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The America Invents Act at Work – The Major Cause for the Recent Rise in Patent Litigation


Written by Ron Katznelson, Ph.D.
President, Bi-Level Technologies
Posted: April 15, 2013 @ 12:59 pm

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In a recent article on this blog, Gene Quinn reported on The Rise of Patent Litigation in America  in 2010, 2011 and 2012 and propounded the question: “what explains the significant uptick in the number of patent litigations initiated?”  Gene appropriately cautions readers from speculative conclusions that the rise in the number of lawsuits is somehow due to rampant patentee abuse of the legal system.  He appropriately rules out as a significant factor the fact that there are more patents being issued, as this has been a trend for years.  Notably, Gene is on to something as he suggests that “the prohibition against suing numerous defendants in a single case ushered in by the America Invents Act (AIA) is to blame for at least a portion of the increase that occurs after September 16, 2011.”  As shown below, it is ironic and highly likely that the AIA – the legislation touted by its proponents as the instrument to reduce the number of costly patent lawsuits – is in fact the major cause for their increase in the last three years.

Several factors created by the AIA caused, and will continue to cause, increased rate of lawsuit filings.  Several of these factors were building up even before passage of the AIA in September 2011, as patentees acted prophylactically or in anticipation of more adverse legal conditions at various phases of the AIA implementation.  Examples follow:

As codified by the AIA, 35 U.S.C. § 299 substantially curtails joinder of multiple defendants in a single case, requiring multiple lawsuits where one would have been filed before September 2011.  Moreover, because this provision raises the initial costs for patentees who assert their patents against multiple defendants, it is highly likely that a significant portion of the increase in the number of suits filed before September 2011 (the effective date of § 299) was due to patentees’ efforts to avoid the bifurcation of cases that name multiple defendants.  This provision will continue to contribute indefinitely to more lawsuit filings.

But there is more to the significant uptick in the number of suits filed in the last couple of years.  When such surges are observed, it is unlikely to be a mere inexplicable spontaneous fluctuation and a further inquiry into the nature of the surge reveals a fundamental change in patent litigation trends: the increase in lawsuit filings appears to be dominated by assertions of newly issued patents – a dominant trend that was not there before the AIA.

The graph in Figure 1 below shows a histogram of the age of asserted utility patents at the time that an infringement complaint is filed.  As this graph shows, filings during 2009 – the last year before the onset of the surge shown in Gene’s article – patents that were 1-5 years old were most frequently the subject of an infringement lawsuit.  In contrast, filings in 2012 were dominated by newly issued patents at an unprecedented factor of two compared to any other patent age category.

The only plausible explanation to this change that comes to mind is based on the relationship between Federal court actions and the AIA-created administrative proceedings of Inter Partes Review (IPR), Post Grant Review (PGR), and the Transitional Program for Covered Business Method Patents (TPCB), which is governed by PGR rules.  These proceedings are conducted at the Patent Office where there is no presumption of validity and where proof of unpatentability is by mere preponderance of evidence under the broadest reasonable claim construction – standards that are more detrimental to patentees than those in the Federal courts.

Figure 1. Percentage of asserted patents by patent age and by year during which suit was filed. Sources: Dennis Crouch, PatentlyO at http://j.mp/2009-Suits; and http://j.mp/FY2012-Suits.

A rational patentee would naturally act to minimize the opportunities for potential accused infringers to avail themselves of the benefits of IPR/PGR/TPCB by identifying infringers and filing suits much earlier, even prophylactically.  For example, the new statute at §325(b) codified by the AIA provides that if a patentee files suit for infringement within 3 months of the patent issuance, the court may not stay a motion for preliminary injunction on the basis that PGR (or TPCB) petition was filed or instituted.  Thus, ever since §325(b) first passed in a bill even before passage of the AIA, this provision would have motivated patentees (particularly of Covered Business Methods) to identify infringers as soon as a patent issued and file a suit within 3 months so as to preserve the patentee’s preliminary injunction power.  This incentive clearly remained after passage of the AIA and is most likely to be the major cause for the disproportional share of actions against accused infringers of “zero-old” patents during 2012 as depicted in Figure 1 above.  It is worth noting that contrary to allegations made by the anti-patent crowd that Non Practicing Entities (NPEs) are to be blamed for the uptick in recent lawsuit filings, the dominance of suits based on “zero-old” patents in 2012 suggests that these allegations cannot be credible at least for that year because NPE’s mostly acquire older patents and in any event, the preliminary injunction rights secured by early filing are foreclosed on NPEs anyway because of the eBay decision.

Incentives to advance the filing of patent infringement suits before the AIA enactment in September 2011 also grew substantially due to AIA’s §315(b) which provides that no IPR can be instituted if the petition is filed more than one year after petitioner is served a complaint alleging infringement of the subject patent.  Thus, in order to inoculate any particular existing infringed patent against the threat of IPR challenge, patentees simply had to advance filing lawsuits earlier than September 2011, which was one year before any party could institute an IPR proceeding which came into effect in September 2012.

We read daily about the alarming rise in patent litigation.  These are no different than the complaints that led to the enactment of the AIA.  It is ironic and perhaps predictable that it is the AIA that appears to be the dominant cause of the recent major uptick in patent lawsuits.


9 comments
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  1. Ron-

    Very interesting. Pursuant to 37 CFR 42.101, an inter partes review cannot be filed more than one year after the date on which a defendant is served with a complaint alleging infringement of the patent. So a quick filing starts the 1 year inter partes review countdown. I wonder how much that influences the decision as well?

    -Gene

  2. Gene,
    You are correct. The regulation you cite simply implements the statute at §315(b) that I discuss above.

  3. Thanks Ron – we are in agreement here.

  4. Ron-

    Yikes. I did what I complain that others do. I read through your discussion of 325 and jumped to the comments without finishing the article. Mea culpa.

    I think this really adds to the dialogue. It seems as if all of this data is proof that the system is NOT broken at all, but acting exactly as designed. The question, therefore, needs to shift from “is the system broken” to “is this intentional design by Congress good or bad”?

    -Gene

  5. Excellent points Ron. Particularly “As codified by the AIA, 35 U.S.C. § 299 substantially curtails joinder of multiple defendants in a single case, requiring multiple lawsuits where one would have been filed before September 2011″

    Thanks for taking the time to look into this.

  6. I have been told that it makes relatively little practical difference to defendants whether they get sued seperately or get sued along with numerous other defendants in the same case. I.e., the AIA non-joinder provision has increased the number of patent lawsuits, but that does not equate to the relevant number, which is the number of companies being sued.
    The ability to obtain preliminary [pre-trial] injunctions in patent cases is so rare [even more so now that the majority of patent suits are by NPE’s] as to seem highly unlikely to have influenced law suit filing dates, as argued here.
    The increased ratio of newer patents to older patents being sued on as reported here is very interesting, and worth further study. Could some of that perhaps be due to the long PTO delayed issuances of many internet “business method” patents?

  7. Paul Morgan: “The ability to obtain preliminary [pre-trial] injunctions in patent cases is so rare [even more so now that the majority of patent suits are by NPE’s] as to seem highly unlikely to have influenced law suit filing dates, as argued here.

    Paul, do you have facts to back up your claim that the ability to obtain a preliminary injunction is not valuable enough in the bargaining process to have an influence on suit filing dates? Regardless of the reason for these filing dates, how do you reconcile the substantial rise in “zero-old” patent assertions with the alleged “fact” that the majority of patent suits are by NPE’s? By any definition of an NPE, their portfolios are dominated by patents that have been acquired from prior patentees and are therefore typically asserted more than one year after patent issue; NPE’s virtually have no “zero-age” patents to assert.

    Could it be that your claim is wrong because it’s underlying premise – that “the majority of patent suits are by NPE’s” – is an inaccurate sweeping portrayal based on the loose, biased and undefined term “NPE”?

    You ask: “Could some of that perhaps be due to the long PTO delayed issuances of many internet ‘business method’ patents?”

    This appears highly unlikely. Long PTO delays for internet business method patents are not new. The pendency data shown previously on this blog from Patent Advisor suggests that there were no appreciable surges of business method patent grants in 2012. These art units did not suddenly change their allowance trickle to a flood of grants. In contrast, the AIA was not there before – now it is a factor.

    I have an open mind and will entertain other explanations supported by substantial evidence; I just do not see any other credible explanation for the uptick of “zero-age” patent assertions other than the provisions of the AIA described above. And for reasons explained above, these assertions are hardly by NPE’s.

  8. Ron, as indicated, I found your reported change in the AGE of patents asserted in recent patent suits very interesting, and I do not have an explanation for it, just questions. Traditionally most patent suits have been on older patents, which makes sense where it takes some years for products of others allegedly utilizing patented inventions to be developed and become big enough markets to be worth suing. But perhaps that is no longer true in this era of high speed product developments in electronics and software, and relatively low speed patenting due to patent application backlogs?
    As to statistics on WHO is filing the majority of patent lawsuits nowadays, studies on that are sumarized in the Law360 article of April 09, 2013, and in another article published on this blog. I have not seen any contrary reports so far. But the reported increase in the number of PE’s selling their patents to NPE’s aka “monitizing” organizations, for them to assert, in return for a percentage of their recovery and/or cash, may be a factor.

  9. Very interesting.

    I feel that Paul Morgan’s questions are more than just mere questions and in fact reflect the one side of my view on the http://www.ipwatchdog.com/2013/04/15/patent-monetization-entities-filed-58-of-lawsuits-in-2012/ article (and it’s not the “good” side).

    On the other hand, I think Ron (with his usual perspicuity), cuts right through the smoke screen.

    While ALL court actions should be “optimized” (a term that I would use to include both the concepts of being more cost effective as well as being brought with a modicum of merit), the drumbeat of “you are bad because you are trying to enforce rights” really should be looked at with a much more critical eye. The point being, that a focus on who is bringing suit is simply the wrong focus to have. My blessed grandmother’s adage comes to mind: when you point your finger at someone, your have three fingers pointing back at you.