How Fish & Richardson has climbed to the top of our annual list of most active IP practices

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1 Patent Litigation Survey go fish How Fish & Richardson has climbed to the top of our annual list of most active IP practices

2 2010 Patent Litigation survey An Unexpected Turn Work was steady for top firms last year, but judges started to rein in damages. By Joe Mullin Judging by the results of the 2010 edition of our annual Patent Litigation Survey, you might not guess that the number of patent suits filed in federal court fell last year. According to PricewaterhouseCoopers, though, that s just what happened: The number of new infringement claims brought in 2009 was down by 6 percent, compared to the 2008 total. But while there may have been less litigation work to go around overall, there was certainly plenty to keep the top law firms in our rankings busy. Consider Fish & Richardson, which snagged the top spot on our overall list again. In 2008 Fish handled a combined total (plaintiffs plus defense) of 77 cases. In 2009, the firm s total shot up to 99 cases a 29 percent increase. Second-place finisher Kirkland & Ellis saw its docket surge from 57 cases in 2008 to 72 in 2009, a 26 percent jump. All five of the top firms on the overall list Jones Day, Quinn Emanuel, Urquhart & Sullivan, and Howrey are the others benefited from one patent litigation trend that just won t quit: the ongoing flood of suits filed by nonpracticing entities (NPEs), or patent trolls. In fact, for several of the top firms, defending against Meanwhile, in the First STate... Delaware is home to one of the busiest federal districts in the country for patent litigation. For that reason, Delaware firms rack up substantial caseloads every year and 2009 was no different. As they have in the past, the midsize Wilmington-based firms Morris, Nichols, Arsht & Tunnell (82 cases; 31 defense, 51 plaintiffs); Richards, Layton & Finger (47; 27, 20); and Potter Anderson & Corroon (42; 25, 17) responded to our survey. While all three can, and do, handle patent cases on their own, they also often function as local counsel for out-of-town firms that file suit in Delaware. That s why we ve opted to recognize their efforts here, rather than include them on our main lists. J.M. NPEs accounted for more than half of their overall caseload. But while NPEs are responsible for many patent suits, disputes between competing companies which tend to drag on longer and generate more in fees than troll suits still make up the core of many top firms litigation business. The smartphone wars that flared up this year between Apple Inc. and rivals like Nokia Corporation and HTC Corporation, for example, may ultimately produce more fees for the firms representing them (Kirkland & Ellis and Wilmer Cutler Pickering Hale and Dorr, among others) than many patent troll cases combined. So the business of patent litigation is fundamentally solid. For further proof, consider data compiled by PricewaterhouseCoopers that shows damages awards in patent cases reaching a median of $9.3 million in 2009 not far off the alltime high of $10.6 million in Of course, a few extraordinary awards helped push up last year s median, including i4i Inc. s $290 million win against Microsoft Corporation, which the software giant hopes the U.S. Supreme Court will consider, and the even more eye-popping $1.8 billion awarded to Johnson & Johnson subsidiary Centocor Ortho Biotech Inc. for having the patent on its antiarthritis drug Humira infringed by Abbott Laboratories. Large awards like those don t just nudge the median higher. They grab the attention of everyone involved in patent litigation including judges, who have always been more conservative than juries in awarding damages. Now in an emerging trend with major implications for the firms that rely on patent cases those judges are moving to limit the size of awards by examining more closely the economic models on which they are based. The issue turns largely on royalty calculations. While they are often at the heart of patent damages cases these days, that wasn t always so. As recently as the 1980s, The Busiest s Overall Name District Court 1 1 Fish & Richardson Kirkland & Ellis Jones Day Howrey Quinn Emanuel Orrick Finnegan, Henderson McDermott Will Alston & Bird Morrison & Foerster Cooley Niro, Scavone Foley & Lardner Winston & Strawn Baker Botts Wilmer Greenberg Traurig McCarter & English Perkins Coie Kilpatrick Stockton Knobbe Martens Amster Rothstein Connolly Bove K&L Gates McKool Smith Goodwin Procter Robins, Kaplan Wilson Sonsini Covington & Burling Sidley Austin Fitzpatrick, Cella DLA Piper US Kenyon & Kenyon Nixon Peabody Banner Witcoff Husch Blackwell Fulbright & Jaworski King & Spalding 21

3 For the Defense Name Defense 1 2 Fish & Richardson Kirkland & Ellis Jones Day Howrey McDermott Will Orrick Cooley Morrison & Foerster Quinn Emanuel Winston & Strawn Alston & Bird Foley & Lardner Baker Botts Finnegan, Henderson Greenberg Traurig Perkins Coie Goodwin Procter Kilpatrick Stockton Amster Rothstein K&L Gates Sidley Austin Wilson Sonsini 20 patent litigation and the damages it produced mostly involved battles between rivals trying to persuade judges and juries of the profits they d lost as a result of infringement. Today, the lost-profits argument is less prevalent than it once was. According to PricewaterhouseCoopers, lost profits accounted for 39 percent of damages awards in patent cases from 1995 through 2001; the figure dropped to 28 percent for awards granted between 2002 and That s partly explained by the rise of nonpracticing entities as a force in the patent litigation arena. Another factor: the increasing willingness of operating companies to try to cash in, via lawsuits and licensing, on patents that aren t generating revenue otherwise. The heavy reliance on royalty calculations in figuring damages has prompted judges to apply particular scrutiny to the so-called entire market value rule, which allows plaintiffs experts to claim damages for a patented invention based on the overall value of an infringing product, even if the patent at issue only covers a small piece of the product in question. And one judge in particular appears to be having a major influence in this area: Chief Judge Randall Rader of the U.S. Court of Appeals for the Federal Circuit. In 2009, before becoming chief judge, Rader sat by designation on three district court trials, On the Plaintiffs Side Name Plaintiffs 1 1 Niro, Scavone Fish & Richardson McCarter & English Jones Day Finnegan, Henderson Fitzpatrick, Cella Kirkland & Ellis Wilmer Robins, Kaplan McKool Smith 15 two in Eastern Texas, the other in New York s Southern District. It s not unusual for appellate judges to spend time in trial courts, but many observers saw Rader s decision to visit East Texas still considered a plaintiff-friendly venue as telling. In one of the Texas cases, Rader threw out expert testimony backing patent-holding plaintiff IP Innovation, saying that the expert s report improperly inflates damages by using irrelevant or unreliable evidence. In the New York case, he sliced a $184 million award to Cornell University to $53 million, finding the royalty base on which the initial award was calculated too broad. Rader issued both rulings in March 2009, and patent practitioners say his apparent willingness to get tough on damages has already started to filter down into district courts. There s a noticeable effect on the high-tech side, says McDermott Will & Emery partner Yar Chaikovsky. The entire market value rule is applied much more vigorously. It s causing plaintiffs to search for other methods, and be much more creative in their damage theories. As if to drive the point home, the Federal Circuit issued an important damages ruling in September 2009 in connection with a longrunning patent dispute between Alcatel-Lucent and Microsoft. After a San Diego jury found that the date picker function on Microsoft s Outlook calendar infringed an Alcatel-Lucent patent, the damages arguments between the parties couldn t have diverged more wildly. Citing the entire market value rule, Alcatel-Lucent argued that it should be paid 8 percent of relevant Outlook sales $561 million while Microsoft argued that the damages award should be no higher than $6 million because the patent in question covered a small portion of Outlook s overall functionality. The jury ultimately awarded Alcatel-Lucent $358 million. On appeal, Microsoft repeated its argument that an award based on total Outlook sales was Methodology Earlier this year, Corporate Counsel contacted more than 300 law firms and asked them to provide us with a list of patent lawsuits they either filed on behalf of plaintiffs in federal district court in 2009 or were hired to defend against. To be considered for this survey, the cases in question had to be active as of February 1, We did not count cases before the International Trade Commission or appellate courts. Some firms listed multiple district court cases with the same plaintiff. If those cases involved the same patent, highly similar technology, or consolidated discovery, we counted them all as one. nonsensical an argument the Federal Circuit embraced while affirming the lower court s finding of infringement. In February the Federal Circuit used similar logic in tossing out a 12.5 percent royalty rate awarded in ResQNet.com, Inc. v. Lansa, Inc. While rulings that limit damages hardly spell the end of high-stakes patent cases, litigators say that such decisions do make it harder for a patent plaintiff to make an intimidating damages demand. I think now you re going to have to come up with a tighter case, if you re going to make that kind of claim, says Hopkins Guy, a patent litigator at Orrick, Herrington & Sutcliffe. It s worth noting that a year ago, few would have guessed that the most meaningful changes shaping patent law at the moment would involve judges reining in damages calculations. Most people were focused instead on patent reform legislation and, as time passed, on how the Supreme Court would rule in the Bilski case. Ultimately, the Court s ruling changed little about patent law or litigation. The Bilski opinion did ensure that patent disputes including those in such controversial areas as software and business methods will continue to flare up. And when they do, there will still be substantial sums of money at stake, and, according to Ronald Schutz, head of IP litigation at Robins, Kaplan, Miller & Ciresi, defendants who are often ready to fight harder than ever. The amount of money that defendants are willing to spend on defending an NPE litigation these days is mind-boggling, says Schutz, who busied himself mostly with contingency-fee plaintiffs work in Faced with a steady docket of patent litigations and with no serious changes to damage calculations apparently coming via legislative patent reform anytime soon defendants may feel that fighting is all they can do.

4 2009 & 2008 Patent Litigation survey Fish & Richardson Kirkland & Ellis 57 3 N/A Quinn Emanuel Kenyon & Kenyon Finnegan, Henderson Niro, Scavone Morrison & Foerster 46 8 N/A Wilmer Howrey Jones Day 43 9 N/A Knobbe, Martens Alston & Bird Greenberg Traurig DLA Piper US Foley & Lardner N/A K&L Gates N/A McKool Smith N/A Akin Gump Wilson Sonsini Baker Botts McDermott Will Fish & Richardson Morrison & Foerster Kirkland & Ellis Howrey Jones Day Niro, Scavone Winston & Strawn 52 8 N/A Knobbe Martens Foley & Lardner Kenyon & Kenyon Finnegan, Henderson McDermott Will Baker Botts N/A Morgan Lewis Heller Ehrman Sidley Austin Alston & Bird Kilpatrick Stockton N/A Townsend and Townsend N/A Akin Gump Cooley Godward 34 By any measure, Fish & Richardson comes out on top. August/September 2009, IPLB

5 , 2006, 2005, 2004 & 2003 Patent Litigation survey Fish & Richardson Jones Day Kirkland & Ellis Foley & Lardner Howrey Greenberg Traurig Niro, Scavone Knobbe Martens 35 9 N/A Cooley Godward McDermott Will Baker Botts Morrison & Foerster Kenyon & Kenyon Weil, Gotshal N/A Heller Ehrman Connolly Bove Perkins Coie Finnegan, Henderson Kilpatrick Stockton Sidley Austin Fish & Richardson Jones Day Foley & Lardner Morrison & Foerster Howrey Kirkland & Ellis Morris, Nichols 37 5 N/A Niro, Scavone McDermott Will Finnegan, Henderson N/A Kilpatrick Stockton Greenberg Traurig Kenyon & Kenyon Sidley Austin Knobbe, Martens Potter Anderson N/A Baker Botts Michael Best Winston & Strawn N/A DLA Piper* 25 Bose Corporation general counsel Mark Sullivan, a longtime IP client, is pleased that he can go to Fish & Richardson for both prosecution and litigation. The acoustics company jealously protects its IP, because, as Sullivan says, if we don t do the right thing, we are out of business May 2004, IPLB Fish & Richardson 77 2 Knobbe, Martens 60 3 Jones Day 56 4 Foley & Lardner 47 5 Howrey 43 5 Kenyon & Kenyon 43 7 Morris, Nichols 41 8 Winston & Strawn 34 9 Finnegan, Henderson Connolly Bove Fish & Richardson 69 2 Knobbe, Martens 57 3 Kirkland & Ellis 50 4 Morris, Nichols 45 5 Howrey 44 5 Pillsbury Winthrop 44 7 Morrison & Foerster 40 7 Sidley Austin 40 9 Finnegan, Henderson Morgan Lewis 28

6 The cover herein is customized soley for this reprint in collaboration with Fish & Richardson. The remaining elements are reprinted and excerpted with permission from the 2010 edition of CORPORATE COUNSEL & the edition of IP LAW & BUSINESS 2010 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact or #

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