Intellectual Property, Litigators, Patents

Is Patent Litigation Dead? What Gives?

Is the field of IP litigation still worth getting into?

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A slowdown in the world of patent litigation? It is, in fact, “a thing” (as the kids say nowadays). If you look at the Biglaw firms with the biggest drops in attorney headcount, a number of them are known for their IP litigation practices. And it’s not just IP lit departments at Biglaw firms; litigation departments at IP-focused firms are also suffering (as this case study demonstrates).

We aren’t the only ones who have taken notice of this phenomenon. Our friends at Law360, for example, have published articles like IP Boutiques Shrink Amid Litigation Slowdown. This shouldn’t come as a shock; our columnist Mark Herrmann predicted in January that the slowdown in IP lit that he already observed back then would only get worse over time.

Last weekend, I attended an interesting panel at the 2015 annual convention of the National Asian Pacific American Bar Association (NAPABA), “Is Patent Litigation Dead? What Gives?” It featured the following speakers:

  • Bijal Vakil (moderator), an IP litigation partner at White & Case;
  • Diana Luo, assistant general counsel at Walmart Global eCommerce;
  • Michael Shen, managing counsel for patent litigation at Taiwan Semiconductor Manufacturing Company (TSMC); and
  • Vaishali Udupa, vice president and assistant general counsel for IP litigation and policy at Hewlett Packard Enterprise.

What’s driving the slowdown in patent litigation? One major factor is the Supreme Court’s ruling in Alice Corp. v. CLS Bank International (2014). As Mark Herrmann summarized it, the Court in Alice held “that certain business methods, previously thought to be patentable, are not.” (You can read Justice Thomas’s opinion for a unanimous Court here.)

Diana Luo of Walmart said that Alice has been very helpful to Walmart’s defense strategy (and Walmart is almost always a defendant rather than a plaintiff in patent cases). The company, citing Alice, can get rid of cases at an earlier stage in the proceedings — especially cases brought by patent trolls aka “non-practicing entities” (NPEs), if you want to be more polite. Alice didn’t represent a total sea change — prior to Alice, Walmart and other defendants had Bilski v. Kappos (2010) to rely upon — but it was still good news for Walmart and other defendants (even if not for outside counsel hoping to profit on these matters).

So cases controlled by Alice are getting disposed of more quickly and less expensively. But other areas of patent litigation are booming — which is why Michael Shen of TSMC offered an emphatic “no” to the question of whether patent litigation is dead.

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At TSMC, Shen has seen an explosion in Inter Partes Review (IPR) proceedings, which he views as a form of patent litigation. As explained by the U.S. Patent and Trademark Office, IPR is “a trial proceeding conducted at the [Patent Trial and Appeal] Board to review the patentability of one or more claims in a patent only on a ground that could be raised under [35 U.S.C.] §§ 102 or 103, and only on the basis of prior art consisting of patents or printed publications.” The grounds for IPR are limited, and the PTO charges a pretty penny for filing them, but overall IPR proceedings can be faster and less expensive than other forms of IP litigation (which might be bad news for outside counsel hoping to run up big bills).

Vaishali Udupa of Hewlett Packard Enterprise agreed with Shen that patent litigation is far from dead. HP Enterprise is usually but not always a defendant — sometimes it has to sue competitors for infringement — so it has to be careful about the arguments that it makes about precedents like Alice. Udupa said that while there was a dip in IP cases for HP in 2014, this year the company saw an uptick.

“Patent trolls are smart,” Udupa said. “They change with the landscape.” So it’s crucial for companies to protect patent quality and the value of patents when they seek to patent inventions.

One important issue for companies that affects their patent dockets is where they are fighting the cases. Certain jurisdictions are less receptive to Alice motions than others. For example, the Eastern District of Texas, a famous haven for patent trolls, continues to be less friendly to defendants. Judge James Rodney Gilstrap of that court, who has the biggest patent docket in the nation, earlier this year announced a special procedure requiring defendants to seek leave of court for bringing an early Alice motion. So patent litigation is alive and well in E.D. Tex. — and if you’re a defendant in that court, you might want to try and get the case moved to the Northern District of California, the District of Delaware, or another, more-defendant friendly jurisdiction.

The America Invents Act (AIA), passed in 2011, contributed to the changing landscape of IP litigation (and the slowdown in such work, as discussed by Mark Herrmann). But it didn’t do anything on venue reform — i.e., fixing the Eastern District of Texas problem — which many defendants see as the next frontier.

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We probably won’t see major patent reform legislation anytime soon, according to the panelists. Elections are looming, Congress has other issues on its plate, and there are competing interests vying for influence on Capital Hill when it comes to IP issues. Any effort to curb frivolous lawsuits through patent reform must also preserve the incentives for innovation that lie at the heart of our patent system.

During the Q&A session, I asked the panelists — almost all of them from the in-house world — to see things from the perspective of outside counsel. These recent changes in the IP litigation world sound great for defendants and in-house lawyers, but what about the outside law firms that do IP lit work? Don’t you feel a little bad for all the outside lawyers and law firms just trying to make a living?

Law firm practitioners of IP litigation need to be smart, according to Vaishali Udupa of HP Enterprise. The days of throwing dozens of people on a case are over. IP litigators, both in-house and outside counsel, must figure out which cases are important and which ones aren’t. Where can the budget be streamlined? Can you reduce costs through a joint defense? How small a team can be staffed on a matter? Outside lawyers who can provide value to in-house counsel by litigating cases smartly and economically will become the go-to practitioners in the space.

Mike Shen of TSMC agreed. There’s still plenty of work, he said; it just needs to be done differently.

“My budget hasn’t shrunk,” Shen said. “I still have a big budget for managing litigation. But you need to show that you’re worth it. We aren’t going to pay for throwing an army of young associates on a case.”

What implications does this have for law students and young lawyers who are interested in IP litigation? First, you need to learn as much as you can about how you can bring value to the table, the panelists said. Being a general IP litigator is a lot tougher; you need to figure out the specific areas and issues that will matter to future clients. Bijal Vakil of White & Case mentioned global IP litigation and design patent cases as two areas of possible growth.

Second, you need to be better prepared than ever. Diana Luo of Walmart said that she will prepare extensively for even the briefest meeting with her general counsel. Shen urged young lawyers not to underestimate the importance of your role, even if you are junior. A client might not be “your” client in the same way as it’s the relationship partner’s client, but you still need to do your best at every task you’re given.

Finally, from the in-house perspective, diversity is more important than ever. Udupa said she wants to see diverse individuals not just on the pitch but on the bill, i.e., as timekeepers on the matter. In other words, outside counsel, don’t just throw a token minority on your pitch or RFP response; you need to staff the matter with minorities as well.

Udupa mentioned a huge case of hers that has dozens of outside lawyers working on it. After reviewing the bill, she contacted the relationship partner and said, “We have a problem. There is one woman associate and two women paralegals on this matter. I want a list of your women IP litigators — and if you don’t have enough, I’m happy to give you the names of some great women you can consider hiring.”

In another case that was scheduled to go to trial, the outside firm wanted to take one of its associates, a woman who was about to get married, off the case. It sounded like the firm wanted to do this out of consideration for the associate — but it didn’t sit well with Udupa. She called up the associate directly and asked, “Do you still want to work on this case?” After the associate said yes, Udupa made it so. The bottom line: just because a woman is getting married or having a baby doesn’t mean she should be taken off all interesting work.

So is patent litigation dead? There are pockets of weakness here and there, to be sure. But for lawyers and law firms who understand the importance of high-quality work, good value for the client, and diversity, the IP litigation world remains full of opportunities.

2015 Annual Convention [National Asian Pacific American Bar Association (NAPABA)]
IP Boutiques Shrink Amid Litigation Slowdown [Law360]
Litigation Firms Make Cuts Amid Work Slowdown [Law360]

Earlier: What’s Going On At Kenyon & Kenyon?
The Biglaw Firms With The Biggest Drops In Attorney Headcount (2015)

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