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Can't kill off the patent trolls yet

The U.S. Patent and Trademark Office (USPTO) seal is displayed outside the headquarters in Alexandria, Va.
Andrew Harrer | Bloomberg | Getty Images
The U.S. Patent and Trademark Office (USPTO) seal is displayed outside the headquarters in Alexandria, Va.

The number of patent litigation cases filed in U.S. courts dropped in 2014, the first decrease in five years. That's according to a new report from PricewaterhouseCoopers.

"It's a sea change from the past, especially the last four years," said Chris Barry, a partner with PwC's forensic services practice and the lead author of the report. After patent lawsuits doubled since 2009 to more than 6,000, they dropped by 12 percent in 2014.

The report, which CNBC got an early look at, comes out Wednesday. It credits the Supreme Court's decision in Alice Corp. v. CLS Bank for much of the drop in patent litigation. The case, which was decided in June 2014, raised the bar for software patents, the sort that many nonpracticing entities (aka NPEs, or patent trolls) prey upon.

"We'll probably see this trend continue, and more dramatically," Barry said. That's because the case was concluded halfway through 2014, meaning a full year's worth of effects in 2015 should really show a big decline.

The increase in litigation action coincided with—though outpaced—a dramatic rise in the number of patents granted by the U.S. Patent and Trademark Office. Critics contend that regulators have become lax, approving too many patents with questionable specs.


Big tech companies like Apple and Amazon saw a decline in the number of lawsuits filed against them in 2014, according to data from Patexia. Apple was sued 44 times in 2014, 10 fewer than the previous year. And Amazon fielded only 29 patent lawsuits in 2014, down from 45 in 2013.

Lawsuits against and between big tech companies—for things like rounded rectangular phone screens—have led to calls for reform to the patent system. A number of bills have been introduced, but Congress has failed to pass any.

Barry said it's unlikely there will be significant patent reform now, because the Supreme Court's decision should help pave the way to minimize the reach and effect of vague and loose patents. "My sense is there might be less imperative to get that done," he said.

Patent troll suits still paying off

As patent trolls reduced their number of lawsuits in 2014, they saw mixed success in their results. Even though overall median damages continued their downward slide, to $2.9 million for the 2010-14 period, damages going to patent trolls increased to $8.9 million in the same period.

In the cases that they won, patent trolls got 4.5 times more in damages than actual practicing entities (companies with patents who actually do real work).


Trial by jury

Patent holders involved in a lawsuit should try to face a jury, if the case goes all the way to trial. Juries found in the patent holder's favor 75 percent of the time in 2014, according to the report. At the same time, juries handed out awards that were 31 times bigger on average compared to the median bench award. That is a massive difference.

The courts have become busy as the number of patent lawsuits clogged up the system over the past decade and it now takes an average of 2.4 years to reach that point. Still, only 3 percent of cases actually make it that far, Barry said. Most are settled and don't see the inside of a courtroom.

The report should be welcome news for those critics who say patent trolls are stifling American innovation and bemoan Congress' inactivity on patent reform. "There's still a lot of action around protecting intellectual property," Barry said. "However I think a lot of the more specious cases are being driven out of the system."