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The reasons for the drop in US patent litigation

Michael Loney

It is not just Alice driving the patent litigation decline in the United States. Managing IP has this week published some data we hope will help inform the public debate around patent litigation and non-practicing entities in particular

As a number of sources – such as Lex Machina and Unified Patents – have reported, patent litigation fell in the third quarter of this year.

Source: Docket Navigator

We conducted in-depth data analysis to look beyond the headline figures to assess how non-practicing entities (NPEs) are being affected, and which companies have reduced their activity the most. Yesterday we revealed how individual NPEs are changing their patent lawsuit activity, and today we have followed this up by analysing how a sample of high-profile defendants have benefited and how law firms are being affected (this data is available to subscribers and triallists only – sign up for a free trial if you don’t have access already).

Although the data varies between the different companies, our analysis on a broad level confirms that overall patent litigation is down. Figures taken from Docket Navigator reveal that patent case filing was down 11% in July, 25% in August, 42% in September and 34% in October, when compared with the same months in 2013.

This drop in litigation has led some to claim that the Supreme Court’s Alice v CLS Bank decision released on June 19 has caused NPEs to scale back their litigation. However, while the Alice decision certainly has important ramifications for NPEs – and for patent litigation in general – our analysis of individual NPEs activities reveals that litigation among those NPEs that were most active in 2013 has been down all year, not just after June 19.

"The PTAB has served to shift the balance of power between plaintiffs and defendants in patent litigation. Plaintiffs are now wary that the patents they are asserting may be challenged at the PTAB."

This suggests that other influences may be at play. One big factor on NPEs’ decisions to file or not file lawsuits is the surprising popularity of the Patent Trial and Appeal Board (PTAB). This has served to shift the balance of power between plaintiffs and defendants in patent litigation. Plaintiffs are now wary that the patents they are asserting may be challenged at the PTAB. This not only makes litigation a potentially much longer process – with a PTAB trial meaning cases could be stayed for up to 18 months – but NPEs could end up losing their patents altogether.

All of this means that the data for the two remaining months of the year will be keenly watched to determine whether the decline in litigation we are seeing is a long-term trend or a blip while companies pause to take stock of what Alice means to them and how they need to change strategy.

It is not only the patent community that will be taking note. Lawmakers will also be following how the figures are changing. The decline in litigation has come at an interesting time because the push for patent reform looks likely to resume following the Republicans seizing the Senate earlier this month.

With Alice and PTAB proceedings possibly leading to a reduction in litigation it could be argued that patent reform is now less urgent than when it was being debated last year. If the decline is a long-term trend it becomes harder to claim that NPEs – or patent trolls if you prefer – need to be tackled urgently through legislation now. Conversely, it could be argued that 2013 was a peak year because plaintiffs were waiting to see how the America Invents Act reforms panned out and then filed litigation once there was more clarity.

What do you all think? Is the fall in litigation a long-term trend? What is driving it? And how will NPEs respond? Let us know by posting comments at the bottom of this blog or joining the discussion in our LinkedIn group.


Article Comments

Because many companies want to compromise with each other.

Kemal Ayyıldız Nov 26, 2014

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