Of Spikes and Means: Q1 2016 Litigation Data

The first quarter of 2016 is in the books, and no doubt the level of NPE litigation activity has dipped. Defendants added to NPE campaigns in Q1 of 2016 total 496, about half the number added during the same quarter in 2015 and in 2014. That said, such a comparison is not “apples to apples”: NPE activity appears to correlate more closely with current events than with arbitrary calendar milestones. When we instead compare the 2016 Q1 data to periods with similar patterns over the last few years, one possible explanation presents itself: the current lull is the aftereffect of an event-driven spike in activity.

The figure above shows weekly activity levels from 2011 to present, along with events that have coincided with fluctuations in litigation activity. On December 1, 2015, NPE-unfriendly amendments to the Federal Rules of Civil Procedure took effect, changing rules related to pleading requirements, initial case management, and scope of discovery. They appear to have motivated a large number of patent case filings in the weeks immediately before their effective date: more than 450 defendants were added to NPE campaigns in the week leading up to December 1, most of them on the last day.

In 2011, in the two weeks just before the effective date of the America Invents Act (September 16), more than 1,000 defendants were added to litigation campaigns, with a one-day spike reaching well past 400. After the spike, weekly activity dipped below baseline levels for several months. Similarly, in 2014, the proposed passage of a bill in Congress to change the rules by which attorney fees are shifted in patent cases, which would have been effective as of April 24, also seems to have triggered a spike in weekly filings. Again, activity temporarily dipped below baseline.

Whether this plays out as a true downturn remains to be seen. Litigation volume offers one lens through which to view and gauge the marketplace. That indicator—along with a continued decline in the backlog of active cases since 2013—indeed signals a lull in litigation activity. Yet patents are still transacting at a steady rate, with NPEs in 2015 acquiring about as many assets as they did in 2014 and in 2013. The clip at which patents are changing hands to NPEs indicates that market activity has not slowed substantially.

RPX will be watching—and placing into context—the numbers as they surface in the coming months.