Recent Changes to the Patent Litigation Landscape and Predictions for the Future June 12, 2018
Rob Reckers Fiona Bell 2
Trends in Patent Litigation: Cases Filed 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Data source: Lex Machina Patent Litigation Year in Review 2017 3
Concerns Over the Quality of Asserted Patents Older patents from failed commercial ventures, purchased by litigation-focused investors Patents of questionable scope and precision High standards and expenses associated with proving a bad patent was improperly granted 4
Concerns Over the Plaintiffs Tactics and Venue Source: Bloomberg News, Patent Trolls: What Are These Hideous Creatures, May 27, 2014 5
Congress Passes the America Invents Act (2011) Creates new avenues for challenging bad patents Supreme Court Issues Alice Decision (2014) Redefines what can be patented Supreme Court Issues T.C. Heartland Decision (2017) Redefines venue rules What Happened Next? 6
7,000 Effect on Patent Litigation: Decrease in Cases Filed 6,000 5,000 4,000 3,000 2,000 1,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Data source: Lex Machina Patent Litigation Year in Review 2017 7
Effect on Patent Litigation: Shift Away from Eastern District of Texas 2016-2017 2017-2018 42% 40% E.D. Tex. D. Del. 51% 15% 25% C.D. Cal. 5% 14% Other 8% Data Source: Lex Machina; LEFT: Patent cases filed June 1, 2016 May 1, 2017 (pre-tc Heartland); RIGHT: Patent cases filed May 23, 2017 - Jan 31 2018 (post- TC Heartland). 8
Basic Patent Law Concepts 9
What is a Patent? 10
What is a Patent? 11
How Do You Get A Patent? What is claimed is.... 12
Patent Basics $$$ Patent Rights 13
Patent Basics Patent Rights 15
Defense: Patent Is Invalid Invention must be: New and non-obvious Directed to patent eligible subject matter 16
Example A food product comprising: 2 slices of bread, A layer of nut butter, and A layer of fruit jelly, Wherein the nut-butter and fruit jelly are located between the two slices of bread. 17
Summary Patent = property right to invention Patent Owner can sue if invention used without permission Defense: patent is invalid 18
Recent Changes in the Law: New Avenues for Challenging Bad Patents 19
Lawsuit: District Court Patent Owner - Plaintiff Respondent Defendant Petitioner Inter Partes Review: U.S.P.T.O 20
Timeline Litigation vs. IPR IPR Petition IPR Final Written Decision < 6 months < 12 months Complaint 35 U.S.C. 312-16. IPR Institution Decision District Court Trial 21
Litigation vs. IPR X 3 Clear and Convincing Narrow Preponderance Broad 35 U.S.C. 311; Leahy-Smith America Invents Act, 125 Stat. 284, 299-305 (codified as amended 35 U.S.C. Chap. 31); 37 C.F.R. pt. 42(B). 22
IPR Outcomes Favor Defendants Petition Decision Final Decision 30% 70% 19% 14% 67% Instituted Denied Invalid Upheld Mixed Result Source: Lex Machina analytics; data for concluded/ terminated IPR trials, from 09-16-2012 through 04-29-2018. 23
IPRs Have Chilling Effect on Litigation 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Data source: Lex Machina Patent Litigation Year in Review 2017 24
IPRs Have Chilling Effect on Litigation 7000 6000 5000 # of Filings 4000 3000 2000 1000 0 2012 2013 2014 2015 2016 2017 2018 IPR District Court Data Source: Lex Machina analytics 25
Recent Changes in the Law: Redefining What is Patent Eligible Subject Matter 26
Patent Eligible Subject Matter 35 U.S.C. 101: Whoever invents or discovers any new and useful [1] process, [2] machine, [3] manufacture, or [4] composition of matter, or any new and useful improvement thereof, may obtain a patent therefor 35 U.S.C. 101 27
Patent Eligible Subject Matter Non-patentable subject matter - judicial exceptions: Laws of nature Naturally occurring products Abstract ideas They are the basic tools of scientific and technological work and thus the grant of a patent might tend to impede innovation more than it would tend to promote it. 35 U.S.C. 101 ; Mayo Collaborative Servs. v. Prometheus Labs., Inc., 132 S. Ct. 1289, 1293 (2012). 28
101 Supreme Court Decisions 1. Bilski v. Kappos, 561 U.S. 593 (2010) Method for risk hedging was a patent-ineligible abstract idea. 2. Mayo Collaborative Services v. Prometheus Labs., Inc., 132 S. Ct. 1289 (2012) Process of calibrating dosage of a drug is patent-ineligible law of nature 3. Alice Corp. Pty. Ltd. v. CLS Bank Int l, 134 S. Ct. 2347 (2014) Computerized system for managing escrow debts Abstract idea + generic computing = not patentable 29
Patents Held Invalid Under 101 160 140 120 100 80 60 40 20 0 2012 2013 2014 2015 2016 2017 2018 Data source: Lex Machina Patent Litigation Year in Review 2017 30
7,000 Increase in Patents Held Invalid Under 101 Results in Decrease in Patent Litigation 6,000 5,000 4,000 3,000 2,000 1,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Data source: Lex Machina Patent Litigation Year in Review 2017 31
The Impact of Alice District Courts: substantial number of software patents invalided under Alice Patent Office: stricter standards, many patent applications rejected in light of Alice Software patents issued today must demonstrate a true inventive concept. 32
Recent Changes in the Law: Venue Reforms 33
Patent Venue Statute Any civil action for patent infringement may be brought in the judicial district [1] where the defendant resides, or [2] where the defendant has committed acts of infringement and has a regular and established place of business. 28 U.S.C. 1400(b) 34
Patent Venue Statute Any civil action for patent infringement may be brought in the judicial district [1] where the defendant resides (i.e., state of incorporation), or [2] where the defendant has committed acts of infringement and has a regular and established place of business. 28 U.S.C. 1400(b) 35
Patent Venue Statute - 1990 (Fed. Cir.) Any civil action for patent infringement may be brought in the judicial district [1] where the defendant resides (i.e., state of incorporation), (i.e., in any judicial district in which it is subject to personal jurisdiction ), or [2] where the defendant has committed acts of infringement and has a regular and established place of business. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F. 2d 1574 (Fed. Cir. 1990) 36
Effect of VE Holding E.D. Tex. D. Del. 42% 40% C.D. Cal. Other 5% 14% Source: Lex Machina analytics; patent cases filed June 1, 2016 May 1, 2017 (pre-tc Heartland); 37
Why E.D. Tex? o Local patent rules o Low MSJ success rate o Speedy ( rocket docket ) o Jury pool o Large damages 38
Effect of VE Holding Source: thetimes.co.uk, April 28, 2015 39
Effect of VE Holding Sourcse: thetimes.co.uk, April 28, 2015; Patents: Last Week Tonight with John Oliver (HBO), April 20, 2015 40
Patent Venue Statute 2017 (S. Ct.) Any civil action for patent infringement may be brought in the judicial district [1] where the defendant resides (i.e., state of incorporation) (i.e., in any judicial district in which it is subject to personal jurisdiction ), or [2] where the defendant has committed acts of infringement and has a regular and established place of business. TC Heartland LLC v. Kraft Foods Grp. Brands LLC, 137 S.Ct. 1517 (2017) 41
Effect of T.C. Heartland on Venue Before: After: 42% 40% E.D. Tex. D. Del. 51% 15% 25% C.D. Cal. 5% 14% Other 8% Source: Lex Machina; LEFT: Patent cases filed June 1, 2016 May 1, 2017 (pre-tc Heartland); RIGHT: Patent cases filed May 23, 2017 - Jan 31 2018 (post- TC Heartland) 42
Recent Case Law Further Restricts Venue Options Defendant only resides in a single judicial district In re BigCommerce 18-120 (Fed. Cir. May 15, 2018) Law regarding what is a regular and established place of business still developing In re Cray, 871 F.3d 1355 (Fed. Cir. Sept. 21, 2017) Burden is on plaintiff to prove venue is proper In re ZTE (USA) Inc., 18-113 (Fed. Cir. May 14, 2018) 43
Forecast & Predictions 44
7,000 Forecast: Filings Will Remain Depressed 6,000 5,000 4,000 3,000 2,000 1,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Data source: Lex Machina Patent Litigation Year in Review 2017 45
The New Normal Petitions for Inter Partes Review 101 Challenges Venue other than E.D. Tex. 46
Law Continues to Evolve Law regarding 101 still developing Multiple Petitions for Certiorari Pending at S. Ct. Law regarding IPRs shifting Two recent S. Ct. decisions, more expected in future Law Regarding Venue Law regarding regular and established place of business continues to evolve 47
Record Numbers of Patents Continue to Issue 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Data source: U.S.P.T.O website 48
Thank you Rob Reckers Fiona Bell 49
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