Intellectual Property

3 Takeaways From The Lex Machina 2021 Patent Report

2020 was not a normal year -- for any of us.

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Back in August, I shared some insights from Lex Machina’s PTAB Report, which centered on the early impact of COVID-19 on the PTAB’s activity. As we rue the one-year anniversary (especially in New York City) of COVID-19’s devastating impact, we can also appreciate the tremendous efforts by everyone in the patent litigation community to keep things moving along as well as possible during the pandemic. In fact, in a press release announcing the issuance of their 2021 Patent Litigation Report (available with registration here), one of the report’s authors commented that the effects of the pandemic were not “as prevalent as originally predicted a year ago.” That said, it is important to remember when considering the findings in the report that 2020 was not a normal year — for any of us.

As is my wont, I would like to focus on three idiosyncratic takeaways based on my review of the report. In doing so, I’d like to illustrate some broader themes of what is really happening in current patent litigation, impacted as it has been by the pandemic. First, I’d like to focus on what the report deems High-Volume Plaintiffs. Second, I’ll look at what invalidity defenses have been successful for defendants, especially at relatively early stages of a patent case. Third, I’ll investigate the increasingly outsized role Texas plays when it comes to the handling of patent cases.

We can start with a look at what the report deems High-Volume Plaintiffs. Those come in three flavors. First, you have the patent owners pursuing a quick-hit, volume settlement approach. Where the target is an immediate settlement, often for less than $100,000. That evergreen activity does not seem to have been impacted by the pandemic, and may have been helped by a reluctance for target companies to spend big on hiring defense counsel. But that is low-stakes fare anyway.

More dangerous for operating companies are the second breed of High-Volume Plaintiff, the nuclear-bomb wielding (i.e., funded for bare-knuckle litigation to the end) patent assertion entity. Armed with pedigreed patents and the financial backing to detonate them at trial, this group of plaintiffs may be currently in the minority but are having an outsized impact on the universe of well-heeled defendants that are their targets. As just one example, the report notes that Google was sued in over 20 cases by just two such plaintiffs. Add in the spate of sky-high jury verdicts that were announced in the past year, and it is easy to understand why this slice of the patent litigation market commands so much attention on the defense side.

Perhaps more prosaically, the third type of High-Volume Plaintiff identified in the report falls in what we would normally term the “competitor case” category. One would expect that such a category would be populated by companies operating in a litigious industry, with 2020’s winner apparently being the electronic cigarette space. One of the giants in that industry, Juul Labs, found itself as the plaintiff in 50 filed cases in 2020. E-cigarettes — a patent litigator’s best friend.

Next, it was very interesting to see the report’s analysis concerning invalidity defenses. While we all know of Alice’s impact on patent litigation, the picture painted by the numbers is a stark one. Over 50 cases in 2020 alone were terminated on the basis of a 101 motion. More importantly, nearly all of those terminations were based on early motion practice — confirming that 101 motions are an effective tool for defendants to clear out weak cases early on. But there is another tool available to defendants that gets a lot less attention but has proven just as effective — the indefiniteness motion, which often gets made on summary judgment (without the need for much discovery as it arises out of the patent language itself) as part of claim construction proceedings. Such motions saw 25 cases terminated in a defendant’s favor last year, which may be a harbinger for more indefiniteness fights in cases going forward.

Finally, if it seems like all patentees would want to be in Texas, it is because that is increasingly true. Last year, the report shows that filings in the next most popular district, Delaware, dropped 26% compared to 2019. Texas, on the other hand, maintained its popularity, with nearly one-third of all patent cases filed in the state in 2020. Considering the restrictions on patent holders filing where they please because of TC Heartland, that is an astounding number. Moreover, I would venture to say that Texas filings comprise a much higher percentage of the “danger cases” — those brought by nuclear High-Volume Plaintiffs as discussed above. It is no secret, for example, that certain litigation funders will only consider funding patent cases that can be brought in Texas. For the foreseeable future, therefore, all eyes will remain on Texas when it comes to patent litigation, especially outside of the pharma/biotech realm.

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Ultimately, the great thing about the report is that it has useful information for anyone impacted by patent litigation. And different people reading the report are likely to focus on the takeaways that are most germane to them. At bottom, however, we should be grateful to have had work to do over the past year. As well as thankful to Lex Machina for giving us a snapshot of what our collective efforts resulted in.

Please feel free to send comments or questions to me at gkroub@kskiplaw.com or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at gkroub@kskiplaw.com or follow him on Twitter: @gkroub.

 

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