Weekly Chart 45: Patent Litigation Down 10 Percent While IPR Up 5 Percent in 2017

Last year marked the second consecutive year of decline for patent litigation. After 21 percent decline in 2016, patent litigation saw another 10 percent drop in 2017. Total of 4,132 cases were filed but in Q4 it was almost unchanged compared to Q4 of 2016 (1,201 cases vs. 1,190). On the other hand, Inter-Partes Review (IPR) is still strong and saw a small single digit increase in 2017. Throughout the year, total of 1,724 IPR challenges were filed before the Patent Trial and Appeal Board (PTAB) which is about five percent higher than 1,638 challenges filed in 2016. However, we believe this trend will gradually change in 2018.

While the litigation has dropped to pre-AIA levels, it is worth mentioning that post-AIA numbers are generally magnified because of joinder rules. Therefore, total number of unique patent assertions should be much lower than pre-AIA years.

In terms of quarterly comparison, lawsuits in Q4 of 2017 was almost unchanged compared to Q4 of 2016. However, compared to prior quarter, we saw approximately 30 percent increase in activities (1,201 cases vs. 927 cases in Q3 of 2017). Our estimate is total filing activity will remain in the same levels throughout 2018 (i.e., about 1,000 cases per quarter).

IPR filings has been around 110 to 160 per month for the past 3 years (average of 144 cases per month in 2017). We expect to see moderate decline in 2018 as we see some stability in district court filings (more than 80 percent of IPR cases are filed in response to a district court case). As we showed in Weekly Chart 12, IPR is heavily used by a small number of companies and we believe this trend to continue in 2018.

In terms of quarterly comparison, IPR activity in Q4 was about 7 percent lower than Q3 of 2017 (355 vs. 381) and it was about 21 percent lower than Q4 of 2016 (448 vs. 355). We also observed quarter-over-quarter decline throughout 2017. As we had anticipated before, the decline has been expected since IPR is closely following district court trends with a 12 to 18 months delay. We anticipate a small 5 to 10 percent decline in IPR filings for 2018 given the decline in district court filings over the past 24 months (i.e., estimated 1,550 to 1,650 cases in 2018).

Looking at all 7,316 IPR challenges filed by the end of 2017, we learned that as of January 10th, about 28 percent of all challenges have received the Final Written Decision (FWD Entered). This is 2 percent more than same time last year. About 32 percent or almost ⅓ of challenges have been denied institution (Terminated-Denied) due to various reasons. This is unchanged from last year. And about 14 percent have been settled (Terminated-Settled). 22 percent of challenges are still pending (i.e., instituted, submitted / PO response filed, etc.).

2017 marked the second consecutive year of decline in patent litigation. This happened while IPR filings had a modest increase of five percent. However, we anticipate the trend gradually change in 2018. IPR closely follows district court activities with a 12 to 18 months delay. About 80 percent of IPR challenges are filed directly as a result of a district court case. Therefore, with a decline in district court filings over the past 24 months, we estimate IPR activity drops 5 to 10 percent to between 1,550 to 1,650 in 2018.

Next week we plan to cover cryptocurrency activities and top companies with the most filings related to Blockchain and Bitcoin technologies.