In recent days I've read three good articles dealing with trends in patent litigation, and wanted to discuss a few of them, because in many ways they contradict the conventional wisdom about patent dockets, and I think in some cases correctly so.
The Effect of the 2011-2016 Changes in Patent Litigation ... and the the 2015 FRCP Amendments
First of all, in The Face Of Patent Litigation After Federal Rules Amendments Marc Pensabene and Sarah Pfeiffer of O'Melveny & Myers LLP discuss the effect of the December 2015 federal rule amendments on patent litigation, putting the new federal rules in the context of the other recent dramatic alterations to the patent litigation landscape. "In the past five years," they write, "patent litigation has seen the implementation of the America Invents Act and several significant U.S. Supreme Court cases that have dramatically altered the patent litigation landscape. . . . [m]uch has been written about the impact of various provisions of the AIA, and the significant impact of inter partes review, post-grant review and covered business method review in dampening the willingness of patent owners to subject their patents to such review. The Supreme Court’s recent decisions have similarly been widely acknowledged as having deterred new patent actions. Alice set forth a new test for patent-eligible subject matter, and shortly after courts saw an historic increase in motions under Section 101, with an equally historic increase in the success rate of those motions. In Octane, the Supreme Court “lower[ed] considerably the standard for awarding fees” to prevailing parties in exceptional cases."
"Taken together," they write, "these changes have tipped the balance of power in patent litigation a little more in the direction of the accused infringers. The recent amendments to the Federal Rules of Civil Procedure, which went into effect on Dec. 1, 2015, are likely to have a further impact on that balance by heightening the pleading requirements and reducing the ability of patentees to use onerous discovery as leverage for settlement." The authors note that the filing of new patent cases has dropped in the most recent six months by nearly 30 percent nationwide, and note the belief among some that 'the patent litigation playing field has become more level and there is less incentive to file meritless claims in hopes of a quick settlement."
The Effect of Filings on Undermanned Courts
Then on Monday of this week Michael Macagnone of Law360 in Judicial Nomination Logjam Strangles Texas Docket discussed the effect of undermanned courts on dockets in Texas' federal courts, with substantial discussion about the effect of the three current vacancies on the other five remaining judges of the Eastern District of Texas. He notes that the amount of work facing Eastern District judges "blows every other district in the country out of the water" with the three vacancies in the Eastern District having a weighted number of annual filings at 1,261 when the next heaviest district is 696, in Kansas. (Read that sentence carefully - that means that the five judges with weighted filings each of 1,261 are also absorbing on average another 700 each from the vacancies - for a total of around 2,000).
The article goes on to quote several distinguished practitioners to the effect that the backlog of judicial nominations is delaying trials in Texas federal courts, but I think the facts may have gotten a little confused because while that is certainly the case through much of the state and possibly parts of the Eastern District, it conflicts with my experience in patent cases locally. The specific comment was that "Markman [hearings] running two years and trials running two and a half." Actually, that's not the case. A couple of weeks ago I had two Markman hearings in Marshall before Judge Payne. They were in cases which were filed on September 22 and 25, 2015 respectively and had their Markman hearings on August 2 and 4 - thus a little over ten months after filing. That's been pretty consistent for over four years now - Markmans are typically 6-8 months after the status conferences and trials are 6-8 months after that, meaning typically patent cases go to trial within 15-18 months from filing.
Why the continuing short times in light of the increased filings - in fact in spite of them? A couple of reasons, starting with a very specific judicial management decision. Macagnone writes that "Judge Gilstrap helped to rein in the worst of the wait just after coming on the federal bench . . . by 'playing chicken with his own docket' and scheduling a large number of trials close to each other." But that quote (which is from me, displaying my sophisticated legal verbal skills) requires a bit of an explanation.
"Playing Chicken With His Own Docket?" Do Tell.
As practitioners know, judges typically schedule cases at each batch of scheduling conferences for trial after the batch that was heard at the previous conferences. When Judge Gilstrap took the bench in December 2011 as I recall the time to trial was 24-28 months from the status conference - not because the cases needed that much time but because there weren't trial slots available before then (which actually goes back to Texas' Congressional redistricting in the early 2000's, but that story is too long to tell here).
So what happened in the early months of 2012 was that Judge Gilstrap scheduled trials for 14-18 months out from the scheduling conferences, and rescheduled many recently set cases forward. I'll never forget getting a call from the court's clerk around then asking if we could move a just-scheduled case forward a bit. I said we probably could - how much was the court thinking? "A year," was the answer. Sure enough, the existing schedule essentially had almost a year of dead time, so the parties agreed and moved the trial date up a year. As Sun-Tzu once said, cleverness has never been seen associated with long delays.
But sharp readers will have noticed that there were already cases scheduled for that same time period - which is why I refer to the Court's scheduling practices at that time as "playing chicken with his own docket." If the cases Judge Ward set for 2013-2014 went at the usual rates and so did the ones Judge Gilstrap set, as Dr. Spengler put it in the original Ghostbusters, "it would be bad." (You see what I did there - Sun Tzu to Ghostbusters? Can't say I'm not a Renaissance man).
But that same period 2012-2014 saw large numbers of cases transferred under new Federal Circuit caselaw on 1404, and numerous other cases settle early or voluntarily dismiss as the AIA's post-grant procedures (remember the initial "patent death squads"?) and Federal Circuit and Supreme Court caselaw on damages and other topics (including Alice, which you'll recall percolated at the Federal Circuit for some time before the Supreme Court's 2014 opinion) further thinned the docket in ways that couldn't have been anticipated in 2010-2011. As a result, as my Markman hearings illustrate and as I expect we will continue to see at the status conferences in Marshall next week, time to trial locally has stayed remarkably consistent at 12-16 months after status conference (15-19 months after filing), and no chickens were killed in the management of the court's docket. It didn't have to happen this way - but it did and that one decision had the effect of permanently putting the docket back on a 18-month time to trial, give or take.
Thus when the influx of post-AIA filings began to impact the district in early 2014, as shown in the Lex Machina chart below comparing EDTX and DDel filings broken down by high volume/low volume, the district was able to absorb the filings with relatively minor effect on time to trial, since cases were already being setting assuming much higher mortality (or at least settlement) rates. (Did I mention the patent death squads?)
Patent Filings and Patent Assertions
I think it's a fool's errand to compare patent filing statistics before the enactment of the AIA in 2011 with those after, but since then it is undisputed that the number of patent cases filed has increased. That was the case until this year, when, as previously noted, overall filings are down substantially and in the Eastern District by almost half over the prior year. And as I noted a few weeks ago, and as also shown to the left the statistics are also showing a decided decrease in filings by bulk filers/patent assertion entities/high volume plaintiffs/patent trolls. In the Eastern District, for example, Lex Machina's data showed that the decrease was so pronounced that the majority of patent cases filed in the EDTX in the first two quarters of 2016 were not by "high volume" filers at all - and that such non-NPE filings had been increasing since the fall of 2014, even as NPE filings were dropping. I have written about this rise in "competitor cases" previously - at least four of the first ten trials this year were competitor cases, not NPEs.
But why are they down? Well, Pensabene and Pfeiffer, supra provide five years' worth of reasons, but as as I discussed in a previous post, the effect of the Section 101 dismissals and Section 285 sanctions assessed by Eastern District judges since last fall, with eDekka being the most notable, appear to have played a major role. We saw a 94% reduction in the top three NPE filers in the first few months of 2016, with the trend continuing through the second quarter of the year and across other filers as well.
But I mentioned that there was a second interesting factor at play, and that was illustrated by another article from last week The Number of Unique Patent Assertions Has Been Declining Since 2010 by Pedram Sameni on IPWatchdog. In that article, Pedram notes that while patent case filings increased from 2011 to 2015, the number of unique patents asserted each year has been declining. In fact since 2010 the number of patents asserted has declined 23% from where it was in 2010.
Taken together, these changes may indicate that while absolute levels of patent filings were up - at least through last fall - the number of patent assertions has been decreasing for three years. And while the number of parties is not irrelevant, since the number of defendants drives the number of motions to transfer and to dismiss, not to mention discovery disputes and so forth, the decrease in the number of patent claims to process means that there is at least potentially less complex patent work for the court on the back end of cases. And especially beginning in 2015 there is a massive decrease in the average number of patents asserted in each case, which likely has an effect as well.
As Michael Macagnone notes in his article cited above, and as I posted a few weeks ago, to handle Judge Schneider's senior status, and possible retirement, Chief Judge Clark transferred Judge Schneider's Tyler criminal docket to himself, and his civil docket to Judge Schroeder, who is already handling most of the patent docket in Tyler. It may seem counterintuitive that one of the patent judges laboring under such a massive docket is being given an additional docket load, but recall also that as I posted last month, Judge Schroeder and Judge Gilstrap recently did away with the letter briefing requirement that many of the district's patent judges had used for several years to help manage to heavy patent docket - one of the more or less emergency procedures that had been put in place to help with the influx of patent filings. As I suggested a few weeks ago, it is possible - even likely - that these changes reflect what yet another writer referred to as the "hot, but no longer boiling" nature of the patent docket.
Finally, the changed docket profile may be having another effect as well. An interesting statistic I ran across while studying recent verdicts - and am trying to confirm - is that while January - March had three patent trials each month, it appears that there were only two patent trials in the next five months combined. The most recent defense verdict was last Friday, and there hasn't been a plaintiff's verdict since March (and that one had the damages verdict set aside last week).
That gap coincided approximately with the hole where the patent cases that weren't filed from January through April would have gone for status conferences and to have their motions to transfer/dismiss worked on - again, that was a 40% reduction so we're not talking peanuts. And it was when Judges Schroeder and Gilstrap deliberated on and eventually issued their standing orders doing away with "in-person" meet and confers on discovery disputes and with letter briefing for summary judgment motions. And - and this is only anecdotal at this stage - it seemed to be when rulings started creeping earlier on everything from motions to transfer to 101 motions to the new Twiqbal motions to dismiss.
Only time will tell what comes next. But I did think that some of these trends were worth noting, because the conventional narrative is that filings are always going up, up, up, and as we can now tell, not only is that no longer true, it has been overlooking important characteristics about the content of those filings going back several years. And those characteristics and changes are now having a demonstrable effect on the docket.