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Patent Litigation Statistics: 1980 – 2010


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
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Posted: August 2, 2011 @ 12:02 pm
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A patent owner has the right to prevent others from making, using or selling a product or process covered by an issued and valid United States patent.  Likewise, a patent owner can prevent the importation of products covered by an issued and valid United States patent.  In order to enforce these patent rights it is necessary for the patent owner to bring an action in either a United States Federal District Court, or an action in the International Trade Commission (ITC). The ITC, however, only has limited jurisdiction; the ITC may issue either a exclusion order to prevent importation or a cease and desist order. Federal District Courts have the ability to issue orders prohibiting further infringement and issue monetary awards to compensate for damages suffered by the patent owner as the result of patent infringement.  Increasingly patent owners will simultaneous file a lawsuit in Federal District Court and file an action at the ITC, forcing an alleged infringer to fight the same battle in multiple forums.

It is unfortunate that there is such redundancy in the litigation process, with the Federal District Court and the ITC having overlapping jurisdiction in many cases.  If you add reexamination to the mix the Federal District Courts, the ITC and the United States Patent and Trademark Office are doing nearly the same thing reviewing the validity of claims. But is patent litigation out of control?  A look at the numbers relating to patent litigations in the Federal District Courts over the past 30 years may surprise you.  Patent litigation in the Federal District Court is really where the action is at since that is where patentees must turn to seek money damages for infringement, and the statistics don’t suggest there is the “curse” of litigation that many might want you to believe.

So there is definitely an increase in the number of patent cases filed in the Federal District Courts between 1980 to 2010, but is this “out of control”?  If you take a look at the number of utility patents issued between 1980 and 2010 you would expect an increase in the number of patent litigations simply because of the increased number of patents granted (see below).

And if you focus on the number of utility patents filed (see below), which demonstrates an enormous increase in the interest in obtaining a patent the fact that more patents are litigated is a completely logical conclusion and does not demonstrate a patent litigation process out of control.

In trying to determine whether patent litigation is out of control it is worth looking at the numbers of patent cases terminated and how they are terminated.  What becomes clear is that there is no statistically relevant increase in the number of trails over the last 30 years even with a significant increase in the number of cases commenced.  The following charts show that while actual trials remains largely constant over the last 30 years there has been growth in the number of patent litigations terminated without any court action, as well as increase in cases terminated with court action and before pre-trial and the number of cases terminated between pre-trial and trial.

What does this show?  It suggests that there has been an increase in the number of patent cases commenced for strategic purposes, which corresponds to cases being terminated prior to court action.  In the patent world if the defendant reasonably fears being sued the defendant can initiate litigation in a forum of their choosing, which is not typically where the patentee would prefer to litigate.  For that reason increasingly lawsuits are filed without anyone ever knowing they were in the cross-hairs.  The first time you are likely to learn that someone thinks you are infringing is when you are served.

These charts also show that the real growth in patent litigation is after the court gets involved but prior to the pre-trial conference.  So there has been discovery and almost certainly a Markman ruling relating to the meaning of the claims.

What these charts also show is that the overwhelming majority of patent litigation ends with settlement, not a verdict. This becomes even more clear when you focus in on the total number of patent trials each year, which has averaged 99.9 trials per year since 1980. With such constant numbers of trials in the face of significant filing growth it is impossible to justify the claims that patent trials are out of control.

More to come picking up on these patent litigation statistics.  Stay tuned!

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Posted in: Gene Quinn, IP News, IPWatchdog.com Articles, Patent Litigation, Patents

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

7 comments
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  1. Mr. Quinn,
    I’m a big fan of yours and believe you do important work in our field. To further our mutual thinking, I want to challenge a couple of your assumptions:

    (1) “And if you focus on the number of utility patents filed (see below), which demonstrates an enormous increase in the interest in obtaining a patent the fact that more patents are litigated is a completely logical conclusion and does not demonstrate a patent litigation process out of control.”

    Or, entities are filing for more patents, so they can then use them to litigate and further abuse the patents system. The increase in applications may not be organic or natural but motivated itself by a desire to sue.

    (2) An increase in the number of cases filed, but not going to trial evidences: “It suggests that there has been an increase in the number of patent cases commenced for strategic purposes, which corresponds to cases being terminated prior to court action.”

    Not quite sure i know what “commenced for strategic purposes” means (you suggest maybe correlates with DJs?)… To me it suggests cases filed with no intention of going to trial. Which is an abuse of the patent system per se, according to Judge Davis (see Parallel Networks). That data suggests, to me, extortion: cases filed to get early settlement money.

    So, I am not sure I would draw the conclusions you are drawing from the data.

    Rachael

  2. It almost goes without saying – almost but not quite as I do not see a cumulative active patent graph, but the true and most telling statisitic would be these instances of litigation per active patent.

    This number would show that not only is litigation not a runaway problem that is a drumbeat behind the villifying or patents, but that litigation rates have been in decline.

    Such a stat would deflate the rampant “troll’ rhetoric.

  3. Is it not a sign of a well-functioning patent litigation system, that 95% of cases settle after discovery and Markman. When the facts are known, and the claim has been construed, what’s left to litigate?

    Even better would be if, statistically, few cases were to be modified on appeal. Then, fewer cases would go to appeal. But for that to happen requires that claim construction be done “right first time” Is that too much to ask?

  4. Rachel-

    Thanks for your comments.

    I suppose it is possible that there is an increase in the number of patents to be used as weapons in litigation to further abuse the patent system, but that isn’t what I see or hear. From what I can tell the driving force for growth in patent applications is the desire to obtain defensive portfolios and the need to obtain patents to obtain funding. From what I can tell those who are abusive of the patent system typically are acquiring patents after they have been issued, not filing them and waiting the 4+ years to obtain a patent to institute a lawsuit. What are you seeing that calls this into question?

    As far as filing without intent to go to trial, I don’t know how that can be characterized as an abuse of the system. If the rules give you the ability to do something how can the exercising of that right be abusive? You can file any lawsuit and you have 120 days to serve. So you can file a lawsuit, try and work out a settlement and if no settlement can be obtained you serve. By filing first prior to negotiations you effectively have a first filed action that cannot be supplanted by an after filed DJ. Whether this is ideal or not, the rules do allow this to happen. Similarly, if you do serve the court won’t get involved until a settlement conference, so the case could still be settled prior to that. I don’t see this type of strategic use of filing a complaint to be abusive per se. What would be abuse if this type of behavior combined with no due diligence to determine whether there was infringement in the first place. But if there has been due diligence and there is reason to believe there is infringement ongoing I don’t see anything wrong with using procedure to your advantage. Finally, I don’t know how intent to go to trial is relevant to abuse given that upwards of 96% of patent litigations settle. Lawsuits create leverage, and I see nothing wrong with that. Where it becomes abuse in my mind is when there is an attempt to create leverage when there is no substantive rationale to support the existence a right of redress.

    By the way, I enjoy your Twitter feed!

    -Gene

  5. Gene,

    I don’t think the data allows us to discuss our positions (where they diverge, which is only in a couple of places). What we really need is a way for the court to parse out early in the litigation which cases have merit and which don’t. Unfortunately Twombly means little in patent cases and so the parties ((defendants) are left spending often considerable sums to get out of cases that never should have been filed in the first place. Unfortunately, we don’t have any real data how often that happens because parties, well, settle.

    That is why I, and others, … and courts, have bene trying to figure out ways to separate the wheat form the chaff. See, e.g., http://www.patentlyo.com/patent/2011/07/reverse-bifurcation-1.html
    or http://mcsmith.blogs.com/eastern_district_of_texas/2011/07/reverse-bifurcation-requested-in-patent-case.html

    (BTW, the citation of that last link is not self-promotion; it goes to show how widely recognized the problem of patent-litigation-as-extortion is).

    My primary point was you could draw either conclusion (yours or mine) from the “data” and so I question its value. Still, we all need to kepe looking, as the problem is a recognized and real one. See id.

    Rachael

  6. >> “The increase in applications may not be organic or natural but motivated itself by a desire to sue.”

    Actually there have been several other periods in U.S. history when a huge increase in patenting took place, and each corresponded to a major technical and industrial renaissance — exactly as we have been in the midst of since 1980 and the birth of digital technology revolution.

    In the late 1880s, the average number of new patents issued jumped an astonishing 56 percent over previous years. This period, of course, corresponded with the huge advances made in the emerging telegraph, telephone, and electric power industries.

    The next big increase in patent issuances began around 1902 and lasted until about 1916 or so, when the average number of patents granted each year actually doubled — a 100 percent increase! This was a time of great advances in the emerging auto and aircraft indfustries, and of course in the technologies of mass production which came to define the age.

    Patenting levels then remained relatively stable until the post-war era and the emergence of the semiconductor, aerospace, computer and advanced materials (plastics!) industries, when the number of yearly patent issuances jumped another 50 percent or so to 60,000 or thereabouts each year.

    Which is where they stayued until the 1980s, which saw a huge spurt — with another Internet- and telecom-borne spurt in issuances beginning in the mid-to-late 1990s.

    Now, to be sure, cerrtaion institutional changes in the 1980s — the Dole-Bayh act enabling the patenting of university research and the formation of the CAFC to handle patent cases — did strenghten patent rights. And this, presumably, made patents more attractive to innovators.

    But nowhere is there any evidence that the strategic use of patent litigation as a business model or competitive weapon was a significant driver of the increase in patenting. For one thing, the surge in patenting began at least a decade before the emergence of so-called patent “trolls” in the 1990s.

    In any event, this issue was decisively settled by Josh Lerner and Samuel Kortum in their 1997y Harvard workling Paper entitled “Stronger Protection or Technological Revolution: What’s Behind the Rcent Surge of Patenting?” (available on ssrn.com at no cost).

    Their conclusion? “It appears that the jump in patenting reflects an increase in U.S. innovation” and “changes in the management of research.”

  7. [...] Then there is the question about whether what would have otherwise been a prior user was abandoned and whether the defense was raised unreasonably. Raised unreasonably? Have you read any Answers to patent infringement complaints lately? Not only is everything denied, or deferred because there is not sufficient information at the moment to confirm or deny, but every defense that can ever be conjured up is listed. Can’t you just see some of those, shall we say over zealous litigators, just throwing a prior user rights defense into every Answer? Of course you can and you know it is likely to happen, if not virtually guaranteed.  After all, the overwhelming percentage of patent litigations settle anyway.  See Patent Litigation Statistics: 1980 – 2010. [...]