In the News IP Law & Business

The Boom Goes Bust

Is the patent litigation boom over? Our annual patent litigation survey shows an overall decline of the number of patent cases filed in 2005 – the first drop we’ve seen since we began publishing this list in 2000.

The survey is fairly straightforward. We count the number of new patent cases a firm initiated or defended in 2005. Firms with the most cases come out on top. It’s a survey that reflects quantity. We tackled the quality question in our Litigation Department of the Year contest [January 2006]. The survey also reflects national statistics. Since 2000, the number of patent cases filed in U.S. district courts has risen steadily, with filings jumping 9.3 percent between 2003 and 2004, according to the Administrative Office of the U.S. Courts. In 2005, filings totaled 2,720, a sizable drop from the 3,075 cases filed in 2004, but still higher than a decade ago. In 1995, 1,723 patent cases were filed [see "A Decade of Growth," page 27].

The dozen or so patent litigators and in-house IP lawyers we spoke with haven’t yet felt the downturn. Joseph FitzGerald, vice president of IP at Symantec Corp. in Cupertino, California, believes that patent litigation has at the very least remained steady. "The traditional litigation shops seem as busy as ever," he says. In May, FitzGerald’s company, represented by Latham & Watkins, filed a patent suit against Microsoft Corporation, claiming the software giant is misusing data management technology that Symantec acquired last year.

"We have not seen a trend toward any decline," says Douglas Luftman, associate general counsel for IP at Sunnyvale, California-based Palm Inc., noting that patent-holding companies have been more active and aggressive in pursuing licenses for patents [see "Quick Draw," page 30].

Palm is one of 31 defendants named in a patent case involving JPEG technology brought last year by Compression Labs, which is owned by patent-holding company Forgent. The Austin-based video technology developer sued a who’s who of tech giants, including Adobe Systems Inc., Apple Computer, Canon USA, Creative Labs Inc., Dell Inc., Eastman Kodak Co., Gateway Inc., Hewlett-Packard, IBM Corp., Panasonic Communications Corp. of America, and Toshiba America Inc. The case has swept up at least 27 law firms in its wake, including DLA Piper Rudnick Gray Cary, Fitzpatrick Cella Harper & Scinto, Fulbright & Jaworski, Irell & Manella, Milbank Tweed Hadley & McCoy, and Wilson Sonsini Goodrich & Rosati.

David Barkam, who heads Fish & Richardson’s litigation group, says these kinds of cases may explain why there are fewer filings, but no drop-off in work. "Plaintiffs used to sue one infringer after another, or just one or two at a time," he says. "But now patent holders often go after all the infringers they can think of at once."

"Cases are getting larger, and the size of the cases is not reflected in the statistics," says Barkan. Fish & Richardson saw a drop of two cases between 2004 and 2005, but remained at the top of the survey – a position it has held in four out of the last five years. The firm’s 75 cases far outpace second-ranked Jones Day’s 53 cases.

Gross revenue at Fish & Richardson totaled $246.5 million in 2005 – up 9.8 percent from 2004, according to The American Lawyer’s recent survey of the nation’s highest-grossing law firms. And the firm’s revenue from patent litigation rose 24 percent in 2005 over the previous year, says Barkan.

Revenue was also up at last year’s second-place winner, Knobbe, Martens, Olson & Bear, which saw an 11.2 percent increase, to $99 million. But new filings dropped dramatically, from 60 cases to 28, landing the firm in fifteenth place. Vito Canuso, chair of the firm’s business development committee, says that 29 of the new cases Knobbe handled in 2005 were resolved within the year, making it ineligible for the survey’s count [see Methodology, page 27]. Also, he notes that many of the cases that the firm handled were larger. "Our revenues for patent litigation went up $2.5 million in 2005," he says.

Robert Kahrl and Kenneth Adamo, co-chairs of Jones Day’s IP group, offer another explanation for the drop in filings: U.S. courts are seeing fewer patent suits because foreign jurisdictions are seeing more. Sometimes a case litigated successfully overseas can influence infringers in the United States, Adamo says. Jones Day has filed cases in Germany, for example, rather than in the U.S., for just that reason, and is currently handling three cases in overseas jurisdictions rather than in the U.S. courts. The firm, which has had patent litigators in Frankfurt, Munich, London, Brussels, and Paris for a while, has also opened offices in Beijing, Shanghai, Taiwan and Hong Kong in the past few years, with an eye toward increased IP work in those offices.

A few firms actually saw an increase in cases last year. Kirkland & Ellis jumped from fifteenth to fifth place, with an increase of 11 cases. Twenty-five of Kirkland’s 250 IP lawyers were tied up for two-and-a-half years representing surgeon-inventor Gary Michelson in a patent suit against Medtronic Inc., explains Robert Krupka, who co-chairs the firm’s IP group. The litigation settled in 2005 with Medtronic paying $1.35 billion. "Once that suit was over, more attorneys were free to take on new cases," says Krupka.

Morrison & Foerster filed 16 more cases in 2005 than in 2004, moving from twenty-second to fourth place. Harold McElhinny, co-chair of MoFo’s IP group, says the firm gets more work because it has so many partners capable of first-chairing a patent suit. The San Francisco office, for example, is home to not only McElhinny, but also to Michael Jacobs, who won a summary judgment ruling for noninfringement on behalf of client Think Outside Inc., a designer of foldable keyboards. In 2004 Rachel Krevans, also in San Francisco, won a settlement valued at about $100 million for client Chiron Corp. against Roche Molecular Systems, Inc. In New York, Karen Hagberg successfully defended Fujitsu Ltd. against the University of Illinois, in a patent case involving flat panel plasma displays. In San Diego, David Doyle is representing Bridge Medical Inc., General Atomics, and Dexcom Inc. In Los Angeles, Vincent Belusko obtained a judgment for an inventor who sued Microsoft Corp. for patent infringement – a ruling that has forced the software giant to put nearly $60 million in to escrow pending appeal. Finally, the Palo Alto office is home to Gerald Dodson, who this year obtained a $200 million settlement from Monsanto Co. for the University of California ["Cash Cow," May 2006].

There were also some newcomers to this year’s most mentions list, including Baker Botts, Wilson Sonsini Goodrich & Rosati, Duane Morris, and Goodwin Proctor. Since 2002, Goodwin has gone from 30 to 110 IP lawyers, says Ethan Horwitz, chair of the firm’s IP group.

And Ropes & Gray, which acquired Fish & Neave in 2004, makes a debut of sorts this year: Fish & Neave hadn’t made the list since 2001.