R. David Donoghue is a patent trial attorney and partner with Holland & Knight’s Intellectual Property Group in Chicago. He maintains both the Chicago IP Litigation Blog and the Retail Patent Litigation blog, which was was created to help retailers understand patent litigation and how to drive their cases to positive resolution.
Professors John Allison (University of Texas at Austin McCombs business school), Mark Lemley (Stanford), and David Schwartz (Chicago-Kent) have published an interesting article looking at empirical patent litigation data for cases filed in 2008 or 2009 as compared to similar data for cases filed in 1998-99 — Understanding the Realities of Modern Patent Litigation. It is not a perfect data set because, as the article notes, it does not include the most recent cases, those filed in or after 2010. But it does track decisions in the 2008-09 cases through 2013 which makes the data set more recent than it could be. And regardless of whether it includes the most recent data, it is valuable for retailers to show macro trends in patent litigation. Here are some highlights and related takeaways for retailers:
Anticipation is King. In 1998-99, decided invalidity challenges (won or lost) were “overwhelmingly” based upon obviousness, to the point that although obviousness had a very low win rate, the largest number of invalidations were still based upon obviousness. For the 2008-09 data set, there were as many anticipation challenges as obviousness challenges (154 v. 149). This suggests that defendants have become more sophisticated and more cost conscious. Knowing that obviousness challenges have a low win rate, defendants are focusing their prior art challenges on anticipation. And anticipation challenges are likely to continue rising as obviousness challenges drop based upon: 1) the low win rate for obviousness; and 2) the fact that the PTAB is a far better trier of fact for obviousness arguments. The Patent Office is accustomed to complex, multi-reference obviousness challenges and is willing to invalidate based upon obviousness, making the PTAB the faster, cheaper and most successful route for obviousness challenges.
The King is Dead. Long Live the King. Indefiniteness challenges, virtually non-existent in the 1998-99 data set, have overtaken anticipation and obviousness challenges with 176 motions. And that is before the Nautilus, Inc. v. Biosig Instr., Inc., No. 13-369, __ S.Ct. __ (2014), decision replacing the “insolubly ambiguous” standard with the arguably higher standard that the patent must inform one of ordinary skill as to the scope of the term with reasonable certainty. There is some dispute about whether the standard will result in increased indefiniteness, but whether or not it does it should at least generate more indefiniteness defenses and summary judgment motions while the district courts and eventually the Federal Circuit flesh out what the “reasonable certainty” standard means.
Invalidity SJ is a Long Shot. Or at least, the motions have low success rates. 20% success for anticipation motions, 20% for obviousness, and 17% for indefiniteness. The clear winner was 54% for Section 101 patentable subject matter motions. One of the reasons for the low success rates is likely over-filing of invalidity motions. I suspect defendants who file invalidity motions sparingly only when there really is no question of fact in a necessarily fact-intensive analysis have a much higher win percentage. As patentable subject matter motions become more widespread (as they already are), we will likely see a large increase in the number of motions and some drop off in the win rate.
Invalidity Is Also a Long Shot at Trial. Invalidity win rates at trial do improve, but not drastically: 31% for anticipation; 28% for obviousness; 17% for indefiniteness. This is not surprising because the patentee enjoys the presumption of validity and jurors tend to see the Patent Office as beyond reproach, which collectively requires a very strong invalidity case and presentation to overcome. These statistics are another indication that retailers should strongly consider Patent Office proceedings to challenge patent validity.
Patentees Lose Most of the Time. While invalidity decisions have relatively low success rates (at least for now), patentees only win 26% of rulings on the merits. This is because defendants win 54% of noninfringement motions, and if you include noninfringement stipulations after claim construction, the percentage raises to 57%. And of course, the patentee has to win every issue to succeed. So, the noninfringement and invalidity rulings are largely additive, with some limited overlap when a court decides motions together on multiple issues.
Forum Matters. The article analyzed win rates which suggest that, patentees fair best in E.D. Texas and D. Delaware (the two biggest patent districts), as well as S.D. New York. Conversely, patent defendants are most successful in C.D. California, N.D. California and N.D. Illinois.