US patent litigation has undergone substantial transformations in the past year, prompting litigation funders to recalibrate their strategies. Notable shifts in popular venues and filing behaviors have shaped a landscape marked by caution and adaptation. At the same time, the U.S. International Trade Commission (ITC) had a noticeable downturn in intellectual property (IP) cases, sparking discussions about its efficacy. This article looks at the nuanced interplay of patent litigation and ITC trends, shedding light on the factors driving these changes and their potential implications for litigation funding.
US Patent Litigation Landscape in 2023
2023 witnessed a noteworthy decline in US patent litigation, hitting a decade-low with 3,111 new cases—a 19% decrease from 2022. For litigation funders, this departure from the norm signals a strategic reassessment,with key factors influencing this shift including heightened caution among patent litigants stemming from funding disclosure rules in Delaware and alterations in case assignments in the Western District of Texas.
A pivotal aspect of these changes lies in the decline of suits initiated by “high-volume plaintiffs,” entities filing a minimum of 10 patent cases within 365 days. This segment experienced a substantial 45% reduction between 2022 and 2023, particularly impacting the District of Delaware and the Western District of Texas—venues that historically accounted for almost 40% of all U.S. patent suits in the preceding three years.
In Delaware, Judge Colm Connolly’s 2022 mandate for outside funding disclosure and subsequent investigations into compliance led to an obvious decrease in filings. Similarly, a rule change in the Western District of Texas in 2022 altered case assignments, diminishing the venue’s overall attractiveness. A shift has also been observed as plaintiffs appear to redirect their focus to the Eastern District of Texas, where new lawsuits increased from 471 to 627 between 2022 and 2023, suggesting a potential resurgence of this district as a favored venue.
ITC Trends in 2023: Evaluating Impact and Potential Revival
Running parallel to shifts in patent litigation, the U.S. International Trade Commission faced a significant downturn in IP cases during 2023, with only 37 cases filed compared to 54 in 2022. While this decrease has sparked discussions about the ITC’s efficacy, caution is warranted before characterizing it as a sustained trend. Notably, a report from WIT Legal highlighted an ITC investigation involving Masimo Corp. and Apple. Despite a Federal Circuit decision suspending the ITC’s exclusion order against Apple Watches, Masimo’s subsequent victory showcased the ITC’s ability to enforce acts of unfair competition, one reason to consider the venue for a potential revival in 2024.
Interconnected Trends and Litigation Funding Strategy
The interconnected nature of these trends calls for a nuanced approach among patent litigants and, by extension, litigation funders in 2023. Funding strategies must adapt to factors such as funding disclosure rules, case assignment changes, and evolving legal precedents. While the decrease in IP cases at the ITC aligns with the broader decline in patent litigation, both venues are viewed optimistically for potential resurgence in 2024 and beyond.
As the IP legal landscape continues to evolve, litigation funders must remain agile in navigating shifting dynamics, popular venues, and judicial preferences. The observed lull in patent litigation in 2023 is anticipated to be transient, primarily driven by conditions that are either temporary or are already being swiftly addressed by the industry. Looking ahead, a host of new areas, particularly those involving novel aspects of IP related to ownership and trade secrets of emerging AI technology, will be closely monitored by litigation funders seeking strategic opportunities in this evolving landscape.
Notably, several funders have opted to exit this market sector in 2023, and the current landscape suggests that this trend may persist in the short term. However, Erso Capital is deviating from this trend. Demonstrating a broad mandate and adaptability, Erso maintains a steadfast commitment to investing in patent disputes. The firm is strategically planning substantial increases in its capital deployments within this sector over the next 24 months, encompassing financing for existing cases, law firm portfolio capital, and direct acquisitions of intellectual property.
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