By Joe Mullin
IP Law & Business/July 2008

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Last year was another extraordinary one for patent litigation. It began with two U.S. Supreme Court decisions likely to change patent practice for years to come-one on a patent licensee's right to sue, the other on damages for products sold abroadÂ-and ended with a strong legislative push, which ultimately foundered this year, to revamp the patent system. It also was the year when little Marshall, Texas, rose to become the undisputed patent litigation capital of the world.

Our survey has changed as well. For the first time, IP Law & Business has done a separate survey of appellate work at the Federal Circuit level, measuring court appearances that not only settle business disputes but also tend to create law. This addition has led to the appearance on our lists of some firms that don't usually make our district court list, such as Dechert, Minneapolis-based Robins, Kaplan, Miller & Ciresi, and Chicago-based McAndrews, Held & Malloy.

Howrey, perennially strong on the district court list, dominated appeals practice last year, handling 19 Federal Circuit cases for both appellees and appellants. In addition to following up work from the district court level, like other IP heavyweights, Howrey has a specialized appellate practice group that allows a client to get "an objective opinion of someone who's not close to the trial team," says Alan Grimaldi, a Washington, D.C.-based Howrey lawyer who was the firm's first IP associate, hired in 1978.

For smaller firms like 260-lawyer Robins, Kaplan, appellate work is driven by their clients at the district court level. A district court judge's claim construction can be all-important in a patent case, yet those decisions are reviewed de novo on appeal-and often overturned. Now, 13 years since the Markman decision, which established that a patent's claims must be defined by judges rather than juries, claim construction is still a quagmire.

Certainly patent cases are expensive, now averaging about $4 million to litigate from filing to trial. That expense, combined with a good chance of an upset on appeal compared to other kinds of cases, means that those defeated at trial often aim for a second chance at the Federal Circuit, says Ronald Schutz, head of Robins, Kaplan's IP practice group. District court decisions on both summary judgment and at trial are modified or reversed more than half the time on appeal. "Most people will say, that's a shot worth taking," says Schutz. "The decision to file an appeal in a patent case is an easier decision for a client."

The district court survey data, while reminiscent of last year's, shows small but significant changes. Of the five firms that handled the most work last year, four are the same, but Foley & Lardner dropped down several places, while Morrison & Foerster shot back up into the top ranks. Overall filings increased, but just barely-2,896 patent lawsuits were filed last year, an increase of about 2 percent over the previous year and still below the record year of 2004, which saw 3,075 filings.

More than 12 percent of the national total-371 lawsuits-were filed in the Eastern District of Texas, mostly in Marshall. That's more than a patent lawsuit for every day, and puts the rural, sparsely populated Eastern District of Texas well ahead of the next closest district (California's Central District, the nation's largest by population). "Ironically, I think there was an uptick in Texas because people were concerned about the prospect of [patent reform] legislation," says Morrison & Foerster patent litigator Harold McElhinny. "A lot of plaintiffs moved to get on file," anticipating that a change in the law could make it harder to venue-shop.

A few operating companies were more than happy to sue their competitors in East TexasNetApp, Inc. and Eastman Kodak Co., to name a few. Even Boston-based Northeastern University was willing to give up its home-turf advantage to enforce its patent on Internet search technology against Google Inc.

All around the country, much of the growth in suits was driven by patent-holding companies filing against multiple defendants. A few patent-holding companies, including Ronald A. Katz Technology Licensing, Acacia Research Corp., and Erich Spangenberg's Plutus IP empire, created huge amounts of defense work last year.

The impact of such multidefendant suits is hard to measure for a number of reasons, not least because some lawyers will go to great lengths to give such litigation a low profile. Fulbright & Jaworski partner Bob Chiaviello filed a lawsuit on behalf of patent holder Antor Media Corporation, naming Metacafe, Inc., a little-known video-sharing Web site, as a defendant; days later, he filed an amended complaint with no less than 20 defendants, including household names like Google Inc. and Sony Electronics, Inc. It's a tactic he's used twice before. Antor may look small-time if you are reading dockets, or headlines, but the patent-holding company has now sued a vast swath of the economy over the last 18 months, naming more than 50 defendants, from Wal-Mart Stores, Inc., to Ford Motor Company to Cisco Systems, Inc. That's just one patent and one patent-holding company.

Big corporations are becoming experienced at handling the proliferation of such suits, and are more likely to share defense costs. "We're seeing a lot of suits that settle pretty early on, within the first few months of filings," says Kathi Lutton, Fish & Richardson's head of litigation. But just because companies are getting used to it doesn't mean they are happy about it; and nobody wants to settle too quickly. "They don't want to be perceived as an ATM," says Lutton.

Still, not many companies are willing to spend $5 million just to risk losing more at trial. Aggrieved competitors who actually do battle in the marketplace are more willing to stick through years of tough litigation, and are still a patent lawyer's best bet for a steady, and hefty, paycheck.

Under Lutton's lead, Fish has maintained its top position, and flourished. But will the effects of a rough second half of the year show up in the firm's 2008 docket? The firm fired its principal Scott Harris in September; Harris had set up a side business selling, and perhaps enforcing, his own patents, and is now embroiled in litigation with his former firm. In November, Fish's appeal to the Federal Circuit on behalf of Microsoft Corporation in the z4 Technologies case failed, leaving the software giant on the hook for a $140 million judgment.

Morrison & Foerster, riding high on the afterglow of a rare defense win in East Texas, shot up to the number two spot this year. Winston & Strawn, famously strong in copyright, jumped into the top ten this year, powered mostly by work from established clients like Barr Laboratories.

Cooley Godward and Heller Ehrman continued to take big chunks of plaintiffs' work from an arm of Acacia Research Corp. and Ronald Katz's licensing firm, respectively. Since March, Howrey has been urging clients to scrutinize whether rival law firms litigate for "patent trolls"-and assuring clients that it doesn't do so. So far other law firms have declined to follow that gambit. "Many clients like us to work both sides of the fence," says one patent litigator, "so we will know who we are up against."