Patent risk: PwC report highlights a changing landscape
Last month, PwC released the 2015 edition of its annual Patent Litigation Study. Compiled by experts from PwC’s Forensics Services Practice, the report identifies a number of trends from across the patent litigation landscape – based on an assessment of more than 2000 District Court patent decisions issued since 1995.
Clearly, understanding these trends is vital to assessing wider patent risk and, by extension, the overall value of a patent portfolio. With that in mind, our top five observations from PwC’s report are:
Patent litigation rates are falling: Surprisingly, the number of patent lawsuits in 2014 dropped by 13% compared with 2013. By any standard, given the historical upward trend, that is a vertiginous fall – but whether it is a blip, or a genuine reversal with implications for the wider risk landscape, remains to be seen.
Median damage awards are down again: Nothing new here, merely the continuation of a trend stretching back to 2000. Overall, median damage awards have fallen from $7.6 million for the period 2000-2004, to £2.9 million for 2010-2014 – the lowest level for 20 years. That, however, is not the whole story. NPE awards are on the rise again, up from $7.5 million in 2005-2009, to $8.9 million in 2010-2014. Perhaps more interesting, median NPE awards are now around 4.5 times higher than practising entity awards, having been roughly on a par in 1995-1999. The short, and obvious, conclusion is that NPE litigation represents disproportionate financial risk.
Damages awarded by juries remain on the rise. Indeed, the median jury award is now 31 times greater than the median bench award. Small wonder then that 67% of patent litigations go to jury trial.
It takes even longer for patent litigation to get to trial. According to PwC, time to trial now stands at almost 2½ years. For anyone facing legal action, that means a lot of uncertainty and substantial legal costs – another landscape factor that must to be taken into account when assessing risk.
(Some) NPEs are less successful, in court. It’s true that, overall, NPEs have a litigation success rate of 26%, but strip out individuals classified as NPEs and the rate rises to around 40% – that’s higher than the rate for practising entities (35%). What’s more, the median damages for NPEs rises significantly when individuals are excluded – from $9 million to around $14 million (1995-2014). That’s 3.5 times higher than practising entities over the same period. These figures highlight once again the gap between the financial haves and have-nots in the patent world. Individual inventors simply do not have the financial muscle to assert their patent rights – as a result, they win fewer than one in five cases and, even then, damages awards are relatively lower.