NPEs Continue to Play Large Role in Patent Litigation

by Foley & Lardner LLP

The annual patent litigation study recently released by PricewaterhouseCoopers LLP (PwC) sets forth some interesting trends in patent litigation, including that cases involving non-practicing entities (NPEs) continue to account for a large and increasing amount of patent cases. This may bolster recent calls by some to curb abusive patent litigation, which many largely attribute to certain types of cases involving NPEs. In 2013, cases involving NPEs accounted for the majority of new patent infringement cases, continued to be concentrated in a relatively small number of districts, and had higher damages awards even though damages overall are decreasing in patent litigation.

According to the report, the number of patent infringement cases increased by 25% in 2013 to a record filing of 6,500 new cases. NPEs accounted for 67% of these filings, compared to only 28% in 2009. However, only 20% of decisions issued in 2013 involved NPEs, which may reflect a tendency for these cases to settle or be dismissed prior to trial, summary judgment, or other dispositive rulings.

These cases were concentrated in several districts; five district courts accounted for 41% of all decisions involving NPEs. Notably, the Eastern District of Texas rendered 12% of those decisions. The Eastern District of Texas also had one of the highest NPE success rates (46%). Other jurisdictions with a high number of NPE decisions included the Northern District of Illinois, Southern District of New York, Northern District of California, and the District of Delaware.

Although median damages awards are decreasing overall in patent litigation, damages awarded to NPEs are increasing. Over the last four years, NPEs were awarded damages averaging more than three times the damages awarded to practicing entities. Median damages for for-profit NPEs were slightly higher than awards for non-profit NPEs (such as universities). Awards to individuals who asserted, but did not practice, patents were significantly lower than those to both for-profit and non-profit NPEs

In addition to these statistics, the study also included some interesting statistics regarding patent litigation in general, although no doubt influenced by NPE litigation. In terms of favorability to patent holders, the top four districts remain the same compared to prior years: Eastern District of Virginia, District of Delaware, Eastern District of Texas, and Western District of Wisconsin. However, the fifth spot in the rankings went to a new district, the Middle District of Florida. Although the Middle District of Florida had the lowest amount of damages awarded ($322,927), it averaged a relatively fast time to trial (1.80 years) and a high success rate for patent holders (54%).

The judges with the highest number of patent cases on their dockets included Judge Sue Robinson (Del.), Judge Gregory Sleet (Del.), Judge Leonard Davis (E.D. Tex.), and Judge Leonard Stark (Del.). These judges also yielded damages awards significantly higher than the median. Judge Robinson and Judge Stark recently released new guidelines and procedures for patent litigation, likely due to the high volume of patent cases on their dockets.

The study also looked at trends in certain industries and found that the consumer products industry had the largest percentage of patent decisions. Additionally, patent holders in the consumer products, biotechnology/pharmaceutical, medical devices, and computer hardware/electronics industries had higher success rates than the overall median. The telecommunications industry, in particular, had the highest median damages award at $22 million.

New to the study this year were statistics related to appeals of cases to the Federal Circuit. The study found that 71% of district court cases were appealed, and 76% of those decisions were modified in some way.

Finally, the study found that the number of issued patents continued to grow, with 300,000 patents granted in 2013. This continues the trend of high correlation between the number of patent cases filed and the number of patents granted by the United States Patent and Trademark Office. For more detail, the full report of the study can be found here.

Although many of these statistics may come as no surprise to practitioners, these statistics do provide a clearer picture of the role of NPEs in the changing landscape of patent litigation. With more cases filed by NPEs each year and the increasing amount of damages awarded to NPEs, these findings will likely influence litigation strategy depending on the parties, the jurisdiction, and potential damages involved. The continued upward trend in NPE cases may also provide additional support for recent and forthcoming efforts to introduce new legislation aimed at curbing abusive patent litigation.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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