IP litigation research firm Lex Machina has recently released a 2015 year in review report looking at the world of patent litigation. Back in January, we here at IPWatchdog had reported on some patent litigation trend highlights reported by Lex Machina, which had developed over the past year, including increases in the volume of patent infringement suits filed as well as copyright infringement activity and the high volume of case filing activity taking place in the U.S. District Court for the Eastern District of Texas (E.D. Tex).
The recent patent litigation report discusses a wider scope of activity, including information on the most active parties in infringement cases, the patents being asserted and case timing, among other aspects of the legal environment of the intellectual property world. Among one of the more interesting aspects of the recent report is a changing of the guard atop the listing of top defendants in patent infringement cases. Through 2015, Samsung Electronics America, subsidiary to the South Korea-based tech giant Samsung Electronics Co. (KRX:005930) overtook the spot for the top defendant in new cases with 64 appearances as a defendant last year. Previously, this spot had been held by multinational tech company Apple Inc. (NASDAQ:AAPL), headquartered in Cupertino, CA; it was a defendant in 57 patent infringement cases through 2015. Despite the widely publicized smartphone patent wars taking place between these two tech developers in recent years, it seems that recently the two have achieved a ceasefire according to data provided by Lex Machina data scientist Brian Howard. “Apple and Samsung have not been adverse to each other in 2015 in patent litigation,” Howard said. It is possible, Howard mentioned, that the two tech giants have been co-defendants on the “same side of the v.” It was also pointed out that the number of pharmaceutical companies on the list of the top 10 patent infringement defendants had jumped between 2014 and 2015, from one company to four.
On the list of top plaintiffs in patent infringement cases, one thing that jumps out right away is that every single one of the top 10 is a limited liability corporation (LLC). According to Howard, that’s likely the second or third year in a row that this trend has continued. 2015 is the second straight year in which the list of top plaintiffs has been led by eDekka LLC, a patent holding company, which at times has been accused of exhibiting trolling behaviors. Last December, E.D. Tex. Judge Rodney Gilstrap ordered eDekka to pay the attorney’s fees of many defendants which the company had sued, calling eDekka’s behavior “exceptional” and finding that the claims of a patent used by eDekka to sue more than 200 companies were related to unpatentable subject matter.
The year’s most frequently asserted patent was eDekka’s U.S. Patent No. 6266674, entitled Random Access Information Retrieval Utilizing User-Defined Labels. eDekka asserted the ‘674 patent in court a total of 101 times during the course of 2015. In fact, this was the patent which Judge Gilstrap held to be unpatentable in the December 2015 eDekka case. Issued in 2001, the patent claims a method for storing information provided by a user by receiving and storing user input information, designating the information as data while it’s received, designating a portion of the information as a label, traversing a data structure and providing an indication of a location in the data structure and associating the label with the data. Other than eDekka’s ‘674 patent, each of the top 10 asserted patents were asserted at least 50 times, and each of the top eight asserted patents had more than 50 assertions. According to Howard, of the 4,326 total U.S. patents asserted last year, there were 1,440 U.S. patents asserted twice or more in American courts.
The Lex Machina patent litigation report also provides at least an indication of how recent U.S. Supreme Court decisions have had a real effect in the American intellectual property environment. One graph included in the report allows us to draw a strong correlation between the Supreme Court’s decision in Alice v. CLS Bank, a decision which found that computer-readable media storing program code was unpatentable subject material pursuant to Section 101 of U.S. patent code, and a higher number of patents invalidated under Section 101 since the case. In the year and a half leading up to the end of the second quarter of 2014, about the time that the Alice decision was handed down, there were 26 U.S. patent invalidations under Section 101; since the third quarter of 2014 and through the end of 2015, there were 173 invalidations under Section 101. Howard points out that the increase in Section 101 invalidations does lead the Alice decision slightly, so the pace of invalidations increased just before the decision regarding software innovations was handed down. Another chart shows that this increase in Section 101 invalidations is not reflected in patent invalidations under other sections of U.S. patent code, although invalidations under Section 102 for novelty did spike in the first quarter of 2015 with 20 such cases.
Another interesting data point is the high percentage of likely settlements on patent infringement suits terminating between 2009 and 2015. Nearly three-quarters of patent litigation cases terminating during those five years reached a likely settlement, a total of 17,189 cases. The next largest subset was the 15.7 percent of cases which reached a procedural outcome. Over the course of those five years, claimants won suits more often than claim defendants, although in 2015, claim defendants won 4.2 percent of cases while claimants won 3.7 percent of their cases.
Between 2000 and 2015, Lex Machina reports that a total of 49,057 patent litigation cases had terminated, resulting in a grand total in damages of nearly $17.5 billion. A breakdown of types of damages awarded to parties shows that of this total, a little over $10 billion was awarded to parties through reasonable royalties, dwarfing damages for lost profits or other types of damage claims. As Howard explains, lost profits were more often awarded than reasonable royalties between 2000 and 2004, although that script has largely flipped in the decade since.
The report also includes a chart identifying the top U.S. district courts by the ratio between case volume and compensatory damages. Atop this list was the U.S. District Court for the Northern District of California (N.D. Cal.), which between 2005 and 2015 has awarded more than $2.1 billion in compensatory damages over the course of 2,169 cases filed. Following behind them was the U.S. District for the Southern District of California (S.D. Cal.), U.S. District Court for the Southern District of New York (S.D.N.Y.), and followed in fourth place by E.D. Tex. Median damages for cases terminating between 2000 and 2015 showed a different story, however, as that list was topped by the District of Delaware, which had a median award of $10.46 million in 40 cases with damages. The Eastern District of Texas follows in second with a $7.68 million median damages award and in third is the U.S. District Court for the Eastern District of Virginia (E.D. Va.), with a median award of $2.98 million. After that, there’s a steep drop and every other district is showing a median damages award of less than $1 million.
According to Howard, one of the more valuable pieces of information to legal teams involved in patent litigation cases is the case timing data indicating how long an infringement case takes to reach a conclusion in different U.S. district courts. “It’s not the sexiest stuff in terms of news grabbing headlines,” Howard said, but noted that it was one of the more practical pieces of information for budgeting and daily decision making among legal counsel. The national median waiting period to reach a claim construction hearing was 1.5 years for cases filed between 2005 and 2015 and also reaching a claim construction hearing between 2012 and 2015. This 1.5 year median is also seen in D. Del., but E.D. Tex. has a shorter median waiting period of 1.3 years to a claim construction hearing; in the U.S. District Court for the Central District of California (C.D. Cal.), the median waiting period for a claims construction hearing was only one year. For cases filed during that 2005-2015 time period and reaching trial between 2012 and 2015, the national median waiting period of 2.4 years to get to trial had a stronger correlation with median waiting periods for individual district courts.