Overview

Why do NPE lawsuits require special treatment?

Patent infringement disputes between two Practicing Entities (PEs) are usually resolved in a way that both parties consider reasonable, often with a cross-licensing agreement.

Both parties have similar types of exposure and risks. Both parties know that they could be involved in another licensing discussion later, in which the relative negotiating strengths could differ.

Patent disputes between Non Practicing Entities (NPEs) and PEs lack such symmetry. The NPE has no product or revenue at risk. Therefore, there is no opportunity for cross-licensing. Furthermore, NPEs are often represented by contingency attorneys, whereas PEs pay their attorneys on an hourly basis. The longer the dispute continues, the more the PE pays, even if the PE can win ultimately. Finally, NPEs are adept at playing one defendant against others, through techniques such as offering cheaper settlement to defendants who settle earlier, and threatening that a defendant who fights a lawsuit will end up carrying all the costs.

For these reasons, PEs are at a disadvantage in negotiating settlements with NPEs.