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March 1, 2007

Patent Enforcement Trends

PricewaterhouseCoopers released its 2007 survey of patent enforcement. It found less business method action, more alternative dispute resolutions, and, owing to rising costs, the first decline in litigation filings in 16 years.

The survey is based upon 2,300 cases in federal district courts and the Court of Appeals for the Federal Circuit (CAFC); 2,193 district court cases, 350 CAFC cases (includes patent & trademark cases).

In 1991, 1,171 infringement complaints were filed, rising to 3,075 in 2004. 2005 witnessed the first decline in 16 years, to 2,720. Aron Levko, IP practice leader at PricewaterhouseCoopers, attributed the decline in parts to a decline in alternative dispute resolution mechanisms, the high cost of litigation, and a dip in business method patents.

The drop in litigations may be short lived. The October 2006 Supreme Court ruling in MedImmune v. Genetech let licensees test validity by seeking declaratory judgments without necessarily breaking a licensing agreement. And, with a dropping dollar, thanks to abysmal Bush administration governance, foreign imports that infringe patents may increase.

Plaintiffs win damage awards in about 35% of all cases filed. That win rate increases to 61% when a summary judgment motion has been considered and the case continues.

Patent holding plaintiffs win about 34% of all cases, while alleged infringers have a 55% win rate. The burden of proof is not slight. The Western District of Wisconsin was most favorable to plaintiffs: overall 63%, and 91% after summary judgment. Other districts with high plaintiff win rates include: Eastern District of Texas, Eastern District of Virginia, Central District of California, and the District of Delaware (the corporate registry capital). It sucks to be a plaintiff in the Eastern District of Michigan, which eked a 12% win rate overall, 33% after summary judgment. Other districts for plaintiffs to avoid: District of Kansas, Southern District of Florida, Southern District of New York, and the U.S. Court of Federal Claims.

Jury awards tend to be higher than those by judges. Though already common practice, plaintiffs increasingly request jury trials. Juries decided 19% of cases in the 1980s, and 38% in the 1990s. Between 2000 and 2005, cases went to juries for damage award determination 53% of the time. 1990-2005, the median jury award was $4.8 million, while the median bench ticket was $1.1 million. Since 2000, the ratio has risen to a five-times multiple, with 2000-2005 jury award of $8 million median, $1.6 million median from the bench. Levko thinks the juries have become more aware of how important patents are to business, and more insensitive to big damages. There has been a recent dip, however: the median award leveled off from a high of $7.4 million in 2001 to an average $4 million 2003-2005. The number of awards has increased: comparing 2000-2006 to the 1990s, up 59%, and a 91% jump from the 1980s.

Since 2000, reasonable royalties were the basis of 65% of damage awards, lost profits 32%. In the 1980s and 1990s, lost profits accounted for 78% of damage awards. Lost profits are more complex and costly to figure; companies get squeamish about disclosing proprietary financial data, and more suits are being brought by patent holders who are not competitive in the marketplace.

Posted by Patent Hawk at March 1, 2007 12:23 PM | Litigation


I have always wondered how they compute for Profit Loss in these litigation.

Posted by: Patent Enforcement force at May 11, 2009 6:18 PM