The number of new patent cases filed in the District of Delaware jumped 33 percent in 2013, according to new data released Tuesday. However, patent attorneys say the bump is the result of a 2011 change in the law governing patents and not increased activity among plaintiffs.
Plaintiffs filed 1,336 patent cases in the District of Delaware last year, according to data from Lex Machina, a Menlo Park, Calif., legal analytics and research company. That represents a 33 percent increase over the 1,002 cases filed in 2012.
Delaware’s main competitor for patent litigation, the Eastern District of Texas, had a greater increase in overall lawsuits filed last year, but saw a smaller percentage increase. Plaintiffs filed 1,495 patent cases in the Eastern District in 2013, a 20 percent increase over the 1,247 cases filed in 2012.
Patent attorneys say the main reason for the increase in Delaware filings is the result of the Leahy-Smith America Invents Act, a 2011 federal statute prohibiting plaintiffs from suing multiple defendants in the same infringement action. Plaintiffs are now required to file a separate lawsuit against each defendant in a patent infringement lawsuit. Since the AIA went into effect in 2012, plaintiffs can only join multiple defendants if the request for relief arises out of the same transaction or series of transactions.
Non-practicing entities, often derisively referred to as “patent trolls,” do not have the capabilities to design or distribute products covered by their patents and use litigation to seek damages awards for their patents. They have adopted the strategy of suing multiple defendants in an effort to increase their damages awards. However, the AIA now requires NPEs to file a separate litigation against each defendant instead of one lawsuit naming all the defendants.
The increase in Delaware patent litigation directly correlates to the passage of the AIA. In the five years prior to the legislation’s passage, Delaware averaged 186 new patent case filings, according to Lex Machina’s data. Delaware has had more than 1,000 new patent case filings in both years since the AIA went into effect.
“The trend over time for Delaware patent case filings looks like a hockey stick,” said Owen Byrd, Lex Machina’s general counsel. “It was relatively flat and then started to increase. With the passage of the AIA in 2011, as well as other factors, patent activity in Delaware shot off like a rocket.”
Patent attorneys agree that the dramatic increase in Delaware patent filings is the result of the AIA requiring separate lawsuits against individual defendants in most cases.
“The AIA provides the context in which one must look at these numbers,” said Jeff Bove, senior partner at Novak Druce Connolly Bove + Quigg. “The numbers correlate pretty directly with the passage of the AIA. I do think Delaware, because of its tremendous national reputation for managing and adjudicating cases with complex technology, would have had increased filings in any event, but not at this level.”
Rodger D. Smith II, a partner in Morris, Nichols, Arsht & Tunnell’s intellectual property litigation group, agreed with Bove.
“No one has done a regression analysis, but everyone agrees that AIA has influenced the numbers heavily,” he said. “There is just a counting phenomenon created by the AIA. Before, a plaintiff could sue 10 defendants in one case, now they have to sue them in 10 cases.”
Another factor that led to the increase of Delaware patent litigation is a bill introduced last November in the U.S. Senate that would require parties that lose patent lawsuits to cover the winners’ legal bills. The bill, drafted to deter frivolous patent suits, was expected to go into effect this April, but is still being debated in the Senate Judiciary Committee. In an effort to avoid the possibility of footing their opponents’ legal bills, several NPEs filed lawsuits in late 2013 and early 2014 before the bill was expected to go into effect.
“You have the combined effect of the AIA and the pending legislation to control these types of lawsuits,” Bove said. “It is causing an even greater rate of filing.”
The attorneys said the AIA only explains the increase in the overall number of patent litigation cases. Delaware’s percentage increase in case filings show that patent plaintiffs are confident the district court can effectively manage the case burden caused by the AIA.
“The AIA only explains the increase in absolute numbers,” Smith said. “But there is another phenomenon at work. Plaintiffs who bring these cases recognize that Delaware is a forum that efficiently manages the cases. Delaware is a predictable and fair forum that the plaintiffs are seeking out.”
Bove agreed Delaware’s reputation for case management has made it a preferred venue for patent plaintiffs.
“I think if you were to talk with the district court judges, they will say the AIA has caused them to engage in procedural maneuvering to effect better case management even though lawsuits may involve the same patent across 10 or 20 different cases,” he said. “They are figuring out the best mechanisms to do this.”
U.S. District Judge Sue L. Robinson of the District of Delaware, one of the busiest patent judges in the country, unveiled a raft of changes on how she will handle the burden of increased patent litigation. Robinson had 248 patent cases assigned to her in 2013, according to Lex Machina. The judge was also tied for most cases resolved on the merits with 15.
Under Robinson’s proposed rules, parties must identify damages models and the infringed products earlier in the litigation, while the defendant must provide the core technical documents to show how the allegedly infringed patent operates. Robinson also suggested that the amount of discovery should be proportionate with the amount of money at stake.
“The District of Delaware is trying to adapt procedural mechanisms that will translate to the new, post-AIA world,” Smith said. “It wants to be smarter about how it manages its cases.”
Smith added the district court has hosted a series of sessions with the patent bar to gain information about the economics and practical dynamics of how to manage an increased caseload.
But even with the district court’s proactive efforts, managing cases will present a difficult task going forward.
“The Delaware courts are on the cutting-edge, but the sheer numbers create a tremendous burden,” Bove said. “It’s a very complicated problem at the national level that involves a number of issues.”
Despite the problems created by the AIA, Byrd said he expects the number of Delaware patent filings to steadily increase over the next few years.
“The data supports the opinion that Delaware is going to remain a go-to jurisdiction for patent litigation for the foreseeable future,” he said. “The quality of judges in the district continues to position Delaware as one of the most important districts in the country for patent litigation. I see nothing in the data that suggests Delaware may not continue to be a preferred patent litigation jurisdiction.”
This article first appeared in Delaware Business Court Insider, a Legal sibling publication.