Non-Practicing Patent Holders Winning Bigger And Bigger Awards — And Why They Like East Texas

Studies

from the speed-or-success? dept

It’s no secret that many non-practicing entities (i.e., patent holders who do not actually build anything, but just try to license their patent or sue others for infringement) tend to prefer jury trials. It’s well-known that juries, who have been fed years of misleading (and sometimes blatantly false) stories of the mythic “sole inventor,” are extremely sympathetic to stories of big bad companies “stealing” ideas from lone inventors. Of course, reality is a lot more complicated. It’s extremely rare that there’s any evidence at all that a practicing entity actually took the idea from the patent holder, and there’s significant evidence that the use of patents by such NPEs is woefully inefficient and a drag on innovation. But juries sure do love those David vs. Goliath stories, and some new research shows how popular jury trials have become for such lawsuits — and how the awards for NPEs have been growing rapidly because of that.

BearGriz72 points us to some new research on non-practicing entities from PwC that shows the end result of all of this:

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.

It does seem quite odd that NPEs would generally win much larger awards than practicing entities. After all, it would seem like the clear losses for practicing entities should be much easier to establish than for NPEs. But, perhaps it has something to do with the fact that a real company suing another real company creates a less sympathetic story than a “lone patent holder” (rarely true in practice) suing a big company.

There’s some other interesting data in the report. For example, it looks at the various district courts and how they handle patent lawsuits. As you know, it’s become incredibly popular for non-practicing entities to sue in Eastern Texas because of the court’s history of siding quite frequently with the patent holder. However, defenders of using the courts in East Texas claim it’s actually because the “rocket docket” goes through patent cases much faster than other districts. Except, the new data suggests that’s not the case. The Eastern Texas district actually came in ninth in time-to-trial. Interestingly, the report also suggests that the Eastern District of Virgnia may now be even more “patent friendly” than Eastern Texas, in a measure that tries to combine both time-to-trial and patent success rates. And yet, many more cases are still filed in Eastern Texas than in Eastern Virginia. Why? Well, if you separate out the two separate factors used in determining “patent friendliness” — what the data shows is that while Eastern Virginia is much faster to get to trial, the success rate for patent holders is lower than in Eastern Texas. In other words, the claim that Eastern Texas is chosen due to speed? Bogus.

Filed Under: awards, east texas, juries, non-practicing entities, patents