“More patentees now have the resources to wage meaningful litigation campaigns with sophisticated litigation counsel. Gone are the days of quick settlements; your company needs to be prepared for a lengthy battle.”
A company’s knowledge of IP trends and its own internal IP strategy is crucial to a wide range of issues the company may face—including litigation, business expansion, and retaining its talent. Being prepared for IP issues your company may face externally, as well as developing a strategic plan internally for your company’s IP portfolio, will better position your organization on multiple fronts. Below are 10 reasons your company should pay attention to these IP trends.
1. Patent litigation is on the rise.
Patent litigation actually increased during the COVID-19 pandemic. While some thought litigation might decrease during these uncertain times, that has not been the case for patent litigation. Rather, there has been a steady uptick of cases since 2019—to the tune of 15%. With the current uptick in patent litigation that shows no signs of abating, it is unlikely your company will be unscathed by IP litigation. It is therefore important to be aware of and understand the current threats and issues in IP litigation before your company is hit with just such a suit. As detailed below, many of the jurisdictions where these types of suits are filed are fast-paced, and there is little time to waste getting up to speed before defending against these suits.
2. The Western District of Texas.
If your company is sued for patent infringement, there is a good chance it will find itself in the Western District of Texas. The Western District currently has approximately 20% of all patent infringement cases and shows no signs of slowing down. In this jurisdiction, which has a fast-paced schedule and a record of limited transfers to other districts, companies need to be ready to litigate right away. Engaging with experienced counsel familiar with this district and its procedures in advance of getting hit with a suit can be invaluable to ensuring litigation success.
3. Litigation funding has increased.
There has also been a marked increase in litigation funding flooding the market. Possibly driven by some extremely large awards in recent years, billions of dollars have flowed into the market for patent litigation cases. This means that even more patentees now have the resources to wage meaningful litigation campaigns with sophisticated litigation counsel. Gone are the days of quick settlements; your company needs to be prepared for a lengthy battle. Indeed, many suits are brought by a small number of law firms that represent multiple non-practicing entities (NPEs), so companies should actually be wary of quick settlements, as they may only make them a target for another suit before the ink has dried on the settlement papers.
4. There is an escalation in NPE litigation.
Not unrelated to the increase in litigation funding is the increase in NPE litigation. Like patent litigation generally, NPE patent litigation remains undeterred by the pandemic. Patent lawsuits filed by NPEs were up 11% in 2021. Some are backed by the litigation funders mentioned above, and many of these NPEs have experienced counsel that are ready and willing to take the cases through trial. Trial is thus more and more likely to happen, given demands for settlement in the millions or more. The defense costs of responding to NPE litigation can be hefty. It is important that you are aware of the risks and the major players in the NPE space (including the law firms that represent them), so that your company can be prepared and respond appropriately to the individual NPE. It is also important to engage counsel who is familiar with these NPEs and their playbooks and can guide your company to the best resolution.
5. There is increased NPE litigation at the International Trade Commission.
Companies are not getting a respite from NPE litigation at the International Trade Commission (ITC). There has in the past been a perception that the ITC is unavailable to NPE entities because they do not import or sell products within the United States. Section 337, which governs ITC actions, contains a requirement that a party seeking relief in the ITC must demonstrate the existence of a “domestic industry” in the United States utilizing the patents, as well as that there have been substantial investments made in that domestic industry. However, in recent years the ITC has shifted to be more permissive on the domestic industry requirement. NPEs have gained access to the ITC with arguments that they are “licensing” entities that meet the domestic industry requirement. Importantly, litigating at the ITC involves a very fast and intense schedule, leading to a final hearing approximately 9-10 months after the filing of the complaint. There is little time for defense counsel to get up to speed in these types of cases; it is important that you and your counsel are already very familiar with your company’s business and IP, and to retain counsel who is experienced in ITC investigations and has the appropriate resources to defend these fast-moving cases.
6. ITC decisions are not given preclusive effect in district court.
Even if you prevail at the ITC, district courts do not give preclusive effect to the decisions of the ITC. Thus, patentees are not precluded from pursuing the very same claims against you in federal court that they tried (and even lost) at the ITC. Indeed, the fast pace and broad scope of discovery at the ITC may give a plaintiff an advantage at the district court, having had a chance to test their theories and, likewise, test your defenses. They will then get a second bite of the apple before the district court to advance different or more attuned theories, having had the benefit of discovery from you at the ITC. It is important that you and your counsel are aware of this dynamic when considering whether to seek to stay district court litigation during ITC cases and how to respond if/when the case in the district court proceeds.
7. Your competitors are building patent portfolios.
It is also important to consider your company’s IP strategy, because a robust patent portfolio can ward off competitor lawsuits. Before bringing a lawsuit, a competitor should be doing its due diligence and evaluating the risk of potential counterclaims from potential targets. According to the World Intellectual Property Organization, international patent applications filed via WIPO’s Patent Corporation Treaty (PCT) are up in 2021. In light of this increase, even if patents have not been a part of your company’s strategy previously, your company should consider the value a portfolio can lend to avoiding litigation with competitors. The doctrine of “mutually assured destruction” may aid your company in avoiding some of these lawsuits—and ensuring you have fodder to fight back if targeted.
8. IP programs can increase employee engagement and morale.
Strategically building IP assets is also useful outside of the litigation context. Many companies offer an incentive program for employees to disclose inventions that can be evaluated by the company (typically by a committee created for this purpose) for potential submission to the U.S. Patent and Trademark Office (USPTO) for patent protection. These programs typically offer various rewards and recognition to employees based upon whether their ideas are ultimately used in patent applications, and whether those applications are granted by the USPTO. By implementing this type of program, you can not only increase your company’s IP asset portfolio, but also improve the morale and engagement of the talent in your organization. Studies have shown that programs that reward employees positively impact employee engagement, increase employee happiness, and improve employee relationships. Keeping your organization’s talent engaged is thus an additional benefit that can be obtained from a patent program—in addition to the benefit of expanding your patent portfolio.
9. Increase innovation and expand business.
Encouraging a patent program among your employees to protect your IP is also a useful way to expand your company’s business. Employees have first-hand knowledge of customer needs and gaps in the market. Creating an outlet for employees to share their ideas, and potentially be rewarded, may lead to new lines of business and revenue for your company. Furthermore, patents have inherent value to the company that can be used to create additional revenue opportunities. For example, patent licensing can create an additional income stream for your business. Likewise, patents can be sold or leveraged as an asset to secure additional capital for expanding your organization. If there are patents in your organization’s portfolio that you do not currently practice, licensing or sale of these patents can be a resource to provide additional capital to your company.
10. Be ready for future deals.
Lastly, becoming knowledgeable about IP can benefit you when it comes to business deals your organization may be a part of. For example, traditional due diligence may overlook or misjudge IP value in acquisitions. By knowing to look for these key assets, you can ensure that your company, if it is the one being acquired, is not sold for less than it is worth. Conversely, as the acquiror, a better awareness of the value of IP may mean an acquisition has a better value than it would otherwise have because of intangible IP assets. There is also, of course, the opportunity to divest IP assets after an acquisition that can gain additional revenue. Knowing a target’s IP portfolio in a deal can help you plan ahead as an acquiror and maximize the “bang for your buck” in an acquisition.
Be Aware, Stay Equipped
In sum, the world of IP is fast-paced and always shifting. Being aware of the key issues in IP today and how to best protect your company against external threats, as well as maintaining a thoughtful strategy for your organization’s internal development of IP, will make your organization better equipped to handle whatever challenges may come its way.
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