Patent litigation in the semiconductor industry has been on a steady incline since
1997, as federal district court filings have slowly doubled. A decade ago, 47
suits were filed. Halfway through 2007, 53 were filed, with 109 total for 2006.
Over 900 suits have been filed in all since 1997.
Almost 50% of these suits were filed in the Ninth
Circuit, primarily in courts located in California. The
Patent Local Rules in the Northern District of California
and the physical locale of many companies in the
semiconductor industry help account for such filing
statistics. The Fifth Circuit, with its Eastern District of
Texas, is second with roughly 18% of the filings.
In general, the litigation propensity of large semiconductor
companies to enforce their patent rights
has remained stable during the last two decades. In
contrast, smaller chip-design firms have been quite
litigious. To establish proprietary rights in niche markets, these
firms have been so bold as to enforce roughly four out of every
100 patents they own.
Trolling for action
While most suits are between
rivals, there has been a rather dramatic increase in suits
brought by outside patent owners or non-rivals. These entities,
sometimes pejoratively referred to as patent parasites or patent
trolls, see a target within the industry and go after it with the
sole goal of obtaining license revenue.
The United States International Trade Commission (ITC) has
conducted 50 Section 337 investigations alleging infringement
of semiconductor-related patents over the last decade. There
has been a notable change in the amount of investigations
recently (nine halfway through 2007) compared to a decade
ago (four in 1997).
This increase may be a reaction to eBay Inc. versus MercExchange
LLC, 126 S. Ct. 1837 (2006). With this landmark unanimous
decision, the Supreme Court put an end to the “general
rule” that a permanent injunction should follow a finding of
infringement of a valid patent in a district court proceeding.
Whether an injunction should issue is now within the trial
court’s discretion. In contrast, the ITC’s primary remedy is still
the almighty exclusion order.
More on the way
Absent legislation or other dramatic
reform, expect to see another twofold increase in patent litigation
in the next decade. We should see the same steady rate of
enforcer litigation by the large semiconductor companies. We
also should continue to see aggressive enforcement by smaller
design chip companies. And, we should see many more lawsuits
as a result of more and more outside patent
owners and non-rivals seeking to cash in on licensing
fees.
Such lawsuits may come as a result of the
greater ease with which an accused infringer can
now file suit for declaratory judgment, per the
Supreme Court’s MedImmune Inc. versus Genentech
Inc., 127 S. Ct. 764 (2007). Or they may come
as preemptive filings, i.e., as a result of the patentee
affirmatively seeking to sue first in its chosen
forum and then initiating contact with the accused
infringer to negotiate a license.
Moreover, an accused infringer may be more willing to sue
for declaratory judgment of invalidity in light of the Supreme
Court’s KSR International Co. versus Teleflex Inc., 127 SCt
1727 (2007), which may make it easier to prove obviousness,
and in light of eBay, which makes it much more difficult for a
non-rival to obtain an injunction. Due to that reason alone,
expect more ITC investigations as these quick proceedings
offer an exclusion order as the primary remedy.
Going to court
Assuming the litigation takes place in
federal district court, the Ninth Circuit should continue to be the
primary go-to circuit, with its Northern District Court and Central
District Court seeing the most action. The Eastern District of
Texas should continue to be a favored forum for patentees.
But expect to see this forum’s shine diminish. Trial dates are
being pushed further and further into the future due to backlog.
Defendants also have been increasingly coming away victorious,
as evidenced by recent summary judgment motions in
favor of the accused infringer and jury findings of invalidity.
Indeed, at trial, the patentee’s win rate for 2007 is 33%.
Also, expect to see more suits filed in the increasingly popular
and speedy Western District of Wisconsin. The Northern District
of Texas, Northern District of Georgia, and Western District
of Pennsylvania, each of which has now enacted local patent
rules, should see increased filings as well.