Despite US Efforts, Patent Litigation Grows Apace

The United States worked hard over the last five years to reduce patent infringement suits. Congress enacted patent reform, the courts handed down important anti-patentee rulings, and the US Patent and Trademark Office began a campaign of energetically rejecting patents and patent claims. Despite all this, from 2014 to 2015, new patent infringement suits increased 18 percent and the number of defendants sued for patent infringement increased 21 percent. What went wrong?

Since 2010, every branch of the US government has acted to reduce patent litigation. Congress, for instance, passed the America Invents Act in 2011. That law created new, expedited administrative procedures to challenge patents (thus allowing alleged infringers and others to challenge dubious patents without having to go to court). The statute also increased the difficulty of suing multiple defendants for patent infringement and made other important changes in the US patent system.

The US Supreme Court has handed down a series of decisions that have made it harder for patentees to obtain and enforce their patent rights. Alice Corp v. CLS Bank Int’l [pdf] and Association for Molecular Pathology v. Myriad Genetics [pdf], for instance, significantly reduced the types of inventions eligible for patent protection.

Octane Fitness, LLC v. Icon Health & Fitness, Inc. [pdf] made it much easier for a party wrongfully accused of infringement to have its legal fees paid by the patentee. This ruling, many experts thought, would discourage patentees from suing on dubious infringement claims, which was a common practice of so-called “patent trolls” (i.e., companies whose primary source of revenue comes from licensing their patents and suing those who refuse to purchase licenses).

The USPTO has been busily throwing out patents under expedited procedures created by the America Invents Act. The number of these administrative challenges jumped after Alice and Myriad undercut the validity of many patents. USPTO officials have eagerly embraced these high court rulings and have used them as the basis for throwing out many patents and patent applications.

Why, despite all this, did patent litigation increase in 2015? To answer that, one must first analyze the statistics for patent litigation.

Numbers Game

The data comes from a study [pdf] by RPX Corporation. That study found considerable growth in new patent infringement suits over the last five years. The number of such suits went from 2,137 (in 2010) to 4,396 (in 2014) to 5,203 (in 2015).

This dramatic increase in infringement litigation is, however, somewhat misleading – because the America Invents Act, which went into effect in 2012, largely prohibited the common practice of suing multiple defendants in a single patent infringement case. This legislative change pushed patentees that wanted to sue multiple defendants into filing multiple lawsuits, each with a single defendant. The result was a big boost in the number of infringement suits. Thus, comparing the number of suits in 2010 with the number of suits in 2015 suits creates a false impression of the rise in infringement litigation.

Even comparing the number of infringement suits in 2014 with the number of suits in 2015 is somewhat misleading. Because every year since 2010, the number of US patents has increased significantly. More patents will naturally produce more patent litigation, according to a blog post by Erich Spangenberg, the founder of IP Navigation Group, a patent monetization firm. So an annual increase in the number of new infringement suits is only to be expected.

A Better Metric

Next, consider the number of defendants in new patent infringement suits. That number rose last year, but it has bounced up and down over time. It went from 6,966 (in 2010) to 7,849 (in 2011) to 6,466 (in 2014) to 7,834 (in 2015). An optimist can look at this data and assert there is no trend of suing more companies for infringement. A pessimist can counter that there is no trend of suing fewer companies – despite a variety of measures making it harder for patentees to bring and win infringement suits.

A more revealing metric is the number of defendants in new patent infringement suits divided by the number of patents. If this ratio has remained stable over time, then the increase in infringement litigation was simply the result of more patents. If the ratio increased, then patentees were acting more litigiously.

This ratio has wobbled up and down since 2010, but overall, there has been a slight decrease, according to Spangenberg. The ratio went from 0.387 percent (in 2010) to 0.403 percent (in 2011) to 0.269 percent (in 2014) to 0.313 (in 2015). This suggests that US patentees may be becoming a bit less litigious than five years ago. Perhaps the patent litigation reforms have had some effect after all. The evidence, however, is far from conclusive.

What is clear, from the RPX study, is that US efforts have failed to stop the most worrisome type of patent infringement lawsuits. Suits brought by patent trolls hit new highs in 2015, as will be discussed in a subsequent article.

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