30/01/2025
Throughout the long process of creating the Unified Patent Court, there has been a heated debate about the extent to which non-practicing entities (NPEs) will use the new system to commercialize their patents. Since the 2000s, there have been waves of lawsuits filed by non-practicing entities in the United States, starting in the field of electronics. About ten years later, the phenomenon reached Europe with IPCom and others.
December of last year marks the one-year anniversary of the first NPE-initiated infringement case before the UPC and it is worth taking a closer look at the developments of the Unified Patent Court in this area.
Over the last year, the UPC has become a quite attractive venue for NPEs to litigate patents. There has been a steady increase in the number of cases, albeit at a moderate level, currently about 70 actions, with up to 10 fillings per month, but this is in line with the overall number of proceedings before the UPC and the rather tentative, albeit solid start of the new venue in Europe for patent litigation.
Figure 1: Timeline of NPE litigation before the UPC
Figure 1 shows the development of NPE litigation before the UPC over time. In addition to the delayed start, there is a trend that NPE-initiated infringement cases are almost always answered with a revocation counterclaim after 2 to 3 months; the dark blue infringement cases are followed by light blue revocation counterclaims with peaks of similar shape. Furthermore, it can be seen that the NPEs currently control the system: four times as many infringement actions, about 31 cases, are filed as active standalone revocation actions, 7 cases, marked orange in Figure 1.
This is certainly also due to the fact that the NPEs want to exploit the attacker’s advantage in the UPC system, as the defendant’s time pressure is immense.
At the moment, with most cases having been filed just some months ago, the data on the ratio of cases settled to cases litigated to final judgment is of course only of limited reliability, but the rate of settlement in the area of NPE litigation before the UPC appears to be significantly lower than in the area of disputes between producing competitors. The relatively low settlement ratio leads to the impression that the cases are probably carefully selected and prepared, which is of course due to the high potential cost recovery in case of a win and the fact that litigation and licensing is the core business for NPEs.
The technical areas of the NPE-initiated UPC litigation are currently focused on electronics and communications networks. Here is a brief overview with only a selection of cases: Automobile manufacturers, AUDI AG, Volkswagen AG, and others have been sued by an NPE in the technical area of network clock synchronization. In the field of wireless communication networks, IPC class H04W, Lionra Technologies Ltd has filed an infringement lawsuit against Cisco before the UPC, the NPE originates from an Atlantic IP entity that was recently active in the U.S. against Fortinet, Palo Alto Networks, Crowdstrike, VMware, and Cisco. Already some months ago, Microsoft was sued by a Finnish entity for patent infringing before the UPC in the area of web browsing as covered by a software patent.
In summary, it can be said that before the UPC, rather experienced NPEs (already have filed campaigns in Europe and/or the U.S.) have so far initiated infringement actions and that NPE litigation is currently taking place in the electronics and wireless communication networks sectors. Overall, NBP-related patent litigation (more than 70 cases to date) accounts for 14% of all litigation (more than 500) before the UPC.
This article is for general information only. Its content is not a statement of the law on any subject and does not constitute advice. Please contact Reddie & Grose LLP for advice before taking any action in reliance on it.
