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On average, the number of patent suits filed in district courts increased by about eight percent in each year of the 1990s, and in no year did the number of suits decline, according to a study performed by the Penta Advisory Services division of Navigant Consulting Inc. HOW MANY AND WHERE � Number of suits filed: In 1998, the last year for which the study includes data on this question, 2,218 patent suits were filed. � Most popular venues: Of the 92 venues, the most popular was the Central District of California, followed by the Northern District of Illinois and the Northern District of California. The District of Delaware came in ninth and the Eastern District of Virginia came in an even more distant 16th. Delaware and Virginia, however, are growing in popularity. The cases were distributed unevenly. More than two-thirds were filed in the 20 most popular venues. More than 40 percent were filed in the top 10. � How disposed: Approximately 60 percent of the cases were settled without a decision by the trial court; about 15 percent were disposed of by a final decision or verdict; and the remaining 25 percent were dismissed, either voluntarily or for cause such as lack of jurisdiction or improper pleading. These numbers remained fairly stable throughout the 1990s. DAMAGE AWARDS � Average Award: Cumulatively, the district courts awarded money damages about 44 times each year. The median award was about $2.8 million. The mean award was approximately $18 million. The 1990 Polaroid v. Kodakcase, however, skews the mean upward. If the 1990 numbers are left out, the mean award dips to about $14 million. � Judge v. Jury: Surprisingly, judges turned out to be more elastic than juries in regard to damages. In other words, both awarded the same median award, but the judges’ mean award was more than twice as high. Specifically, from 1990 to 1999, 123 jury trials resulted in money damages. The median award was $2.8 million and the mean award was $10 million. 126 bench trials resulted in money damages. The median award was $2.8 million and the mean award was $24 million. � Appealed Awards: One hundred fifty-one damage awards were appealed to the U.S. Court of Appeals for the Federal Circuit in the 1990s. Overall, it reversed and remanded 32 percent of them, affirmed 41 percent, and modified the remaining 26 percent. Judges fared better, with the Federal Circuit reversing and remanding 25 percent of judge awards but 40 percent of jury awards. However, judge awards were more likely to be modified�32 percent of judge awards versus 21 percent of jury awards. (Not all the appeals concerned damages per se; some attacked the underlying finding of liability.) Oddly, the mean award in cases where trial judges were reversed was only $3.6 million, while in cases where they were affirmed it was $17.6 million. On the other hand, the mean award in cases where juries were reversed was $19.7 million while in cases where they were affirmed it was only $6.8 million. � Awards by Industry: Cases involving computers and electronics were the most likely to result in damage awards, constituting about 20 percent of all cases where damages were awarded. Medical equipment (13 percent), machinery manufacturing (12 percent), and fabricated metal manufacturing (9 percent) were also the source of many damage awards. The remainder were distributed across a wide variety of fields and technologies. � Damages Calculation: The basis for many damage awards was not reported. For those that were, lost profits were the exclusive basis for damages in 26 percent of cases. Reasonable royalties were the exclusive basis for damages in about 55 percent of cases. Both lost profits and a reasonable royalty were used in the remaining 19 percent of cases. Consequently, a reasonable royalty will be relevant three-fourths of the time. Sixty-three percent of awards based on a reasonable royalty reflected royalty rates of 10 percent or less. More specifically, 26 percent of the awards reflected royalties of 5 percent or less and 34 percent reflected royalties of between 6 percent and 10 percent. Fewer than 8 percent of the awards reflected royalty rates exceeding 25 percent. Where the basis for the royalty rate was explained, the courts relied on the hypothetical negotiation method in 83 percent of cases. Some Georgia Pacific factors were mentioned more than others. The most often mentioned were (1) the royalties received from licensing the patent-in-suit, (2) the opinions of expert witnesses and (3) the potential or established profitability of the patented product. The data indicates that damages may be higher if lost profits are used as the basis for the award. Using lost profits resulted in awards that were 12 percent higher. � Enhanced Damages: Half of all reported damage awards were enhanced. Of this half, half were trebled. The rest were enhanced to some degree less than treble damages. Interestingly, when damages cross the $1 million mark, the courts appear to lose their nerve: The mean enhancement amount for awards that were trebled was only $3.4 million, while the mean enhancement amount for awards that were doubled was $9.4 million. This seems to indicate that as damage awards exceed the million-dollar mark, courts become less righteous in regard to punishing willfulness. (An alternative hypothesis is that small companies are more likely to engage in outlandish behavior than large, established companies.) ATTORNEY FEES AND COSTS Navigant/Penta’s study also includes a summary chart of the results of a 1999 American Intellectual Property Law Association survey on attorney fees and legal costs. The average fees and costs ranged from $400,000 to $5 million per side per suit, depending on the amount at stake. Cases in the at-risk range of $10 million to $100 million resulted in average fees and costs of $2.2 million. Cases in the at-risk range of $1 million to $10 million resulted in average fees and costs of $1 million. Shockingly, it appears that cases in the at-risk range of less than $1 million resulted in average fees and costs of $400,000. If so, then the combined fees and costs of both sides often equals or exceeds the amount in controversy. The AIPLA survey, however, may need to be taken with a grain of salt. The survey may be biased because those litigants who had bad experiences were more likely to respond. Also, there was suspicious variance in the numbers. For example, in California the cases in the at-risk range of less than $1 million resulted in average fees and costs of $251,000 while in Washington, D.C., they exceeded $1.1 million. Finally, the numbers appear to have jumped unrealistically from AIPLA’s 1997 survey in which the fees and costs ranged from $301,000 to $3 million per side per suit. If both surveys are accurate, then the 1999 survey reflects a 25 percent to 40 percent increase over a two-year period. For more information, contact William Kerr, an IP damages expert at Navigant Consulting/Penta, at [email protected]or (202) 371-9660. Samson Vermont is a registered patent attorney, the senior legal editor of IP Law Weekly, and co-editor-in-chief of Patent Strategy & Management. He may be contacted at [email protected].

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