Digging deeper into NPE patent litigation trends

(Editor's note: This is the first of a three-part special report digging into patent litigation trends. You can see data about how defendants and law firms are being affected here and how software patent lawsuits have changed here.)

In recent weeks, a drop in patent litigation has been reported by a number of sources.

For example, Lex Machina noted a 40% drop in September compared with September 2013, followed by a 33% drop in October compared with October 2013.

Likewise, Unified Patents reported that patent litigation was down 23% in the third quarter compared with the second quarter of this year, with 1,145 patent litigations in the third quarter compared with 1,473 in the second quarter. The second quarter had represented a 16% increase over the first quarter figure of 1,269. The third-quarter was the slowest quarter for patent filing since the fourth quarter of 2011.

Managing IP conducted an analysis of patent case filing data using Docket Navigator, which suggested overall patent litigation trends are in line with those reported elsewhere. Figures taken from Docket Navigator reveal that patent case filing was down 11% in July, 25% in August, 42% in September and 33% in October, when compared with the same months in 2013.

The trend that patent litigation is down is clear but less clarity exists around what is driving this drop and what it means for patent case filing in the longer term. It is too soon to tell if the third quarter was a blip. Lex Machina noted that new filings generally decrease during the summer and increase towards the end of the year “but filings this year have not so far shown any sign of bouncing back upwards”, it said.

The drop has occurred against the backdrop of the Supreme Court’s Alice v CLS Bank decision, released on June 19. Stanford Law Professor Mark Lemley, patent litigator at Durie Tangri and a founder of Lex Machina, thinks more patentees are deciding not to file suit after Alice. “In the last two months, we’ve seen over a dozen decisions invalidating software and business method patents on the basis of Alice,” he said in a blog post published on October 8 (the figure has since increased to about 20 decisions). “That’s a pretty strong deterrent to software plaintiffs whose patent isn’t directed to specific new computer technology.”

In contrast, Unified Patents – which protects its members against non-practicing entities (NPEs) by monitoring NPE activity, investigating prior art, challenging patents and buying patents– was quick to say that litigation is still historically high. It estimated that, although overall patent litigation filings declined in the third quarter, total patent litigation for 2014 is on track to be the second-most litigious year in history. This prediction, however, assumes a halt in the decline in patent cases filed in the fourth quarter. Unified Patents predicts total patent litigations for 2014 will exceed the 5,038 litigations filed in 2012, the second-most litigious year after the high reached in 2013.

Unified Patents said, while overall patent litigation has declined, high tech remained the most targeted technology area and NPE activity remained at historically high levels. High-tech litigation accounted for 58% of all patent litigation filed in the third quarter (655 of 1,124 cases), down from the 66% in both the second quarter (975 of 1,467) and in first quarter (814 of 1226). Unified Patents estimated that NPE activity made up 85% of high-tech litigation in the third quarter, 88% in the second quarter, and 82% in the first quarter.

Overall patent cases filed July-October
	July	August	September	October
2013	476	522	554	515
2014	424	394	319	343
difference	-52	-128	-235	-173
% change	-11%	-25%	-42%	-33%
Source: Docket Navigator/Managing IP

Managing IP wanted to dig deeper into the figures to identify some of the trends that are driving patent litigation at the moment. To do this, we analysed several different groups. We used Docket Navigator’s extensive database of patent litigation to conduct our own analysis of patent litigation before and after June 19’s Alice decision.

For our data being published today (we have published data about how defendants and law firms are being affected here and how software patent lawsuits have changed here), our team of analysts dug into the numbers to assess how the litigation activity by individual NPEs has varied since the start of 2013. To analyse how the most-prominent NPEs have been affected we used RPX’s list of the top 10 NPEs by cases filed in 2013, which was included in its 2013 NPE Litigation Report.

"What is clear is that a trend of greatly decreased litigation has been seen all year – not just since the Alice decision on June 19"

These firms were, in alphabetical order: Acacia, ArrivalStar, Eclipse IP, Empire, Innovative Wireless Solutions, IP Nav, Marathon, Novelpoint, Ubicomm and Wyncomm.

Using RPX’s database of known subsidiaries for each of these 10 companies, we searched on Docket Navigator for all lawsuits filed by these companies and their known subsidiaries. For example, this included 56 companies for Acacia.

Although this is by no means a comprehensive analysis and it is difficult to draw conclusions about how all NPE activity is changing, we believe analysing the top 10 NPEs does give an indication of larger NPE litigation trends. What is clear is that a trend of greatly decreased litigation has been seen all year – not just since the Alice decision on June 19.

Source: Docket Navigator/Managing IP

The monthly filing number for this group was down for every month of 2014 over the same month the previous year. For the 10-month period from January to October case filings were down 57.3% – with the 418 cases filed in that period in 2014 down from 979 in the same period in 2013. Interestingly, each year saw a large spike in April, with 187 cases in that month in 2013 and 102 in 2013. The one in April this year appeared to the result of a rush to file cases caused by an informally proposed amendment to patent reform being discussed in the Senate that would have included a clause for retroactive application of April 24.

Top 10 NPEs by cases filed in 2013
Rank	NPE	2013	Active at YE 2013
1	Acacia Research Corporation	239	241
2	IPNav	147	145
3	ArrivalStar, Melvino Technologies Limited	137	23
4	Empire IP	126	155
5	Wyncomm	100	25
6	Marathon Patent Group	62	54
7	Innovative Wireless Solutions	62	22
8	Ubicomm	61	10
9	Novelpoint Holdings	58	28
10	Eclipse IP	56	24
Source: RPX

Only one of the 10 NPEs filed more litigation in 2014 than in 2013 during the January to October period. Marathon’s 131 lawsuits filed between January and October 2014 was up 167% on the same period last year. The top two NPEs of 2013 have greatly reduced their litigation in 2014 so far. Acacia’s 154 lawsuits filed between January and October this year was down 38% on the same period last year. IP Nav’s figure of 74 lawsuits filed was down 45%.

Four of the NPEs filed no lawsuits at all in the January-October period this year – ArrivalStar, Wyncomm, Innovative Wireless and Ubicomm. However, ArrivalStar has sincefiled its first four lawsuits of the year on November 10, after the period studied, and followed up with two more on November 18.

NPEs are nimble and quick to adapt to market conditions. It is worth noting that the NPEs we have used in our analysis may have been replaced by new or different ones during this year. However, our analysis shows that no companies have filed lawsuits in sufficient numbers to change the trend of reduced litigation.

Tomorrow, we will publish figures for how the individual defendants named the most in patent litigation have been affected by the decline in lawsuits as well as how the numbers for law firms have changed.

Monthly individual cases filed by top 10 NPEs
	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2013	106	117	79	187	107	80	120	96	39	48	154	32
2014	47	79	47	102	24	60	28	31	29	22
Source: Docket Navigator/Managing IP

Source: Docket Navigator/Managing IP

Source: Docket Navigator/Managing IP