Introduction
Here’s the situation many mid-market technology companies find themselves in right now: a demand letter arrives from a company they’ve never heard of, asserting patents on technology that’s central to their product. The patents look broad. The demanded royalty rate is significant. And the two options on the table — pay up or litigate — both look expensive.
This is the NPE playbook. And it’s working more effectively than at any point in the past five years. Patent assertion entity filings increased by 14% in the first half of 2024 compared to the same period in 2023. EDTX and WDTX accounted for 63.7% of all NPE patent cases in 2025. And the most cost-effective defensive tool that companies previously had — filing an IPR petition at PTAB to challenge the patent’s validity at a fraction of district court litigation cost — is now being denied at rates exceeding 63% under Director Squires’ centralised institution process.
The combination is creating a specific, serious problem for mid-market companies. Large enough to be worth targeting. Not large enough to have the litigation infrastructure to fight back easily. And now without reliable access to the defensive path that previously made NPE campaigns less economically attractive. This article covers why that combination has made mid-market companies the preferred NPE target in 2025 — and why proactive infringement monitoring is now the most valuable investment a mid-market IP team can make.
The NPE Landscape in 2025: What the Data Shows
+14% NPE filing increase first half of 2024 vs. same period 2023 | 63.7% of NPE cases in EDTX+WDTX plaintiff-favorable venues dominating | 63%+ PTAB IPR denial rate under Director Squires’ centralised process
NPE activity isn’t new. But the 2025 environment has specific characteristics that distinguish it from the patterns of five years ago.
The most significant structural change is the multi-defendant campaign model. Rather than filing sequentially against individual targets, NPEs increasingly file against entire product categories simultaneously — naming 8, 10, or 12 defendants in a single complaint or coordinated series of complaints filed the same day. A single legal infrastructure, multiple licensing outcomes. The economics are compelling: the cost of running one well-prepared assertion campaign against 10 defendants is far lower than running 10 separate campaigns, and the settlement pressure on each defendant is amplified by seeing that others in their market have also been targeted.
The venue picture reinforces this. EDTX under Judge Gilstrap remains the dominant NPE venue for technology patents — fast dockets, plaintiff-friendly jury pools, and damages calculation norms that historically favour patent holders. WDTX under Judge Albright has become the second venue of choice for specific technology categories. Together they handle nearly two-thirds of all NPE patent litigation in the US. If you’re in software, AI, connected hardware, semiconductors, or medical devices, the chances that a demand letter you receive is backed by a filing in one of these two courts is extremely high.
Why Mid-Market Companies Are the Preferred NPE Target
NPE targeting isn’t random. There’s a clear economic logic behind which companies get hit — and it explains precisely why mid-market companies are now squarely in the crosshairs.
The NPE business model requires identifying companies that (1) generate meaningful revenue from technology that infringes the asserted patent, (2) face sufficient financial exposure from litigation to make settlement economically rational, and (3) lack the litigation infrastructure to fight back effectively over multiple years. That combination points overwhelmingly at companies in the $50M–$500M revenue range.
- Large corporations ($500M+ revenue) have in-house patent litigation teams, established outside counsel relationships, standardised insurance coverage, and the balance sheet to litigate for 3–4 years if needed. They’re expensive to fight and increasingly likely to counter-assert. NPEs still target them — but the expected settlement is harder to extract.
- Small companies (under $50M revenue) don’t have enough revenue to make a licensing demand economically significant. The settlement that would make the campaign worthwhile is larger than what the company can realistically pay. They’re not worth the overhead of a full campaign.
- Mid-market companies ($50M–$500M revenue) hit the sweet spot on all three dimensions. Revenue is significant enough to support a meaningful licensing demand. The company is unlikely to have a dedicated patent litigation team. And the prospect of a 3-year district court litigation is genuinely disruptive in a way that makes settlement look rational even when the patents are weak.
The PTAB accessibility problem amplifies this. When IPR was reliably available, a mid-market company receiving a demand letter had a credible, low-cost path to challenging the patent’s validity. The settlement dynamic was different when the NPE knew the target could file a strong IPR petition. Under current PTAB conditions, that lever is significantly weakened. The expected litigation cost for a mid-market company that decides to fight has increased materially — which pushes more companies toward settlement even when the underlying patent is weak.
“The NPE targeting model is simple: find companies large enough to pay, small enough not to fight, and in a jurisdiction that moves fast. The PTAB shift has removed the most cost-effective defensive tool from the mid-market company’s arsenal at exactly the moment when NPE filing volumes are increasing.”
The PTAB Problem: Why Your Primary Defence Just Got Harder
Let’s be specific about what’s happening at the Patent Trial and Appeal Board.
Under Director Squires’ centralised institution process, IPR petitions are now reviewed by the Director’s office before the Board sees them. The result: institution rates have dropped from a historical average of around 62% to approximately 37% in 2025. Over 63% of IPR petitions are being denied — and the denials are disproportionately affecting defendants in parallel district court litigation, defendants asserting older patents, and defendants whose petitions don’t clear the elevated practical bar the Director’s review has imposed.
Three specific doctrines are driving the denials that matter most for NPE defence:
- The Fintiv framework. If parallel district court litigation is active and moving quickly, PTAB can — and increasingly does — deny IPR institution on efficiency grounds. A fast-moving EDTX docket combined with an NPE’s refusal to agree to a stay creates exactly the Fintiv conditions that lead to denial. The NPE files in EDTX specifically because the fast docket triggers Fintiv. It’s a deliberate strategy.
- The settled expectations doctrine. Patents in force for six or more years are increasingly receiving discretionary denials on the grounds that patent holders and licensees have built businesses around those patents and the PTAB should give weight to that reliance. Many NPE assertion campaigns use patents that have been held for years before assertion. The settled expectations doctrine specifically protects those patents from IPR.
- Elevated practical institution bar. The theoretical standard for IPR institution — showing a reasonable likelihood that at least one claim is unpatentable — hasn’t changed. The practical bar the Director’s review applies has risen significantly. Petitions that would have been instituted in 2022 are being denied in 2025.
The consequence: ex parte reexamination — filed anonymously, carrying no IPR-style estoppel, and available regardless of parallel litigation — is now the primary PTAB-adjacent tool for mid-market NPE defence. But ex parte reexam is slower, less targeted, and less reliable than IPR. It’s a fallback, not a solution.
What the NPE Playbook Looks Like — From Demand Letter to Trial
Understanding the NPE sequence helps you identify exactly where proactive preparation changes the outcome.
Stage 1 — Demand Letter: Asserts infringement of one or more patents, proposes a licensing rate, sets a response deadline (typically 30–60 days). Often sent to multiple companies simultaneously. The rate is set high enough to create settlement pressure but low enough to seem cheaper than litigation.
Stage 2 — Complaint Filing: Filed in EDTX or WDTX if the demand is ignored or rejected. The speed of case management in these venues is itself a pressure tool — early scheduling orders, tight discovery deadlines, and accelerated trial dates create cost and disruption.
Stage 3 — Discovery: Broad discovery requests designed to increase cost and disruption. For mid-market companies without dedicated litigation infrastructure, discovery burden is disproportionately painful relative to larger corporations with in-house litigation teams.
Stage 4 — IPR Petition: Filed within one year of complaint service. Under current PTAB conditions, institution is uncertain. If denied under Fintiv or settled expectations, the invalidity case has to work in district court instead.
Stage 5 — Settlement or Trial: The overwhelming majority of NPE cases settle before trial. The settlement amount is heavily determined by the defendant’s perceived invalidity position. A defendant with a credible, documented invalidity analysis negotiates from a materially different position than one that received the demand cold.
The critical insight from this sequence: the invalidity position you have on the day you receive the demand letter is the most important determinant of your settlement leverage. If you have a documented prior art analysis that credibly threatens the asserted patent, the NPE’s expected settlement revenue decreases. If you don’t, you’re negotiating from the NPE’s opening position.
How Proactive Infringement Monitoring Changes Your Defence Position
This is where proactive patent monitoring becomes one of the highest-return investments a mid-market IP team can make. The companies that respond most effectively to NPE demands are the ones that already know their invalidity position before the demand letter arrives. Monitoring does two specific things that transform the NPE defence calculus:
- It identifies assertable patents before the NPE does. Classification-based patent monitoring — tracking new grants in the technology sub-domains most relevant to your product — surfaces potentially assertable patents at the time of grant, not at the time of a demand letter. When a new patent issues in a classification that covers your product’s core functionality, monitoring catches it immediately. That gives you the window to run a validity pre-screen, build a prior art case, assess design-around options, or — in some cases — take a proactive licence on your terms rather than the NPE’s.
- It creates a documented prior art analysis history. An ongoing monitoring programme that has tracked a patent from its grant date creates a documented record of when potentially relevant prior art was identified and assessed. When the demand letter arrives 18 months after grant, that record is already built. The prior art analysis doesn’t need to be commissioned from scratch under a litigation calendar. It exists. And it can be deployed rapidly — within days, not weeks — as the foundation of the response.
The difference this makes in practice is significant. A mid-market company that responds to a demand letter within 30 days with a well-documented, credible invalidity analysis is sending a specific signal to the NPE: this target has prepared, this case will be contested, and the expected litigation cost on the NPE’s side is higher than it looked from the outside. For NPEs running volume campaigns with limited per-case economics, that signal changes the settlement calculus.
A company that receives the demand cold — no monitoring, no prior art on hand, no invalidity position — sends the opposite signal: easy target, fast settlement, move on.
How Our Patent Infringement Search Service Supports NPE Defence
Our patent infringement search service is structured around the pre-demand posture that changes the NPE defence calculus. For mid-market companies in technology sectors with high NPE assertion activity — software, AI, connected hardware, medical devices, wireless communications — we provide two engagement structures:
Ongoing classification-based monitoring. We track new patent grants in the CPC and IPC classification codes most relevant to your product’s technology space, running rapid validity pre-screening on grants that represent credible assertion risk. When a patent that could plausibly be asserted against your product issues, you know about it at grant — not in a demand letter 18 months later. The prior art analysis is built proactively, documented, and ready to deploy.
Rapid-response invalidity search for active demands. For companies that have already received a demand letter, we provide rapid-response prior art searches structured to support IPR petitions, ex parte reexamination filings, and district court invalidity contentions. Every search starts with claim construction under the relevant interpretive standard, covers 15+ databases including USPTO, Espacenet, JPO, KIPO, and NPL sources, and delivers element-by-element claim charts — the format that counsel can work with directly under litigation deadlines.
NPE filings are rising and PTAB is harder to access than ever. Our infringement monitoring and invalidity search service gives mid-market companies the pre-demand posture that changes the NPE defence calculus — before the demand letter picks your timing for you. → Contact Us
Conclusion: The Takeaway
Three rulings in one year have changed Japan’s patent landscape more than anything that happened in the previous decade. Record damages. The first SEP injunction in history. Cross-border digital enforcement. These are not incremental developments — they are structural shifts in what Japanese patent enforcement can achieve.
For patent holders, the consequence is a licensing market that is now worth engaging seriously — with enforcement tools that support the licensing conversation and a cultural framework that rewards the patience to build the relationship before presenting the commercial terms. The companies that act on this quickly have a genuine first-mover advantage in a market that most competitors haven’t yet mapped.
Japan has signalled, through its courts and through its JPO guidelines, that it wants to be taken seriously as a global patent jurisdiction. The patent holders that take it seriously first are the ones that will build durable licensing programmes in one of the world’s most commercially significant patent markets.
