Patent litigation by the numbersJune 11, 2008

PricewaterhouseCoopers recently published its annual litigation study entitled 2008 Patent Litigation Study: Damages awards, success rates and time-to-trial. The study examined a wide range of variables pertaining to patent litigation from 1995 to 2007. With the number of patents granted increasing every year, the number of patent cases has continued to grow. Also, with the number of cases growing the amount of damages being awarded continues to grow (several awards over $100 million and some pushing into the billions), and with no legislative changes in sight, developing an effective litigation strategy is crucial. PWC's study attempts to shed some light on emerging trends in patent litigation.Click below for more detail regarding the study.The study looks first at the differences in median damages between the last 7 years and the previous 6 years. The median amount of damages awarded remained relatively the same ($3.9 million versus $3.8 million) which is surprising given the trend prior to 1995 was a steady increase in damages. The study also shows that the booming industries of telecommunications and medical devices are leading the way in the number of patent cases. Telecommunication cases also had the highest median damages award with a whopping $31.3 million; automotive patent cases had the lowest median among the industries studied, with a paltry $34,108. The next area of focus was the use of jury trials versus bench trials. The growing trend appears to be that patent litigators are beginning to put their faith in jurors rather than judges and with good reason. The study shows that recently jury trials have become more successful and juries are awarding greater damages than judges. In the 1980s, the damages awarded in bench trials and jury trials were relatively similar ($700,000 v. $1 million). However, since 2000, juries have been awarding significantly more than judges ($900,000 v. $8.6 million). The types of damages awarded also seem to be changing. In the 1980s and 1990s, lost profits were the main form of damages, followed closely by reasonable royalties. However, since 2000, reasonable royalty awards have been more common than lost profit awards. The study speculates that this shift has occurred because determining lost profits is a complex and costly process, making it much more difficult to prove. As a result, litigators have begun to focus more on reasonable royalties.Patent holder success rate has remained relatively the same, since 1995, with a rate of about 37%. Summary judgment success rate for patent holders remains relatively low at 19%. While the overall trial success rate of patent holders is 57%, the current trend shows that this number is growing. Between 1995 and 2000 the trial success rate was 47%, but between 2001 and 2007 that success rate has grown to 63%. The data on alleged infringers is very interesting. If the alleged infringer was the defendant, they won at summary judgment 85% of the time. But if they were a declaratory judgment plaintiff, the alleged infringer wins summary judgment only 37% of the time. If the case went to trial, the difference mattered substantially less: a 52% success rate if the alleged infringer was a DJ plaintiff and a 42% success rate as a defendant.Interestingly, time-to-trial of patent cases has remained fairly consistent at approximately 2 years, despite the increase in the number of infringement cases filed and the number of patents at issue. Also, the type of industry involved seemed to have little to no effect on time-to-trial. Of course, forum selection can play a huge factor on this statistic. Rocket dockets, such as the Eastern District of Virginia, had the lowest time-to-trial (less than one year for that district and the Western District of Wisconsin), while Connecticut had the longest, of the districts studied, at just over 4.5 years. The study also showed that time-to-trial had relatively no impact on the success rate, but had a huge difference in the amount of damages awarded. The overall success rate for a patent holder lingered around 60% regardless of the time-to-trial. But the amount of damages went from a median of $2.9 million, if the time-to-trial was less than 2 years, to an average of $10.5 million, if the time-to-trial was over 4 years. The study also analyzed which districts are most favorable to patent holders. The criteria considered were median time-to-trial, median damages awarded, summary judgment win rates and trial win rates. Each criterion was given equal weight. Considering all of these factors, the best district for patent holders was the Eastern District of Virginia, followed by a tie between the Central District of California and the Eastern District of Pennsylvania. Interestingly, the Eastern District of Texas, commonly believed to be the most plaintiff-friendly court , ranked only sixth on the list.The final item examined was the effect of appeals. PWC found that patent holders appeal their loss at a much higher rate regardless if the decision was based on a trial or summary judgment. Interestingly, a patent holder is much more likely to get a reversal or modification if the judgment came from a trial rather than a summary judgment, even though the standard of review would seem to be more favorable for summary judgment appeals. An alleged infringer, on the other hand, is more likely to have a summary judgment overturned rather than a trial verdict. The main reason decisions are modified or reversed on appeal is because of claim construction changes, followed by patent validity challenges. The districts with the highest percentage of cases appealed were Massachusetts, the Northern District of California, and the Northern District of Illinois. To read the entire study, click here.

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