Over the last decade, filings of patent lawsuits in the US rose to unprecedented highs in 2013, and remained high for a while thereafter, but have steadily declined in the last few years. The decline is variously attributed to Inter Partes review (IPR) proceedings established in 2011 under the America Invents Act (AIA) and a series of changes in patent law, including a higher bar for patenting abstract ideas, restrictions on where patent suits can be filed, and requirements for more detailed allegations of infringement. The filing decline appears to have ended in 2019, and the trend line shows filing growth once again. If the past is any indication of the future, patent litigation activity may continue to increase as the recession persists and thereafter.
The boom of patent filings witnessed in the early 2010s followed on the heels of the Great Recession of 2007-2009. As of 2009, filings by so-called “high volume plaintiffs,” typically non-practicing entities in business to monetize their patents, had remained constant for almost a decade at about 300 cases per year. That number increased to almost 400 in 2010, more than doubled to almost 900 cases in 2011, and then tripled to over 2,000 cases in 2012—a manner of increase akin to the spread of the SARS-CoV-2 virus responsible for the COVID-19 pandemic. To be sure, the AIA’s new joinder rule caused the rate to increase, but it does not alone explain the extent of growth. Filings by most other plaintiffs also increased in the years after the Great Recession, though not as markedly.
The exception to this post-Great Recession rise in filings were ANDA cases. Filings based on so-called Orange Book patents declined from 2010 to 2012, and then only slowly increased through 2015. While ANDA cases constitute only a tenth of all patent cases, they are often very high-value cases due to the high profitability of the drug products involved. Thus, even though ANDA cases are not as common as other types of patent litigation, the difference in their filing trend is notable.
These trends are shown in charts above, which are based on those provided by Lex Machina in their Patent Litigation Report of February 2020. As also shown above, from 2017 through 2019, there was a general decline in filings of patent cases overall. Filings by high-volume plaintiffs decreased steadily during this time, as did filings of ANDA cases. Filings by other types of plaintiffs decreased from 2017 to 2018, but then slightly increased from 2018 to 2019.
We took a closer look at the recent trends in patent filings, tallying the number of cases filed per month beginning in January 2017 and including filings for the first four months of 2020. Because filings of ANDA cases have historically followed a different trend than other patent cases, we excluded ANDA cases from our tallies and looked at those separately. Because monthly filings tended to vary, we smoothed the data by using a 3-month sliding average rather than the monthly tally; that is, for each month, we calculated an average monthly filing based on filings in that month and in the preceding and subsequent months. These monthly averages for non-ANDA and ANDA case filings are shown below, with each year indicated by a different colored background.
As shown even in these smoothed plots, there are seasonal variations in filings of non-ANDA patent cases, with lows in December followed by increases in the spring. We therefore also plotted the exact number of filings for February, March and April in each of these years, as shown below.
These data reveal a pattern reminiscent of that seen after the Great Recession: A decline in filing of ANDA cases and an increase in filings of other types of patent cases. The decline in ANDA filings was consistent throughout 2019 and has continued in 2020, with filings for February, March, and April of 2020 substantially lower than similar months in any of the last three years. In contrast, filings of other types of patent case appear to be steadily rising. Non-ANDA filings for April 2020 are higher than filings for similar months in any of the last 3 years. Moreover, the increase in non-ANDA filings from February to April in 2020 exceeds any increase for this period of the last 3 years.
These data indicate that filings of patent cases (other than ANDA cases) are on the rise, and are rising more rapidly than in past years to higher levels than in past years.
The increase in filings of patent lawsuits coincides with the spread of COVID-19 across the US and the resulting steep slow-down of the economy. The timing may be merely coincidental, but the pandemic may be a causal factor. For example, patent owners who had planned to file cases later in the year may have decided to accelerate the timetable in light of the impending lock-down of businesses, perhaps resulting in a tactical advantage. In addition, patent owners interested in monetizing their assets may view the timing opportunistically, e.g., their past damages claim being stronger now than in the foreseeable future. Patent owners interested in competitive relief (injunction or settlement) may also see an opportunity, as the costs of litigation added to the burdens of the recession may force competitors to abandon products or services.
While the reasons are speculative, the data are compelling. They indicate a rise in filing of non-ANDA patent infringement cases and suggest that patent filings reached a bottom in 2019. Given the similarity of these trends to those seen after the Great Recession, the recent increases could be a harbinger of another boom in patent litigation.