Image: James Kaczman
Judges and lawmakers are working to deter patent suits, but you wouldn't know it from the results of the 2011 edition of our annual Patent Litigation Survey.
The survey, which ranks law firms according to how many federal district court patent cases they handled in 2010, reveals that the business of patent litigation is booming at many firms. For instance, Fish & Richardson, which took top honors for the eighth year in a row, handled 128 cases in 2010, compared to 99 last year—a 29 percent increase. Similarly, Finnegan, Henderson, Farabow, Garrett & Dunner, second in this year's rankings, saw its caseload shoot up almost 47 percent, to 69.
The other firms at the top of our rankings, like Jones Day and McDermott Will & Emery, were all as busy as ever defending clients against nonpracticing entities (NPEs), or, as they're commonly called, "patent trolls"—the controversial entities that acquire patents to litigate, rather than innovate. Jones Day, in third place this year, defended against 32 cases in the Eastern District of Texas, the epicenter of "troll" litigation. That's almost half the firm's total caseload.
It's not just top intellectual property law firms that are seeing an uptick in work. After an unusually slow 2009, district court patent litigation made a comeback last year. According to a recent study by PricewaterhouseCoopers, patent holders brought 2,892 infringement lawsuits in 2010—a 5 percent increase over the year before. The uptick brings the number of new filings back to prerecession levels, but falls short of the 2004 historical high of 3,075 cases.
Helping drive the uptick are two very different sets of litigants: NPEs, who keep plugging along, and industry goliaths like Apple Inc., Samsung Electronics, and HTC Corporation, whose battle for smartphone supremacy continues to keep courts busy.
So the business of patent litigation appears to be strong, to the relief of IP lawyers and the dismay of litigation-fatigued general counsel.
The lawsuits kept coming, even as judges reined in damages awards in patent disputes. The median award in a patent case plummeted in 2010 to $1.8 million, according to PricewaterhouseCoopers. That's a sharp decrease from more than $6 million in 2009, and the lowest total in 16 years.
The decrease comes as no surprise to patent litigators who have been watching the U.S. Court of Appeals for the Federal Circuit. Since 2009, the court has handed down a slew of opinions urging closer scrutiny of expert testimony on damages in patent cases. "The Federal Circuit in general and [chief judge] Rader in particular have made it a mission to get the word out about how damages should be calculated, and that's had an impact on recoveries," says Sarah Chapin Columbia, head of the IP litigation group at McDermott Will & Emery.
The recession may also explain the smaller verdicts. "In difficult financial times you find juries tightening their belts and looking carefully at what they award. They are keenly aware they shouldn't be too hard on businesses," says Steven Routh, a partner at Orrick, Herrington & Sutcliffe.
Why the increase in lawsuits, if courts are clamping down on big paydays? One explanation may be troll litigation, which shows little sign of slowing. While NPEs love a big verdict, their business model doesn't depend on them. They are notorious for suing a huge number of diverse defendants in plaintiff-friendly venues, and then offering to settle at a price lower than the cost to defend the litigation.
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