Rougher Litigation Terrain For Non-Practicing Entities

Recent trends in patent litigation have made lawsuits brought by non-practicing entities (NPEs) somewhat easier and cheaper to defend. Historically, many of these cases have settled based not on merits but as a function of defense costs. The new developments may shift the balance in the direction of merits-based case valuations.

E-discovery is one of the pressure points available to NPEs when they go after a target. Typically NPEs have only a modest number of documents to produce in connection with the patents they assert, while their targets must produce huge volumes of materials. Leveling the e-discovery playing field would have a profound effect on NPE settlement dynamics, and courts have increasingly sought to streamline the e-discovery process to control patent litigation expenses. Federal Circuit Chief Judge Randall Rader and the Advisory Council of the Federal Circuit have developed a “Model Order” imposing significant limits on email production – for example, by limiting production requests to five custodians and five search terms per custodian.

Courts also have taken steps to prevent patent cases from proceeding to summary judgment or trial with unreasonable numbers of asserted claims still pending. Attorneys’ fees have been awarded to defendants in a few cases.
The legal environment for NPE patent litigation is shifting in ways that will make it harder for NPEs to extract settlements. How far the pendulum swings will depend on how far district court judges and the Federal Circuit are willing to extend these trends.