“The precipitous decline in patent cases commenced beginning in 2016 is likely due to a capitulation by many patent owners who finally started to come to terms with the fact that many legacy patents were simply not going to survive the Federal Circuit’s restrictive interpretation of the Alice/Mayo framework.”
Is patent litigation out of control? Has patent litigation ever been out of control? The answers to these questions largely depend upon your point of view, and as with most complex topics, the truth is nuanced. What is not nuanced are the numbers reported in the annual reports from the Administrative Office of the United States Courts, which shows that the number of patent cases that reach trial are extremely few. In fact, the number of cases that make it to the final pre-trial conference represents a small subset of the number of cases that are filed.
I initially started this research in 1997, while working on my Master’s thesis, which dealt with patent litigation and the use of alternative dispute resolution.
The real growth in patent litigation over the last 40 years has taken place before trial. Between 1980 and 2020, the number of patent cases reaching trial ranged between a low of 63 (in the COVID-19 affect FY 2020) but was otherwise at a low o 64 (in FY 2019) and a high of 164 (in FY 2016). All are a remarkably low number of cases that proceed to trial given the number of patent lawsuits commenced. For example, 6,497 patent cases were commenced in 2013, some 5,686 patent cases were commenced in 2014 and some 5,564 patent cases were commenced in 2015. So, just like all other areas of litigation, very few cases proceed to trial. See Figure 1 (below).
Indeed, if you focus on the period prior to enactment of the America Invents Act in 2011, which occurred just two weeks before the end of FY 2011, the number of trials remained remarkably constant, averaging 100.03 trials per year for the previous three decades. In FY 2012, the number of trials spiked to 139, spiked again to 164 in FY 2016 and stayed high at 151 in FY 2017, before dropping to 99 in FY 2018, to 64 in FY 2019, and 63 in FY 2020.
Figure 2 (above), which relates to the number of patent cases terminated, shows a visually compelling surge in the number of patent cases terminated beginning in 2011 and remaining above the trend line through 2018. Two major events seem likely to account for this surge, which peaked in 2014. The Supreme Court’s decision in Alice Corp. v. CLS Bank, 134 S.Ct. 2347 (2014) was delivered in June 2014. This was the fourth in a series of patent eligibility decisions by the High Court that all retreated from the expansive view of patentability previously announced by the Court in Diamond v. Diehr, 450 U.S. 175 (1981) and Diamond v. Chakrabarty, 447 U.S. 303 (1980). As a result of the culmination of the patentability cases from 2010 to 2014, motions to dismiss became commonplace in patent litigation where software patents, medical diagnostics or DNA were the subject matter.
The second event that explains the dramatic surge in terminated cases beginning in 2011 is the establishment of the Patent Trial and Appeal Board (PTAB) and the three new post grant proceedings at the United States Patent and Trademark Office used by defendants to challenge issued patents. Inter partes review (IPR) and covered business method (CBM) review were the two proceedings primarily responsible for challenges, since they were available to challenge patents issued under the pre-AIA first inventor to file regime. In the early days of the PTAB, it was a killing field survived by few patent owners, who would have their litigations stayed in federal court pending the outcome at the PTAB.
Also noteworthy is the data displayed in Figure 3 (above), which shows a significant uptick in the number of patent litigations initiated in 2016 and 2017, which can almost certainly be attributed to the significant uptick in patent cases commenced immediately following the enactment of the AIA. As a part of the AIA, Congress wanted to make it more difficult for patent owners to sue large numbers of defendants in a single case where there might not be a true nexus of issues, although the same patent might be alleged to be infringed. As a result of making it more difficult to sue large numbers of defendants in a single case, patent owners predictably filed more lawsuits, which was erroneously used as evidence to suggest patent litigation was out of control, when the outcome was a specific design of the AIA (i.e., to have smaller, more focused patent infringement lawsuits).
The precipitous decline in patent cases commenced beginning in 2016 is likely due to a capitulation by many patent owners who finally started to come to terms with the fact that many legacy patents were simply not going to survive the Federal Circuit’s restrictive interpretation of the Alice/Mayo framework regarding patent eligibility. These patents written for a different era did not have the sufficient disclosure to satisfy the newly announced and retroactively applied expectations. This, in combination with an overactive PTAB, dramatically decreased the number of patent infringement lawsuits.
Over the last five years, the number of patent cases commenced in federal district court has reverted to historical norms, even as the number of patents issued continues to grow.