Tuesday, March 24, 2015

Long Term Trends in IP Litigation

Matthew Sag has posted IP Litigation in United States District Courts: 1994 to 2014 (forthcoming Iowa L. Rev.) on SSRN. The article takes a thirty year look at IP litigation in the district courts:
This article undertakes a broad-based empirical review of Intellectual Property (IP) litigation in United States federal district courts from 1994 to 2014. Unlike the prior literature, this study analyzes federal copyright, patent and trademark litigation trends as a unified whole. It undertakes a systematic analysis of more than 190,000 individual case filings and examines the subject matter, geographical and temporal variation within federal IP litigation over the last two decades.

This article makes a number of significant contributions to our understanding of IP litigation. It analyzes time trends in copyright, patent and trademark litigation filings at the national level, but it does much more than simply count the number of cases; it explores the meaning behind those numbers and shows how in some cases the observable headline data can be positively misleading. Exploring the changes in the distribution of IP litigation over time and their regional distribution leads to a number of significant insights, these are summarized below. Just as importantly, one of the key contributions of this article is that it frames the context for more fine-grained empirical studies in the future. Many of the results and conclusions herein demonstrate the dangers of basing empirical conclusions on narrow slices of data from selected regions or selected time periods.

Some of the key findings of this study are as follows:
First, the rise of Internet file-sharing has transformed copyright litigation in the United States. More specifically, to the extent that the rate of copyright litigation has increased over the last two decades, that increase appears to be entirely attributable to lawsuits against anonymous Internet file sharers. These lawsuits largely took place in two distinct phases: the first phase largely consisted of lawsuits seeking to discourage illegal downloading; the second phase largely consists lawsuits seeking to monetize online infringement.

Second, in relation to patent litigation, the apparent patent litigation explosion between 2010 and 2012 is something of a mirage; however there has been a sustained patent litigation inflation over the last two decades the extent of which has not been fully recognized until now. The reason why this steady inflation was mistaken for a sudden explosion was that the true extent of patent litigation was disguised by permissive joinder.

Third, in relation to the geography of IP litigation, it appears that filings in copyright, patent and trademark litigation are generally highly correlated. The major exceptions to that correlation are driven by short term idiosyncratic events in copyright and trademark litigation — these are discussed in detail — and by the dumbfounding willingness of the Eastern district Texas to engage in forum selling to attract patent litigation. The popularity of the Eastern District of Texas as a forum for patent litigation is a well-known phenomenon. However, the data and analysis presented in this study provides a new way of looking at the astonishing ascendancy of this district and the problem of form shopping in patent law more generally.
It's a well-developed abstract, so I don't have a lot to add on the coverage. I do have a few thoughts after the jump.

Some of the patent related findings are consistent with other studies, and that's a good thing. For example, Sag finds that the growth in patent litigation was not a shock in 2011, but a steady rise since 1994, once you correct for number of defendants per case. The takeaways from this likely differ depending on point of view, however, and more digging into plaintiff entity type by year would be useful in future studies.

Similarly, the data and discussion about the Eastern District of Texas is interesting, and complements some more detailed looks at forum selling in some recent articles as well as NPEs in other articles (including my Generation of Patent Litigation article).

But also interesting was seeing the numbers for all the IP together. As much as people have been complaining about patent litigation there were, on average, more trademark cases initiated per year than patent cases (at least until the spike in 2011 that came with the AIA). There was also plenty of copyright litigation, but that at least got some press.

AIPLA surveys show that trademark litigation generally costs just over a third of patent litigation, both through discovery and through trial. And that's not chump change - more than $200K for small cases just to get through discovery. And we know that there can be abuse and overreaching by big companies; I've seen the ridiculous demand letters myself.

Of course, there are plenty of differences. There's less uncertainty (the trademark owner wins more often). And it's easier to search in advance (unless it's trade dress or overreaching). But very little public uproar, despite a much longer history of more cases filed. I found this very interesting food for thought.

I've left a lot out, obviously. The whole copyright litigation landscape is fascinating, as was a lot of the forum selection analysis. It's worth a read.

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