Patent lawyers are betting on a comeback next year for a part of their business that proved vulnerable to the economic downturn: patent filings.
Local lawyers specializing in patents, copyrights and trademarks fared better than some during the recession as companies turned to litigation to protect their intellectual property.
“Clients are more protective of their intellectual property when there is a consolidation or shrinking of market share,” said Doug Muelhauser, partner at Irvine-based Knobbe Martens Olson & Bear LLP, which specializes in intellectual property and is the county’s largest law firm by lawyers. “The litigation practice here has been extremely busy with a variety of cases.”
That wasn’t the case with patent filings, which fell during the downturn.
“The overall number of applications during this bad economy was lower as filing applications is a fairly expensive process,” said Rick Tache, partner at the Costa Mesa office of Phoenix-based Snell & Wilmer LLP.
Last year, 482,871 patents were filed nationally, down 2% from a year earlier, according to the U.S. Patent and Trademark Office.
Now that trend appears to be turning around, according to patent lawyers. They said they are looking to an uptick in filings next year as companies restore research and development budgets to pre-recession levels.
“Our practice has gone up significantly in the last year as companies are rethinking how they purchase legal services and apply for patents,” Tache said. “Patent applications look to be up come next year.”
During better times, companies tend to be more aggressive on patent filings. During the 2000s boom, aggressive filings led to a backlog at the patent office as companies filed on “every incremental improvement,” Tache said.
That subsided in the downturn as companies limited filings to big innovations.
For patent lawyers, more litigation work helped offset the filings slowdown. Typically the biggest jump in intellectual property litigation occurs during slowdowns.
Rather than settling lawsuits, as companies often do when times are good and cash is plentiful, they become more aggressive about protecting their assets in tougher times.
“The economy is certainly a factor in terms of deciding to pursue litigation,” said Elizabeth Weldon, a Snell partner.
Rising Cost
One offsetting factor: the rising cost of patent litigation.
In 2009, the average patent lawsuit cost $5.5 million, up 20% from a year earlier, according to Virginia’s American Intellectual Property Law Association, a trade group for patent lawyers.
“Patent litigation is extremely expensive,” Snell’s Tache said.
A typical patent lawsuit lasts about 18 months, according to Tache.
“These aren’t quick cases as many of them are complicated,” he said.
And patent law always is evolving, according to lawyers.
A federal appeals court recently decided to take up the issue of inequitable conduct where a patent applicant submits false or misleading information to the patent office.
“It is an interesting development for companies that have filed patents,” said Jan Weir, chair of the intellectual property practice at Newport Beach-based Stradling Yocca Carlson & Rauth. “It’s one of the bigger stories in IP litigation.”
‘Patent Trolls’
Another trend: more suits by what are known as “non-practicing entities”—or owners who do little more than hold patents and seek to enforce them for royalties.
That includes Newport Beach-based Acacia Research Corp., which owns and enforces patents or works with other patent holders to do so.
Some in the industry describe Acacia and other non-practicing entities as “patent trolls,” or someone who uses patent law to shake down unsuspecting companies.
Patents also have become a target for plaintiff’s lawyers looking to sue companies for technical violations, according to Ronald Oines, partner at Costa Mesa-based Rutan & Tucker LLP.
Some lawyers go out looking for products labeled with old patents that since have expired, he said.
