U.S. AND GLOBAL PATENT LITIGATION FORUM-SHOPPING Presentation to Colorado Bar Association by Michael C. Elmer © 2009 Global IP Project August 27, 2009.

U.S. AND GLOBAL PATENT LITIGATION FORUM-SHOPPING

Presentation toColorado Bar Association

byMichael C. Elmer

© 2009 Global IP Project

August 27, 2009

2

Global Patent Litigation:The Big Picture And Changing Landscape From U.S. To Global

How Win Rates Drive Forum-Shopping

1974No jury trials in U.S.

No CAFC in U.S. (created in 1982)No U.S. ITC actions (first decision in mid-70’s)

No global data

WHERE IN THE U.S. TO SUE? Win rates not yet important

2001Almost all jury trials (in U.S. only)

Specialty courts outside U.S. becoming more utilizedInternet and global market matures

Win rates begin to drive U.S. forum-shoppingChina joins WTO

German global strategy example (2002)Still no global data

WHERE IN THE WORLD TO SUE?

2002-2009Our research develops global “win rate” data.

Since 2006 data available by 9 industry sectors.1

Win rates become a factor in global forum-shopping.2

Our first global data available in 2003.

1 Industry sectors in order of global volume are: Mechanical, Pharmaceutical, Chem/Mat’l Eng’g, Electrical, Medical Device, Biotech, Semiconductor, Software, Computer hardware.2 For example, low patentee win-rate data from England, now over half of the plaintiffs are alleged infringers bringing DJ actions.

Jury win-rates drive change

Court win-rates drive change

3

Note: PwC data indicates E.D. Va. and W.D.Wis. are fastest districts (trial patentee win rate: 68% and 66%); E.D. Pa. and M.D. Fla. are highest patentee trial win rate = 75%.

Win Rates Drive U.S. “Shopping”Starting To Drive Global Strategy

* These are the 10 districts with the most patent litigation filings in 2008 and represent about These 10 account for 56% of the total filings (1184 of 2116). Top 10 nearly same as in 2007, except EDMich and NDGA replaced MD FlA and SD FLA from the 2007 chart. (source: Pacer). District win rate trial and summary judgment, 1995-2007 (source: PwC, “Recent Trends in Awards in Patent Damages, 2008”) except for SDCAL and NDGA (Legal Metric District Reports), and US Ct. Cls. Data (1998-2004) and US ITC data (1993-2003) from internal FHFGD research.

N.D. Cal.176

Filings in E.D. Tex. went from 33 in 2001 to 371 in 2007 (1124%), but went down in 2008. Patentee win rate also down from peak. Median damage award $20M (1995-2007). Note recent transfer cases: In re TS Tech USA Corp., (Fed. Cir. 2008); Ineos Fluor Americas LLC v. Sinochem Ningbo Ltd (ED Tex, April 28, 2009); In re Genentech, Inc., (Fed. Cir. May 22, 2009) (relied on its TS Tech ); and denial of transfer in In re Volkswagen of America, Inc. (Fed. Cir. May 22, 2009).

C.D. Cal.161

E.D. Tex.230

Down from 371 in 2007.

US ITC47%

S.D. Cal.55

S.D.N.Y.80

N.D. Ill.129

E.D.Mich.55

Ct. Cls.23%

D. Del.131

D. NJ118

ND Ga49

Blue = trial patentee win rateRed = summary judgment patentee win rate (Case decided by judge as a matter of law on motion of patentee.)

Green=Overall average of trial and SJ patentee win rates

68%35%51%

72%8%55%

63%18%41%

50%26%38%

58%13%36%

51%24%38%

52%8%31%

50%0%20%

25%7%16%

50%21% 36%

4

Win Rates Starting To Drive Global Strategy

Global IP Project provides tools to make strategic global patent enforcement decisions to get best business result for patentee and/or alleged infringer.

Note: Global invention patent enforcement will usually involve a related U.S. case. As of 2007, the Global IP Project collects priority application numbers for patents litigated. This will allow related cases to be identified and analyzed.Searchable database – can run queries on any of the fields on slide 26 in Appendix.

5

10 MOST LITIGIOUS COUNTRIES WITH # OF PATENT LITIGATION FILINGS (1997-2007);

MOST ACTIVE COURT IN EACH COUNTRY*

United States: 28,401 E.D.Tex. (first time ever in 2007)

China: 20,047*

Beijing 2nd for invention and utility models

Zhejiang Hangzhou for design patents and overall

Germany: 8000*Dusseldorf

Canada: 846

Toronto/Ottawa/Vancouver

France: 2400* Paris

England: 811 London

Australia: 436Sydney

Japan: 2389 Tokyo

Source: Finnegan Henderson Global Patent Survey

• Estimate or partially estimated/partially hard. Numbers in some countries (e.g. Italy, Germany) represent invention patents, utility model, and/or design patent litigations filed. Number of cases filed in 5 of top 10 countries are estimated because the filing numbers are not published or easily accessible. Note that in Germany’s most active court, Dusseldorf each patent at issue is assigned a separate case number.

• Note, Taiwan and South Korea will soon enter this top 10 list, with estimated 200 and 170 patent litigations filed annually in 2006 and 2007. Just looking at 2006-07 filings, England and Australia drop off, and the top 10 list would be: US (5626), China (4960), Germany (2000*), France (430*), Taiwan (400*), Japan (393), S. Korea (360*), Brazil (160), Canada (141), Netherlands (120*). Italy may or may not be in the top 10 still – we are currently in the process of accessing data in Italy for the first time.

Italy1200*Milan

Netherlands: 660*Hague

6

1 A “win” is defined as a case where at least one claim was found valid and infringed in a court of first impression.2 Indicates number is estimate based on discussions with GIP participants and incomplete data.3 In China, utility model and design patent cases account for about 90% of all patent litigation filed. 4 “U” stands for unified system, where validity and infringement are determined in one forum. “B” stands for bifurcated system, where validity and infringement are determined in separate fora. In the bifurcated systems, the infringement win rate is multiplied by the validity win rate to obtain an overall win rate, but this is somewhat artificial since not every infringement case has a corresponding validity challenge and vice versa. 5 “CI” stands for civil law jurisdiction, “CO” stands for common law jurisdiction; note fewer cases to trial in CO jurisdictions.6 Source: Analysis of IPLC Patent Data, CORNERSTONE RESEARCH, May 2009.

TIER I (U/B4)(CI/CO5)(# trials required: V/I/D)

1997-2007# of patent litigations filed

Approx. number of courts/number sampled/% cases sampled

Number and % of cases going to trial (decision on the merits)

Ratio of wins to wins with permanent injunction awarded

1997-2007 Win Rate

1 US (U)(CO)(1) 28,401 96/96/100% 1050 (3.7%)(43% in US ITC)

63%6 67% jury/59% judge/35% overall (if include dispositive summary judgments).47% in US ITC (28/60)

2 China (B)(CI)(2) 20,0472, 3 71/18/≈ 50% Inf. Cases ≈ 13% (2007 only)Val. Chall. ≈ 2/3

Only if specifically requested.

34% overall (61% invention patent inf. patentee win rate; 55% invention patent validity challenge patentee win rate

3 Germany(B)(CI)(3)

80002 (≈ 600-700 invention patent inf. actions/year)(≈ 225 nullity actions/year in FPC)

12/estimate based on 1 court (Dusseldorf)/≈29%

Inf. Cases ≈ 40%2;

Validity challenges at FPC 43.5%, 2006-2007

Automatic unless no counterclaim in a DJ.

28% overall (63% infringement case win rate x 43.5% validity challenge win rate)

4 France (U)(CI)(1) 24002 6/1(Paris)/75% 598 (25%)2 80% 39% (49/126) (2006-07).

5 Japan (U)(CI)(1) 2389 2/2/100% 655 (27%) 65% 20% overall (132/654)(2000-2007)2006: 10% (4/39)2007: 32% (16/50)

England (U)(CO)(2) 811(≈30/year)

2/1/95% 104 (13%) Automatic unless no counterclaim in a DJ.

22% overall (22/104)(5%, 1/22 for 2006-07)

Tool 1: Comparative Patentee Win Rate Chart, 1997-20071

(Top 5, about 200 cases filed/year to about 3000 cases filed/year + England)

7

ADSL Case Study

Global Hypo Used to Illustrate Methodology and Use of Global IP ToolsNetUS (American company) makes and sells ADSL chipsets. U.S. patent covering the ITU standards for ADSL as well as parallel patent with identical claims in, inter alia, the U.K., Germany, Korea, China, and Japan. The NetUS patent issues worldwide, and NetUS initiates a licensing program at 5% NSP. NetUS has 50% of U.S. market for ADSL modems, and a 35% profit margin in all markets. AccessUK (English company.) has 15% share of U.S. ADSL modem market. It sells to customers in Europe, North America,and Asia, where their chipsets are produced; with a 50% market share in Japan, 30% in the US and China. AccessJapan has a 40% profit margin in all markets.KorDSL (Korean company) sells Korean manufactured ADSL modems throughout Asia: in China (30% market share), Taiwan (25%) and Japan (20%); and U.S. (20%)

It is believed that both AccessUK and KorDSL are infringing the NetUS patent; KorDSL and AccessUK have knowledge of NetUS patent, but, so far, have refused to take licenses. What is the best global strategy for each company?

8

Tool 2: TimelineEastern District Of Texas

01.01.08 12.01.08 06.01.09 10.01.09 05.01.10 06.01.10 File

Complaint Markman decision

Summary Judgment

Pretrial Conference

Begin Trial

Decision

11 months

1.5 Million $ 18 months

2.2 Million $

22 months 2.5 Million $

30 months

$3.5 M. This is estimate for case against one defendant only. For two defendants, costs would be between 1.5-2 times more.

Cost

Time

Cost breakdown:

$1.5 M through Markman $2.2 M through SJ$2.5 M through pre-trial$3.5 M through trial

*Source: LegalMetric

Tool 2 answers “how much” and “how long.” We have a timeline for each of the 33 countries.

Markman hearing: mini-trial where claims construed

Summary judgments: Usually decided before pre-trial conference. Case decided by judge as a matter of law.

Data Source: LegalMetric District Report, 1990-2007.

Pretrial conference: judge decided what evidence will be heard and how long trial will take.

9

Tool 3: Decision Tree for E.D. TEX.

Business managers always want to know:

Green = best case scenario

Yellow = most likely scenario

Red = worst case scenario

Competitor’s U.S. Sales = $100M (past 6 years + 30 mos. to trial, damages to trial only)

80% ED Tex. (16/20) Trial Win Rate*

*Source: LegalMetric E.D. Texas Patent Cases Report, 1991-2007. For 2007 only, the patentee win rate was 72%. This decision tree is generated with TreeAge software.

($3,500,000); P = 0.200

$1,500,000; P = 0.480

$31,500,000; P = 0.320

Invalid and/or not infringed

0.200

Reasonable royalty (5%)

0.600

0.400

Lost profits (35%)

0.800

Valid and infringed

Global IP Project has timeline for all 33 participating countries.Answers questions “What Are My Chances?” and “What Will I Get?”

$19.5M

$14.9M

10

VALUE OF A LITIGATION WHERE SIGNIFICANT DAMAGES UNLIKELY (ANYWHERE OUTSIDE U.S. AND CANADA)

• Total value of litigation sum of two components (A+B)

A. Potential award for damages through trial (outside U.S., typically reasonable royalty)

B. Projected value of injunction going forward using increased market share; patentee’s profit margin multiplied by factor relating to, inter alia, criticality of patented product.

*Component B is usually overstated.

*

11

A+B Analysis for U.S. E.D.TEX.(Using Historical Win Rate Data)

KorDSL’s U.S. sales for 6 years + 30 months of trial = $100M

Negotiated settlement at start of trialA1 Settlement value at start of trial = $14.9M. B1 Royalty rate agreed to by parties for 5.5 years (5% of $330M) = $16.5M

Projected value of case using historical win rate dataA2 To trial and win = $31.5MB2. Projected value of injunction going forward:NetUS U.S. market share = 50%KorDSL’s U.S. market share = 20%Access UK’s U.S. market share = 15%Other U.S. market share = 15%

After injunction, KorDSL gone. NetUS increases share of market proportionally to 56.7%. Value of injunction to them is their profit (35%) on additional 6.7% of market (56.7%-6.7%) for 3 years = $4.2M (using $60M as annual value of U.S. market) [multiply by unique case factor].

• Is patentee a practicing entity? More likely to get permanent injunction, est. 80-85% of the time.• Is patentee a non-practicing entity? Won’t get lost profits, and may not get injunction.

A1+B1 = $31.4M A2+B2 = $35.7M

12

Sample of Applying Global IP Tools and Framework to Obtain Comparative Results For 4 Countries

*Germany and England: this does not include cost for damage trial.

13

U.S. District Court Forum-Shopping Based Upon 5 Objective Factors

Best U.S. district courts in which to initiate patent litigation as patentee:

Best U.S. district courts in which to initiate patent litigation as alleged infringer:

1. High patentee win rate (ED Penn, MD Fla, ED Tex, WD Wis)

2. Fastest time to trial(ED Va, WD Wis, CD Cal, MD Fla, ED Tex)

3. High damage awards(D. Colo., ED Va, ED Penn, D NJ, ED Tex)

WD Wis. Is 11th

4. Low rate of granting summary judgment

(ED Va, ED Tex, WD Tex, SDNY, WD Wis.)

5. Low rate of granting stay pending reexam

(WD Wis, WD Tex, ED Va) WD Wis

1. Low patentee win rate (D.Conn., ED Mich, SD Fla, SDNY, ND Cal)

2. Slow time to trial(D.Conn, D.Mass.,

ND Ill, ND Cal, D. NJ)

3. Low damage awards(MD Fla, ED Mich, SD Ind, ND Tex)

4. High rate of granting summary judgments

(ND Cal, D Minn, CD Cal, SD Cal)

5. High rate of grantingstay pending reexam

(SD Cal, SDNY, ND Ill, ND Cal)

ND Cal

Prediction: WD Wis will soon be in the top 10 most active U.S. district courts for patent litigation. (Current Shabaz vacancy; judges recruited from E.D.Wis.)

•Source of Numbers 1, 2, 5: PwC “Recent Trends in Awards in Patent Damages, 2008,” 1995-2007 data range. Source of Numbers 3 and 4: Robert A. Cote presentation, “Choosing Your Battlefield,” 2006, based on Courtlink research on cases filed between June 1, 2002 – June 1, 2004.•Global IP Project is beginning to look at factors 2, 3, and 5 in other countries.

Prediction: ND Cal appears to be emerging DJ jurisdiction.

14

Inter-Country Forum-Shopping in Europe1 Based Upon 5 Objective Factors

work-in-progressBest European court of first instance in which to initiate patent litigation as patentee: Germany (pretty good chance of winning infringement (prelim and perm), and costs paid by other side2); France; Switzerland

Best European court of first instance in which to initiate patent litigation as alleged infringer:England (expensive, but very good chance of winning)

1. High patentee win rate (Germany/infringement est. 60%,

but when validity taken into account, 26%; Sweden 50%, Switzerland 60%, Denmark 75%; Netherlands 39%)

2. Fastest time to trial(<1 year: England, Germany;

≈ 1 year: Finland18 mos.: Netherlands)

3. Low Cost(Germany, if win; Finland, Denmark,

Netherlands)

4. Unlikely case will be stayed for validity challenge

(England, Germany, Netherlands)

5. Preliminaryinjunction data

(Germany 57% (17/30);Netherlands 36% (10/28)) Germany/

Netherlands

This chart can be customized to countries of interest to your clients

1. Low patentee win rate (England 13%, Finland 8% overall)

2. Slow time to trial

(France (≈3 years))

3. High cost(Germany, if lose;

England)

4. Likely case will be stayed for validity challenge

(Italy)

England

5. Preliminaryinjunction data

(France, 20% (20/100); Finland, 17% (1/6))

Source of data: Global IP Participants.1 To be distinguished from intra-country forum-shopping in U.S. (Class 1).*First preliminary hard data from Germany indicates patentee win-rate may be lower (33%, 3/9) than estimated (60%).

15

Nürnberg

German Court System

Germany has a bifurcated system, i.e. validity and infringement are determined by different fora

12 specialized courts, most important are Dusseldorf, Mannheim and Munich

Requires 3 trials (validity, infringement, damages)

No connection between the two tracks No nullity defense in

infringement proceedings, only request for stay possible

First cases ever from Germany

288 from Dusseldorf, 2006-08

16

Dusseldorf, 2006-2008Data from sample of 258 first-instance final decisions

(about 29% of total number of decisions)

49

27

128

9081

45

0

20

40

60

80

100

120

140

2006 2007 2008

cases

patentee wins

Patentee win rate55%

Patentee win rate70%

Patentee win rate56%

Overall patentee infringement win rate: 63% (162/258)

Dusseldorf, 2006-2008Data from sample of 30 preliminary injunction decisions*

10

87

3

13

6

0

2

4

6

8

10

12

14

2006 2007 2008

cases

patentee wins

Overall patentee win rate:57% (17/30)Patentee

win rate46%

Patentee win rate43%

Patentee win rate80%

*Preliminary injunction data available for Australia, Brazil, Canada, Germany, India, Netherlands, U.S.

17

China Hot Courts: Reported CasesTop 10 Courts with the Most First-Instance Reported Infringement Cases (2007)*

Based On Cumulative Numbers from Invention Patents, Design Patents, and Utility Models We have top 10 lists for each category of patent separately also.

Beijing 2nd (134) • 28 Design Patents (21%)

• 26 UM (19%)• 16 Invention (12%)

• 64 Not Known (48%)•Overall win rate: 56% (31/55)

Zhejiang Hangzhou (146)

• 56 Design patents (38%)• 13 UM (9%)

•6 invention (4%)•71 not known (49%)

•Overall win rate: 76% (34/45)

•According to our methodology, the Chinese patent infringement win rate = win/(wins+losses). •Note: these numbers only reflect the patentee win-rate in infringement cases. Validity is tried separately in China.•Overall win rates vary from 35% in Beijing 1st to 100% in Jiangsu Nantong and Guangdong Shenzhen and Zhejiang Jinjua.•Overall patentee win rate for 2007 in infringement cases is 77% (255/332).

*Order determined by number of cases reported on court websites. Number used as proxy for filings; includes settled, withdrawn, lost and won. Overall win rate calculation is just wins/wins+losses.

Jiangsu Nanjing (141) •30 Design Patents (21%)

•8 UM (6%)•3 Invention (2%)

•100 Not Known (71%)•Overall win rate: 84%

(27/32)

Jiangsu Nantong (72)•12 Design Patents (17%)

•4 Um (6%)•0 Invention

•56 Not Known (785)•Overall win rate: 100%

(6/6)

Jiangsu Wuxi (52)•28 Design Patents (54%)

•6 UM (12%)•2 Invention (4%)

•16 Not Known (31%)•Overall win rate: 95%

(21/22)

Guangdong Shenzhen (79)

•17 Design patents (22%)•17 UM (22%)

•4 Invention (.05%)•41 Not Known (52%)

•Overall win rate: 100% (8/8)

Henan Zhengzhou (65)•12 Design patents (18%)

•3 UM (.05%)•0 Invention (0%)

•50 Not Known (77%)•Overall win rate: 89% (8/9)

Shandong Jinan (53)•7 Design Patents (13%)

•11 UM (21%)•4 Invention (7.5%)

•31 Not Known (58%)•Overall win rate: 82% (9/11)

Zhejiang Jinhua (81) •6 Design patents (7%)

•11 UM (14%)•1 invention (1%)

•63 Not known (78%)•Overall win rate: 100% (15/15)

Beijing 1st (62) •20 Design Patents (32%)

• 10 UM (16%)• 10 Invention (16%)•22 Not Known (35%)

•Overall win rate: 35% (6/17)

1818

Overall Patentee Win-Rates in China (Bifurcated System)

2007China

Patent applications

% of total

Issued patents

% of total

Validity challenge % of total

Validity challenge win rate (V)1

Infringe’t Litigation % of total

Infringe’t win rate (I)

Overall win rate= (V x I)

Invention patents

245,161 35.3% 67,948(grant rate in 2007: 71%)

19.3% 16.22%(354)

57% 15% 61% 35%

Utility models

181,324 26.1% 150,036(grant rate in 2007: 80.2%)

42.7% 46.08(1006)

46% 30% 73% 34%

Design patents

267,668 38.6% 133,798 (grant rate2 in 2007: 71.3%)

38.0% 37.7% (823)

42% 54% 84% 35%

1 Global IP methodology used to calculate validity challenge win rate (claims maintained without + ½ claims amended).2 Most of the design patent applications not granted were withdrawn or deemed as withdrawn because of the failure to pay the fee.

19

How Comparative Patent Litigation Win Rates Can Help You Assist Clients With Strategic Decisions

Fora selection for patent enforcement or putting competitor’s patent portfolio at risk to leverage good first result.

Case valuation: assign dollar value for settlements, M&A negotiations.

Foreign filing where patents likely to be enforced.

20

“First-Strike” Strategy

IN THEORY: no res judicata effect of litigation outcome in one country on litigation outcome in another country (limited collateral estoppel)

IN PRACTICE: leverage power of first litigation outcome to settle disputes globally/other jurisdictions. Clients want to settle conflict globally; exception is pharma

Develop enforcement strategies with patentee win rate in mind.

21

US (D. Or.)5 infringement lawsuits

Currently pending in D. Or.

US ITC24 companies from 5 countries named

as respondentsNov/06 settled

With 6, Ap/07 Imports

barred

England2nd party infringement Settled Oct. 2005

China Shanghai

IPOSettled Aug. 2005

England1st party

infringement lawsuit

Settled May 2005

USA (D. Or.) Filed April 2001“recognized” infringement March 2005

settled June 2005

Seiko Epson enforcing

inkjet printers against various

parties

Companion Second strike“acquiescence” strategy

“ First-Strike”

Patentee won

Patentee won

UK CybaHouse Ltd.

UK Environmental Business Products Ltd.

Japanese Company Employing Offensive “First-Strike” Strategy in an Electrical Case:

(Seiko Epson Example)

2222

Thank You!For further information or copy of Global IP Report, please contact

Mike Elmer650-849-6610650-208-3130949-715-5263

[email protected]

23

Global Summary Table of Answers to 4 Questions

Rank Order

Country(Unified/Bifurcated)(Common Law/Civil Law)

Forum-shopping within country (assuming jurisdiction met)

Trials required to decide infringement/ validity/ damages

Chances for Success ? (Patentee Win rate)

How long?

How Much?Who Pays?

What Do I Get? (damages)

1 US (U, CO)(district court)

Yes 1 67% jury/59% judge35% if incl. SJ’s

30 mos. $3.5M/each pays own costs

Injunction, median award ED Tex $20M, US overall $1.8M

1 US (U, CO)(ITC)

No 1 (no damages awarded)

47% 10 mos. $4M/each pays own costs

Injunction only

2 China (B, CI) Yes 2 34% overall (61% invention patent inf. patentee win rate; 55% invention patent validity challenge patentee win rate

<12 mos. $260K/each pays own costs

Injunction, average award $17.5K

3 Germany (B, CI) 1 Yes (Patentee only)1 3 26% overall (43.5% validity challenge in FPC; 60% inf.

16 mos. $1.1M/Loser pays 100%

Injunction

4 France (U, CI) 1 Yes (in theory) 1 1 60% 35 mos. $800K/Loser pays small portion

Injunction, average award in 2007 $427K

5 Japan (U, BI) Yes 1 25% overall (17/69)(2000-2007)

25 mos. $1M/Loser pays <10% of winner’s costs

Injunction, average award in 2007 $343K

England (U, CO) 1 Yes (in theory) 1 2 (separate damage hearing)

21% 11 mos. $1M/Loser pays 70%

Injunction

Taiwan Yes (in theory) 1 36% (4/11)(invention patents only)

17 mos. $200K inf. + $100 val./Loser pays prepaid court fee of 1.1% of claimed damages.

Injunction/lost profits or infringer’s profits. Av. Award in 2007 $23M. If exclude largest award ($65.8M, largest ever in Taiwan), average is $1.6M.

24

Methodology of Calculating Win Rate

Collect summaries of first-instance final decisions of inter partes patent infringement cases by calendar year from participating countries using a standardized case summary sheet starting in 2006. We now have 2 years of hard data.

Calculate patentee win rate for each country by year.*

Calculate average patentee win rate for each country over time period (e.g., 5 years, 10 years, etc).

A patentee “win” = at least one claim held valid and infringed at court of first instance.– Makes “bifurcated” (where validity and infringement tried in different fora) countries difficult

“First-instance final decision” = a final decision on the merits in the court of first instance.

Only count trials as a final decision on the merits in the court of first instance, since trials provide the only common denominator. Summary judgment data indicated separately where relevant, e.g., US and Canada.

*Starting in Jan. 2007, the patentee win rate will be available on a per case basis as well as a per patent basis.

25

Countries with Data from 2006-2007

AustraliaBrazilCanadaChinaDenmarkEnglandFinlandFranceGermanyIndiaIsraelItaly

JapanNetherlandsNew ZealandNorwaySingaporeSouth AfricaSpainSwedenSwitzerlandTaiwanUS

26

Case Summary Sheet Fields for All First Instance Patent Infringement Decisions

• Parties and case cite• Counsel, trial counsel/firm, judge, court• Result for patentee• Damages awarded? If so, details• Petition to stay? If so, details• Plaintiff is patentee or alleged infringer?• Nationalities of plaintiff and defendant• Time from filing to decision• Preliminary injunction requested? If so, details• Field of technology (10 categories)• 3 or more defendants?• Decision final?• National and regional patent number(s) and priority application number• Is there litigation involving same parties in other countries on counterpart patents?• If infringement was found, was a permanent injunction awarded? (enforced?)• Did the case involve a specialized procedure for pharma patents?

27

Colorado: Objective Factors

•Source: LegalMetric Report, Jan. 1991-Feb. 2009.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Motions to stay pending reexam

88%7/8

1/8

granted

denied

Av. Time 2.6 months

Judge Decisions Win Rate(granted)

Time to decision

Babcock 2 50 0.7

Blackburn 2 100 0.6

Daniel 1 100 5.9

Kane 1 100 3.7

Krieger 1 100 5.8

•15 preliminary injunction decisions•40% win rate (range 16% D. Utah - 50% S.D. Ind.)(national average 36%)•Average time to decision on preliminary injunction motions: 5.7 months (national average 3.6 months)

Motions to stay pending reexam

28

Colorado: Objective Factors

•Source: LegalMetric Report, Jan. 1994-Feb. 2007.•“Summary judgment” is a judgment on the merits that is not a trial. There were no motions for summary judgment brought by the patentee on a case-determinative issue in the time period analyzed in the Legal Metric Report. There were 19 case-dispositive summary judgment motions won by the alleged infringer.

• Patentee win rate at trial 78% (7/9)• Bench trial patentee win rate: 100% (1/1) • Jury trial patentee win rate: 75% (6/8) (national average 67%)

• Summary judgment patentee win rate: 0% (0/19)• Average time to termination for jury trial: 37.5 months• Average time to termination for bench trial 29.8 months

29

Countries where more than 1/3 of patent litigation decisions related to mechanical

patents

42%

33%

75%

66%

50% 48%

38%

58%

46%

64%

48%

66%

50%

0%

20%

40%

60%

80%Australia

Brazil PI

Canada

China

Denmark

France

Japan

Netherlands

Netherlands PI

Taiwan

Sweden

South Africca

Norway

7/21

For 2006-07, What Industry Had the Most Litigation Globally?Answer: Mechanical

5/12 13/2821/366/8 2/4 61/126 34/89156/235 7/11 11/23 2/3 1/2

Mechanical patents are most litigated in the U.S. too, followed by electrical (including electronics), and software. (Based on 2006-07 first-instance patent infringement litigation data). Next fields, in order of volume are: medical device; pharma; chem/mat’l eng’g.

30

Sample of Industry-Specific Global IP Project Data2006-07 Global Patentee Win Rates

• France: 66% (2/3, 2006). 2 wins brought by patentee. Average time for medical device case in 2006 41 months. 0% (0/5, 2007). Average time for medical device case in 2007 32 months. Saisie procedure used in all 5. • Japan: 0% (0/1, 2006). Brought by Swiss patentee. No medical device cases in 2007. • Brazil 0% (0/1, 2006). 22 months. 100% (1/1, 2007), patent had related validity challenge and all claims were maintained.• Finland: 100% (1/1, 2007). Utility model patent. $8K damages awarded.• Netherlands: 50% (1/2, 2006). No medical device cases in 2007.

66%

0%

25%

0% 0%

100%

50%

100%

50%

0%

20%

40%

60%

80%

100%

France Japan Brazil Finland Netherlands

Patentee Win Rates "Medical Device"

2006

2007

2006-072/3

0/5 0/10/11/1

2/81/2

1/1

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Sample of Industry-Specific Global IP Project Data2007 Global Patentee Win Rates

• Australia: 100% (3/3). Costs awarded in all 3. Related validity challenge in all 3; 2 all claims maintained, 1 at least one claim maintained. • Brazil: 33% (3/9, BPTO cases). In 2 of the 3 wins, the plaintiff was not the patentee. • Canada 50% (1/2). Average time 34 months. In win, damages/costs awarded, $2M. Both cases had related validity challenges where all claims were maintained. Neither had preliminary injunction request. Both had US priority applications. • Denmark (50% (1/2). In win, damages/costs awarded, $700K. • France 36% (10/28). Average time 34 months. 4 damage awards reported, average $92K.• Japan 44% (8/18). 17 of 18 brought by patentee. 1 case brought by alleged infringer was loss for patentee. 31% (10/32) if count by patent instead. Osaka 14% (1/7). Tokyo 64% (7/11) (38%, 9/24, if count by patent). All wins had a damage award. Average damage award $224K. 2 wins had corresponding validity challege with all claims maintained. 1 win had corresponding validity challenge with some claims invalidated.• Netherlands 60% (6/10). • Taiwan 29% (2/7). All 7 claims had related validity challenge proceeding. In the 2 wins, all the claims were maintained. One damage award reported, $627K.

Brazil Denmark Japan Taiwan

3/3

3/9

1/2 1/210/28

8/18 6/10 2/7

Compare to U.S. mechanical patentee win rate in final first-instance patent infringement decisions (trials and dispositive SJ’s), 30% (8/27)(2006-07).

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Fourth Tool: Defensive “First Strike” FlowChart of Options for Alleged Infringer (USA)

Patent application is published

Request ex parte reexam. 10% patent revoked, 64% claims amended, 26% no change to patent (42% win rate, USPTO stats)

Patent issuesPatentee sues for infringement

File DJ(52% trial win rate(source: PwC)3

Request stay in inf. proceedings pending outcome of either reexam, chance granted = 59%1, discretion of court, may be different post-RIM

Patent held infringed (63% trial win rate) (source: PwC). Injunction granted

Request SJ of non-infringement and/or invalidity(37% alleged infringer SJ win rate; PwC 2008 Report, Chart 6A)

Infringed claim held invalid on reexam

Ask for rehearing of infringement decision or request that the injunction be lifted

Cases usually settle after Markman hearing

Defensive comparison of published and issued claimsfor provisional rights purposes

White is DJ/infringer perspective

Green is p’ee

1 LegalMetric Report, 2002-2009.2 Only a few cases have been decided so far. Estoppel concerns with inter partes reexams.

Request inter partes reexamCaution re waiver. (86% invalidation rate, USPTO stats)2

D1 D2 D3 D4 D5 D6

P1 P2 P3 P4 P5

Then what?

This is key – patentee win rate doubles if survive summary judgment, alleged infringer’s cut in half.

Everything after D2 is a district-specific decision, and national average statistic would be substituted by district-specific statistics.

We have a defensive strategy chart for each of the 33 countries.