Joff Wild

Further evidence of a dramatic slowdown in patent litigation activity in the United States is provided today in data published by Unified Patents, the entity whose business is based on helping SMEs fight frivolous patent suits. According to the research, which covers the third quarter of this year (June to September),  there was a 23% drop in the number of suits filed compared to the second quarter, and a 27% year-on-year reduction. [NOTE: the Unified Patents press release linked to in this paragraph is not the original one put out by the firm. That can be seen here. See UPDATE below also]  

The findings come just weeks after data released by Lex Machina showed that there had been a 40% fall in patent suits in September 2014 as compared to the same month in the previous year. Commenting to IAM on the reasons for the decline, Lex Machina founder Professor Mark Lemley claimed that much of it could be attributed to the Supreme Court’s Alice v CLS decision. The Alice judgment was handed down towards the end of June.

While confirming the decline first detected by Lex Machina, the Unified Patent research goes further into analysing where it has occurred. And the data shows that it can be almost completely explained by a drop-off in NPE suits in the high-tech sector. Litigation initiated by operating companies fell by just 19 quarter on quarter, but actions launched by NPEs dropped by 301, from 885 in Q2 to 554 - a fall of 35%.

Commenting on the findings, Unified’s chief operating officer Shawn Ambwani stated: “It is clear litigation in general did not change in quarter 3, only NPE suits in high tech had a great tumble.  We cannot be clear as to the causation, but can make some good guesses, which include Alice and the America Invents Act.” Ambwani speculated that both the Supreme Court’s decision and the legislation may have made NPEs less willing to go on the attack: “My guess would be that NPEs are very fragile when it comes to asserting if the ROI is more uncertain.  The doubt that AIA and Alice have added has been enough to dramatically change the picture.  By contrast, operating companies are usually asserting for more than just monetary reasons and often have deeper pockets as well.”

Just last week Ambwani and Professor Brian Love of the Santa Clara Law School published a paper looking at inter partes review procedures at the USPTO. This found that patents owned by NPEs were actually less likely to be invalidated or disclaimed in final determinations by the Patent Trial and Appeal Board.

Speaking at the annual meeting AIPLA meeting last week, Michelle Lee – recently nominated to be the next permanent director of the USPTO – stated that the Obama administration continues to support patent reform. However, the data released today by Unified Patents suggests that the perceived need to urgently address frivolous patent litigation may no longer be there – if it ever was in the first place. With the number of suits being initiated collapsing, business method patent grants in meltdown at the USPTO, no empirical evidence showing any significant harm caused by so-called patent trolls, and worries from various parties that the profound rebalancing of the patent litigation system in favour of defendants envisaged by the Goodlatte Act would do much more harm than good, surely now is the time to pause and see what happens next.

As Mark Lemley told this blog earlier in the month: “The need for legislative reform is a lot less right now than it was a year ago and it probably makes sense to wait a bit and see how these cases play out and what the new dynamic looks like before we try to rewrite the rules.”

UPDATE - Subsequent to the blog above being posted, Unified Patents changed the press release it originally sent out to accompany the data it had produced. The new press release was significantly different to the one that was originally supplied. You can see the two side by side here. The IAM blog covered the changes that were made here.