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PwC Releases 2009 Patent Litigation Study

By Peter Zura

Each year PriceWaterhouseCoopers (PwC)conducts studies on patents and patent litigation, where the organization analyzes statistics relating to "hot" topics of patent law.  This year PwC looked at nonpracticing entities (NPEs - companies that do not design, manufacture, or distribute products) and their effect on litigation.

The study found that, adjusting for inflation using the Consumer Price Index, the annual median damage award has ranged from $2.2 million to $10.6 million, with a median award of $4.4 million over the last 14 years. Overall, this statistic has been more-or-less consistent during this time.

However, damage awards for NPEs have risen considerably in recent years.  In fact, the median damages award for NPEs was more than triple the award for practicing entities over the last seven years ($12 million for NPEs, and $3.4 million for practicing entities). Contrasted with 1995-2001, the median damages award for NPEs was about the same when compared with practicing entities (roughly $5 million).

One obvious explanation could be that NPEs have become more sophisticated in selecting patents to litigate, and understanding the markets to sue against.  However, another explanation may have something to do with the use of jury trials - juries decided only 14 percent of the cases with damages awards during the 1980s and 24 percent during the 1990s. In this decade, juries have decided 51 percent of the cases with damages awards.

NPEs like juries - trial success rates for patent holders are much higher when decided by juries as compared to bench trials. In fact, jury success rates have consistently outperformed their bench counterparts every year since 1995.  Since 1995, 55 percent of trials involving NPEs have been jury trials, as compared to only 41 percent of trials involving practicing entities.  In addition to the rate of success at trial, recent awards by juries have been significantly greater, running several multiples of the amounts awarded by judges.

Success rates at trial for NPEs and  practicing entities are quite good - 67.4% of NPEs and 65.8% of practicing entities.  However, summary judgment is much more brutal, especially for NPEs, which only have an 11.9% success rate.  Overall, NPEs are successful 29% of the time versus 41% for practicing entities.

The median time-to-trial in US district courts has remained steady,at just over two years (2.11) from the complaint date to trial, even as the volume of cases has increased substantially.  However, significant variations have occurred in the median of time-to-trial across jurisdictions

Rank              District                         In years
1        Virginia Eastern District Court        0.88
2        Wisconsin Western District Court   1.01
3        California Southern District Court   1.24
4        Florida Middle District Court           1.71
5        Maryland District Court                  1.75
6        Texas Eastern District Court           1.79
7        Kansas District Court                     1.89
8        Delaware District Court                  1.92
9        Texas Southern District                  1.99
10      California Central District Court      1.99
11      Ohio Northern District Court            2.05
12      New York Southern Dist.Court         2.18
13      Florida Southern District Court        2.27
14      Michigan Eastern District Court       2.32
15      Minnesota District Court                 2.32
16      Texas Northern District Court         2.42
17      Pennsylvania Eastern Dist. Court     2.43
18      Missouri Eastern District Court        2.52
19      New Jersey District Court                2.70
20      California Northern District Court    2.72

The most "patent friendly" jurisdictions (considering time-to-trial + overall success rate + median damage award) for 2009 were:

1    Virginia Eastern District Court
2    Texas Eastern District Court
3    Delaware District Court
4    Wisconsin Western District Court
5    California Central District Court
6    Florida Middle District Court
7    Texas Southern District
8    New Jersey District Court
9    Colorado District Court
10  Texas Northern District Court
10  Ohio Northern District Court (tie)
12  California Northern District Court
12  New York Southern District Court (tie)
14  Illinois Northern District Court
15  Minnesota District Court
15  Massachusetts District Court (tie)
17  Florida Southern District Court
18  Michigan Eastern District Court
19  Pennsylvania Eastern District Court
20  Connecticut District Court

The Top 5 districts by overall success ranking (1995-2008)

1   Florida Middle District Court -- 57.9%
2   Texas Eastern District Court -- 51.6%
3   Virginia Eastern District Court -- 48.6%
4   California Central District Court -- 48.3%
5   Delaware District Court -- 47.7%

Overall (all decisions identified) 38.2%

The Bottom 5 districts by overall success ranking (1995-2008)

1   Connecticut District Court -- 10.5%
2   Michigan Eastern District Court -- 20.0%
3   Florida Southern District Court -- 27.3%
4   Texas Southern District -- 28.1%
5   Pennsylvania Eastern District Court -- 30.3%

Overall (all decisions identified) 38.2%

To download a copy of the PwC 2009 Patent Litigation Study, click here (link)

Read the PwC press release on the study here (link)

Full post as published by Two-Seventy-One Patent Blog on January 27, 2010 (boomark / email).