Drop in Patent Lawsuits, Damages Blunts Call for Congress to Act

Patent lawsuits and damage awards in the U.S. fell in 2014, snapping five years of increases, according to a study that may embolden opponents of litigation rules being considered by Congress.

The number of suits dropped 13 percent to 5,700 in the fiscal year ended in September, according to PricewaterhouseCoopers LLP’s PwC. Median damage awards from judges and juries fell to $2 million, the second-lowest amount in 20 years, PwC said in the study released Wednesday.

The findings signal a reversal of the rising number of lawsuits in the past decade, which led companies such as Google Inc. and Cisco Systems Inc. to lobby Congress for curbs on patent-licensing firms. Often derided as “trolls,” the companies profit by obtaining patents cheaply and turning them into big payouts with lawsuits or royalty demands. Even after passing a 2011 law overhauling the patent system, lawmakers are weighing more lawsuit curbs, such as making the loser pay the winner’s court costs.

“I see a tapering of what was seen as a big problem five years ago,” said lead study author Chris Barry, a PwC partner focused on Forensic Services.

The study cites the Supreme Court’s decision reining in patents on software and appeals court decisions that keep large awards in check. Of appeals where damages were a major issue, 80 percent had the award reversed or modified in some way.

“The combination of the two forces have caused the numbers to go down, both in terms of damages and the number of cases,” Barry said.

First Drop

The drop in patent suits was the first in five years, according to the PwC study, which has been conducted annually for the past 10 years.

Not everyone is convinced the downward trend will continue. According to Unified Patents, a tech-industry group that supports legislation in Congress, lawsuits were up 13 percent in the first quarter and the majority of lawsuits against tech companies were filed by licensing firms.

Comparing suit numbers over the past two decades can be difficult, as there have been sudden drops and surges caused by such factors as a provision in the 2011 law eliminating the practice of filing one suit against multiple defendants.

Some findings may support those arguing for new legislation from Congress. Patent-licensing companies got more money from judges and juries, receiving a median of $8.9 million from 2010 to 2014, up from $7.5 million in 2005-2009. By comparison, the median award for manufacturers dropped to $2 million from $5 million in the same periods.

Supporters of legislation say the 2011 law didn’t go far enough to discourage and punish abusive litigation, and say there are still instances of abusive lawsuits and random letters demanding royalties from thousands of companies.

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