Erich Spangenberg’s Patent Predictions for 2015

Crystal Ball (courtesy NIS86)It’s almost the end of the year and I’m regularly asked what I think is in store for the patent market in 2015. 

The question typically comes up like this:

Between IPRs, Alice (patent eligibility) and a bevy of other decisions (particularly damages decisions), 2014 was a horrible year. Do you think we’re at the low tide mark and things will improve in the patent market in 2015?

My short answer—“no.”   Here are my top five predictions:

  1. Patent reform will be enacted and include fee shifting
  2. IPR filings will increase—but not for the reason you think
  3. The number of patent lawsuit filings will continue to decline
  4. Significant GAAP write-downs are coming
  5. Major cuts are coming at big law firms focused on IP litigation

Patent Reform—Accept It and Learn to Deal with it

Patent reform – broadly, changes in the law and rules applicable to obtaining, enforcing, or invalidating patents made by Congress, the courts, or the USPTO – will reach a peak in 2015. 

Does anyone remember that the “big thing” in the America Invents Act (AIA) in 2011 was supposed to be “first to invent” and “harmonizing our US system to the rest of the world”?  The reality has turned out to be a little different.

We can expect the same with further reform in 2015.  The only question in my mind is whether patent reform will get wrapped into broader tort reform.  If it does, it will slow things down.  My expectation is that until there is a change in the Oval Office, Congress will not tie patent reform and tort reform together.

On the legislative front, look for new patent legislation to be signed into law in the first half of 2015.  It came close in 2014—it will happen in 2015. 

It’s nice to hear some counseling that it’s better to delay reforms until the impact of the AIA and key court decisions are better understood.   It is naive to expect that reason, reliable data, potential harm, and unintended consequences will slow down reform  (see, for example, an interview with Mark Lemley in IAM).

Only patent wonks are aware that the Bessen and Meurer “studies” regularly quoted by reform advocates to support reform are of “suspect quality.”  The drivel served up by these two charlatans has been repeated so often it’s now accepted as fact. See our post “More Bogus Patent Statistics.”   At some point (maybe after a few more outrageous editorials or after someone in Congress asks who is sponsoring their “research”), credible peer reviewed research will be presented and considered by our policy makers in Washington, but not in time for the next round of “reform.”  

Anticipate that the House of Representatives will lead the way and the Senate will follow with a more limited bill.  The House and Senate versions will go through a reconciliation process where the final bill that’s sent to the President will look more like the House version than the Senate version.  Key elements likely to be present include:

While I’m fine with the concept of these changes, the bill will undoubtedly be poorly drafted and simply lead to more disputes. 

It is also likely that judicial “patent reform” will continue as well. The Supreme Court already has a couple of cases due for decision and at least the one (on district court claim construction) has the potential to lead to further lack of clarity in patent litigation. 

More significantly, I believe we’re only a single vote change away on the Supreme Court and Federal Circuit from effectively eliminating business method patents.  A resignation and a new appointment at either court, or a change of heart by one judge, could have massive implications for the patent market.

IPRs – Expect More for a Different Reason

The AIA introduced several new ways to challenge patents at the patent office -- and their popularity far exceeded our expectations.

While recent data shows a slight decline in the “killing fields” impact of the inter partes review (IPR), the overall rate is still extremely high. IPRs have done a lot to change the market and this will continue.  After a slow start for the first seven or eight months the new procedure existed – an average of 20-30 IPRs filed per month – the rate has skyrocketed.  There have been 150 IPRs filed per month for the last eight months. You can see the data here.

The objective of establishing a faster and less expensive means to confirm the validity of patents is one I support.  While far from perfect, IPRs bring down costs and are far more efficient than court proceedings. If you are going to lose, you would much rather lose in the first round than after spending a fortune and losing on appeal.

There’s a slight concern that something equivalent to the USPTO’s no-longer-secret SAWS program—that started out as a way to stop stupid inventions (e.g., crust-less PB&J sandwiches) but was expanded to delay “sensitive” applications—will be imposed upon the PTAB, but I have confidence the PTAB judges would not buy into this and will execute on their charter. 

For 2015, look for the overall number of IPR filings to continue to increase – but not for the reason you might think. 

Even though IPRs were ostensibly put in place to help weed out weak patents allegedly being asserted by Non-Practicing Entities (NPEs), in 2015 the number of IPRs filed against NPEs will decline as the number of NPE suits falls.

Look for an increase in IPRs filed against patents owned by operating companies – both by other operating companies and by others.  Businesses will catch on that IPRs are a very effective way of clearing out annoying patent impediments—and far cheaper than licensing.

Patent Lawsuits—Massive Decline Coming

The recent decline in patent lawsuits filed is not a fluke – I expect it to continue. 

Lex Machina reported that patent suits filed in September 2014 were down 40% compared with September 2013.

Look for litigation in 2015 to continue this trend – I expect that the total cases filed in 2015 will fall over 50% compared with 2014.  The decline can be attributed to the growth in IPRs, the Supreme Court’s Alice decision and, most significantly, mandatory/presumptive fee shifting.  

Financial products will emerge to address fee shifting, much as they have in Europe, but it will take a while for the US patent market to adapt.

Business Impact – GAAP Write-downs

All of the above factors – patent reform at both the legislative and judicial levels, the Supreme Court weakening patents, and IPRs – are part of a process that’s reducing the value of patents in a dramatic fashion.  These aren’t just obscure issues that only a patent nerd could love – they’re real issues that have a major effect on the entire intellectual property ecosystem.

It may not have been the goal of Congress and the Supreme Court, but the combination of the AIA and recent Supreme Court decisions, especially Alice, have had the effect of wiping out billions of dollars of value in patents, especially software patents.  If some of the more recent 101 (what is patent eligible) decisions are upheld, we are only beginning to understand what Alice means.

In our blog post from back in August, “Patents, GAAP, and Balance Sheets,” we talked about how the environment has changed in a way that damaged the value of many patents, and we asked

Given these dramatic changes, why haven’t we seen major write-downs of the acquired patent assets of large corporations? There are many, many patents whose value has been impaired by these issues, yet the problem remains invisible to the investor community.

Expect the investor community to finally notice.  I expect to see the first lawsuits filed for failure to write down the value of patents that were purchased or that are on the books as part of an acquisition.  If an acquisition any time in the last few years resulted in a significant allocation to software patents, those assets aren’t worth now what was paid for or allocated to them then – and the companies have been hiding or ignoring that fact.  Reality will hit soon.

Law Firms—Bad News

Needless to say, a dramatic decrease in patent litigation means there will be a dramatic decrease in the need for patent litigators.   

Downsizing happens in the legal market on a fairly regular basis.  In the late 1980’s large law firms helped lobby for fixes to shareholder lawsuit abuse—they were wildly successful and within a few years of enactment many of these big firm lawyers had to retool.  The impact on patent lawyers will be more significant simply because there are too many of them.

Look for staff and lawyer reductions in the big law firm IP departments starting with associates in 2015 and continuing with partners in 2016.  Some of the major firms are staffed 40 to 60% above what the demand is going to be next year.

The changes will be painful. Large and boutique patent litigation firms, you’re going to need to adapt and morph.  Smart firms won’t wait, and might even start the process at the end of 2014.  

Impact on Patents and Innovation

I hope my predictions are off the mark.  Because if they are accurate, there will be an overall negative impact on the US economy. 

Yes, there will be some savings from reduced patent litigation.  But I believe this will be more than offset by negative implications for investment in innovation and start-ups.

The proposed patent reforms for the most part benefit the well funded at the expense of the innovative underfunded companies.  Eroding patents takes away one of America’s most important competitive advantages.  If we make it easier for certain “big tech” companies to rip off other people’s IP, we also make it easier for foreign companies to rip off America’s IP – which is not the approach we should be taking when other countries are taking steps to strengthen their patent systems. What’s good for Google is not necessarily good for America, but it may take time before Congress wakes up to this. 


JC at January 1, 2015, 11:01 AM

"in 2015 the number of IPRs filed against NPEs will decline as the number of NPE suits falls."

Based on this comment, what is your outlook for NPEs in 2015, and specifically, publicly traded NPEs? It seems you imply the NPE industry will not do well. You think operating companies will assert more than NPEs in 2015? I assumed more operating companies would approach NPEs due the tougher environment and a need for their expertise to navigate. I would think this type of environment would separate the chaff from the wheat. Thanks for your thoughts.

IPNav at January 7, 2015, 5:32 AM

NPEs are going to have to adjust to a new environment -- that does not mean

they won¹t be able to do well. See our blog post The Future of Patent

Monetization. . Quality is

more important than ever. Operating companies will continue to outsource

patent monetization when it makes sense for them to do so, but there will

also be a lot of patents that NPEs won¹t be interested

in and that operating companies would have a harder time enforcing on

their own should they choose to do so.

Peter Corcoran at January 5, 2015, 11:56 AM

If Eric is even 75% correct, we're all pretty much screwed. I'm so glad that I dedicated my entire professional life to patent law to see it flushed down the toilet by our ignorant lawmakers. USA #1!

martin snyder at January 7, 2015, 4:12 PM

Its a minor tragedy that “patent trolls” are defined as NPE’s, when the real problem is patent litigation abuse, which is behavior completely unrelated to the status of the patentee.

What do patent trolls do that legitimate patent owners don’t do?

– they sue multiple defendants without warning or attempts to settle

– they sue on old, broad (abstract) and almost always software or business method patents

– they demand absurd settlement amounts that have no reasonable relationship to a hypothetical royalty negotiation or lost profits

– the vastly overstate the value of their feature patents to the sale of a complex system/solutions

– they use patent litigation is a marketing tool, or an extortion tool, rather than a means to resolve an actual business dispute.

The whole NPE question is actually a canard which distracts from this kind of abuse, because NPE’s obviously have the same rights to enforce a patent as any other kind of patentee- but the question confuses the public, which is of course the intent.

The disastrous results are exactly what the patent cheerleaders (like Mr. Spangenberg) should most worry about; diminished public legitimacy of an otherwise effective system that has served the USA very well, PLUS an easy way to characterize anyone seeking to enforce a patent as a troll, which is obviously a very bad thing for innovation and economic justice.

As to these predictions? This is a most black is white, up is down kind of a post: a large reduction in litigation is posited as a bad thing? Really? A streamlined means of removing invalid patents from the system is a bad thing, really?

Copyright is clearly emerging is the IP protection of choice for software, as Google's impending loss to Oracle will demonstrate- perhaps with as much force on software IP direction as Alice.

Lastly, any prediction for legislative productivity in 2015 is likely fanciful, which is probably a good thing for all of us....

RM at January 10, 2015, 4:39 PM


Operating companies do many of the things you attribute to trolls. True trolls rarely file lawsuits, doing so costs money and gets to the merits of bad patents. They may threaten to do so but do not. NPEs that file lawsuits do so to fix jurisdiction somewhere for future cases and file against those entities that they truly believe will never willingly take a license. Just look around, many medium and larger "operating" companies have very public reputations of never voluntarily taking licenses. I'd also submit that operating companies overstate the value or coverage of their patents. Just look at the smartphone patent wars. All large operating companies with the vast majority of asserted patents found invalid or not infringed, or both.

Trolls are the dialing for dollars, never file real lawsuits, looking for damages that have no logical basis (sometimes small damages are just the reasonable royalty for some inventions so size of damages are not telling)but are often small especially when compared to the asserted scope of the claims.

Patent infringement is not copying, it is using someone else's idea not an expression of an idea like copyright protects. One has little to do with the other and neither is a substitute for the other.

Adam Floyd at January 8, 2015, 2:02 AM


I whole-heartedly agree with most of your predictions. I don't think big firms will be hit for awhile because the patent litigators are largely just shifting to an AIA practice (myself included). However, layoffs will occur over the next several years and the number of AIA and district court case decline.

I think it will take several years for the AIA trials to decline because we are only in the first wave of such trials. These are primarly focused at NPEs. But I think there will additional waves focused at existing licensors, there will be new types of entities that make their living taking down portfolios, etc.

Eventually, big business will realize they have shot themselves in the foot and the pendulum will beginning swinging the other way.

John Kennedy at January 8, 2015, 11:20 AM


The impact of Alice is only just beginning to be felt. A team of lawyers at Dorsey & Whitney has undertaken a review of every Federal Circuit, District Court and most PTAB decisions to date applying Alice. The results are shocking, <5% survival rate. Simply put, if your patent is directed to data processing, without improving the operation of a machine, it is likely ineligible. What is even more scary, is Alice will likely be applied to other patents (non-software) where conventional steps/articles in a claim are disregarded and the remaining limitation(s) can be shown to be an abstract idea to lacking an "inventive concept."

A. Won at January 8, 2015, 4:36 PM

Eric, do you think the hit by Alice/IPR/fee shifting combined will be as much influential to the pharmaceutical industry as to the computer software industry? For example, will the patent litigators in the pharmaceutical industry face much less demand as well?

IPNav at January 9, 2015, 9:01 AM

The impact will be more significant in tech (initially). Wait for Alice

to really set in and the whole Alice/IPR/fee shifting impact will be

evident across the board. Maybe move to prosecution side? The ones that

litigators look down on now, will soon be their bosses.

FRANK LUKASIK at January 23, 2015, 7:36 AM

Check out "Lucree v. US,(2014-5134)Federal Court of Appeals, which is trying to solve these problems, Oral Hearing is scheduled for March 5.

angry dude at January 23, 2015, 10:41 AM


What are your predictions for the number of fresh patent filings in high-tech field, for small and large tech companies ?

Does it make any sense to publicly disclose important details of future tech products in patent applications being a small undercapitalized startup ?

Patent-pending status used to be almost mandatory requirement when looking for angel or VC funding.

I assume it's all gonna change.

Also, with less patent filings the prosecution attorneys and agents will be cut too.

IPNav at January 25, 2015, 2:09 PM

We anticipate it will take longer for these factors to impact the aggregate number of US patent filings. Patents (particularly at large corporations) get filed for many reasons not related to the potential right to exclude. Given large companies file for the most patents this statistic may not be the best measure to test impact. As these changes become apparent to VC and other investors, start ups that rely heavily on patent protection—life science, medical device and some physical product, for example--to obtain backing will have to change their approach. Aggregate filing numbers may not be the best indicator—probably better to look at certain classifications and type of filer (large versus small entity, for example).

Rich Baker at June 12, 2015, 4:48 PM

Eric, I think you are off on the the GAAP write-downs. It may be more than $1 Trillion. See

Dan Beeaff at November 28, 2015, 3:21 PM

After evading the NYTimes article on your coalition, as a retired physician and patient I support what you are doing. Please check out the Ipsen drug Somatuline auto gel, which per their official site the patent expires this year. The medication needs a generic as the cost run from $36,000 to $72,000 per year. I suspect they will do what many Big Pharma are doing and that is to get an extension or eception so they can continue to charge a huge amount for Somatuline.

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