The patent system continued to see significant changes in 2017, spurred in part by the passage of patent litigation reform in 2011. Upcoming court decisions, new leadership at the Patent Office, and other changes in the patent market will likely make 2018 just as dynamic as the past few years, if not more.
In 2017, patent assertion entities, or non-practicing entities (NPEs), added around 2,000 defendants to new and existing lawsuits. Among those plaintiffs was IP Edge LLC, which added over 350 defendants to litigation, and inventor Leigh M. Rothschild, various affiliates of whom brought more than 160 defendants into new lawsuits. The year’s top NPE filers also included monetization firms Monument Patent Holdings, LLC (adding over 90 defendants to litigation) and IP Valuation Partners LLC (suing more than 60 defendants).
The Patent Trial and Appeal Board and Inter Partes Review
In 2017, the Patent Trial and Appeal Board (PTAB) saw over 1,780 petitions for AIA review, which is just above the total from 2016 and is comparable to overall filing volumes observed since 2014. A dip in new petitions at the end of the year perhaps reflected anxiety triggered by several cases that threaten to alter the PTAB’s process. Chief among these is Oil States v. Greene’s Energy Services, which challenges whether inter partes review (IPR) violates the US Constitution. As previously reported by RPX, supporters of the IPR regime were left cautiously optimistic after the November 27 oral arguments held in that case, with the justices seemingly inclined to rule that the Patent Office has the authority to reconsider its own decisions to grant patents. In addition, the Federal Circuit’s October 4 decision in Aqua Products, covered in detail on RPX Insight, made it easier for patent owners to amend their patents (and, thus, potentially save them from cancellation) during the IPR process; this may shift the strategic implications of an IPR petition dramatically as the decision plays out in 2018.
Meanwhile, the public debate continues over the Saint Regis Mohawk tribe’s controversial deal with Allergan, under which the tribe acquired its patents and licensed them back in order to shield the patents from IPR. The deal has been dismissed by some as a “sham” and supported by others as a legitimate use of the tribe’s immunity. The PTAB is also considering the issue of whether a public university that asserts a patent in litigation is still immune from IPR as to that patent, or if it has waived that right by filing suit.
NPEs Shy Away from Texas After TC Heartland
The Supreme Court’s May 2017 decision in TC Heartland, which significantly limited where patent suits can be brought, caused NPE litigation to shift out of the Eastern District of Texas by the end of the year. While that district was once the overwhelming favorite for NPE plaintiffs (at 57 percent of all patent suits), it is now a close second to the District of Delaware. Both districts each accounted for around 26 percent of all patent litigation at the end of 2017. In addition, the Federal Circuit has since clarified some key legal issues that arose in the wake of TC Heartland, with its decision from In re Micron making it easier for certain defendants in existing lawsuits to challenge venue when they previously could not.
Patent Divestitures Lead to New Litigation
Intellectual Ventures LLC accelerated the sale of assets from its massive portfolio throughout 2017, and many of those patents have since been asserted in litigation by their new owners. Those plaintiffs include four subsidiaries of Monument Patent Holdings, LLC, the litigating affiliate of Dominion Harbor Enterprises, LLC; several affiliates of patent monetization firms Equitable IP Corporation and IP Valuation Partners LLC; and inventor Leigh M. Rothschild. Meanwhile, Uniloc Corporation Pty. Limited—an Australian NPE that had previously litigated only homegrown patents—filed a flurry of lawsuits asserting patents acquired from third parties throughout 2017.
A Shift from Publicly to Privately Financed Campaigns
A number of notable, publicly traded NPEs withdrew from the business of patent assertion in 2017. For example, Pendrell Corporation announced in March that it would be pivoting away from patent assertion in search of more stable revenue streams. Meanwhile, Wi-Lan Inc. changed its name to Quarterhill Inc. as part of a major restructuring, announcing that it would deemphasize patent licensing and refocus on the acquisition of Industrial Internet of Things businesses.
As those NPEs transitioned away from patent assertion, investment firm Fortress Investment Group LLC began to take a more prominent role. In April 2017, Fortress took over a telecommunications campaign from Inventergy Global, Inc. after the latter failed to make payments on debt owed to the firm, while another publicly traded NPE funded by Fortress—Crossroads Systems, Inc.—fell into bankruptcy. Fortress has since begun asserting patents in its own right through affiliate VLSI Technology LLC. RPX has also begun to observe other established NPEs start to rely on outside financing for the launch of new campaigns, including prolific litigant Brian Yates and publicly traded Document Security Systems, Inc.
The Year Ahead
Other changes may befall the patent system in 2018 if reform efforts pick up steam. The STRONGER Patents Act—widely seen as favoring patent owners—may get a boost due to the resignation or impending retirement of several members of Congress that favored defendant-centric reforms. Meanwhile, the Trump administration’s approach to patents may become clearer in 2018 once Andrei Iancu, nominated as USPTO director, is confirmed. The administration has also signaled that it will take a more restrained approach to antitrust enforcement with respect to standard essential patent (SEP) licensing.
For a closer look at the tumult of 2017, and additional analysis of what may be store for 2018, see RPX’s latest blog post, “2017 in Review: A Year of Transition”.