In mid-January, legal data analytics firm Lex Machina released a Q4 2017 End of the Year Litigation Update that highlights trends in district court filing activities through the end of last year. Data indicates that, while various areas of intellectual property litigation activity are showing signs of consistency, certain trends are highlighting the effect of U.S. Supreme Court actions on patent-related legal activities. Specifically, 2017 saw another drop in the total number of patent lawsuits filed.
The fourth quarter of 2017 saw a total of 981 patent infringement cases filed in U.S. district courts, the second-lowest total for any quarter in 2017 and the third-lowest total for any quarter going back to the third quarter of 2011. The 4,057 patent lawsuits filed in district court through 2017 was the lowest total for an entire year since 2011. Although it may look as though patent infringement-related case filings may be declining, Lex Machina data scientist Brian Howard noted that it may be more appropriate to view current patent lawsuit filing levels as reaching a “new normal.”
“Patent filing activities in 2017 are down in aggregate from the numbers seen in 2016 but it’s not a dramatic drop off,” Howard said. “In 2016 and 2017, we’re seeing a level of patent filing consistency that we haven’t seen in a long time.”
The idea that patent filing activities have achieved some consistency is supported by a graph of monthly patent filing data which shows that, since December 2015, patent lawsuits have generally remained between 260 lawsuits and 460 lawsuits on a per month basis. This consistency in patent filing activities can be attributable at least in part to a lack of any major changes in how patent infringement cases can be filed in district courts across the U.S. The last major monthly spike of 848 cases in November of 2015, for example, coincides very closely with the abrogation of Form 18 for pleading patent infringement in district court, which may have induced more plaintiffs to speed up their timeframe for filing an infringement suit in order to take advantage of the use of Form 18. “This new consistency in patent filings doesn’t mean that plaintiffs aren’t paying attention to changes but that there are fewer events presenting the opportunity for that kind of arbitrage,” Howard said.
Although the number of patent infringement filings is not showing much volatility in recent quarters, there has been a sea change in terms of where patent lawsuits are being filed. Through the first half of 2017, the Eastern District of Texas had enjoyed a lofty position in the patent legal world, receiving more than one-third of all patent cases filed in U.S. district courts in many quarters. After May 2017, however, the dominance of Eastern Texas has largely given way to the District of Delaware mainly due to the effects of the Supreme Court’s decision in TC Heartland LLC v. Kraft Foods Group Brands LLC, a case which redefined the meaning of the legal statute regarding proper venue in patent infringement cases (28 U.S.C. § 1400(b)). A week-by-week graph of patent filings shows that, while Eastern Texas saw a much greater share of patent filings than Delaware in the months leading up to the TC Heartland decision, Delaware filings have topped Eastern Texas filings in almost every week since the SCOTUS decision. “The dominance seen in Eastern Texas appears to be over,” Howard said. “That said, it’s still a very asymmetric practice area where there’s tremendous concentration.” Although Eastern Texas only saw 12 percent of all patent cases filed in the fourth quarter of 2017, Eastern Texas and Delaware combined still saw more than one-third of all patent cases filed in that quarter.
The increased number of patent infringement filings in Delaware has led to a 71.1 percent increase in 2017 filings when compared to the number of lawsuits filed in that district during 2016. Although this percentage increase gives Delaware the largest share of overall patent filings, its not the largest percentage increase among all U.S. district courts in terms of patent suit filings. Compared to 2016, the Western District of Texas saw a 115.8 percent increase in patent filings during 2017 while the Western District of Washington saw a 108 percent increase year-over-year. In some cases, a large percentage increase in filings is attributable to a particular plaintiff bringing a large volume of case filings to a new district. For example, the District of Massachusetts, which saw a 60.3 percent increase in patent infringement filings between 2016 and 2017, had its increase largely driven by a single plaintiff, Hybrid Audio, LLC, which filed 37 cases out of the total 101 cases filed in Massachusetts during 2017.
One area of patent case filings which do seem to be experiencing a significant drop in activity is petitions for inter partes review (IPR) proceedings at the Patent Trial and Appeal Board (PTAB). IPR filings at PTAB dropped for the third quarter in a row down to 356 petitions in the fourth quarter of 2017, the second-lowest total of IPR petitions filed in a single quarter going back to the first quarter of 2014. Both the recent decline in IPR filings as well as the first quarter spike to 548 IPR filings could very well be attributable to the Supreme Court’s decision to grant writ to Oil States Energy Services, LLC v. Greene’s Energy Group, LLC. Depending on how SCOTUS rules in that case, it’s possible that the PTAB could be declared unconstitutional and there is the slight possibility that such a ruling could undo past findings of patent invalidity at the PTAB. “The typical lifespan of a PTAB trial is one year,” Howard said. “ From a game theory basis, if you’re trying to be smart about how the Supreme Court might rule, you might make sure that your IPR is in and settled before the Oil States decision comes out, or you might wait until after the decision when you have more certainty.” Until Oil States is decided, Howard noted that the decline in IPR filings would likely continue due to the lack of certainty at the PTAB posed by the case.
In other areas of IP litigation, trademark filings remained remarkably consistent with 953 case filings in the fourth quarter of 2017, representing a continuing and gradual decline in trademark cases notwithstanding a spike in 2014’s third quarter caused by a spate of filings in the District of Minnesota against the National Football League over the usage of player likenesses in league media. In copyright case filing activity, however, a new spike developed in the fourth quarter of 2017 related to file sharing cases, or copyright cases filed against anonymous defendants regarding the use of file sharing technology. File sharing cases jumped from 141 cases in 2017’s third quarter up to 367 cases in the fourth quarter, the largest such total for a single quarter in two years. Part of this increase involves the return of Malibu Media, an adult erotic film copyright owner, as a plaintiff; Malibu filed 92 file sharing cases in the fourth quarter of 2017 after filing zero cases in the third quarter.
“For practicing lawyers, being informed of the trends is important, especially during a time of increasing disruption,” Howard said. “Especially with Oil States and TC Heartland, it’s important that lawyers get the best data to see what’s happening in this new world.”