Patent Litigation Continues to Surge, as Stakes for Infringement Remain High, According to New PwC Study

The number of patent infringement actions filed in 2011 reached 4,015 – the highest number ever recorded, according to data compiled in the 2012 Patent Litigation Study released today by PwC US. 

In 2011, there was a 22 percent increase in the number of filings over 2010, and an overall compound annual growth rate (CAGR) of 6.4 percent since 1991.  PwC’s 2012 Patent Litigation Study notes that courts have been applying greater scrutiny to damages assessments in patent infringement matters – a trend expected to continue.

Annual median damages awards have ranged from $1.9 million to $16.1 million between 1995 and 2011.  More recently, from 2006-2011, the median damages award has been approximately $4.0 million.  In 2012, two of the four largest patent infringement damages amounts were awarded – totaling approximately $1 billion in damages each.

“Enormous damages awards continue to garner headlines and keep corporate management keenly aware of the risks of potential infringement, as well as the rewards of enforcing patent rights,” said Chris Barry, a partner in PwC’s Forensic Services practice.  “With the courts paying more attention to damages methodologies and calculations, patent litigation counsel and damages experts should monitor ongoing rulings that could affect damages opinions.”

Last year marked the most significant change to the U.S. patent system in almost 60 years with the signing of the Leahy-Smith America Invents Act (AIA) into law on September 16, 2011, converting the patent system from a ‘first to invent’ to a ‘first inventor to file’ system.  Despite these resounding changes, the AIA does not address the calculation of damages in patent infringement matters, a topic that had been discussed in earlier drafts of the Act.  2011 also proved to be a historic year for strategic intellectual property acquisitions – particularly in the telecommunications sector, which saw two high-profile multi-billion-dollar acquisitions of patent portfolios.

According to PwC, over the last decade, median damages awards for non-practicing entities (NPEs) have almost doubled those of practicing entities.  Additionally, PwC found that the disparity between jury and bench awards continued to widen as the median jury award amounted to more than 20 times the median bench award between 2006 and 2011.

Additional key findings from the 2012 study include:

1. Overall, practicing entities have experienced higher success rates in patent infringement actions (34 percent) than NPEs (23 percent)

2. Reasonable royalties were a component of damages awarded over 80 percent of the time over the last six years; lost profits were only a component approximately 30 percent of the time

3. Median damages awarded in the telecommunications sector were significantly higher than other industries – others with higher relative median damages awards include biotechnology/pharma, medical devices, and computer hardware/electronics

4. Certain federal district courts (particularly Virginia Eastern, Delaware, and Texas Eastern) continue to be more favorable to patent holders, with shorter time-to-trial durations, higher patentee success rates, and higher median damages awards

5. The top five most active federal district courts (out of a total of 94) accounted for 38 percent of all identified decisions involving an NPE as the patent holder, with the Eastern District of Texas accounting for 12 percent of NPE decisions

PwC maintains a database of patent damages awards extending from 1980 through 2011, collecting information about patent holder success rates, time-to-trial statistics, and practicing versus NPE statistics from 1995 through 2011. New to this year’s study is an analysis of Abbreviated New Drug Application (ANDA) cases, which are increasingly prevalent in the dockets.

PwC Forensic Services’ portfolio of services includes: Financial Crime Examinations, Forensic Technology Solutions, Regulatory Compliance Reviews, Fraud Risk Management and Fraud Prevention, Dispute Analysis and Litigation Support. The Forensic Services team also manages the PwC Fraud Forum, an exclusive community where members can gain knowledge, participate in events and share important insights on preventing, detecting and investigating fraud, corruption and economic crime.

PwC’s Advisory professionals are engaged in assisting organizations improve business performance, respond quickly and effectively to crisis, and extract value from transactions.

PwC firms are a network of firms in 158 countries with close to 169,000 people who are committed to delivering quality in assurance, tax and advisory services.

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