 4. Who’s involved (and who isn’t) • Of 136 sample firms, ~56% involved in patent-related disputes • 53% of the manufacturers • 65% of the design firms • On average, firms NOT involved: • Are smaller • Invest less in R&D • Invest less intensively in R&D (relative to employees or sales)

  13. 4. What’s involved • 674 patents (504 unique) • 55% “semiconductor product” inventions (+process) • 23% “production process” inventions (process only) • 20% “downstream product” inventions • 1% ??? • Top owners of patents litigated #1: TI (70) – e.g., Boone calculator or Kilby IC patents #2: Intel (34) – e.g., math co-processor, EPROM/EEPROM #3: Jerome Lemelson (17) – e.g., scanners

  14. 5. Broader Trends • Increased patent litigation in this industry over time (not surprising) • More interesting: • Calculation 1: Litigation rate falls (per patent) • Calculation 2: Litigation rate rises (per R&D$) • Even more interesting: • Active presence of design firms in litigation • 4 out of every 100 patents involved in a case • More like biotech than semiconductors

  15. Patent v. Patent Litigation Activity (136 US Semiconductor Firms, 01/1975-06/2001)

  16. Litigation Rates (Mfg Only)

  17. Litigation Rates: Mfg v. Design Firms(1986-2000 only) Note: Using # of disputed patents assigned to the firm as the numerator generated similar results.

  18. Profile of disputes (Mfg vs. Design) • Design firms (on average) • Most commonly oppose other design firms in dispute • Enforce patents that are “newer” than the average patent in their portfolios • Are almost always engaged in disputes over product-related inventions (not surprising) • Manufacturers (on average) • Face a more diverse set of opposing parties (more firms in unrelated businesses; independent inventors; non-US firms) • Enforce patents that are “older” than the average patent in their portfolios • Are involved in more disputes over purely “process” inventions (not surprising)

  19. In Summary • Patent litigation has become more common in semiconductors (not surprising) • Whether the rate of litigation has risen or fallen or risen depends on how you measure it • Regardless of how it’s measured, the litigation rate of design firms is high

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