PricewaterhouseCoopers Releases Its 2014 Patent Litigation Study

On July 10 PricewaterhouseCoopers released its 2014 Patent Litigation Study, available here.  (The focus is on U.S. patent litigation only.)  From the introduction:

In some ways, 2013 appeared to be a moderating year in patent infringement litigation. The “mega” verdicts of prior years (2012 saw three cases that resulted in damages awards of over $1 billion) were missing, with the largest new award falling to just over $200 million.1 Four of the ten largest awards from previous years were settled, overturned, modified or remain under appeal in 2013. And the median damages award continued its gradual downward tapering, to $4.3 million in the most recent four-year period.

On the other hand, both the number of patent cases filed and the number of patents granted continued to grow rapidly in 2013—by 25% (to almost 6,500 cases) and 7% (to almost 300,000 patents), respectively, over 2012. And mega-cases continued to make headlines, including one involving an “at-risk” launch of a generic pharmaceutical that was settled mid-trial for $2.15 billion, and another matter involving medical devices where post-trial bench consideration added substantial punitive damages, potentially bringing total damages to over $1 billion. The year 2013 also saw the continuation of the multi-year “smartphone wars,” both in district courts and before the International Trade Commission (ITC).

Nonpracticing entities (NPEs) continued to play a growing role in patent litigation in 2013. One recent analysis reported that in 2013 NPEs filed 67% of all new patent infringement cases, compared to 28% in 2009.2 Our statistics indicate that only 20% of identified decisions in 2013 involved NPE patent holders, reflecting the much higher tendency for NPE-filed cases to settle or be dismissed. However, as further detailed in this year’s study, NPEs’ median damages award in recent years has been triple that of practicing entities.

Also of considerable interest are the following, which I am quoting from the "Summary of Key Observations":

• The median jury award amounted to nearly 37.5 times the median bench award between 2010 and 2013. 

• Reasonable royalties remain the predominant measure of patent damages, consistently representing around 80% of awards since 2000. However, lost profits showed a surprising resurgence over the last four years, growing to a 37% share of the awards.

• NPEs have been successful 25% of the time overall, versus 35% for practicing entities, due to the relative lack of success for NPEs at summary judgment. However, both types of entities win about two-thirds of their trials.

• The median damages award in the telecommunications industry was the highest, at $22 million over the full study period. Biotechnology/pharmaceutical, medical devices, and computer hardware/electronics also had relatively high median damages awards, at double to triple the overall median across all industries. 

Unlike PwC's studies from previous years, this year's study also includes statistics on patent litigation appeals to the Federal Circuit.  According to the study, in "65% of appealed patent infringement decisions . . . some aspects of the appeal were affirmed while others were reversed, remanded or vacated.  Twenty-four percent of cases were affirmed in total and 11% were entirely reversed, vacated and/or remanded" (p.25).

Overall, this study provides a nice companion to the recently published Lex Machina Patent Litigation Damages Report, which I blogged about here.  One matter that strikes me as odd, though, is that PwC reports median damages for 2013 of $5.9 million (p.6), while Lex Machina reports a 2013 median compensatory award of only $688,000 (Lex Machina report p.15).  (Lex Machina also reports median enhanced damages of $699,000 (6 cases), median attorneys' fees of $199,000 (15 cases), and median prejudgment interest of $1.362 million (15 cases))  Perhaps the difference is attributable to methodology.  Lex Machina excludes "cross-category" decisions, which it defines as follows (p.vi):  "A cross-category damages award is one awarded on the basis of different claim types, without apportionment of the amount among those claim types, (or where documents specifying the types/apportionment are not available). For example, the much-publicized $290 million award in the November 2013 Apple v. Samsung case (N.D. Cal., 5:11-cv-01846-LHK) was not apportioned between patent infringement and trade-dress infringement; thus LMI classifies this award as cross-category."  (Query:  I thought there weren't any trade dress damages at issue in the November 2013 retrial?)  PwC appears to include such cases in its statistics, see p.2 n.1.  

On the other hand, it looks like Lex Machina may include more damages decisions overall.  If you look at Figure 7 (p.6) of the Lex Machina report, you'll see that from 2010-13 it reports a total of 116 reasonable royalty decisions, 46 lost profits decisions, and 101 "compensatory lump" decisions.  (At p.v, "compensatory lump" is defined as follows:  "Where a damages award is clearly compensatory but the specific sub-type (reasonable royalties or lost profits) is not specified or the apportionment of the award between sub-types is not specified, we have coded the award as a compensatory lump.")  Even given some overlap among these categories (say, in a case in which both lost profits and reasonable royalties are awarded and clearly apportioned), these numbers seem higher than the 114 decisions (total) that PwC reports at p.6 for 2010-13.

For the reports' respective statements about methodology, see the PwC study at p. 27 ("To study the trends related to patent decisions, PwC identified final decisions at summary judgment and trial recorded in two Westlaw databases, US District Court Cases (DCT) and Combined Jury Verdicts and Settlements (JV-ALL), as well as in corresponding Public Access to Court Electronic Records (PACER) system records."); Lex Machina report p. 63 ("This report draws on data from Lex Machina’s specialized intellectual property litigation database. Although most of our data is derived from litigation information publicly available from PACER (federal court system) or EDIS (the ITC system), Lex Machina applies additional layers of intelligence to bring consistency to, and ensure the completeness of, the data.").

Anyway, if readers notice that I'm missing or overlooking something important in my analysis of these two reports, I'd appreciate hearing what it is.