Patent, Copyright Lawsuit Volumes Fall in 2016

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By Malathi Nayak

Intellectual property infringement complaints in U.S. federal courts dropped in 2016 from a year ago, driven by declines in patent and copyright infringement claims, Bloomberg Law data shows.

Patent infringement filings totaled 4,624 complaints in 2016. That represented a 22 percent drop from a year earlier, as recent case law and regulation have made it tougher for patent licensing companies, also called non-practicing entities (NPEs), to mount and win legal fights. Patent infringement complaint filings rose steadily starting in 2010 and peaked in 2013, when 6,314 cases were filed in federal courts.

Copyright complaints fell 25 percent to 3,811 in 2016 from the previous year. Volumes of copyright complaints continued to fluctuate, partly due to irregular activity from adult film maker Malibu Media LLC, which has filed more than 5,000 lawsuits since 2012. Malibu still files more copyright infringement lawsuits than any other company in the country.

In 2017, numbers of IP infringement complaints may start to stabilize. “Looking at the pending cases and legislative environment, there is nothing that signals either a significant uptick or a drop in IP cases across the board” in the year ahead, Matt Larson, a litigation analyst at Bloomberg Intelligence, said.

It is possible, however, that a “legal decision or presidential ruling” could come along in 2017 that “shakes up the landscape,” Larson said.

Tough Environment for Patent Holders

Last year saw a return to the downward trend in patent infringement filings that started in 2014, with 2016 complaint volumes falling below 2014 levels. The surge seen in filings in 2015 appears to be an exception driven by patent owners rushing to make claims before stricter pleadings rules went into effect in December of that year.

The new rules require patent owners to provide sufficient factual detail to show that a claim is “plausible"—instead of the bare minimum complaint that could be filed before .

The Supreme Court’s June 2014 decision in Alice Corp. v. CLS Bank Int’l resulted in the invalidation of hundreds of software patents for covering ineligible abstract ideas. The ruling helped fuel that year’s downward trend in numbers of complaints. Also in 2014, the Supreme Court’s Octane Fitness, LLC v. ICON Health & Fitness, Inc. ruling gave courts discretion to award attorneys’ fees to prevailing parties in infringement cases.

Those rulings, and the ability to challenge patents at the Patent Trial and Appeal Board as created by the America Invents Act of 2011, continue to figure in patent holders’ decisions on whether they should litigate. The PTAB process gives someone accused of infringing a patent another route, in addition to court, for questioning that patent’s validity.

“Supreme Court decisions have been going against patent holders very consistently, and financing for NPEs is getting tougher,” Kent Richardson, an attorney at Richardson Oliver Law Group, said. “The risk of having to pay the other side’s legal costs has gone up substantially.”

Moreover, companies have been defensively buying patents to protect against entities that seek to earn revenue by aquiring patents and asserting them against other companies, he added.

The U.S. District Court for the Eastern District of Texas remained the busiest patent court in 2016 with 1,684 cases filed. However, this year the Supreme Court will hear TC Heartland LLC v. Kraft Food Brands Group LLC, a case that could dramatically limit where patent holders can bring infringement suits. Current case law lets plaintiffs file complaints in districts where defendants sell their products. That has led to a glut of cases filed in courts such as the Eastern District of Texas that are considered friendly towards patent holders.

In TC Heartland, the high court will determine whether patent owners may sue only in districts where defendants do business or are incorporated, or where they have a regular and established place of business and have committed acts of infringement. The decision could reduce the dominance of the federal court in the Eastern District of Texas.

Companies that filed the highest numbers of patent infringement suits in 2016 included Shipping and Transit LLC and Uniloc USA Inc., according to Bloomberg Law data. Both companies make money by asserting and licensing patents.

Florida-based Shipping and Transit filed over 100 lawsuits, many in the online shopping sector over package tracking. Uniloc filed around 90 lawsuits, including complaints against Silicon Valley firms Apple Inc. and Facebook Inc. related to Voice over internet Protocol technology.

Copyright Complaints Fall

The biggest shift in copyright litigation remains the slowdown in Malibu Media’s lawsuit campaign. Complaints from the adult film company that individuals are downloading and distributing their films over the internet dropped by more than 60 percent in 2016 to about 750.

The sudden drop follows year after year of steady increases. Malibu Media changed law firms in 2016 and sued its former attorney in federal court over its share of settlements. The case was dismissed in September.

Hollywood studio Millennium Films ramped up litigation in 2016 against online piracy of its movies. The company filed 229 complaints related to downloads of its film “London has Fallen,” the sequel to the blockbuster “Olympus has Fallen” starring Morgan Freeman, Gerard Butler and Aaron Eckhart. Millennium Films also had 68 complaints for the movie “Criminal,” and 82 for “Mechanic: Resurrection.”

Based on jurisdiction, Millennium typically files complaints against multiple unknown defendants ("John Does") in the same complaint. By contrast, Malibu Media brings separate complaints against each individual defendant.

Trademark Fights Move Up

Filings of trademark complaints rose 3 percent in 2016 to 3,186. Trademark lawsuit volumes were relatively stable through the year, with counterfeit enforcement making up the bulk of docket activity.

Roor, the German maker of water pipes for smoking, and its U.S. licensee Sream Inc. were among the top filers of trademark suits in 2016. The companies stepped up their campaign against some smoke shops and other retailers they claim have been selling counterfeit goods with the Roor logo. Complaints filed by Roor and Sream increased about five-fold to more than 180 cases in 2016 from 2015. Sream and Roor filed most of their complaints in the Central District of California and the Southern District of Florida.

Traditional fashion brands that consistently sue to stop counterfeiters remained top filers. Eyewear company Luxottica Group SA filed 43 suits, and French luxury brand Chanel SA filed 47 suits.

—With assistance from Tommy Shen

To contact the reporter on this story: Malathi Nayak in Washington at mnayak@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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