Is it a dip or just a blip?
Patent case filings in U.S. district courts dropped 22 percent to 4,537 in 2016, analytics shop Lex Machina reported Thursday in its annual patent litigation review.
While that decline sounds steep, analysts think it was exaggerated by a December 2015 change to federal pleading requirements that caused patent owners to rush hundreds of cases into court in late 2015 to beat the deadline. “It sort of cheated the first two months of 2015,” is how Brian Howard, Lex Machina’s director of analytics services, put it.
The company’s report also found that the Eastern District of Texas is still the overwhelming forum of choice in patent litigation, with 37 percent of all patent cases filed there last year. That’s down from 43 percent in 2015, though Howard said the number is trending back to 40 percent these past few months.
U.S. District Judge J. Rodney Gilstrap of the Eastern District of Texas remained the nation’s busiest patent jurist with 1,119 new cases in 2016—nearly 25 percent of the nation’s total, a number Lex Machina calls “astounding.”
The District of Delaware finished a distant second with 10 percent of cases, while courts based in Los Angeles, Chicago and Silicon Valley each checked in with between 4 and 6 percent.
The venue numbers could look different next year depending on how the U.S. Supreme Court decides TC Heartland v. Kraft Foods Brands Group. The Supreme Court is being asked to overrule a 1990 decision from the U.S. Court of Appeals for the Federal Circuit that liberalized venue selection and, critics contend, has led to rampant forum shopping in the Eastern District of Texas.
Howard and Emily Hostage, director of corporate development at RPX Corp., think the March 27 arguments in TC Heartland could lead to another rush to the courthouse similar to November 2015′s, particularly among nonpracticing entities. “We often see spikes correlated with legal events,” said Hostage, citing the run-up to passage of the America Invents Act in 2011 as another example.
Patent cases generated a lot of work for U.S. law firms on the mainland in 2016, but one of the prime beneficiaries was based just off shore. Lex Machina reports that Ferraiuoli LLC of San Juan, Puerto Rico, handled the most plaintiff-side cases with 206. Much of the firm’s work was for nonpracticing entities affiliated with inventor Leigh Rothschild or IP Edge Inc.
Russ August & Kabat, whose clients range from licensing giant Intellectual Ventures down to smaller, inventor-owned NPEs, checked in second with 110 cases, while McCarter & English was third with 74.
On the defense side, Fish & Richardson was the runaway leader with 160 cases. Winston & Strawn was second with 63, followed by Perkins Coie with 61 and Alston & Bird with 51.
The most litigious plaintiff in 2016 was Shipping and Transit, a nonpracticing entity formerly known as ArrivalStar. Shipping and Transit had a hand in 106 district court cases in 2016. It and ArrivalStar have filed 600 cases over the last seven years and have yet to prevail on the merits once, Lex Machina’s Howard said. The company’s average time to settlement is less than three months.
Defense group Unified Patents persuaded the Patent Trial and Appeal Board last month to launch inter partes review of one of Shipping and Transit’s flagship patents, which covers monitoring the location of vehicles.
RPX’s research shows that two additional entities drove even more cases from behind the scenes. Patent monetization firm IP Edge Inc. was responsible for a whopping 414 cases last year, though they were filed by affiliated entities such as Guyzar LLC, Micoba LLC and PanTaurus LLC, according to RPX. Rothschild brought 123 cases via entities such as Rothschild Digital Confirmation LLC and Symbology Innovations LLC.
Ferraiuoli was plaintiff counsel in many of the IP Edge and Rothschild cases. RPX’s Hostage said the cases generally reflect a trend among large NPEs toward quick, low-cost settlements. “The number of less-than-six-month cases is growing,” she said. “More and more are ending sooner and sooner.”
Of Lex Machina’s 15 most frequent plaintiffs, 14 were nonpracticing entities. The only operating company in the top 15 was No. 15 Whirlpool Corp., which filed 28 patent suits.
On the defense side, Samsung, LG Electronics, Apple and Amazon were the most frequent targets. Samsung Electronics America Inc. (37) and Samsung Electronics Co. Ltd. (31) led the way, though the two were named often in the same suits.
Aside from Gilstrap, Judge Robert Schroeder, also of Texas’ Eastern District, received the most patent cases among district judges with 488. Four Delaware judges—Leonard Stark (146), Gregory Sleet (125), Richard Andrews (120) and Sue Robinson (91)—were next. Robinson took senior status earlier this year and plans to retire this summer.
Most patent cases settle out of court, and that was especially true in the Eastern District of Texas. But with the high volume of cases, Gilstrap reached the most judicial decisions on patent infringement, validity or enforceability, with 64, according to Lex Machina. Andrews decided the next most, with 36. Other judges making the list included Jerome Simandle of New Jersey (28), Stark (24), Sleet (20), Robinson (15), John Kronstadt of Los Angeles (10) and Beth Labson Freeman of San Jose, California (9).
Overall, the number of patent case filings was well off the high of 6,128 reached in 2013. The America Invents Act, Supreme Court decisions tightening Section 101, and the rise of groups like RPX and Unified Patents have probably all played a role.
But 4,533 cases is still far more than any year before 2013. “It’s relatively stable in the scheme of things,” said Lex Machina’s Howard. “I don’t think it’s falling off a cliff or anything like that.”