2021 Patent Dispute Report: Third Quarter in Review

Overview

With patent reform clearly on the horizon, as three different bills were introduced this past month, patent disputes still show no signs of slowing down. In fact as Senator Patrick Leahy introduced the Restoring the America Invents Act to address the uncertainty with Fintiv, reexaminations have made a significant comeback and are expected to continue to grow by 33%. This comes on the heels of much uncertainty in 2021 with the pandemic still ongoing, the critical Arthrex decision, and several proposed changes to the patent system. Other factors, such as Qualcomm leaving Velos, could signal a new wave of litigation related to video codecs with a fractional pool approach. Despite the uncertainty this year, the constant variable has been NPEs continually asserting low quality patents against start-ups, small businesses, and manufacturers that are vital for economic recovery and growth. 

Highlights:

• Despite Judge Albright's Eleventh Abuse of Discretion on Transfers on Mandamus, TXWD leads other district courts in accounting for nearly 25% of all patent cases. NPE-related litigation accounts for 72% of the patent cases in this district.

• NPE-related litigation continues to drive the total number of cases, as 60% of all cases stem from an NPE.  

• Even with the slight dip in PTAB filings, Fintiv still remains a challenge as 77 denials have been issued under this framework, nearly matching last year's total of 85. 

• Reexaminations have matched last year totals and are expected to increase by 33% to nearly 300 filings.

• Access Advance has poached significant HEVC portfolios, such as Panasonic's patents, from its competitors and shown that it is backed by effective litigation. This can only spur licensing and litigation efforts as Access Advance will have to deliver for its new licensors. It is easy to speculate that pools like Velos will have to follow suit if they wish to remain in the market. Qualcomm's recent exit from Velos however doesn't help.

• Unified is the 6th overall filer with 237. This year alone Unified has filed 23 reexaminations and 17 Chinese oppositions, in addition to the 7 EPO oppositions, 1 UK opposition and 5 Japanese oppositions from last year. 

Figure 1: As 2021 begins the final quarter, it would appear business as usual despite the Covid Pandemic continuing. Litigation appears to be following its normal average since 2017, with a projected amount of 3,675 for the entire year. In addition, despite the earlier uncertainty around Arthrex and Fintiv, the PTAB will see over 1,300 filings for the entire year. Reexaminations have already matched last year’s total and are expected to increase by 33%

Figure 2: Reexaminations have more than doubled since the third quarter of 2020, making up for any decline that can be seen in litigation and PTAB filings.

Figure 3: Despite Judge Albright's Eleventh Abuse of Discretion on Transfers on Mandamus, TXWD leads other district courts in accounting for nearly 25% of all patent cases. NPE-related litigation accounts for 72% of the patent cases in this district and almost surpasses the total number of patent cases filed in the District Court of Delaware. View all District Court and PTAB litigation on Unified’s Portal.

Figure 4: High-Tech litigation continues to dominate both district courts and the PTAB, respectively.

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District Court

Figure 5: NPE-related litigations are projected to out-pace last year’s numbers by 2.4%, while operating companies have shifted focus on post-pandemic recovery. However, the increase in NPE-related litigation seems to put litigation on par with the last couple of years.

Figure 6: Looking quarter-by-quarter, NPE-related litigation continues to remain at its 5-year average of 59%.

Figure 7: Cedar Lane Technologies is the highest asserting entity in 2021. Following previous trends, 9 of the top-10 named asserting entities in 2021 were NPEs. View District Court litigation on Unified’s Portal.

Figure 8: Samsung entities were the most targeted first-name defendants in 2021. Litigation seems to be centered on network, computer, wireless, and cellular manufacturers. View District Court litigation on Unified’s Portal.

Figure 9: In the first half of 2021, 70.5% of all new US district court patent cases involve High-Tech companies. This is up 5% from last year.

Figure 10: NPE activity in the High-Tech sector alone continues to contribute more 2021 patent infringement cases than all non-NPE patent litigation combined. NPEs target the High-Tech sector 95% of the time. View High-Tech litigation on Unified’s Portal.

Figure 11: NPEs accounted for 87% of assertions in High-Tech Litigation in 2021. View all 2021 District Court litigation on Unified’s Portal.

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PTAB Disputes

Figure 12: Based on the second quarter of 2021, PTAB filings are projected to decrease by 13% this year. This is most likely due to the combination of companies turning to re-examinations and the uncertainty of discretionary denials. The Board’s institution rate in inter partes reviews has increased and is now at 57.7%. More details for these PTAB proceedings are available on Unified’s Portal.

Figure 13: This quarter, the PTAB received a total of 311 requests for inter partes reviews, down 11.14% from the second quarter of 2021. NPE related-filings accounted for 36% of all filings.

Figure 14: Consistent with district court proceedings, approximately 66.9% of petitions filed in 2021 involved High-Tech companies.

Figure 15: Approximately 54% of all AIA challenges filed in 2021 that involved High-Tech companies related to NPE-controlled patents. Explore this data further on Unified’s Portal.

Figure 16: IPRs remained the most popular post-grant proceeding at the PTAB. However, reexaminations account for 17.7% of all patent challenges at the USPTO, an 3% increase from last quarter. Explore this data further on Unified’s Portal.

Figure 17: As of September 10, 2021 a total of 105 decisions were made on the basis 314(a) and 31 decisions were made on the basis of 325(a). The 105 314(a) denials accounts for 73% of all denials. That is, compared to 2019 in total, no change—in 2019, 314(a) denials accounted for roughly 73% as well. 

Figure 18: NHK Spring/Fintiv continues to be the dominant framework of 314(a) denials. This year has seen 77, nearly reaching the previous-year high of 85. NHK Spring/Fitniv accounts for 73% of all 314(a), whereas in 2020 only 51% were based on the Fintiv framework. This is a 23% increase from last year.  More details will follow in the Unified quarterly report on discretionary denials.

Figure 19: The first half saw Samsung as the most frequent petitioner with 90. Unified, is the 6th overall filer with 237. This year alone Unified has filed 23 reexaminations and 17 Chinese oppositions, in addition to the 7 EPO oppositions, 1 UK opposition and 5 Japanese Oppositions from last year. View all of Unified’s cases on Unified’s Portal.

Figure 20: Breaking from previous years there is now a focus on challenging operating companies, rather than NPEs at the PTAB, as only 4 of the top 10 Patent Owners are NPEs. View all PTAB cases on the Portal.

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Reexaminations

Figure 21: Reexaminations continue to increase. This year has already matched last year’s totals, with an expected increase of 33% to 292 for the year. View all reexaminations of Portal.

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Standard Essential Patents

Figure 22: Competing HEVC pools are poaching each other's licensors by offering better monetization - ie, more aggressive licensing and litigation. HEVC has already seen a fair number of cross-pool poaching over the last year, with Panasonic's side-step from Velos to Advance being the most recent. Indeed, Velos and MPEG LA are shedding major licensors which in turn is weakening their attractiveness towards licensees and licensors alike - the downward spiral in value is inevitable. Panasonic's side-step is a harbinger of worse things to come for Velos. On September 23rd, per the USPTO, Velos Media LLC transferred 51 coding patent assets to Qualcomm. Shortly thereafter, Qualcomm announced that it was leaving Velos and had no immediate plans to join another pool. At Velos' height, around 15% of Velos' pooled patents was attributed to Qualcomm. This signals a significant decrease in Velos' ability to monetize its licensors' portfolios and also increases the pressure on Advanced to deliver for its newly poached licensors. View Unified Consulting assessment on HEVC and VVC.

Figure 23: Unified Patents recently produced an independent economic study on VVC’s licensing value as a follow up to its 2019 study on the licensing value of HEVC. The study points out that “[f]or VVC to capture market share among cellular device manufacturers, [its] royalty rates will have to be very attractive compared to the rates for AVC and AV1.” VVC is entering a fragmented, multi-codec market and its adoption is uncertain in the face of competitive video solutions that are subject to lower or no royalties. Much of this is due to the excessive royalties and licensing uncertainties that continue to plague VVC’s predecessor, HEVC.

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Definitions

Sectors

High-Tech = Technologies relating to Software, Hardware, and Networking

Medical = Technologies relating to Pharmaceuticals, Medical Devices, Health Related Technologies

Other = Technologies relating to Mechanical, Packaged Goods, Sporting Equipment and any other area outside of high-tech and medical patents.

Entities

Non Practicing Entity (NPE) = Company which derives the majority of its total revenue from Patent Licensing activities.

Operating Company or Op. Co. = Company which derives most of its total revenue from Product Sales or Services. Could be an SME or a large company.

Other Entity = Universities / Non-Profits / Government / Non-Governmental Organizations (NGOs)

NPE (Patent Assertion Entities) = Entity whose primary activity is licensing patents and acquired most of its patents from another entity

NPE (Small Company) = Entity whose original activity was providing products and services, but now is primarily focused on monetizing its own patent portfolio.

NPE (Individual) = Entity owned or controlled by an individual inventor who is primarily focused on monetizing inventions patents by that individual inventor.

Venues

CACD = Central District of California

CAND = Northern District of California

DED = Delaware

NJD = New Jersey

NDIL = Northern District of Illinois

SDNY = Southern District of New York

TXED = Eastern District of Texas

TXWD = Western District of Texas

Methodology

This report includes all District Court, PTAB, and Reexaminations litigations between January 1, 2015 and September 30, 2021.

Total number of reported cases can vary based on what is included. Unified made its best attempt to eliminate mistaken, duplicative, or changes in venue filings, hence the totals may vary slightly compared to other reporting entities. Statistics include litigations initiated by NPEs or Declaratory Judgments (DJs) initiated by operating companies against NPEs.

Unified strives to accurately identify NPEs through all available means, such as court filings, public documents, and product documentation.

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Copyright © 2021, Unified Patents, LLC. All rights reserved.

IP Edge entity, Paradise IP, patent challenged

On September 29, 2021, Unified filed a petition for inter partes review (IPR) against U.S. Patent 7,200,613 owned by Paradise IP, LLC, an NPE and IP Edge entity. The ’613 patent relates to asset management databases and has been asserted against 15 companies such as Spotify, Box, Iron Mountain, Citrix Systems, and others.

View district court litigations by Paradise IP. To read the petition and view the case record, see Unified’s Portal. Unified is represented by in-house counsel, Jordan Rossen and Ashraf Fawzy.

Acacia sub, Targeted Radio, patent claims found invalid

On September 22, 2021, the Patent Trial and Appeal Board (PTAB) issued a final written decision in Unified Patents, LLC v. Targeted Radio LLC holding claims 1 and 3-9 of U.S. Patent 8,948,684 invalid. Targeted Radio LLC is an affiliate of well-known NPE Acacia Research Corporation. The ’684 patent is generally directed to the insertion of advertising or other content into an Internet radio stream based on the user's location. This patent was asserted against Pandora Media, but the case was terminated in 2020.

Unified is represented by in-house counsel, Jessica Marks and Jung Hahm, in this proceeding. View Targeted Radio’s district court litigation. To read the petition and view the case record, see Unified's Portal.

Expansion of AIA would have added $1.5 billion to GDP

In a new economic study, the Perryman Group has determined that enhancements to the America Invents Act’s post-grant review proceedings and increased use of district court stays would have saved the U.S. economy almost $1.5 billion dollars in gross domestic product (GDP), $712.7 million in personal income, and would have generated upwards of +6,792 job-years of employment between 2014 and 2019. That would have been in addition to the substantial savings realized of almost $3 billion already reported based on the current AIA regime. In other words, it could have been upwards of $4.5 billion of GDP savings, combined. This demonstrates that while the AIA has had a strong positive impact on the U.S. economy, it has fallen short of the benefits it could have accomplished with broader use of stays and a more comprehensive mandate. 

The study found that U.S. manufacturing would have experienced the greatest gains. It analyzed three scenarios: 1) If all court proceedings on a patent were automatically stayed after IPR was instituted, 2) if all invalidity defenses could be asserted in IPR proceedings, and 3) if both expansions had been in place. 

For 1), automatic district court stays, the Report estimates those changes would have led to an increase in U.S. business activity of an additional $543.1 million in GDP, $259.6 million in personal income, and +2,474 job-years of employment.

For 2), adding all defenses to the process, it estimates that adding those defenses would have led to an estimated $731.3 million additional increase in gross product, $349.5 million in personal income, and +3,331 job-years of employment.

And for 3) both, including multiplier effects, it estimates additional savings of $1.49 billion in gross product, $712.7 million in personal income, and +6,792 job-years of employment, noting that the benefits associated with Scenario Three are greater than the sum of the prior two if implemented separately, as the additional proceedings allowed if all invalidity defenses could be asserted would also benefit from being universally stayed while the IPR process is ongoing. 

Unified Patent’s Patent Quality Initiative (PQI) previously commissioned a study that demonstrated the substantial financial impact passage of the America Invents Act, and in particular, challenges like inter partes review (IPR), have had on the U.S. economy. That study demonstrated that U.S. businesses and the economy as a whole saved upwards of $2.95 billion dollars in gross domestic product, $1.41 billion in personal income, and generated upwards of +13,500 job-years of employment between 2014 and 2019.  

That study relied on the current AIA regime of post-grant review, where district court stays are inconsistently applied, limited grounds of challenge are available, and in practice—given recalcitrance to stay, confusion in caselaw and regulatory requirements like discretionary denials, and some resulting duplication of efforts between fora—the Congressional goals of providing a true cost-effective alternative to inefficient district court litigation have fallen short. Further study was needed to determine how much could have been saved over the same time period had district courts automatically stayed cases or had more grounds of invalidity been available in IPR.

Indeed, innovation has long been recognized as the key factor supporting U.S. economic growth and competitiveness. A critical element of the infrastructure facilitating product development and commercialization is the system that protects intellectual property and encourages its widespread adoption and implementation. The current framework that facilitates this process includes the Leahy-Smith America Invents Act (AIA) and the Patent Trial and Appeal Board (PTAB). The AIA and PTAB reduce the need for patent litigation, reducing costs and generating substantial economic benefits. Potential expansions of the AIA would lead to additional gains in business activity.

Economic performance in the United States over the long term is tied to innovation. The AIA and PTAB not only support innovation, but also generate substantial economic benefits. These benefits could be even greater with expansion of the AIA. 

The report is part of Unified Patents’ ongoing Patent Quality Initiative (PQI), an effort to gather and provide objective data and research demonstrating how lowering patent quality will inevitably lead to even higher cost and risk for U.S. SMEs, inventors, and manufacturers, and can lead to less innovation, fewer U.S. jobs, and a drain on the U.S. economy. Our PQI aims to provide data, studies, and testimonials to give policymakers and practitioners a clear picture of the state of the patent system. More information about our PQI efforts can be found here.

For far greater detail, read the entire report HERE.

PTAB Uses Discretion, Fintiv to Deny Petitions 38% in 2021 to Date

2021 is current through September 8, 2021

Institution decisions are generally down in 2021 to date, compared to previous years. Nonetheless, the USPTO’s use of procedural denials rivals last year’s. In 2020, nearly 19% of all institution decisions were denied procedurally, whereas this year, over 16% are denied—over 144 of the 377 denials to date have been denied under the Board’s discretion. In other words, almost 40% of all denials this year have been non-substantive.

A total of 105 decisions were made on the basis 314(a) and 31 decisions were made on the basis of 325(a). The 105 314(a) denials accounts for 73% of all denials. That is, compared to 2019 in total, no change—in 2019, 314(a) denials accounted for roughly 73% as well.

Over 94% of all procedural denials this year stem from either 314(a) or 325(d). In 2020, 88.5% of denials stemmed from these from 314(a) or 325(d). This year has seen a 5.5% increase from last year.

Section 314(a) denials are now used by the Board roughly 12.4% of the time, an 0.2% increase from last quarter.

Meanwhile, 325(d) denials have slightly increased to 5.7% from the year-over-year average of 5%.

NHK Spring/Fintiv continues to be the dominant framework of 314(a) denials. This year has seen 77, nearly reaching the previous-year high of 85. NHK Spring/Fitniv accounts for 73% of all 314(a), whereas in 2020 only 51% were based on the Fintiv framework. This is a 23% increase from last year.