Patent litigation returning to pre-2013 levels, says Lex Machina

There’s a narrative which exists about the patent world in which patent litigation has grown to incredibly high levels, burdening innovators with excessive and expensive litigation which diverts resources away from research and development. Some have used the growing number of patent cases to continue beating the drum on “patent trolls,” while others consider the phenomenon to be a naturally occurring consequence of recent legislative changes to the U.S. patent system, most notably in the form of the America Invents Act (AIA) of 2011.

With many story lines abounding, a data-based view of the current intellectual property landscape is always useful. Recently, legal analytics firm Lex Machina published an IP litigation trends report for the second quarter of 2016. Although the quarter saw an uptick in patent litigation from the year’s first quarter, there is some reason to believe that such litigation is currently in a downward trend.

During 2016’s second quarter, plaintiffs filed a total of 1,282 patent infringement cases in U.S. district court. This is a 33 percent increase in the 958 patent cases filed during the first quarter but data suggests that the second quarter tends to see the highest level of infringement cases over all other quarters according to Lex Machina data scientists Brian Howard. “We would expect a jump up from the first quarter,” he said. The first quarter was also a trough for patent infringement cases after last November’s massive number of 847 patent cases, just more than 100 cases less than the entire docket for this year’s first quarter. “The rise we’ve seen puts this year on track with 2011 or 2012 rather than the last two years,” Howard said.

In fact, the first quarter and the second quarter of 2016 each saw fewer patent infringement cases than 11 out of the last 14 quarters according to charts published with the report. 2016’s first quarter had the least number of patent infringement cases since the third quarter of 2011. That’s the quarter in which the AIA was enacted, increasing the number of patent cases filed by plaintiffs who could no longer sue multiple defendants in one lawsuit under the new law. The low number of cases filed in 2016’s first quarter is likely a result of the incredibly high number of cases last November which were spurred on by the abolition of Form 18 used to plead infringement, but the suggestion that we’ve gotten close to pre-AIA litigation levels is notable.

The second quarter continued to see the dominance of the U.S. District Court for the Eastern District of Texas (E.D. Tex.) as the venue of choice for infringement cases. The 476 cases filed in E.D. Tex. during the first quarter was almost as much all other districts outside of the top five, combined. That total caseload was more than triple what was seen in the U.S. District Court for the District of Delaware (D. Del.), which took second place with 134 cases in the second quarter, just over 10 percent of the quarter’s entire patent infringement caseload in the U.S.

Additional charts we received from Howard highlight another interesting trend regarding court venue. In data separating high-volume plaintiffs filing 10 or more cases within a year from low-volume plaintiffs filing less than 10, it seems like there’s a clear preference for E.D. Tex. as a venue for such high-volume plaintiffs. Nationally, the number of patent cases brought by high-volume plaintiffs was about 100 cases less than the number of infringement cases brought by low-volume plaintiffs for 2016’s second quarter. In E.D. Tex., however, the majority of the caseload there involved high-volume plaintiffs. In essence, the plaintiffs who are filing the most patent infringement lawsuits have identified E.D. Tex. as a very friendly venue. High-volume plaintiffs were also more active in D. Del., but only held a slightly larger proportion than the caseload brought by low-volume plaintiffs.

At the Patent Trial and Appeal Board, the second quarter marked a return to business as usual for inter partes review (IPR) filings. The 416 IPRs filed in the most recent quarter is squarely within the range seen from 2014’s second quarter until 2015’s third quarter, when IPR filings generally fell between just shy of 400 filings up to about 460 filings per quarter. That had declined to 375 IPRs in 2015’s fourth quarter and then down to 335 IPRs in this year’s first quarter before the second quarter jump. As Howard notes, PTAB filings are in a sense derivative of district court activity as an upswing in demand letters and lawsuits typically encourages filings for IPRs and other review proceedings. “I think it’s reasonable to expect that PTAB will somewhat track what’s going on in a loose sense in district court,” Howard said. He added that it’s not outside the realm of possibility that this level of PTAB activity will continue, a viewpoint which would undermine the notion that PTAB’s recent decline in activity has “flushed the hairball” of bad patents out of the U.S. patent system.

A slow yet fairly steady decline in trademark litigation continued through 2016’s second quarter. The 882 trademark cases brought during the recent quarter was the highest since 2015’s third quarter, but outside of that, it’s the lowest level of trademark litigation going back to before the first quarter of 2009, the oldest quarter which the Lex Machina IP report shows. The only major irregularity during this downward trend is a spike in litigation during 2014’s third quarter. However, removing a spate of 450 trademark cases brought by former football players against the NFL for the use of their likenesses, the third quarter of 2014 falls much more into line with the rest of the graph. Howard noted that one reason why trademark litigation has remained so consistent is that, unlike patent litigation where a patent holder can observe infringement for some time without bringing suit, trademark holders have a greater impetus to file suit because they have a duty to preserve the mark; unchallenged infringement of a trademark can actually hurt a plaintiff in court in a way that it doesn’t affect patent owners.

Copyright litigation during the second quarter proved to be a bit more interesting as file sharing cases, which made up most of the copyright infringement caseload as recently as 2014’s fourth quarter, plummeted to 249 cases in the second quarter. That total was less than half of the 626 other copyright infringement cases filed during the quarter. As Howard notes, the drop in file sharing cases could be attributable to legal issues at Malibu Media, previously the largest filer of such file sharing cases which is now suing its former legal counsel for professional negligence and breach of fiduciary duty.

“The global takeaway from all of this is that it’s important for litigators and in-house attorneys to pay attention to the global scale to be out ahead of shifts,” Howard said. The report could be helpful to attorneys looking to focus on a specific district or in identifying sectors where activity is slowing up, such as in copyright file sharing cases. “Being the first to know carries a real-world advantage beyond an academic interest,” Howard said.