© 2007, Dawsey Co., LPA
January 2007

Can patent lawsuits in the medical device industry be forecast? Recent studies suggest that certain features of patent applications themselves tend to correlate with a higher chance that some patents will end up in court. Innovation is at the heart of the medical device industry. As with many industries, if you are not constantly working to bring new products and technology to the market, there is a good chance you will not survive. Companies that are successful, and that continue to survive, invest millions of dollars in research and development every year to create new or better products. Companies that are successful, and that continue to survive, invest millions of dollars in research and development every year to create new or better products. Not only are these companies investing in the development of new technology, they are also investing in the protection of their innovations through the patent system. In fact, for fiscal year 2006 the United States Patent and Trademark Office (USPTO) reported a record of more than 440,000 patent applications filed, more than double the number of applications filed ten years ago.1

Of course, with the record number of patent applications being filed, and the large number of patents issued each year, it would be logical to expect that the number of patent related lawsuits would also increase. Recent statistics tend to substantiate this logic as more and more patent owners are turning to the courts to help protect their valuable intellectual property assets. For example, from 1995 to 2005, the number of patent lawsuits filed in the United States increased from approximately 1700 to more than 2700, a 58% increase in just 10 years.2

However, the chances of a lawsuit remain low on a probability basis. While the number of patent suits filed has substantially increased over the past ten years, it is interesting to note that recent studies estimate that on average only roughly 1% of U.S. patents will be litigated.3 However, these studies also note a variety of characteristics that tend to predict whether a patent is likely to be litigated. These characteristics include: (1) the number of claims describing the invention; (2) the number and types of prior art citations; and (3) the “crowdedness” of the technological field.4 Each characteristic is described below, including how the characteristic relates to the medical device industry.

Number of Claims
A patent must include at least one claim that describes with particularity what the applicant regards as his invention. The claims of a patent are often analogized to the property description in a deed to real estate; both define the boundaries and extent of the property. Since the claims set the boundaries of the invention, the applicant has an incentive to define the invention through a number of broad claims. However, in some technological areas where there is a vast amount of prior art, the applicant may have to define the invention through a number of narrow claims to avoid the invalidating prior art.

So how does the number of claims appearing in a patent correlate to the likelihood that the patent will someday be litigated? Empirical studies have found that litigated patents include a larger number of claims as opposed to non-litigated patents.5 In fact, one study determined that litigated patents had nearly 20 claims on average, compared to only 13 claims for non-litigated patents.6 Researchers cite a couple of reasons that help explain their findings: the perceived value of the patent and the crowdedness of the field of technology protected by the patent.7

Patent claims are easily the most important part of the patent. Therefore, it should come as no surprise that claims are expensive to draft and prosecute. Paying more money for a larger number of claims suggests that the patentee believes a patent with more claims is likely to be more valuable. However, some researchers conclude that the reason litigated patents have more claims than non-litigated patents is that the patentee knew the patent would be valuable, anticipated the prospect of litigation, and as a result drafted more claims to help the patent stand up in litigation.8

The field of technology protected by the patent may also explain why patents with a large number of claims are more likely to be litigated. In a crowded technological field there will likely be more competitors who are developing similar products. Therefore, it seems to make sense that patents having a large number of claims in these crowded fields are more likely to conflict with competitors.

In order to get a general idea of how the number of claims relate to the medical device industry, 50 of the most recently issued patents for endoscopes were analyzed.9 The results show an average of 17 claims per patent. This number falls somewhere in the middle of the claim numbers for litigated and non-litigated patents cited above. It would seem more likely, according to the empirical studies, that these patents will have a higher chance of being litigated. In addition to having a higher chance of being litigated, these results may indicate that the crowded medical device industry values their patents and anticipates litigation, with the end result being patents having a larger number of claims.

Prior Art Citations
Under U.S. patent law, the inventor and every other person who is substantively involved in the preparation and prosecution of an application has a duty to disclose all information known to be material to the patentability of the invention.10 To discharge this duty, patent applicants typically file what is known as an information disclosure statement, commonly referred to as an IDS. In the IDS, the applicant lists all of the U.S. patents, foreign patents, and non-patent literature that they are aware of and that is relevant to the invention. Also, a USPTO patent examiner conducts a search of the prior art and may cite prior art against the applicant that was not previously disclosed in an IDS.

When a patent is granted, the prior art citations made of record during prosecution before the USPTO are listed in the patent. Researchers have used this citation information to conclude that the number of prior art citations appearing in a patent is a good predictor of whether a patent is likely to be litigated.11 One study found that litigated patents on average cited 14.2 U.S. patents, while non-litigated patents cited only 8.6 U.S. patents.12 The study also showed that litigated patents are more likely to be cited as prior art by other issued patents, and that litigated patents include more self-citations, that is, citations to other patents owned by the same assignee.13

How do patents from the medical device industry compare? Again, using the small sample of endoscope patents noted above as a proxy for the medical device industry, the average number of U.S. patents cited was approximately 37. This is significantly more than the study’s finding of 14.2 U.S. patents. Does this result mean that medical device patents are more likely to be litigated? Not necessarily. The study notes that two particular categories of prior art citations (citations received and self-citations) are more significant predictors of litigation.14 Although the study does not cite an average for self-citations, it does find that litigated patents received an average of 12.2 citations from other patents, compared to only 4.1 citations received on average for non-litigated patents.15 The average number of self-citations and citations received for the endoscope patents were only 1.74 and 0.34, respectively. Nevertheless, as the study authors suggest, the large number of prior art citations found in this small sample set may indicate that the applicant anticipated the prospect of litigation and took reasonable steps to make the patent as strong as possible.16 Similarly, the large number of citations may be due to attempts to get around prior art in the crowded and ultra-competitive medical device field.

Crowded Fields
Both of the previously discussed characteristics of litigated patents have mentioned the idea of crowded technological fields. It may be obvious, but the term “crowded field” refers to an area of technology where there are many competitors and many issued patents that define the technology. Thus, for patents that are issued in a crowded field, there is by definition more competition and hence more opportunity that the patent will be litigated.

Under the current U.S. patent classification system, which includes over 430 classes, there appear to be eight classes that are directly related to the medical device industry.17 Within these eight classes, there are over 2300 subclasses in which a medical device patent may be classified. The large number of classes and subclasses seems to suggest that the medical device field, as a whole, would likely be considered a crowded field. Moreover, most medical device manufacturers are sophisticated and have a better understanding of the value of their intellectual property. Since innovation is the lifeblood of the industry, it makes sense that the industry protects more of their inventions, which leads to more medical device patents being issued. Thus, more patents in the technological field bring about a higher likelihood of patent litigation within that field.

At least one study indicates that patents on medical devices are significantly more likely to be litigated than the average of all patents.18 The study provides an explanation for why medical device patents are more likely to be litigated by noting that the medical device industry, as a whole, view patents as valuable assets.19

Conclusion
Patent litigation is, in fact, on the rise. The empirical studies conducted over recent years have identified some of the characteristics that are strong predictors of whether a patent is likely to be litigated. A large number of claims and prior art citations may increase a patent’s likelihood to end up before a court. A crowded technological field may also lead to a higher risk of patent litigation.

By virtue of being in such a crowded field, the medical device industry will likely remain very litigious. Of course, this race to the courthouse is indicative of the value that the industry as a whole places on its innovations, and hence its survival.

1United States Patent & Trademark Office, Performance and Accountability Report, Fiscal Year 2006, http://www.uspto.gov/web/offices/com/annual/2006/2006annualreport.pdf, Table 1, pg. 120.

2 U.S. District Courts. Copyright, Patent and Trademark Cases Filed, http://www.uscourts.gov/judicialfactsfigures/Table407.pdf, accessed Jan. 15, 2007.

3 Jean O. Lanjouw & Mark Schankerman, Characteristics of Patent Litigatioin: A Window on Competition, 2000, p. 10, available at http://www.cramton.umd.edu/workshop/papers/lanjouw-schankerman-characteristics-of-patent-litigation.pdf

4 Jay P. Kesan and Gwendolyn G. Ball, How Are Patent Cases Resolved? An Empirical Examination of the
Adjudication and Settlement of Patent Disputes, 2006, pp 15-17, available at http://law.bepress.com/cgi/viewcontent.cgi?article=1051&context=uiuclwps

5 Lanjouw & Schankerman, supra note 3, at 17-18. See John R. Allison et al., Valuable Patents, 92 Geo L. J. 435 (2004).

6 Allison et al., supra note 5

7 Id. Lanjouw & Schankerman, supra note 3, at 17.

8 Allison et al., supra note 5

9 The endoscope patents analyzed were the 50 most recent patents having a Current US Classification of 600/101, as of January 15, 2007.

10 37 C.F.R. § 1.56

11 Allison et al., supra note 5

12 Id.

13 Id.

14 Id.

15 Id.

16 Id.

17 Current U.S. Classes relating to the medical device industry include: 128, 600, 601, 602, 604, 606, 607, and 623.

18 Allison et al., supra note 5

19 Id.