1 global patent litigation: win rates and strategies by michael c. elmer may 31, 2007 © finnegan,...

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Global Patent Litigation: Win Rates and Strategies

byMichael C. Elmer

May 31, 2007

© Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, 2007Confidential & Proprietary Information

Presentation for

FICPI “ABC” ConferenceLoch Lomond, Scotland

http://www.ficpi.org/index.htm

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Global Patent Litigation:The Big Picture and Changing Landscape from U.S. to Global

1974No jury trials

No CAFCNo ITC

No global dataWHERE IN THE U.S. TO SUE?

2001China joins WTO

Almost all jury trialsMore cases settling

Global courts becoming more sophisticated/Specialty trial courts/less expensive

Still no global dataWHERE IN THE WORLD TO SUE?

2002-2007Development of global “win rate”

data for 33 most IP-rich countries and focus on 15 most litigious

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HOT U.S. FORUMS (2006 filing numbers)*

*These are the 10 districts with the most patent litigation filings in 2006 and represent about 50% of the 2812 U.S. district court patent litigations filed in 2006. Litigation filings source: Pacer Court Records and Administrative Office of the Courts Annual Reports, Table C-2. District win rate overall and “after SJ”, 1995-June 2006, source: PwC, “Recent Trends in Awards in Patent Damages, 2007,” except for N.D.Ill. From LegalMetric district report, 1991-2007, and US ITC from internal FHFGD research, 1993-2003.

D. Del.152

(5.4%)

S.D.N.Y.124

(4.4%)

C.D. Cal.286

(10.2%)

N.D. Ill.131

(4.7%)

E.D. Tex.263

(9.4%)

D. Mass.78

(2.8%)

D. Minn.65

(2.3%)

N.D. Cal.156

( 5.6 %)

S.D. Cal.92

(3.3%)

E.D. Pa.61

(2.2%)

44%74%

60%83%

35%48%

42%58%

31%57%

31%75%

32%82%

28%51%

Note 2006 PwC data indicates W.D.Wis. highest “after SJ” win rate: 91% (overall 63%). Compare with lowest “after SJ” win rate in E.D. Mich.: 33% (overall 12%).

Blue = “after SJ” patentee win rateRed = overall patentee win rate

US ITC49%

Ct. Cls.28%44%

12%62%

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Summary

Global litigation, like US litigation, driven by business ($$)

– US no longer >50% of world market, change driven by China (market = 1.3B compared to US market of 300M)

Global litigation, like US litigation, driven by differences in win rates

More sophisticated damages analyses outside US and more rigorous Asian enforcement will influence future global strategies

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High-Level Conclusions

Forum selection

Case valuation: assign settlement value

Foreign patent application filing decisions

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Methodology of Calculating Win Rate

• A patentee “win” = at least one claim held valid and infringed at trial court level. • According to our methodology, cases are only counted with a final decision on the merits at trial in the court of first instance

• Makes “bifurcated” (where validity and infringement tried in different fora) countries difficult

• Tip of iceberg - does not account for summary judgments*, but trials provide only common denominator

* Summary judgments are important in some countries, e.g., Canada and the US. In the US, summary judgments account for about 52% of the patent litigation cases decided on the merits. Source: PwC, 2007, “Recent Trends in Awards of Patent Damages”

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Where In The World To Sue?

Four key questions for any litigant in any country1. How much will it cost?

2. How long will it take?

3. What will we get?

4. How strong is our case?

(what are our chances of success?)

GIP Project developed 4 tools to answer these 4 questions for the GIP participating countries using

a hypothetical fact scenario

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Four Tools* Developed to Answer 4 Questions for Business Managers

1. Global database providing patentee win rate (Tool 1 to answer “what are my chances of success?”)

2. Litigation timeline (Tool 2 to answer “how much?” and “how long?”)

3. Decision tree methodology to estimate case worth using historial patentee win rate (Tool 3 to answer “what will I get?”; and to show chances for success)

4. Defensive strategy flow chart (Tool 4 for each country, includes defensive options and chances for success and data points– work in progress for many of the countries.)

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First Tool: Comparative Patentee Win Rate Chart (1997-2005)For Most Litigious Countries1 (1st Tier)

1997-2005# of patent litigations filed

Approx. number of courts/number sampled/% cases sampled

Number and % of cases going to trial (decision on the merits)

1997-2005 Win Rate

1 US 22948 96/96/100% 848 (3.7%) 59% trial/67% jury (35% if include dispositive SJ’s)

2 China3 10446 (1997-2004, includes utility models and design patents)

59/1/ 4% Pat. Inf. Cases 36%2

Reexams/invalidations 66%2

36%2

60% invalidity

60% infringement (2002-04)

3 Germany 74002

(900-1000 inf. actions/year)

(200 nullity actions/year in FPC)

#/data not publicly available, but estimate based on 1 court (Dusseldorf)/>50%

60%2 45.5%, 32%, 31%2

Patentee win rate in validity challenges (70% FPC, 49% EPO, 48% GPTO)

65% infringement2

4 France 33672 6/2/70% 1345 (40%)2 55%

5 Japan 2016 /2/ 565 (29%) 20% (112/565)

6 Italy 30002 12/2/17% 33%2 40%2

7 G. Britain 721 1/1/95% 121 (16%) 26% (21/82)

8 Canada 705 1/1/99%5 46 (6%) 38% (17/45)

9 Switzerland 6502 1/1/100% 130 (20%)2 85%2, 4

10 Australia 316 (1997-2004) 1/1/99%5 53 (17%) 30% (1997-2004)

1A “win” is defined as a case where at least one claim was found valid and infringed in a court of first impression.2Indicates number is estimate based on discussions with GIP participants.3Most (est. 70-80%) of China's patent infringement cases are utility model and design patent infringement.. In the Beijing First Intermediate People's Court, there are about 20-30 invention patent infringement cases filed/year. 4Skewed high because only stronger cases go to trial due to judge’s signal at pre-trial conference5 The Global IP project data for Canada and Australia reflects patent infringement cases filed with the Federal Court, which can sit in multiple cities. While legally possible to file infringement actions in the provincial and state courts, respectively, the Federal Court represents the vast majority of patent litigation.

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First Tool: Comparative Patentee Win Rate Chart1 (2nd Tier)

Annual # of patent litigations filed

Approx. number of court/number sampled/% cases sampled

% of cases going to trial (decision on the merits)

1997-2005 Win Rate

11 Netherlands

40/year2 1/1/100% 70%2 27%

12 Korea 40/year2 40/1/50% Over 50%2 26%2 (50% inf. x 52% validity)

13 Spain 40/year2 70/2/50% 80%2 49%2

14 Brazil 60/year2 */2/80% 33%2 56%2

15 India 25/year2 6/1/65% 20%2

16 Austria 20-25/year (1997-2001 data)

1/1/100% 95% (1997-2001 data) 5% (1997-2001 data)

17 Israel 24/year2 5/1/80% <50%2

18 Sweden 20/year (1997-2001 data)

1/1/100% <49% (1997-2001, 41/84)

19 Finland 20/year (1997-2001 data)

1/1/100% <50% (1997-2001 data)

20 Argentina 10-15/year2 11/1/80%

1A “win” is defined as a case where at least one claim was found valid and infringed in a court of first impression.2Indicates number is estimate based on discussions with GIP participants.

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First Tool: Comparative Patentee Win Rate Chart1 (3rd Tier)

Annual # of patent litigations filed

Approx. number of court/number sampled/% cases sampled

% of cases going to trial (decision on the merits)

1997-2005 Win Rate

21 Denmark 5-10/year (1997-2001 data)

1/1/100% 33% (1997-2001 data) 88% (1997-2001 data, 8/9)

22 South Africa

7/year (1997-2001 data)

1/1/100% 33% (1997-2001 data, 11/39)

55% (1997-2001 data, 6/11)

23 Scotland 2/year 1/1/100% 50% 50% (2006 data only)

24 New Zealand

1/year2 1/1/100% <50%2 50%

25 Singapore 1/year (1997-2001 data)

1/1/100% 71% (1997-2001 data, 5/7)

40% (1997-2001 data, 2/5)

26 Ireland 1/1/100%

1A “win” is defined as a case where at least one claim was found valid and infringed in a court of first impression.2Indicates number is estimate based on discussions with GIP participants.

Chile, Taiwan, Russia, Hong Kong, Norway, Mexico, and Portugal are participating countries, but we do not have data yet.

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10 Most Litigious Countries with # of Patent Litigation Filings (1997-2005) and Most Active Court Indicated

United States: 22,948 C.D.Cal.

China: 10,446** (1997-2004)

Beijing First Intermediate People’s Court

Germany: 7400* Dusseldorf

Canada: 705

Toronto/Ottawa/Vancouver

France: 3367* Paris

U.K.: 752 London

Australia: 316

(1997-2004) Sydney

Japan: 2016 Tokyo

Source: Finnegan Henderson Global Patent Survey

Notes: * Indicates number extrapolated from 1997-01 data – currently being verified** est.; China data includes trial court infringement actions only, not AAPA actions

(9,630 for1997-2005). Most (est. 70-80%) of China's patent infringement cases are utility model and design patent infringement. In the Beijing First Intermediate People's Court, there are about 20-30 invention patent infringement cases filed/year.

*** Indicates estimate by GIP participant based on number of decisions because number of cases filed is not obtainable

Italy: 3000***

Milan

Switzerland: 650***

Zurich

Put invention patent number in box too in different color

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Annual Civil “Invention” Patent Infringement Litigation Filings, 2006

750700

250200

150

80 70 60 50

0

100

200

300

400

500

600

700

800 40 40 40

30

25 25 24

20 20

15

0

5

10

15

20

25

30

35

40

3000 US

China

Germany

France

Japan

ItalyCanada Swixx

Brazil Australia

Korea Neth. Spain

U.K.

India AustriaIsrael

Sweden

Finland

Argen.

3000

Tier I Tier II

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Patent Litigation Filing Trends(Top Four Countries)

0

500

1000

1500

2000

2500

3000

3500

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

# o

f p

ate

nt

litig

ati

on

ca

se

s f

iled

Germany (est.)*

China*

USA

France(est. 2000-05)

China inv. pats. only (est.)

Germany inv. pats. only (est.)

* Number includes utility model and design patent litigation filings

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Patent Litigation Filing Trends(Next six of top ten)

0

50

100

150

200

250

300

1997 1998 1999 2000 2001 2002 2003 2004 2005

# o

f p

ate

nt

litig

ati

on

ca

se

s f

iled

Japan*

Italy (est.*)

UK

Italy inv. pats. only (est.)

Swiss(est.)

Australia

Canada

* Number includes utility model and design patent litigation filings Redo Swiss

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ADSL Case StudyGlobal Hypo Used to Illustrate Methodology and Use of Three

Tools1

• NetUS (Silicon Valley based U.S. Corp.) makes and sells ADSL chipsets. 3 U.S. patents covering the ITU standards for ADSL as well as 2 patents with identical claims in, inter alia, the U.K., Germany, China, and Japan. The NetUS patents issue worldwide, and NetUS initiates a program to license its patents to competitors in industry at 5% NSP. NetUS has 50% of U.S. market for ADSL modems, and a 35% profit margin in all markets.

• AccessUK (London based U.K Co.) has 15% share of U.S. ADSL modem market. It sells to customers in Europe and South America, mostly to the U.K., where their chipsets are produced, and to Spain (50% of market), Germany and France (30% of markets). Access UK has a 40% profit margin in all markets.

• KorDSL (Seoul based Korean Co.) sells Korean manufactured ADSL modems throughout Asia: in China (30% market share), Taiwan (25%) and Japan (20%); and U.S. (20%)

• It is believed that both AccessUK and KorDSL are infringing the NetUS patents; KorDSL and Access UK have knowledge of Net US patents, but have refused to take licenses. What is the best global strategy for each company?1. Actual ADSL market sales data used (Hypo Details and Assumptions available upon request)

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Second Tool: TimelineCentral District of California

01.01.05 05.01.06 01.01.07 05.01.07 07.01.07 08.01.07 File

Complaint Markman decision

Summary Judgment

Pretrial Conference

Begin Trial

Decision

16 months

1.5 Million $ 24 months

2.2 Million $

28 months 2.5 Million $

30 months

3.5 Million $ (If electronic discovery issues become significant, this figure may increase by as much as 50%)

Cost

Time

Cost breakdown:

$1.5 M through Markman $2.2 M through SJM$2.5 M through pre-trial$3.5 M through trial

Av. Time to Termination

on the Merits:13.8 months*

*Source: LegalMetric

If patentee survives summary judgment, chances of success nearly double (35% to 67% before a jury

Patentee win rate 35%

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Third Tool: Decision Tree Risk Analysis CD Cal., summary judgmentNetUS vs. KorDSL

For damages analysis, assume NetUS would have made half of KorDSL’s sales.*Source: PwC, 2007, Recent Trends in Awards of Patent Damages

KorDSL U.S. Sales = $162.5 M

44% C.D.Cal. patentee win rate on summary judgment*

Initial value

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Third Tool: Decision Tree Risk AnalysisCD Cal., assuming survive summary judgmentNetUS vs. KorDSL

Source: Kimberly A. Moore, “Empirical Statistics on Willful Patent Infringement,” G.W. Law School, March 2004

73 % - Willfulness decided 67.7% - Jury finds willfulness 23% - Judge approves trebling

17% - Judge approves 2.5X

16% - Judge approves doubling

44% - No enhancement (despite willfulness or no willfulness found or willfulness not decided)

68.5% C.D.Cal. jury win rate

KorDSL U.S. Sales = $162.5 M

Willfulness % source below

((estimated by p. counsel)

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FOURTH TOOL: DEFENSIVE “FIRST STRIKE” FLOW CHART OF OPTIONS FOR ALLEGED INFRINGER (USA) (WORK IN PROGRESS)

Patent application is published

Request ex parte reexam10% patent revoked, 64% claims amended, 26% no change to patent (USPTO stats). With new Central Reexam Unit, should have decision within 2 years. (58% win rate)

Patent issuesPatentee sues for infringement

File DJ(55% overall win rate) (source: PwC)3

Request stay in inf. proceedings pending outcome of either reexam, chance granted = 63%1, discretion of court, may be different post-RIM

Patent held infringed (61%”after summary judgment” win rate) (source: PwC)Injunction granted

Request SJ of non-infringement and/or invalidity (65% win rate) (source: PwC)

Infringed claim held invalid on reexam

Ask for rehearing of infringement decision or request that the injunction be lifted

Cases usually settle after Markman hearing

Defensive comparison of published and issued claimsfor provisional rights purposes

White is DJ/infringer perspective

Yellow is p’ee

1Courtlink, patent cases, 2002-2004, from Orrick presentation2Only 3 cases decided so far. All claims in all 3 cases canceled.3Alleged infringer wants to file DJ in district where low overall win rate (E.D.Mich. 12/33%, Kansas 20/33%, or S.D.Fla. 24/45%) (source: PwC); and SJ’s are received with favor b the court. Patentee wants to do converse.4Chances of success in E.D.Mich. 88% before SJ, 67% after SJ; Kansas 80% before SJ, 67% after SJ; S.D.Fla. 76% before SJ, 55% after SJ. (source: PwC).

Request inter partes reexam100% claims revoked (USPTO stats2). Caution re waiver. (100% win rate)

D1 D2 D3 D4 D5 D6

P1 P2 P3 P4 P5

Then what? In RIM,

case settled. In next case

- ??

This is key – patentee win rate doubles if survive summary judgment, alleged infringer’s cut in half.

Everything after D2 is a district-specific decision

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ADSL HYPOTHETICAL CASE COMPARATIVE RESULTS USING GIP TOOLS

FORUM COST (Tool 2)

OVERALL TI MEFRAME

(Tool 2)

PAT. WIN RATE

(Tool 1)

I NI TI AL EXPECTED

VALUE (Tool 3)

MOST LIKELY TRI AL OUTCOME* *

(Tool 3) U.S.

CD Cal. trial CD Cal. SJ

I TC ED Tex. trial E.D.Mich. SJ

E.D. Mich. trial

$3.5 M $2.2 M $4 M

$3.5 M $2.2 M $3.5 M

30.1 mos.2 19.7 mos.2 7.5 mos.

21.2 mos.1

74% 3 44% 3 47% 88% 1

12% 3 33% 3

$33.4 M $5.2M

--- $40.9 M $158 K $3.4 M

$53.4 M -$2.2 M

--- $ 53.4 M -$2.2 M -$ 2.2 M

China Beijing

$.5 M

24 mos.

39%

$43M

-$0.5 M

UK London

$1 M

14 mos.

26%

$3.4 M

- $1 M

Canada $1.5M 30 mos. 38% $2.2 M -$1.5 M Germany

FPC GPTO EPO

no chall./ Dusseldorf only

O if win $1.1M if lose both

13 mos. inf. 16 mos. inv. in

FPC

45.5% 31% 32% 65%

$4.7M $3 M

$3.1M $7 M

-$600K -$600K -$600K -$500K

*at jury trial

** net, if electronic discovery issues become significant, this figure may increase by as much as 50%

1Source: LegalMetric 2006 Report, 1992-20052Source: LegalMetric 2006 Report3Source: PwC, 2007, Recent Trends in Awards of Patent Damages (1995-June 2006)

Offensive strategy File in ITC (47% p’ee win rate) and in

CD Cal. (70% p’ee win rate) (ED Tex (88%) or W.D.Wis. (91%) if possible for maximum pressure and choice of forum.

File in China because of large potential recovery if successful v. low costs

Defensive strategy File DJ in UK (15-20% p’ee win rate) Post-RIM two venue (PTO and district court)

consequences in US (work in progress to reevaluate reexamination as a defense strategy in view of NTP v. RIM case; especially in ED Tex.)

Use above DJ and first strike opposition strategies to obtain negotiation leverage

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Global Patent Enforcement Strategies

• IN THEORY: no res judicata effect of litigation outcome in one country on litigation outcome in another country (limited collateral estoppel)

• IN PRACTICE: leverage power of first litigation outcome to settle disputes globally/other jurisdictions

• SO? Develop patent enforcement strategies (“where sue first”) with leverage in mind

• HOW? Application of 4 tools to provide objective framework for strategic analysis

“FIRST-STRIKE STRATEGY”

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US (D. Or.)Infringement lawsuit

Filed Feb/06pending

US ITC24 companies from 5 countries named

as respondentsNov/06 settled

With 6, Ap/07 Imports

barredUK

Settled 2nd

party infringement lawsuit

Oct. 2005

China Shanghai

IPOSettled Aug. 2005

UK settled

1st partyinfringement

lawsuitMay 2005

USA (D. Or.) “recognized” infringement March 2005

settled June 2005

Seiko Epson enforcing

inkjet printers against various

parties

Companion Second strike“acquiescence” strategy

“First-strike”

UK Environmental Business Products Ltd.

UK CybaHouse Ltd.

Patentee won

Example of Leveraging “First-Strike” Outcome

Patentee won

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Pfizer enforces Lipitor®

(blockbuster cholesterol-lowering drug) patents around the world•Patents on atorvastatin (“basic patent”) and calcium salt of atorvastatin (“secondary patent”)•All actions against Ranbaxy except Dec/05 action in Spain and Dec/06 action in Canada•Third action in Spain recently filed

Oct. 2005 UK High Court held basic patent valid and infringed, secondary patent invalid; aff’d on appeal June 2006

Dec. 2005 D. Del. held both patents valid and infringed; aff’d on appeal for basic patent Aug. 2006

Mar. 2005 basic patent held invalid. Overturned by APO Oct. 2006

Aug. 2006 No infringement

Sept. 2006 Basic patent infringed, secondary patent invalid

Dec. 2005 Basic patent valid, Ranbaxy enjoined (Andean Court of Justice also dismissed challenge, covers Peru, Ecuador and Venezuela)

Dec. 2006 Aus. Federal Court basic patent upheld (revocation case), secondary patent invalid

Nov. 2006 Mercantile Court of Barcelona, No. 2 held basic patent invalid, EPO advisory opinion upholding secondary patent not binding

Dec. 2005 Court of First Instance in Madrid upheld basic patent in action against Ratiopharm, aff’d on appeal Oct. 2006

Dec. 2006 Cdn. Federal Court granted application barring Teva’s generic version. Jan. 2007 Pfizer’s application to have Ranbaxy’s generic banned was denied.

Global Patent Litigation:Pharmaceutical Industry More Inclined to Litigate?

P

P

P

P

P

P

P

Feb. 2007 Copenhagen bailiff’s court, preliminary injunction granted

P

https://www.cia.gov/cia/publications/factbook/flags/as-flag.html

https://www.cia.gov/cia/publications/factbook/flags/au-flag.html

https://www.cia.gov/cia/publications/factbook/flags/no-flag.html

https://www.cia.gov/cia/publications/factbook/flags/us-flag.html

https://www.cia.gov/cia/publications/factbook/flags/uk-flag.html

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Global Patent Litigation

L1

W1

W2

W3W4/L2

W5

W6

W7

W9W8/L3

Global scorecard to date

Pfizer: 8 wins, 1 loss (Norway) and 2 mixed (Spain and Canada)1 pre. inj. granted in Denmark

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RIM Employing Defensive “First Strike” Strategy to InPro (holding company) Suit in Germany

High-profile US case, NTP v. RIM (Blackberry™ case)– Jury: infringement– District court did not

stay litigation waiting for USPTO to reexamine patents

– USPTO non-final rejections to all claims (Feb. 22, 2006)

– Parties settle litigation for $612M (Mar. 3, 2006)

RIM faces litigation in Europe– InPro II Licensing

sues for infringement in Germany

– RIM does not wait– files nullity suit in FPC– files DJ in UK

– Claims invalidated in both actions (Germany Jan 27/06; UK Feb. 2/06)

– UK Ct. of Appeal aff’d invalidity Feb/07

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Global Patent Litigation: Trends & Predictions

4 of top 10 have >50% patentee win rateIf count summary judgments in US, then 3 of top 10

Expect DJ actions to rise in UK and Japan Litigation filings rising in China some damage awards increase in litigation filings by foreign companies as confidence in

enforcement grows can get award if company subject to international accounting

standards foreign bias, if any, not yet quantified (anecdotal in AAPA cases) hard to get discovery on process patents pre-1993, could not get product patent use of SFDA to follow competitiors’ activity no preliminary injunctions granted in Beijing Intermediate Peoples’

Court, 80% granted in Shandong goal in pharmaceuticals is to get preliminary injunction no perjury in Chinese courts

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US Forum Shopping: Trends & Predictions

Litigation filings decline in US in 2005, about same in 2006 (down 11.5% from 2004) because:

• “patent troll” plaintiffs mean fewer countersuits because patentees have no products• multiple defendants combined in one action means fewer filings• expense may be encouraging use of reexam option to resolve disputes • increased infringement filings in other countries by global companies• More DJ actions filed in UK and Japan where alleged infringers have better chance of success

Rise in patentee-filed lawsuits in ED Tex where patentee win rate before a jury sits at 88% (source: LegalMetric)

Troll strategy: sue multiple defendants in ED Tex and chip off weak to build war chest

Lowest patentee win rates in country – S.D.Ohio 49% (source: LegalMetric)

Patentee’s goal is to survive summary judgment. If do, chances of success almost double (35% to 67% before a jury)

Best forum is where summary judgment win rate low

Best forum for alleged infringers is where summary judgment win rate is high and jury win rate is low (e.g. E.D. Mich.)

Courts with highest win rates (W.D.Wis. and E.D.Tex.) have very low rates of granting summary judgments – cases are going to trial in these districts

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Global Patent Litigation Damages Comparison (work-in-progress)

0

50

100

150

200

Largest Patent Infringement Damages Award non-US (US $M)

Canada

Japan

Taiwan

China

France

Korea

UK

Spain

Germany

India

7 2

2810.7

63.5

Canada: Glaxo Wellcome v. Apotex ($200M* – award under appeal)Japan: Osaka court (“Pechinko”, 2002) ($63.5M)Taiwan: Celanese International Corporation v. China Petrochemical Development Corporation, in Kaohsiung District Court (Sept. 2005) ($28M)China: Zhejiang “Xiao Jia Huo” Foods Co., Ltd. vs. Zhejiang JINYI Group Co., Ltd & SANLI Foods Industry and Trade Co., Ltd. (2003) ($16M)France: Interphyto/Ciba-Geigy (1995) ($10.7M)Korea: Kimberly-Clark Corp. v. Ssang Yong Paper Co. Ltd. (2004) ($7M)UK: Ultraframe v Eurocell (2006)($6.15M) – **most recent, but not largest. Also, Gerber Garment Technology Inc v. Lectra Systems Ltd. (Ct. App.) (1996)($6M)Spain: Otsuka received damages for infringement of pharmaceutical process patent $2M – only reported damages we could findGermany: District court of Munich, "Rasenwabe" case, 2002 ($1.4M) India: Microsoft copyright case. In India, damages awards/decisions in other IP areas relevant to patent cases (2005)($280K* - award under appeal)

166.15**

200*

1.4 .28*

Largest damages award in the US was $1.52B in Lucent v. Gateway (2007); highest settlement $1.35B in Michelson v Medronic (2005)

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CONTACT INFORMATIONMichael C. Elmer

Finnegan, Henderson, FarabowGarrett & Dunner, LLP

700 Hansen Way 2 Overlook Dr.Palo Alto, CA Newport Beach, CA 94304 92657tel: 650-849-6610 tel: 949-715-5263

[email protected]

mailto:[email protected]






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Methodology of Calculating Win Rate

•Unified Systems•Counted infringement suits filed (where available).•Counted infringement suits decided by a final judgment at trial in court of first instance.

•Result is % of cases going to trial.

•Counted suits where at least one claim held valid and infringed (patentee win).•Divide number of patentee wins by number of lawsuits decided to obtain patentee win rate.•Note: validity almost always challenged.

•Bifurcated Systems•Invalidity (estimate)

•Counted number of requests for invalidity/nullity/revocation filed.•Counted number of requests decided.•Counted decisions where claims were upheld without change/rejected/amended. Win counted as claims upheld without change plus ½ of amended claims.

• Infringement•Counted infringement suits filed.•Counted infringement suits decided.•Counted suits where at least one claim held infringed.

•Multiplied the validity win rate by the infringement win rate to obtain overall patentee win rate.

*Note: sometimes we only have hard data for one half of the calculation. For example, in Germany so far it has been impossible to find out how many infringement law suits are filed/decided/won, so the infringement number is an estimation, while the Federal Patent Court/EPO/GPTO invalidity/nullity/revocation action data are available and therefore the invalidity number of cases filed is hard. However, while a result where the claims are maintained without change is a clear win for the patentee, we cannot tell if the result where the claims are amended is a win for the patentee, or if the changed claims no longer read on the allegedly infringing product. We assume that ½ of the cases where the claims are changed are a win for the patentee and ½ are losses. We then add ½ of the changed claims number with the number of cases where the claims were maintained without change to obtain the validity win rate for the patentee.

Also, at this point we have not been able to tie the invalidity suits to the infringement suits. In other words, we cannot tell if the same claim that is upheld as valid is also found infringed.

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Disclaimer• These materials are public information and have been

prepared solely for educational purposes to contribute to the understanding of American intellectual property law. These materials reflect only the personal views of the authors and are not individualized legal advice. It is understood that each case is fact-specific, and that the appropriate solution in any case will vary. Therefore, these materials may or may not be relevant to any particular situation. Thus, the authors and Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P. cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in these materials. The presentation of these materials does not establish any form of attorney-client relationship with the authors or Finnegan, Henderson, Farabow, Garrett & Dunner, L.L.P. While every attempt was made to insure that these materials are accurate, errors or omissions may be contained therein, for which any liability is disclaimed.

33

Infringement Intermediate People’s

Court Beijing

Complaint

Infringement

Judgment 01.01.05 02.01.05 02.01.06 01.01.07

Invalidity Patent Reexamination

Board of the Patent Office

Request for Invalidation

Invalidity Decision

$130K (Pre-Litigation Fees)

1 month

$140K

13 months

$390K

24 months

$500K (Infringement And Invalidity Actions)*

Cost

Infringement Time

Max allowable interval for foreign defendant to file for invalidity

*$400K for infringement action and $50K for invalidity action

Invalidity Time

Second Tool: TimelineChina

34

Assumptions: •Decision tree for bifurcated country somewhat artificial because cannot be sure claims found infringed not necessarily same as claims upheld as valid.•Patentee must choose damage theory (damage to the patentee must be determinable); based on restitution, not punitive damages.•Value of case determined by sales in China assuming 2 years to trial (including 1.5 years for the validity action running simultaneously; assume infringement action is not stayed).•Pre-litigation fees for infringement action total $130K; monthly cost for infringement action runs roughly $11K; total validity action cost is $50K.•Assuming plaintiff prevails, permanent injunction granted at end of trial.•Largest damage award to date in China is $16M•Win rate going down from 1990-2001 to 2002-2004

Third Tool: Decision TreeChina

For comparison purposes only, as

patentee must elect early

39% win rate =

39% win rate =

KorDSL China Sales = $315 M

17

35

Canada Federal Court Litigation

01.01.05 01.01.06 07/01/07 File

Complaint Summary

Judgment Decision

Rendered

12 months

$100 K

30 months

$ 1.5 Million

Cost

Time

Second Tool: TimelineCanada

Av. patentee win rate on summary judgment 48%

Av. patentee win rate at trial 36%

36

NetUS v. KorDSL in Canada

•Assumptions•KorDSL 10% market share in Canada•See ADSL Worksheet and Case Study•NetUS 35% profit margin, 50% market share in Canada•Reasonable royalty of 5%

40.5 % win rate

•Green: best case scenario•Yellow: most likely scenario•Red: worst case scenario

KorDSL Canada Sales 1999-2007= $18 M

Third Tool: Decision TreeCanada

37

patent application is published

File prior art with examinerChance of success = ?

patent issuesPatentee sues for infringement

Request stay in inf. proceedings pending outcome of validity

patent held valid and infringed (38%)Injunction granted, damages awarded

Injunction enforced

When cases usually settle?

Defensive comparison of published and issued claims for provisional rights purposes


Yellow is p’ee

D1 D2 D3

Reexam(Can claims be changed/amended as well as revoked? Chance of success?)

Impeachment proceeding (changed/amended as well as revoked? Chance of success?)

D4

P1 P2 P4 P5 P6

D5

Motion for summary judgment (52% win rate)

Notice procedure to deny marketing approval in pharma case

P3

FOURTH TOOL: DEFENSIVE “FIRST STRIKE” FLOW CHARTCANADA (WORK IN PROGRESS)

38

01.01.05 03.01.05 08.01.05 01.01.06 03.01.06 09.01.06 File Complaint

Close of Pleadings/CMC

Discovery/ Experiments

Begin Trial

Judgment Damages

2 months

0.15 Million $

7 months 0.6 Million $

12 months

0.85 Million $ 14 months 1 Million $

Time

Cost

Damages*

Second Tool: TimelinePatents Court, London

39

(NetUS v. KorDSL In UK)

Green: Best case scenarioYellow: Most likely scenarioRed: Worst Case scenario

Trial costs only for liability trial, does not include cost of damages trial

20% Win RateKorDSL UK Sales 1999-2007= $43 M

Third Tool: Decision TreePatents Court, London

40


File prior art with E’r?

patent issuesPatentee sues for infringement

Request stay in inf. proceedings pending outcome of validity

patent held valid and infringed (26%)Injunction granted, damages usually negotiated between parties (or hearing after decision on the merits)

Injunction enforced

When cases usually settle?

Defensive comparison of published and issued claims for provisional rights purposes


Yellow is p’ee

D1 D2 D3

Post-grant revocation proceedings(70% of revocations lodged are decided, 2001-04) 90% revoked, 10% not revoked. Should we add a possibility of an EPO opposition too? What impact of EPO proceedings in court?Source: http://www.patent.gov.uk/about/reports/index.htm

File DJ

D4

FOURTH TOOL: DEFENSIVE “FIRST STRIKE” FLOW CHART PATENTS COURT, LONDON (WORK IN PROGRESS)

P1 P2 P3P4 P5

41

Patent Litigation TimelineDüsseldorf

Infringement

District Court Düsseldorf

Complaint Judgment on

Infringement*

01.01.05 03.01.05 02.01.06 05.01.06 Invalidity

Fed. Pat. Court Munich Complaint Decision on

Validity*

$300K (including $275 K in court fees)

2 months

Invalidity court fees paid by AccessUK

13 months

$0.6 M

16 months

$0 M (win) or $1.1 M (lose) ($500 K infringement, $600 K validity)

Assumptions: Litigation Value is $10M (value for fees computation by statute for court and attorneys’ fees).N.B.: Losing party bears winner’s costs, including: attorneys’ fees , court fees, and expert and witness expenses.

Cost

Infringement Time

Invalidity Time

Second Tool: TimelineGermany

42

Decision Tree Risk Analysis Düsseldorf NetUS vs. AccessUK

•Assume infringement proceeding is not stayed in light of validity proceeding.•Infringement win rate is estimated.•Green: best case scenario•Yellow: most likely trial outcome•Red: worst case scenario, lose portfolio, plus pay litigation costs •Assume NetUS would have made ½ of AccessUK sales, so $48M used for reasonable royalty and lost profits calculations. $95.5M used for infringer’s profits calculation.

Third Tool: Decision Tree with Validity Challenged in Federal Patent Court

AccessUK Germany Sales = $95.5 M

Win rate 45.5%

43



Third Tool: Decision Tree with No Validity Challenge

Win rate 65%


44



Third Tool: Decision Tree with Validity Challenge in GPTO


Win rate 31%

45



Third Tool: Decision Tree with Validity Challenge in EPO


Win rate 32%

46


1. File prior art with E’r

patent issues

Patentee sues for infringement

2EPO. File post-grant oppositionto European patent designating Germany with EPO within 9 months of issue (51.6% chance claims revoked), don’t pay if lose

patent held infringed (65% est. win rate)Injunction granted (loser pays litigation costs, court costs and about ½ opponents’ attorneys’ fees)

Injunction enforced

Infringed claim invalidated by FPC

4. Injunction lifted (automatic?), compensation for losses during injunction

When cases usually settle

Defensive comparison of published and issued claimsfor provisional rights purposes


Yellow is p’ee

EPO Opposition or GPTO Opposition fail

3. File nullity request of German part of European patent in Fed. Pat. Ct. in Munich (30% chance claims revoked) after time for EPO or GPTO opposition over; pay if lose

2GPTO. National opposition proceeding (within 3 mos. post-grant); >52% chance claims revoked, don’t pay if lose

Best option

2nd Best

3rd Best

File protective letters with all competent district courts saying that do not infringe and request the court to consider noninfringement arguments in case the patentee files an application for the grant of an interim injunction

Interim injunction granted without hearing the alleged infringer’s arguments

FOURTH TOOL: DEFENSIVE “FIRST STRIKE” FLOW CHART GERMANY (WORK IN PROGRESS)

D1 D2 D3D5

D4

P1 P2 P3 P4 P5 P6 P7 P8

1 global patent litigation: win rates and strategies by michael c. elmer may 31, 2007 © finnegan,...

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