Q1 Data Update: The New Year Brings Greater Clarity As The Pendulum Swings Back

The end of 2017 left the patent ecosystem at a crossroads, with pending judicial rulings, new strategies by plaintiffs and defendants, market realignments, and the possibility of further reform seemingly poised to swing the pendulum back toward patent owners. While much remains to be resolved, the first quarter of 2018 brought some clarity—or, at least, further change—to certain notable points of uncertainty and controversy, including the further evolution of the law surrounding patent eligibility and pushback against certain novel strategies designed to avoid inter partes review. The patent market, in turn, saw new divestitures further the shift away from formerly dominant players as newly resurgent NPEs continued to solidify their recently assumed roles at the forefront of patent assertion.

Litigation Update: NPEs Hold Steady, While BioPharma Operating Companies Rush to File

Patent Venue: Stabilized Since TC Heartland

Alice Upended: Berkheimer Casts Doubt on Early Eligibility Challenges

PTAB: The Impact of Aqua Products, and Setbacks for Tribal Sovereign Immunity Deals

Market Realignments: Notable Portfolios Change Hands, Some NPEs Expand, and Others Diversify

Trump Administration: New USPTO Director Calls for Stability, While Antitrust Head Stirs Controversy

District Court Litigation

The first quarter of 2018 saw roughly the same amount of patent litigation as in Q1 2017, with 931 defendants added to infringement suits filed (compared to 928 filed within the same period last year). For their part, NPEs added 394 defendants in the first quarter of 2018, or around 42% of those sued; while operating companies added 537 defendants, or 58%. By contrast, NPEs filed the majority of infringement litigation one year ago, adding 495 defendants, versus the 397 added during Q1 2017 by operating companies. The greater share of operating company litigation in Q1 2018 included a notable increase in the number of lawsuits filed in the biotechnology and pharmaceutical market sector, which saw 82 defendants sued in 130 cases filed in that quarter, compared to the 57 defendants sued in 97 cases filed in that sector during the same period last year.

That increase in biopharma litigation may be partly the result of the unique uncertainties caused for drug companies by the Supreme Court's opinion in TC Heartland v. Kraft Foods Group Brands. Since that May 2017 holding restored a narrower definition of where patent defendants "reside" for venue purposes, subsequent litigation has placed greater importance on another prong of the patent venue statute, under which venue is proper wherever a patent defendant has a "regular and established place of business" and has committed "acts of infringement". In pharmaceutical lawsuits filed under the Hatch-Waxman Act, the filing of an Abbreviated New Drug Application (ANDA) is considered the act of infringement—an anticipatory and "highly artificial" act that has no true location. That ambiguity has caused a split among courts considering venue for Hatch-Waxman litigation, with one side finding venue under the "acts of infringement" prong just in the district where the defendant prepared and/or submitted an ANDA, and the other where the defendant intends to market the drug and has a regular and established place of business (essentially, nationwide jurisdiction). Thus, the recent glut of biopharma suits could be the result of drug company plaintiffs looking to lock in the exclusivity period offered as a Hatch-Waxman remedy as soon as possible, should the split ultimately limit their available venues.

Patent Venue Overall

While the issue of Hatch-Waxman venue remains in flux, the overall distribution of venue has mostly stabilized for NPE litigation now that parties and courts alike have adjusted to TC Heartland. In Q1 2018, the District of Delaware was the top district for NPE suits, followed closely by the Eastern District of Texas, with those two venues accounting for just under half of all...