The patenting process is specifically designed to help protect the creative and monetary interests that innovation bring. Without patents, it would be possible for the general marketplace to infringe on any idea and make profits from it without any involvement in the creation process. Some people still try to do that anyway and that’s when patent litigation begins.
In 2012, there were more patent litigation cases commenced than at any other time in history.
With only a few exceptions, patent litigation cases have been increasing on an annual basis since 1980. In 2012, there were over 5,000 different cases that were initiated. Remarkably, however, only a fraction of these cases ever reach the trial stage. Only about 5% of patent litigation cases will go before a jury.
- In 2012, there were over 500,000 utility patents that had an application filed for consideration.
- The total number of patents issued in 2012: over 200,000.
- Applications for patents have been increasing dramatically since 1995, but the amount of patents issues as remained relatively the same annually.
- In 2012, 3 cases of patent litigation awarded damages of over $1 billion.
- 4 of the 10 largest awards from previous years were settled, overturned, modified or remain under appeal in 2013.
- The average award that is granted in a successful patent litigation case: $4.3 million.
- The median damages that are awarded in the telecommunications industry were the highest, at $22 million per case.
- The same four districts that rule favorably for patent holders has remained consistently the same: Western Wisconsin, Eastern Virginia, Delaware, and Eastern Texas.
Although the number of patent applications is up, as are the amount of patents that are being issued, the actual awards that are coming through are going down. The large cases bring in a lot of attention – it’s difficult to ignore an award of $200 million. Even cases that are settled outside of court are going for big money figures. A pharmaceutical patent litigation case was settled mid-trail for $2.15 billion in the last couple of years. In many ways, the awarding of a patent isn’t necessarily about setting up a new business venture. It’s about setting up the legal foundation of winning a successful litigation case if infringement occurs.
Why Is Patent Litigation Increasing So Rapidly?
- Nonpracticing entities are estimated to be involved in as many as 67% of all brand new patent infringement cases in 2013.
- The percentage of NPE involvement in patent litigation in 2009: 28%.
- Only about 20% of NPE-filed cases involve a court decision for the patent holder.
- NPEs typically receive about triple the amount of infringement damages as practicing entities do.
- The US Supreme Court has begun to seek out a better definition of patent litigation with six patent matters granted certiorari in 2013.
- 80% of the awards of patent litigation are tied into reasonable royalties.
- Lost profits have grown to account for up to 37% of the total award amount in certain cases.
- NPEs are successful with their patent litigation just 1 out of every 4 times.
Anyone who can afford a filing fee can sue someone. With billions of dollars on the line in some cases, there is a lot of upside associated with a patent litigation case. Even though 25% of the NPEs are successful and 35% of practicing entities are successful overall, which are both surprisingly low numbers, the goal is ultimately the same: recovering potential losses from the successful business ventures of someone else. This is why a clear definition of patent rights in as many situations as possible is so important. Without these definitions, there will continue to be more litigation cases because more patents are being applied for and granted.
Who Is Filing For Patent Litigation?
- 17% of the total patent litigation occur in the consumer products industry, accounting for the most cases that have been heard since 1995.
- The telecommunications industry accounts for just 5% of the cases, but is one of the largest contributors to awards.
- The Top 10 industries that see patent litigation cases account for 90% of the total decisions that have been identified in the last two decades.
- Patent holders who have consumer products or pharmaceutical items as their primary patent have a 33% higher chance of receiving a favorable reward.
- Jury cases are desired because they tend to award more funds than bench cases do.
If someone is blatantly copying another organization’s work in order to make money, then royalties are well deserved. This is why a majority of the awards that are issued involve royalties. The business venture that has created a successful amount of sales from a patented product is still rewarded, but the court system also wants the innovator of the patent to be awarded as well. This means that a vast majority of patent litigation cases would be non-existent if the laws were appropriately followed in the first place.
What Is Changing In The World Of Patent Litigation?
- Over the last 19 years, patent holders generally have experienced higher trial success rates when their cases are decided by juries rather than by the bench.
- The margin of success between bench trials and jury trials has dropped from 40% to 10% since the 1980s.
- None of the 2013 patent litigation awards were able to crack the Top 10 of the largest initial adjudicated damages awards since 1995.
- The amount of patent litigation has grown at an average annual rate of 8% since 1991.
As the amount of patents increases, the amount of patent litigation opportunities is also bound to increase. Until the laws are clearly defined, it is more profitable to pursue litigation in many instances because the chances of losing, though greater than the chances of winning, could bring in billions. With 7 figures as the average award across all demographics, being innovative certainly does have the potential to pay off big – one way or another.