Brandon Gee, The Daily Record Newswire
A quick glance at the raw data would seem to strongly support the contention that litigation by so-called "patent trolls" - entities that hold a patent for a product or process, but rather than develop it, make questionable claims of patent infringement and use the threat of costly litigation to extort licensing fees or settlements - is increasing at an alarming rate.
According to statistics included in the new Goodwin Procter publication "NPE Litigation: A Tactical Guide for Practitioners," the total number of patent infringement lawsuits rose from 2,287 in 2009 to 5,411 in 2013, and the share of those lawsuits filed by non-practicing entities increased from 640, or 28 percent, in 2009, to 3,608, or 67 percent, in 2013.
Some commentators contend, however, that the alarm is unwarranted due to the anti-joinder provisions of the America Invents Act, which was signed into law in September 2011 and prevents non-practicing entities from filing a single patent infringement lawsuit against a very large number of defendants.
So, is the increase in patent infringement litigation real, or do the numbers merely reflect the fact that trolls now must file separate lawsuits for each defendant they target?
In an attempt to control for the impact of the America Invents Act's anti-joinder provisions on the numbers, Goodwin's report also looks at the number of operating companies that have been sued by non-practicing entities over time, which still reveal a general upward trend: There were 2,812 such defendants in 2009 and 3,716 in 2013.
Goodwin IP litigator and study co-author Michael G. Strapp says that, taken together, these statistics and others reveal that there has been a dramatic shift in patent litigation nationwide that has "some really important implications" for lawyers.
It should be noted that Goodwin's report eschews the term "patent troll" - Strapp says it "obscures rather than clarifies the issue" - and instead discusses "non-practicing entities," or NPEs, which it defines as companies that earn the majority of their revenue from the licensing or enforcement of their patents, rather than the production and sale of products.
Strapp says dealing with such plaintiffs, rather than the business competitor adversaries of "traditional" patent litigation - who might be interested in cooperative business resolutions such as the cross-licensing of patents - requires lawyers to rip up the old playbook and adopt a new strategy.
"Traditional negotiating strategies don't apply," Strapp says, noting, for example, that defendants don't have the ability to countersue NPEs for their own patents as they would if confronted by a competitor. "The mutual bargaining chips don't exist. A competitor v. competitor lawsuit is often brought for business purposes beyond just wanting damages and could end with injunctive relief to shut down a product. NPEs don't have products, or operating costs beyond enforcing their patent portfolio. There is a single-minded focus on maximizing return through contingency-fee litigation."
NPEs use this advantageous bargaining position to leverage early settlements. Goodwin's report notes that, "by some estimates, 95 percent of all NPE cases are settled." When NPEs go to trial, they are successful 79 percent of the time, according to the report, and from 2010 to 2013 were awarded median damages of $8.5 million.
For all those reasons, Strapp says lawyers representing defendants in NPE litigation should consider settling as quickly and cheaply as possible. For those who decide to litigate, whether as a matter of principle or otherwise, the Goodwin report suggests challenging NPEs' damages experts early and often. If an NPE has sued several defendants, the report recommends establishing a joint defense group to reduce costs.
About a third of all defendants sued by NPEs were in the e-commerce/software industry in 2012, according to Goodwin's report. The second most common sector targeted was consumer electronics and personal computers, which accounted for 12 percent of all defendants.
Published: Tue, Jan 06, 2015
