Archive for the ‘Settlements in Post-Grant Proceedings’ Category

IPRs And Settlement of Patent Infringement Cases

Sunday, February 14th, 2016

The passage of the AIA is still relatively recent, yet statistics are starting to emerge that demonstrate the effective use of IPRs to settle patent infringement cases.  IAM magazine recently published an interesting report by Unified Patents showing that IPRs have the effect of increasing the median time to settle litigations (from 211 to 420 days), but when viewed from the time that the first IPR filing is made, the median time of the “adjusted duration” (163 days) is shorter than the median time for litigations without IPRs (211 days):

For the 15,000 cases filed between 2012 and 2014 that settled before the end of 2015, the median duration was around 211 days. By contrast, for the much smaller subset of 1,100 cases which were identified as related matters to at least one inter partes review proceeding, the median overall duration was 420 days.

At first glance, this result seems counter-intuitive and contrary to the America Invents Act’s efficiency and cost-saving goals. However, a closer look at this subset of 1,100 related matters reveals that most settled within 180 days of the earliest inter partes review filing date. Specifically, the median adjusted duration for these cases was 163 days as of the end of 2015.

This timing data demonstrates that settlement is statistically likely before an institution decision is made (which can take place as late as 6 months after the filing date of the petition).  The report offers a few explanations for the observed data:

One explanation for the increase in pre-institution settlements may be that settling the dispute earlier allows patent owners to eliminate the risk that an adverse decision could be used as grounds for institution in a later case. [ ]

A second explanation may be that defendant petitioners have an increased incentive to settle claims before institution due to the low rate of institution – although this seems less likely.

Other potential reasons why IPRs encourage settlement include:

  • Weak patent assertions are more likely to attract IPR petitions by defendants.
    • Well-educated defendant petitioners are incentivized to file IPR petitions to combat weak patents.
    • As long as there is an inexpensive validity challenge option, weak patent assertions are inherently easier to settle than cases involving strong patents.
  • IPR filings quickly inform the parties about the strengths and weaknesses of each other’s case.
    • Strong IPR petitions educate the patent owner about any potential weaknesses of the challenged patent.
    • Weak IPR petitions inform the patent owner about the weakness of the publication prior art.
    • Expectations of each party will converge more quickly if they learn more about their case early in the patent contest.
  • IPRs require the parties to communicate relatively early in a patent assertion.  These communications provide more opportunities for the parties to understand their case and to discuss and settle the dispute.

Those active in post-grant proceedings know that IPRs also provide a limited mechanism for settlement before the IPR petition is filed.  Of course, it is difficult to account for settlements that occur before an IPR petition is filed, but pre-filing settlements were discussed in an earlier post, and will be part of a half hour presentation I will be making for Patexia’s webinar series on March 24, 2016: “Posturing IPRs for Early Settlement.”  More information about that seminar can be found by clicking on this link.

The Settlement Effect of PTAB Proceedings and Recent Patent Office Trial Statistics

Monday, December 29th, 2014

December 29, 2014

The Patent Trial and Appeal Board (PTAB) released statistics for AIA Patent Office trials as of Dec. 18, 2014.  Different commentators have recently reported that the institution rate for these proceedings has dropped to about 60-70 percent, depending on how you calculate it.  Those familiar with PTAB trial practice (IPR, CBM, PGR and derivation proceedings) understand that the trial statistics are moving targets, but they do provide some insight to interesting trends.

Based on the Dec. 18, 2014 data provided by the PTAB, it appears that the rate of denied petitions is approaching the rate of party settlements.  If the denial and settlement data are normalized to the number of filed trials (excluding the filings prior to decision on institution), the statistics show about a 20:20:60 percent relationship between settlements, denied proceedings, and instituted proceedings (ones that do not settle), respectively.  That means for every five petition filings, approximately one proceeding will be denied, one will settle early, and three will complete their trials.

But the filing of a petition is not always required to reach settlement between parties — the threat of a petition can provide all the impetus needed for settlement between parties.  This settlement effect of PTAB proceedings provides another opportunity for parties to attempt to settle their differences prior to the formal filing of an IPR, CBM, PGR or DER petition.  Frequently, the petition will be prepared to posture the matter for final discussion prior to its filing.  Once filed, the petition serves as valuable information for all other stakeholders interested in defeating the Patent Owner and its patent.  So a Patent Owner with some concern about the patentability of its patent has an incentive to settle with the prospective Petitioner before any petition is filed.

Of course, the PTO statistics cannot account for the cases where parties settle without filing a petition (“non-filed settlements”), so if the number of non-filed settlements is significant, then the PTO statistics underestimate the overall efficacy of post-grant proceedings for settlement of disputes between parties.

If you poll attorneys actively filing these petitions about the number of non-filed settlements they have accomplished compared to the number of petitions actually filed, you will get very different anecdotal responses.  Depending on that number, the impact on settlements of disputes in general (both formal proceedings and prior to formal proceedings) can be significant.

The following table shows how the settlement ratios change using different percentages of the number of matters that settle without any petition filing (percentage of non-filing settlements to that of post-filing settlements).  For example, if you estimate that for every 5 filed petitions, about 1 settlement occurs without a filed petition, refer to the 20% entry in the table below to find the aggregate percentage of disputes settled (including both pre-filing and post-filing disputes).  Using this 20% estimate, the aggregate percentage of disputes settled rises to roughly 33%, the percentage of denied cases drops to roughly 15%, and the percentage of matters going through full trial drops to roughly 48%.  This means for every six disputes, roughly two will settle (one with and one without a petition), one will be denied, and three will complete their trials.  Thus, by viewing disputes from a settlement perspective, including settlements obtained without filing a petition, the aggregate denial and institution rates necessarily fall and the efficacy of the challenges from an overall dispute perspective is enhanced, regardless of the win:loss ratio experienced by the parties at trial.

Of course, this is only a crude first approximation of settlement dynamics.  More information is needed to know the magnitude of the settlement effect of patent office trials on party settlements.  That information will be difficult to ascertain due to the confidential nature of such settlements, but each stakeholder can make its own approximation based on its experience.  Regardless, these settlements amplify the efficacy of the PTAB proceedings and their effect can be as significant as the known settlements arising from the PTAB proceedings themselves.

Table 1