Patent Litigation Report Raises Questions

By Grantland Drutchas --

A recent publication by PricewaterhouseCoopers announced that patent suit filings in 2014 had reduced by 13% from the prior year, and concluded that this "dramatic shift" was "[d]riven by Alice Corp. v. CLS Bank, which raised the bar for patentability and enforcement of software patents" (see "2015 Patent Litigation Study: A change in patentee fortunes").  This rather strong attribution has in turn driven a number of news outlets, such as IPLaw 360 and bloggers to pick up the story (see "Patent Lawsuits Took First Dive In Years, Report Says" and "Patent Litigation Study Should Cause Patent Reform Pause").

A more careful analysis of the government's data, however, shows that PricewaterhouseCoopers' theory is almost certainly wrong.

First, the data that PricewaterhouseCoopers relied upon for its "[a]pproximately 5,700 cases" in 2014 statistic (Judicial Facts and Figures (US Courts)) is not for the calendar year 2014, but for the Federal Court's fiscal year, which ran from October 31, 2013 to September 30, 2014.  Thus, the data is already pretty old (see "Judicial Business 2014 Tables" at Table C-7, citing 5686 total patent cases filed through September 30, 2014).

Second, the Supreme Court issued its Alice decision on June 19, 2014 (see "Supreme Court Issues Decision in Alice Corp. v. CLS Bank"), only a little over three months before the close of the Court's fiscal year.  It is hard to imagine that Alice would have had such a significant effect on the filing of new complaints within just that period of time.  In fact, if the 13% annual reduction occurred only in these last 3 1/3 months of the fiscal year, it would have required a 50% reduction of all new patent cases filed in that time period.  An unlikely scenario.

A far more comprehensive analysis of new district court filings was performed by Lex Machina (see "Patent Case Trends and the Business of Litigation"), which looked at a monthly comparison for new filings in 2014 over 2013 (calendar year).  It also looked at the effect of Alice on case termination, a more directly attributable result.  As for new patent filings, however, the data cited by Lex Machina shows that new patent filings were down more than 8% in the first 5 months of 2014 over 2013 (2330 vs. 2537), i.e., even before the Alice  Supreme Court decision came out.  That downward trend simply continued the rest of the year.

Although Alice, together with the other § 101 decisions issued by the Supreme Court, are impacting and will continue to impact patent litigation, both new case filings and termination of proceedings, it is a little too simplistic to say that the trend in the data cited by PricewaterhouseCoopers was "driven" by Alice.

Comments

[auguste rodin]

Simplistic, but sexy too, which is why sensationalist outlets like IP360 picked it up uncritically. Thanks for for giving the matter more than PWC or its parrots.

[Skeptical]

Your observations simply do not fit the "desired" narrative.

I am reminded of the particular scene in a classic American movie in which a certain little canine pulls aside a curtain revealing a man pushing a lot of buttons and turning a lot of gears...

[Paul F. Morgan]

Thank you for supporting my own prior suspicions of this PwC report, which were expressed as follows:
It is hard to attribute such a relatively small new patent suits reduction to any one legal change as being the most important. I think it is the availability and wide use of IPRs [and some CBMs] to defendants if they are sued, whereas PwC thinks it is Alice-101 [which you have disproved]. Attorney fee sanctions and claim ambiguity challenges are not really up that much, per other studies. Presumably all of these new factors could contribute to some extent to patent suit reductions. I think their impact will increase in the future by reducing private venture capital funding of new suits by NPEs because they impact the PAE business model. The PAE business model depends on the approximately 97% of litigation defendants that "settle" to avoid high discovery and other litigation costs (obtained at low costs by PAEs) rather than on the few actual final litigation awards affirmed by the Fed. Cir.
[N.B. this is not about pharma patents.]