Debate Over Patent Reform Continues to Grow According to PwC's 2010 Patent Litigation Study

New report examines the continued evolution of patent damages law; Median damages awarded in 2009 were approximately $9 million

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Jan 11, 2011, 09:00 ET

NEW YORK, Jan. 11, 2011 /PRNewswire/ -- According to a new report released today by PwC US, patent holders are winning considerable awards of damages as US patent trial success rates near their highest level in history. The largest ever patent damages award of over $1.8 billion was issued in 2009, for a case that is currently in the appeals process. The annual report – PwC's 2010 Patent Litigation Study – examines the overall impact of court decisions on patent damages law.

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"As the debate over US patent reform continues, an important topic of discussion has been the issue of damages," said Chris Barry, PwC Advisory partner in the Forensic Services practice. "While the legislative process has slowly taken its course, the courts continue to address the link between patent damages and the value of the patented feature."

According to the report, patent litigation brought by nonpracticing entities (NPEs) has been partially responsible for the increased calls for patent reform. PwC found that while median awards for NPEs have been significantly higher than for practicing entities, NPEs' overall success rates have been lower.

"NPEs will continue to be frequent participants in patent litigation, having been involved in almost 20 percent of reported decisions since 1995," added Barry.

PwC has compiled and maintained a database of patent damages awards, collecting information about patent holder success rates, time-to-trial statistics, and practicing versus NPE statistics (all from 1995 through 2009).

Key findings from PwC include:

Although the number of patent applications with the USPTO continued to grow, 2009 saw a decrease in patent actions filed, the first time since 2005.

Annual median damages (in 2009 dollars) award has ranged from $2.4 million to $10.5 million between 1995 and 2009, with no discernable trend.

Damages awards for NPEs have averaged more than triple those for practicing entities since 2001.

The disparity between jury and bench awards continues to widen and is likely the contributing factor in the significant increase in use of juries since 1995 (over half since 2000).

Reasonable royalties continue to be the predominant measure of damages awards being awarded in about three-quarters of case decisions.

NPEs have been successful 31 percent of the time overall versus 40 percent for practicing entities, due to the relative lack of success for NPEs at summary judgment. However, both have about a two-thirds win rate at trial.

Win rates of alleged infringers increase when they are the plaintiff. However, the increase is only significant when the patent holder is an NPE.

While the median time-to-trial has remained fairly constant since the late-1990s (at 2-2.5 years), significant variations exist between jurisdictions.

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

Five federal district courts (out of 94 total) accounted for 36 percent of all identified decisions involving an NPE as the patent holder.

"Patent litigation continues to be used as a protection and monetization path for patent holders," commented Barry. "IP will continue to play an important role in the economy, and represents an important competitive advantage for companies to realize value."

For more information and to download a copy of the 2010 Patent Litigation Study, please visit www.pwc.com/us/forensic-services.

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SOURCE PwC