US patent litigation down for 2014 -- but what does this mean?

"New patent lawsuits are down for the first time in five years. Here’s why that’s a huge deal" is an eye-catching blogpost by Brian Fung on the Washington Post's The Switch weblog, here. Based on a recent PricewaterhouseCoopers report, the blogpost reads, in relevant part, as follows:

" ... a new study shows that the pace of litigation has actually slipped — for the first time in five years. This is a big deal for a whole range of industries, not just the tech sector. It's happening at a time when the spotlight on frivolous patent lawsuits has never been brighter. And that makes it a surprising find.

[According to] PricewaterhouseCoopers' latest report on patent litigation ... in 2014, there was a sharp drop in the number of new patent cases. There were about 5,700 filed last year, according to PwC. That might sound like a lot, but it's actually a 13 percent drop from the year before. We haven't seen anything like this since 2009 — which is about when many companies started getting hit with their first demand letters [from patent trolls].

The letters are often vague about which patents have allegedly been infringed, leading to confusion and fear among the victims about what they may have done wrong. They can fight the suit and go to court, but defending a case is costly and unaffordable for many companies. The congressional legislation being debated would try to address some of these issues.

But here's what else could wind up curtailing patent litigation: The Supreme Court. According to PwC, the sharp decline in new patent lawsuits can be traced almost directly to the outcome of a major case last year known as Alice Corp. v CLS Bank. Most analysts at the time said that Alice didn't matter much. The Court ruled that the software patent Alice Corp. used to sue CLS didn't pass the smell test. That much was obvious to many people watching the case; what they really wanted from the Court decision was a more concrete outline as to what kinds of software patent were patentable.

But the fact that Alice put some limits on software patents at all appears to have put major pressure on those who are considering bringing a patent lawsuit, said PwC.

Alice effectively "raised the bar for patentability and enforcement of software patents," PwC's report reads.

This doesn't make the issue of abusive patent litigation go away. Previously, PwC found that patent trolls accounted for 67 percent of all new patent lawsuits. But this year's findings suggest that the increase in patent trolling is not inevitable.

This blogger is not particularly surprised about the outcome of the survey and he doesn't think it is of significance at all.  For one thing, he feels that the high rate of patent litigation in the US may itself be based on the me-too principle: after a couple of speculative patent actions against moneyed defendants secure large damages awards and this is publicised, suing for patent infringement becomes a form of learned profitable behaviour among others, who may persist in pursuing it for a while but will stop when it becomes unprofitable. The analogy is with feeding pigeons in the park: at first, I have plenty of bread and there are only a few pigeons to feed. When I've been throwing crumbs to them for a while, many other pigeons learn to approach me for more crumbs.  Once I have finished dispensing crumbs, the pigeons will still hang around for a short while but will move on once they learn that there is no further pay-out.

The effect of the Alice ruling is also open to further investigation.  For one thing, Alice only relates to one form of patentable subject-matter, while those who abuse (and/or allegedly abuse) hold patents in other fields of technical application too. For another thing, there is some suggestion -- and this can be quantified and may be confirmed -- that there has been a decline in patent infringement litigation in many jurisdictions outside the United States too, something that would be hard to attribute to the Alice effect.

A further point, on which some kindly statistician might care to comment, is that a 13% drop in a year might be an accurate description of filings in that year but need not represent any sort of trend and could be attributable to factors quite outside the patent system such as the weather, the cost of credit, the availability of other ways of monetising assets other than by suing for patent infringement -- or even the willingness of more potential defendants to accept licences.

2015 Patent Litigation Study: A change in patentee fortunes is available here.

Thanks go to Chris Torrero for providing the link.