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Patent Cases Plummet In California As Courts Embrace Alice

California federal courts saw a 30 percent drop in patent cases last year, and attorneys say judges are showing a greater willingness to invalidate patents in light of the U.S. Supreme Court’s Alice decision. Thus, nonpracticing entities are concentrating on launching their litigation campaigns in friendlier jurisdictions outside the state.

Compared with a 19 percent decline from the previous year in patent complaints filed in all U.S. federal courts in 2014, California took in almost a third fewer patent cases, dropping from 876 cases in 2013 to 612 cases last year. Although the Central District of California retained its spot as the third most popular venue for patent filings — after the Eastern District of Texas and the District of Delaware — patent filings there decreased 27.9 percent, from 412 cases in 2013 to 297 cases in 2014.

The Southern District of California, which had emerged as the fourth hottest patent jurisdiction in 2013 with 222 cases, slipped to 11th place last year with 68 cases. The Eastern District saw a slight drop in filings, from 33 cases in 2013 to 28 cases in 2014, while the Northern District experienced a small boost, from 209 cases in 2013 to 219 cases in 2014.

The U.S. Supreme Court’s Alice ruling in June held that abstract ideas implemented using a computer aren’t eligible for a patent, putting at risk many software patents often asserted by nonpracticing entities. California courts appear to be more open than other jurisdictions to rely on the decision to invalidate questionable patents.

“I think the drop in filings was particularly acute among software and business method cases, and more of those may be filed in California because the technology is so prevalent here,” said Mark Lemley, a founding partner of Durie Tangri LLP.

“Federal court judges in California are no stranger to patent cases, and they are not shy to apply whatever the current patent law is,” said Case Collard, a Dorsey & Whitney LLP partner. “Judges in other states who don’t see as many patent cases might be more reluctant to invalidate patents in an early phase of a case, like through a motion to dismiss.”

“Savvy plaintiffs with patents vulnerable to an Alice challenge may be fleeing to Texas and Delaware instead [of California],” Lemley said.

The Central District of California may be seen as relatively unfriendly for litigants because it has a busy docket and some judges impose local patent rules or their own rules on patent cases, according to Peter Hahn, a partner at Pillsbury Winthrop Shaw Pittman LLP.

“Litigants don’t get the same face-to-face time with a judge as they would in other districts,” he said. “And some judges have their own rules for patent cases that can shift the timing of things around and make it difficult for everyone involved. The rules tend to be harsher on litigants in terms of flexibility. … For a lot of plaintiffs, they may feel they have a better shot at getting things to run more smoothly at other districts.”

While the Northern District of California, for instance, has more than 20 Article III judges with vastly different approaches to managing patent cases, the District of Delaware’s four judges have similar approaches to handling patent disputes and the Eastern District of Texas’ small subset of judges who handle patent cases allows litigants better odds of narrowing down who may preside over their suit.

“Although there is a reduced number of patent cases overall, we are seeing an increased focus on traditional forums that are preferred by plaintiffs,” he said. “The Eastern District of Texas and the District of Delaware are more plaintiff friendly and have a small number of judges … that give plaintiffs a good idea of who is going to be assigned to their case versus other places like California where there is more uncertainty.”

The Alice decision and renewed efforts in Congress to pass a patent bill that includes a provision requiring losing parties to pay their opponent’s fees in many patent cases indicate that patent filings in California and elsewhere may continue to go down.

For more information, see Law360.

Methodology: Law360’s analysis of trends in new patent complaints uses raw data from PACER filtered by Law360’s sophisticated docket tracking systems. The data is then normalized and reviewed by Law360 reporters to build a reliable and revealing data set.

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