Patent Actions On The Rise, Median Damages Awarded Hits 16-Year Low, According To Patent Litigation Study

Patent Actions On The Rise, Median Damages Awarded Hits 16-Year Low, According To Patent Litigation Study

NEW YORK - Reflecting upon developments currently underway in patent reform legislation, PwC US on Oct. 18 released a new report "2011 Patent Litigation Study: Patent litigation trends as the 'America Invents Act' becomes law" summarizing trends in the patent infringement litigation landscape.  PwC reports that the annual number of patent actions filed has increased at an overall compound annual growth rate (CAGR) of 4.9% since 1991, while annual median damages awarded ranged from $1.8 million to $15.6 million between 1995 and 2010.

The passage of the patent reform bill, the "America Invents Act," in March 2011 represents the most significant changes to the U.S. patent system in nearly 60 years.  Among them: the conversion to a first-inventor-to-file system that alters the current patent system's approach to priority of inventorship and effective filing date.  Specifically, it awards a patent to the first person to file a patent application on an invention with the U.S. Patent and Trademark Office (USPTO).  President Obama signed the bill into law on September 16, 2011.

"While the passage of a patent reform bill represents a significant change to the U.S. patent system, the elimination of the 25 percent rule, as well as rulings in a variety of other recent court decisions, demonstrates that the courts will continue to shape the future of patent law and play the primary role in how patent damages are calculated," said Chris Barry, a partner in PwC's Forensic Services practice.

PwC maintains a database of patent damages awards, collecting with specificity information about patent holder success rates, time-to-trial statistics, and practicing versus non-practicing entity (NPE) statistics (all from 1995 through 2010).  This year's study adds industry classification and expanded NPE segmentation analyses.

Notable findings include:

  • Damages awards for NPEs averaged more than double those for practicing entities over the last five years
  • Almost half of the largest damages awards have gone to NPEs; however, these large awards are frequently reversed on appeal, with final results dramatically reduced or eliminated
  • The disparity between jury and bench awards continues to widen and is likely the primary contributing factor in the significant increase in use of juries since 1995
  • Reasonable royalties remain the predominant measure of patent damages awards
  • NPEs have been successful 23% of the time overall versus 33% for practicing entities, with similar success at trial but a relative lack of success for NPEs at summary judgment
  • Technology associated with the consumer products industry represents the largest percentage of identified decisions from 1995 through 2010
  • While the median time-to-trial has remained fairly constant in recent years (averaging 2.28 years), there are significant variations among jurisdictions
  • Certain federal district courts (particularly Virginia Eastern, Delaware, and Texas Eastern) continue to be more favorable to patent holders, with shorter time-to-trial, higher success rates, and higher median damages awards
  • Ten federal district courts (of 94 total, i.e. 11%) accounted for 55% of all identified decisions involving an NPE as the patent holder
  • Not all NPEs are created equal: While University/Non-profit NPEs have the highest success rate among NPE litigants, their median damages award is considerably lower than the median award of Company NPEs

"The 2011 study makes clear that patents continue to represent substantial value to U.S. companies, in protecting their proprietary products in the market, defending against asserted litigation and enforcing patents against claimed infringers.  This is further evident in some recent high-profile patent portfolio transactions, including the Apple/Microsoft/RIM consortium's $4.5 billion purchase of Nortel's patents and Google's $12.5 billion purchase of Motorola Mobility," added Mr. Barry.

For more information, or to download a full copy of the report, visit http://www.pwc.com/en_US/us/forensic-services/forms/2011-patent-litigation-study.jhtml

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