Image: Dan Page
Patent reform hasn't helpedat least not yet, when it comes to curbing litigation.
After more than a decade of discussion and debate over U.S. patent reform, the most dramatic change to the patent system in more than half a century took effect last year with passage of the Leahy-Smith America Invents Act (AIA). Phase-in of the law began in September 2011, and the aim was to bring about significant change. But in 2011 the legislation did not help reduce the number of patent suit filings. In fact, patent cases kept law firms busier than ever, according to results of the 2012 edition of our Patent Litigation Survey.
The study, which ranks law firms according to how many federal district court patent suits they handled in 2011, shows a steep rise across the board in the number of new cases they took on. Fish and Richardson, for example, which ranked number one for the fourth consecutive year, handled 173 cases in 2011, compared to 128 in 2010an increase of 35 percent. Jones Day, which took second place in this year's rankings, saw its caseload jump from 66 to 125up 89 percent. The other firms at the top of our list, such as Kilpatrick Townsend & Stockton; Niro, Haller & Niro; Kirkland & Ellis; and DLA Piper, also saw a sharp rise in their caseloads.
The increase is perhaps not surprising, given that the number of patent infringement actions filed in 2011 reached 4,015the highest number ever recorded, and a 22 percent jump from the previous year, according to a study by PricewaterhouseCoopers LLP. Smartphone wars, including battles between Apple Inc. and Samsung Electronics Co., and other technology-based patent suits were widespread, as were lawsuits related to infringement of pharmaceutical and other life sciences patents. Nonpracticing entities, commonly called "patent trolls," also continued their efforts to extract value from their patent portfolios by suing companies for infringement, thereby contributing to the dramatic rise in patent litigation for the year.
Ironically, the sharp increase in cases per firm is due in part to the reforms that took effect under the America Invents Act. The new law changed the joinder rule for patent cases and now restricts plaintiffs from naming numerous unconnected defendants in a single suit. Previously, defendants that weren't factually connected to each other could be named in a single suit, and NPEs, especially, benefited from filing one suit against multiple defendants.
In fact, on September 15, 2011the day before the new law took effectnonpracticing entities filed a record number of patent infringement lawsuits. According to Dennis Crouch, who writes a popular blog about patent law, at least 54 new patent cases were filed on that day, accusing more than 800 corporate entities of patent infringement. "More patent suits were filed on that day than any other in history," says Ann Cathcart Chaplin, head of the litigation practice at Fish & Richardson. Each complaint was filed against multiple defendants.
The rash of filings before the law took effect contributed to the overall increase. But the numbers continued to rise after the law was implemented because NPEs were undaunted by the nonjoinder rule. They were now filing separate suits against each defendant, even if they were all being accused of infringing the same patent.
Many of the firms in our rankings defended clients against those nonpracticing entities. This is to be expected, given that NPEs accounted for 40 percent of all patent lawsuits filed in 2011, according to a recent study published by the University of California Hastings College of Law. Those NPEs, defined as "entities whose primary focus is deriving income from licensing and litigation as opposed to making products," accounted for only 22 percent of patent suits filed in 2007, according to the study, which was part of a Government Accounting Office research project using Stanford Law School's Lex Machina database.
One particularly active NPE in 2011 was Stamford, Connecticutbased Walker Digital LLC, which has more than 400 patents in its intellectual property portfolio. On April 11, 2011, it filed 15 patent infringement suits against more than 100 companies, including Apple Inc., Google Inc., Microsoft Corp., and Amazon.com Inc. The patents that were allegedly infringed covered a range of areas, from gaming to telephony to image capture. Many of the firms near the top of our rankings, including Fish & Richardson; Finnegan, Henderson, Farabow, Garrett & Dunner; and Kilpatrick Townsend, defended clients against Walker Digital in 2011. Fish alone handled 11 of those suits, Chaplin says.