Patent Reform Doesn’t Prevent Rise in Patent Litigation?

This is one of those stories that will make you scratch your head in utter disbelief.

On November 20, 2012, ALM, which is an integrated media company with brands that include The American Lawyer, Corporate Counsel, Law.com and The National Law Journal, issued a press release titled: Patent Reform Fails to Prevent Litigation Spike, Says Corporate Counsel Law Firm Survey.  Interested, I took the bait.

The first line of the press release says: “Although the America Invents Act (AIA) that took effect September 15, 2011…”

Now I am not one who normally quibbles about what could be a harmless typographical error — from time to time I make my fair share (and then some) of mistakes. But the AIA took effect on September 16, 2011, not September 15. A minor point no doubt, but once I read the rest of the story I wondered whether that was really a mistake, typographical error or more indicative of ALM writing about something that they just don’t understand.

The premise of the press release was that the AIA, which sought to reduce patent lawsuits, had failed to deliver.  In fact, ALM says that the AIA “in some ways helped fuel, a dramatic increase in caseloads at the most active litigation firms…”  Of course, it is far from clear that a rise in caseloads at the most active litigation firms necessarily means that patent litigation is on the rise. It could be that the major law firms are simply attracting a larger share of the work.

Notwithstanding, the survey reveals that counsel are of the opinion that the AIA caused a rush to the courthouse before the law went into effect, which seems objectively accurate.  It is also said that the AIA makes it much more difficult for patent trolls to file group lawsuits, which is likewise objectively accurate. The fact that the AIA allows for fewer omnibus lawsuits with dozens (or hundreds) of defendants is lamented because that has caused “a jump in individual suits when group suits were no longer allowed.”

I fail to see how the increase in individual suits suggests in any way, shape or form that the AIA has failed. Because there was a spike in litigation leading up to September 16, 2012, and because the AIA by its express terms requires more patent infringement cases of smaller scope, patent reform has failed.  Unbelievable! How can something fail when it is working as intended?

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Fewer omnibus lawsuits with massive numbers of defendants was the goal. Indeed, that is EXACTLY what was intended. This is EXACTLY what large corporations wanted, asked for and received. Everyone knew what was going to happen. If anyone believes that patent reform failed it is because they were not paying attention to the terms of the legislation as it moved through Congress. The AIA is working exactly as planned for and predicted. It was never designed to prevent lawsuits, but rather to make it more expensive for patent trolls to sue all of the infringing defendants. Frankly, the AIA imposed what really was already the law upon certain district courts that seemed to ignore the nexus requirement for bringing so many unrelated defendants together in the same lawsuit. It was to prevent these massive, one-size-fits-all patent litigations that hamstrung defendants who would be required to collectively defend where there was no common nucleus of operative facts. The AIA intended to force district courts to do what the overwhelming majority of district courts were already doing. Whether that is a good thing is open to debate I suppose, but to suggest that it has failed is completely erroneous and misses the entire point. The AIA is working exactly as it was designed and exactly for the intended purpose.

There is a great irony that the large entities got their wish with respect to patent litigation reform, but yet they now seem to want to blame the AIA. Please!  That is absolutely ridiculous. Did these people really believe that patent owners were not going to seek redress for ongoing infringement? Did they think that requiring individual or small group defendants would give them the ability to infringe with impunity? Patent litigation was never going to go away.  The numbers involved in terms of damages are staggering and infringement is widespread in many industries. It was foolish to believe that patent owners would simply forego enforcement and tolerate infringement.

At least this press release does acknowledge the reality in the industry that the rise of patent litigation is not completely due to patent trolls and other non-practicing entities.  “Industry parties were very active last year in suing one another over smartphone, semiconductor, pharmaceutical and other life-sciences patents,” says the release. Indeed, much of the growth if not the overwhelming majority of the growth in patent litigation is being fueled by large practicing companies suing each other.  If you ask me that is why the blue-chip patent litigation firms, such as Fish & Richardson and others are seeing such an increase in their case loads.

But wait, there is more! The survey that lead to the headline that patent reform has failed to curb patent litigation related to cases that were active at the end of 2011 and did not include those before the International Trade Commission or appellate courts.

Yes, this survey that seemingly proves that patent reform efforts have been an abysmal failure made that assessment based on about 100 days of data post passage of the America Invents Act.  Still, the survey is being called the 2012 Patent Litigation Survey. In reality, this is a 2011 Patent Litigation Survey that seems to prove nothing more than the AIA, for better or for worse, is doing exactly what it was designed to do.