Patent Litigation: Shifting Winds, Shifting Fortunes

Patent Litigation: Shifting Winds, Shifting Fortunes

Here’s what you need to know… from PwC’s 2015 Patent Lit Study

So what’s new in patent litigation? This year, what isn’t new?

That’s what my colleagues and I set out to uncover in PwC’s just-released 2015 Patent Litigation Study. Now in its 10th year, the Study points to several key trends which will likely touch any company whose intellectual property is key to their business strategy, if not survival. Which means, essentially, almost everyone.

While certain factors — notably concentrations of cases in certain district courts, industry success rates, and share of cases decided by juries versus the bench — have stayed relatively constant over the last decade, other data dynamics point to potentially significant changes in outcomes and strategies.

And as many trends as are uncovered by the data we’ve compiled and analyzed, there are (at least) as many judicial and legislative question marks which will likely profoundly change the landscape for plaintiffs and defendants, practicing and nonpracticing entities (NPEs) alike (especially the latter), for years to come.

With several impactful US Supreme Court rulings last year alone — and, this year or next, the potential for both additional court action and a new Congressional patent reform bill — the stage is set for a landmark year for all parties involved with patents and patent litigation.

Our study breaks down all the numbers and trends — both short-term and longer-term — and seeks to uncover the key issues for companies facing patent litigation. We also track and analyze the critical area of appellate outcomes in patent litigations from the Federal Circuit.

Here’s a quick summary of this year’s top findings for those in a hurry:

A dramatic decrease in patent litigation — while rate of patent growth continues and time-to-trial extends

After five straight years of robust growth, the number of patent lawsuits filed in 2014 dropped by 13%. The Supreme Court decision in Alice Corp. v. CLS Bank was likely responsible for this sharp reversal — and other patent cases now before the Supreme Court may well further affect litigation trends.

However, as the pre-Alice years’ crush of cases continues to grind its way through the courts, a slight lengthening in time-to-trial is evident, now up to just over 2.4 years. As the case decline takes effect, expect to see time-to-trial shorten.

In contrast, the number of patents granted by the US Patent and Trademark Office continued to grow steadily, increasing by 14% over last year. Despite the divergence in 2014, there continues to be a very high correlation (approximately 95%) between the numbers of patent litigations filed and patents granted.

Median damages award continues overall downward trend — as gulf between PE and NPE damages widens

Once again, there were no billion-dollar cases last year. In 2014, the median damages award was $2 million — its second-lowest point in 20 years, and the continuation of a trend seen since 2000. But it wasn’t bad news for every party. Despite the overall downward trend, awards granted to NPEs have grown steadily over the last decade, with the median NPE award approaching 4.5x that of practicing entities over the last five years.

Jury vs. bench — a knockout decision

Two-thirds of all cases were decided by juries in 2014. Not only have patent holders experienced higher trial success rates with juries than with the bench over the last two decades, the median jury award over the last five years has reached a staggering 31x greater than median bench award. Both NPEs and PEs have been more successful with juries than with bench trials.

Reasonable royalties remain the most frequently awarded type of damages — more than double the rate of lost profits awards, which are not even available in cases where the plaintiff is a NPE.

Consumer products leads in number of decisions, biotech/pharma scores highest damages

Ten industries collectively accounted for almost 90% of identified decisions. While consumer products-related patents accounted for the largest share of identified decisions over the last two decades, their median damages award is low compared to the nine other most active. Over the same time period, the biotech/pharma industry has the highest median damages award ($21.4 million), followed by telecoms ($19.7 million) and medical devices ($19.4 million). No other industry comes close.

NPEs buffeted by shifting winds

While the median damages award for NPEs has been significantly higher than that for practicing entities over the last five years, the latter group enjoyed higher success rates and slightly shorter median time-to-trial.

And there could be headwinds ahead for NPEs. Patent-eligible subject matter for computer software will be constrained following the US Supreme Court Alice Corp. v. CLS Bank 2014 decision. What’s more, following a pair of other 2014 Supreme Court decisions, there is a higher likelihood of the losing plaintiff’s having to reimburse the defendant’s costs, which will likely have a dampening effect on future NPE patent claims. A new Congressional patent reform bill is also possible, which could further encourage fee-shifting to plaintiffs who bring cases not reasonably justified.

IP shows no sign of diminishing in strategic interest for companies — and patent litigation will continue to be a high-stakes arena and a shifting target. For the last decade, my colleagues and I have been collecting and analyzing critical data – extending back to the 1980s — on US patent infringement actions, and every year the results of our annual study seem more important than the previous year’s.

I invite you to explore our 2015 study in full — and reach out to me (christopher.c.barry@us.pwc.com) for a deeper discussion of what these shifting winds might portend for your organization.

A partner in PwC’s US Forensic Services practice, Chris has worked on over 90 intellectual property matters and testified at trial as an expert witness over 60 times on various forensic accounting, valuation and damages issues, many of them patent infringement, trademark or trade secret cases.

A sought-after speaker, Chris also publishes on a wide range of IP-related matters. He is a CPA licensed in California and Massachusetts. Chris is also Certified in Financial Forensics, by the AICPA and a member of the Licensing Executives Society.

Kevin Rieffel

Your favorite attorney's favorite patent attorney - Counsel at Haley Guiliano LLP

8y

Hi Chris, I appreciate the work your team did for the study and wish I had seen your blog post last week after I read the study. Great insights with regard to Alice and the fee-shifting SCOTUS cases! My only question is why doesn't your team attribute some of the down-turn to later-effects of the AIA, like IPRs. Perhaps they are an important reason for some pre-Alice plateauing or down trends?

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