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2015 Saw the Most Patent Disputes Ever, but Lower Payouts

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By Casey C. Sullivan, Esq. on January 06, 2016 10:05 AM

If you're a patent lawyer, 2015 was a bumper year. A new report shows that patent disputes increased by 13 percent compared to 2014. Patent disputes, including both district court litigation and inter partes review, were at an all time high, at about 7,500 disputes.

Thought the climate for patent litigation has shifted over the past few years, data shows that patent trolls continue to be the driving force behind disputes and that the Eastern District of Texas remains their favored home. But, despite the increase in disputes, it's likely that patent trolling is become a less remunerative activity. Here's why.

More Disputes, Less Reward

The new report comes from Unified Patents, a subscription-based membership organization dedicated to defending and preventing invalid patent claims.

According to Unified's statistics, district court litigation was on the rebound in 2015. After dipping last year, district court claims rose 15 percent to their second highest level ever. When it comes to the most patent cases filed, only 2013 beats last year's numbers.

However, 2015 also saw a continued increase in inter partes review. Disputes heard before the patent trial and appeal board increased from just a handful in 2012 to nearly 1,800 in 2015.

The growth in patent disputes continues to be fueled by patent trolls. Companies which derive the majority of their revenue from patent licensing, or "non practicing entities" as Unified calls them, were behind two thirds of all disputes and nearly 88 percent of all high-tech patent litigation.

Despite the increase in patent disputes, patent trolls probably aren't making as much from litigation as they once were. According to Ars Technica, the Supreme Court's 2014 Alice Corp decision has lead to a potential 80 to 90 percent decrease in the cost of beating a bad patent. Attorney's fees are also more likely under last year's Octane Fitness Supreme Court decision. It's possible that many new patent litigators are settling for "perhaps much less" than in years past, according to Ars, though no specific numbers are available.

The growth in inter partes review also indicates that patent disputes are paying out less. While arguing a case before the Patent Trial and Appeal Board is expensive -- $250,000 to $450,000 says Ars Technica -- it's much cheaper than litigating disputes in district court and usually ends in smaller settlements of around $100,000 at the early stages of an IPR.

Profile of a Patent Troll

Unified Patents' report also gives us a quick snapshot of the typical patent troll: a patent licensing company litigating high-tech patents in the Eastern District of Texas.

Though NPE's are behind the majority of patent disputes, they're much more likely to be focused on high-tech patents than others. In 2015, NPE's were involved in 87.6 percent of all high-tech litigation, or a total of 3438 disputes. In the second most contentious sector, medical patents, NPEs were involved in only 86 disputes, compared to the 1013 medical patent disputes by operating companies.

Of those patent trolls, almost all were patent assertion entities. Patent assertion entities are companies "whose primary activity is licensing patents," according to Unified. They were behind 91.6 percent of all NPE litigation, while small companies monetizing their patent portfolio and individual investors made up only 3.4 and 5 percent respectively.

When NPEs were involved in patent disputes in 2015, it was much more likely that those disputes would be in district court, rather than before the Patent Trial and Appeal Board. And the district court of choice remained the Eastern District of Texas, which saw 2,536 disputes, or 44 percent of all patent litigation. The second busiest patent court, the Delaware district court, saw only 500 some disputes.

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