Patent litigation is declining….or is it increasing?

Pricewatherhouse Cooper’s 2015 Patent Litigation Study, entitled A change in patentee fortunes made several observations about the shifting state of patent litigation in the United States:

  • That patent lawsuits dropped by 13% in 2014 representing a significant shift from the annual increases over the prior years. The Supreme Court’s decision in Alice Corp. v. CLS Bank is widely considered responsible for this decline as it has increased the rate of invalidity holdings in courts and reduced the rate of patents issuing for software and software applications.
  • The median damages award in patent infringement litigation has continued its downward trend, with 2014 representing a second low point in the past 20 years and the gap between damage awards granted to non-practicing entities (NPEs or “patent trolls”) continues to widen over those granted to practicing entities, with NPE’s enjoying damages awards of 4.5 times those of the practicing entities over the past five years.
  • The median jury award is 31 times greater than the median bench award over the past five years. No doubt this is behind the reason that juries decide 67% of the patent infringement cases.
  • Biotechnology and pharma industries have the highest median damages awards, followed by telecommunications and medical devices. Consumer products leads the raw number of patent infringement cases.
  • The time to trail is getting slower with the median growing to 2.4 years from initiation of suit.
  • 52% of the appealed cases are modified in some manner and when the Federal Circuit addresses a damages award, 80% of those decisions are modified.
  • Where a patent litigation case is filed matters. Five District Courts top the list of patent-holder favorable jurisdictions (E.D. Va., Del., E.D. Tex., W.D. Wis., and M.D. Fla.).

Robert F. Kennedy said in his Day of Affirmation Speech at the University of Capetown, Capetown, South Africa on June 6, 1966: “There is a Chinese curse which says, “May he live in interesting times.” Like it or not we live in interesting times.” Nearly fifty years later now, we continue to live in interesting time; like it or not.

The expotential growth of Inter Partes Review (“IPR”) filings and the almost certain growth in Post-Grant Review proceedings will likely continue to fuel downward pressure on patent litigation in the courts. As Jason Rantanen observed in Patently-O: Patent Litigation Update, when taking IPRs into the calculus of overall patent litigation, i.e., judicial and administrative litigation, there was actually a slight increase in the overall number of patent cases filed. Jason observed:

  • After falling off in 2014, pending district court patent litigation has plateaued for the last few months.
  • While patent case filings in the district courts experienced a dip in 2014 (but note the April surge), filings from the first six months of 2015 are up again. If the current trend holds, FY 2015 will see about as many district court patent case filings as 2013.
  • Since April 2014, challengers have filed over 100 inter partes reviews per month. Two ways to think about this data:
    • On the one hand, if IPRs are leading to stays in district court proceedings, the rise in IPRs might suggest that the number of active patent cases over the past year is actually lower than the first figure indicates since some of these cases may be stayed while the PTAB activity plays out.
    • On the other hand, if we think of IPRs as essentially litigation proceedings involving patents, then the dip in patent cases filed in 2014 is not quite as great as it first appears and the first few months of 2015 are taking us to new heights in case filings. In fact, when both district court filings and IPRs are counted together, the amount of new patent case filings during court FY 2014 actually rose slightly, from 6656 new cases in 2013 to 6753 in 2014. (As of May 30, 2015, there have been a combined 4708 new case filings; if this trend holds, there will be over 8000 new IPR + District Court filings for fiscal year 2015).

The declining rate of patent litigation seems to be, in fact, a mirage. While the rate of patent infringement litigation in the District Courts may be declining, when the administrative litigation, i.e., IPR, is factored, the overall rate of patent litigation appears to be increasing, albeit at a slower rate than in previous years. The data suggest that parties are increasingly shifting their patent challenges to IPRs rather than litigating patent validity in the courts. While there remains a vital and valid role of judicial patent infringement litigation, this shift from judicial patent infringement litigation to administrative patent litigation that challenges the validity of the issued patent is a healthy vital sign that will continue to test the validity and, therefore, the ultimate value of patents issuing from the U.S. Patent and Trademark Office.

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