Lex Machina’s Q2 litigation update shows trends influenced by TC Heartland and Oil States

On July 18th, legal data analytics firm Lex Machina published a 2017 Second Quarter Litigation Update to give an updated outlook on trends developing in the worlds of intellectual property, securities and antitrust litigation. According to the report, there are a couple of developing trends in IP litigation which may be in response to patent cases which have been appealed recently to the U.S. Supreme Court.

During the second quarter of 2017, a total of 1,138 patent cases were filed at the U.S. district court level, an increase of 18 percent when compared to first quarter filings. However, that uptick in patent suits between the first and second quarters of 2017 repeats a trend which has played out since 2013. Compared to the second quarter of 2016, patent case filings were actually down 7 percent on a year-over-year basis. From the beginning of 2016 through the end of 2017, U.S. district courts have seen some of the lowest levels of patent litigation in district courts on a quarterly basis.

Interestingly, the Lex Machina update shows a significant decline in case filings in the Eastern District of Texas (E.D. Tex.) correlating strongly with the Supreme Court’s recent decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, a case which restricted the statute on proper venue for patent infringement cases. 293 patent cases were filed in E.D. Tex. during 2017’s second quarter. That accounts for 26 percent of all patent cases filed in district court. That percentage share of overall patent filings is actually the lowest percentage filed in E.D. Tex. going back to the third quarter of 2014. Lex Machina data scientist Brian Howard notes that, when looking at a monthly comparison of patent case filings, E.D. Tex. case filings dropped significantly in May, the same month the TC Heartland decision came out, and have remained low since. “Texas had been chugging along until you get to TC Heartland, and then it just switches,” Howard said.

Howard added that it appears that the District of Delaware (D. Del.) has been the main beneficiary of the reduced case filings into E.D. Tex.. During 2017’s second quarter, 215 cases were filed into D. Del., 19 percent of all cases filed that quarter, and case filings have been higher in D. Del. than in E.D. Tex. since the May 22nd decision in TC Heartland. Looking at the parties filing cases into E.D. Tex., Howard noted that, while overall filings were down, it does not seem to have significantly affected the percentage of entities which are limited liability companies (LLCs) and other firms which are sometimes referred to as non-practicing entities (NPEs) or patent assertion entities (PAEs). So while TC Heartland may have affected case filings into E.D. Tex., it doesn’t seem to have greatly affected overall volume or the makeup of entities filing patent suits.

One sector of plaintiffs which has seen a decline in filing activity is among high-volume plaintiffs, entities involved in ten cases within 365 days where they’re either a plaintiff filing infringement or a declaratory judgement defendant. Since the first quarter of 2015, filing activity from high-volume plaintiffs are down compared to prior years. It’s important to note that recent totals on high-volume plaintiffs may end up increasing as Howard notes that many of the LLCs filing recent patent suits only need a few more filings to reach high-volume status.

Another significant development in case filing activity is also being seen at the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB). 2017’s second quarter only saw 287 petitions for inter partes review (IPR) proceedings, the lowest total for a single quarter going back to the first quarter of 2014. This trough immediately follows a peak of 548 IPR petitions filed in the first quarter of this year, the highest total of filings in a single quarter since the enactment of the America Invents Act (AIA) of 2011, the legislation creating IPRs and covered business method review (CBM) proceedings at PTAB. This peak-and-trough effect might be a natural consequence of the decision by SCOTUS to grant writ in Oil States Energy Services LLC v. Greene’s Energy Group, LLC, a case which will decide on whether the PTAB is constitutional. “This screams to me that there is this same kind of tidal wave analogy as is true with other events affecting the patent system,” Howard said. “There’s a lot of people who want to get their case in before the deadline.” With certiorari being granted to Oil States this summer, that could lead to oral arguments being heard next spring with a decision coming sometime in the summer.

Compared to every other area of IP litigation, trademark litigation could be considered rather boring. There’s been a very gradual decline in trademark litigation from a high of 1,131 cases filed in the third quarter of 2010 down to 762 trademark cases filed in the second quarter of 2017. Howard’s theory on the relative calm in trademark litigation reflects the fact that trademark owners have a reduced ability to be permissive about filing suits once they’ve been made aware of infringement. “If you don’t sue somebody who you are aware is infringing, it hurts your mark,” Howard said. There is one spike in trademark litigation up to 1,437 cases filed in the third quarter of 2014 but that spike is mainly made up of trademark cases filed against the National Football League by former players in the District of Minnesota (D. Minn.).

In copyright litigation, we may be seeing the end of significant levels of file sharing suits, infringement suits brought by copyright owners against anonymous defendants involving allegations of file sharing through technologies like BitTorrent. Such cases have declined dramatically from a high of 902 cases filed in the first quarter of 2015 down to 151 such cases filed in 2017’s second quarter. During the quarter, there were zero file sharing cases filed by erotic film company Malibu Media LLC, one of the most litigious file sharing plaintiffs in recent years. “By far, they’ve been the largest single filer of file sharing cases,” Howard said. “To see them stop is certainly an interesting development.” In terms of other copyright cases, 2017’s second quarter saw an uptick in activity up to 701 cases; 607 non-file sharing cases were filed in 2017’s first quarter.

Lex Machina’s second quarter litigation update also includes statistics on securities and antitrust litigation which Howard acknowledged might not overlap strongly with IP cases, although some antitrust cases do involve standard essential patents (SEPs). However, Lex Machina has recently launched an analytics service related to commercial litigation including breach of contract and other matters which do have a significant overlap with IP litigation. “A patent practitioner might get a case and wants to see how long the case is likely to take in the context of patent cases,” Howard said, “but it might be better to think of the case as a contract case… For litigators, having that extra module gives you different findings to consider and an ability to contextualize a case in different ways.”


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