2020 Highlights from the Patent Landscape: ICT Patent Litigation

2020 Highlights from the Patent Landscape: ICT Patent Litigation

The following is a breakdown of how patent litigation affected the patent market and particular technologies. It is not a legal synopsis of the cases and should not be considered to be legal advice. Despite the COVID-19 pandemic limiting in-person court appearances and generally slowing pending litigation across the United States judicial system, the number of new patent cases filed in federal district courts increased for the second year in a row, up nearly 15% from 2019. The recent uptick in cases (nearly 4,000 in 2020) reverses the downward trend in new filings, which dropped by more than 2,000 cases since reaching nearly 6,000 new filings in 2013. Much of the increase can be attributed to patent owners, who filed nearly 3,500 new cases in federal district courts across the United States, a 12% increase over 2019 filings.

FEDERAL DISTRICT COURT FILINGS – ALL DISTRICTS

In addition to the noteworthy increase in new patent cases, the location of patent litigation is changing. The Eastern District of Texas, known as a plaintiff-friendly forum, has historically been one of the busiest federal districts for patent litigation. However, in 2020, the Western District of Texas, a district not previously known as a hotbed for patent litigation, experienced a ten-fold increase in the number of new filings in 2020 (thanks solely to Judge Alan Albright, who has previously stated he believes that patent owners deserve jury trials in federal court, and that he can get a patent trial resolved more quickly than the PTAB can)—with 857 cases filed in 2020 compared to just 89 cases in 2018. In contrast, the District of Delaware, a historically popular forum for patent litigation, has seen new case filings decline sharply from a 5-year high of 1,001 in 2019 to 741 cases in 2020.

FEDERAL DISTRICT OF DELAWARE FILINGS

While new case filings have increased in the federal district courts, and cases before the Patent Trial and Appeal Board (PTAB) have remained consistent, cases before International Trade Commission (ITC) have seen a nearly 50% decrease in new cases. Pundits have speculated the increase in litigation may be due, at least in part, to financial pressures caused by the COVID-19 pandemic. Ironically, the same pressures that have negatively affected the retail and restaurant industries, have strengthened the technology sector as businesses transition away from in-person operations.

Case Highlights from the Federal Courts

With so many new filings in 2020, there were a number of noteworthy cases involving some of the biggest players in the technology patent world, including Apple, Huawei, Microsoft, and Nokia.

Pivotal Apple Cases (Virnetx and Optis Wireless) 

Following almost a decade of litigation between Apple, Inc. v. Virnetx, Inc. over a variety of claims related to patents for secure communications, a jury in the Eastern District of Texas awarded Virnetx $502 million in royalties related to Apple’s VPN (virtual private network) on-Demand feature and FaceTime features, which were determined as derived from technology Virnetx, Inc. developed for the Central Intelligence Agency.

The $502 million eclipsed the $454 million previously won in a separate case between the same parties over earlier versions of the VPN and FaceTime features.

$500 million worth of damages awarded to Virnetx would not be the only half-billion verdict against Apple in 2020. In August, a jury in the Eastern District of Texas ordered Apple to pay $506.2 million to Optis Wireless Technology for royalties related to 4G technology used in the iPhone and other Apple devices. The trial marked the first patent jury trial since the outbreak of COVID-19 in the United States, and found that Apple willfully infringed on five patents owned by Optis. However, in April 2021, presiding Judge Rodney Gilstrap granted Apple’s post-trial motion for new trial on the issue of damages. Thus, the amount owed by Apple remains unresolved.

Indeed, 2020 saw a significant increase in the amount of damages awarded by juries in patent cases, with some cases reaching into the billions (VLSI awarded $2.18 billion against Intel and Centripetal’s $1.9 billion against Cisco). Some commentators have attributed the increase in damages to an increased investment in litigation from investors, which may be caused by rising costs associated with licensing negotiations and transaction costs. Investors, unlike innovators, are less interested in stopping infringement and focus primarily on maximizing the return on their investment. Thus, if more litigation results in a higher return, an investor will continue to fund litigation through trial. However, this increased focus on litigation has caused a greater focus on accurately determining the proper damage award, which has caused some awards to be overturned (Such as the Apple v. Virnetx case described above.) While the current economic landscape for tech patents will likely spawn more billion-dollar judgments, the increasing practice of mini-trials on the issue of damages, as well as the Court of Appeals for the Federal Circuit’s habit of reducing damage awards, may counter the 10-figure trend.
WSOU Investments v. Huawei Other important litigation from 2020 includes WSOU Investments, LLC v. Huawei. What began as a single case filed in the Western District of Texas has evolved into 10 separate filings, each alleging the infringement of a single, distinct patent or patent family received by WSOU through a 2017 portfolio purchase from Nokia and Alcatel-Lucent.

The alleged infringements include patents for technology to verify network activity, a patent family for a system that reroutes traffic that Huawei installed in its NetEngine 40E series routers, a patent that relates to the automatic discovery of network devices that have routing capabilities within a managed network, and LTE handover between devices, including routers, smartphones, and smart home devices, among others.

Microsoft v. SynKloud Technologies

In the District of Delaware, Microsoft, anticipating litigation from SynKloud Technologies, brought a declaratory judgment action against SynKloud seeking a court order declaring that Microsoft’s OneDrive cloud storage software did not infringe on cloud data patents held by SynKloud. In its complaint, Microsoft noted SynKloud has previously engaged in a litigation campaign against Microsoft competitors, including HP, due in part to HP’s use of the OneDrive cloud storage software in HP products.

Microsoft also asserted in its complaint that, since at least 2007, Microsoft had developed, marketed, used and offered for sale its OneDrive software. Citing recent public statements and numerous new cases initiated by SynKloud against other cloud storage companies, including major industry competitors, Dropbox and Adobe, Microsoft alleged SynKloud intended to enforce its patent portfolio “broadly and generically against the entire cloud storage industry.”

In a ruling on SynKloud’s motion to dismiss, Judge Richard Andrews found the court lacked jurisdiction over Microsoft’s claims that a sufficient controversy existed based on SynKloud’s litigation campaign against HP, and other cloud storage companies. However, Judge Andrews found that questions of contributory infringement by Microsoft was still at issue (based on SynKloud’s claims of direct infringement against other cloud storage companies for their use of OneDrive software). The court’s ruling narrowed the trial to consider only the justiciable issue of whether Microsoft could be liable for damages to SynKloud under a contributory infringement theory.

New Precedent from the PTAB: Apple v. Fintiv

In addition to the noteworthy cases being heard in the federal district courts, a new precedent was established in the Patent Trial and Appeals Board (PTAB) in the case of Apple v. Fintiv, which set forth new factors governing the exercise of PTAB’s discretion to deny the institution of a post-issuance proceeding. The enumerated factors include:

1. Whether the court granted a stay or evidence exists that one may be granted if a proceeding is instituted;

2. The proximity of the court’s trial date to the PTAB’s projected statutory deadline for issuance of a final written decision;

3. Investment in the parallel proceeding by the court and the parties, i.e. the issuance of substantive orders involving the subject patent or claim construction orders weighing in favor of denial;

4. Any overlap between issues raised in the petition and the parallel proceeding;

5. Whether the petitioner and defendant in the parallel proceeding are the same; and

6. Other circumstances, including then merits of the petition which tend to favor denial.

The PTAB stated that these factors relate whether or not efficiency, fairness, and the merits supported its discretion to deny institution in view of an earlier trial date in the parallel proceeding. It is too early to tell how the PTAB ruling will affect future filings; however, some pundits, including those at the National Law Review, have suggested the ruling may encourage patent owners to file “multiple parallel lawsuits” to increase the chances of an earlier trial date or, in contrast, the ruling may force the parties to cooperate by pausing parallel pending litigation in order to obtain judgment on the merits before the PTAB.

Patent Litigation Continues Through 2021

Despite the pandemic, 2020 proved to be an exciting and interesting year for patent litigation. New case filings increased in the federal district courts, with the Western District of Texas emerging as a hotspot for patent litigation. In addition, patent litigation resulted in the establishment of new precedent in the PTAB, and damage awards were trending into territory we haven’t seen in a decade. While it may be too soon to tell whether these trends will continue in 2021, the emergence of 5G technology and its limitless potential applications seem ripe for conflict, and the continued increase of patent litigation financing, indicate that patent litigation in 2021 will be much like what we saw in 2020.

 

The core team of patent consultants at Vitek IP, LLC have analyzed over 20,000 patents, while managing hundreds of buy-side and sell-side transactions for some of the world’s largest companies. Vitek’s founders have over five decades of experience in IP and tech, and have developed sophisticated patent sales and patent acquisitions strategies for some of the world’s largest companies. Vitek’s patent consultancy, brokerage group, and research organization provide clients exceptional guidance navigating the patent landscape. For more information, visit www.vitek-ip.com.