Opinion

“Patent litigation firms must prepare for difficult times”

The number of newly filed patent cases in Europe continues to fall. Initial data suggests that the long-term trend is continuing. NPEs in particular are currently reluctant to file lawsuits, and the UPC has not taken off as well as many had hoped. There are increasing signs that the business of European litigation firms is changing and that, after many years of prosperity, a downturn is looming.

17 January 2024 by Mathieu Klos

There are signs that a downturn is looming, says co-editor Mathieu Klos. Patent litigation firms must be ready for the challenges ahead. ©Aastels/ADOBE STOCK

The launch of the Unified Patent Court was supposed to be the start of a better – or rather even better – future. Over the last ten years, patent litigation teams in European law firms have only known one direction: ever larger teams, ever greater workloads, ever better business results.

But the future no longer looks quite so rosy. There are increasing signs that the number of cases at patent courts in Europe is falling. That Mannheim saw only 70 new lawsuits over technical property rights last year is significant. Especially when compared with 2017 when the court recorded 215 new lawsuits. Since then, the number has steadily decreased. As a consequence, Mannheim Regional Court has now closed the 7th Civil Chamber, one of its three patent chambers.

Mannheim no isolated case

Munich also stopped assigning new patent suits to one of its three patent chambers in 2023. Since then the 44th Civil Chamber has only processed old patent cases. In 2022, the number of cases in Munich fell by 17% following a peak in previous years. Of the three major patent courts in Germany, only Düsseldorf recorded a minimal increase of 0.5% in 2022.

JUVE Patent does not yet have up-to-date figures for Munich and Düsseldorf, but there are also increasing signs outside of Germany that, at best, the upswing in patent litigation business is beginning to plateau. At worst, a downturn is looming. In London, for example, the number of cases at the UK High Court fell drastically to 35 new actions in 2022.

At the end of last year, several sources told JUVE Patent that market participants hoped the number would move back towards 40 new cases. But the UK High Court is a long way from the 50-plus cases it once had. Patent litigation in the US has also recently fallen by 18%, as IAM recently reported.

UPC not yet a replacement

The UPC got off to a respectable start in 2023. But it was not so brilliant that it will be able to compensate for the decline in national patent cases in the near future. 160 lawsuits have been filed with the new court since June 1, as the court announced at the end of 2023.

“The lucrative preparatory phase is now over and there are still too few cases”

The UPC undoubtedly kept European patent firms occupied in 2023. The firms advised clients comprehensively in the run-up to and at the start of the new court. Advice on opt-out applications kept many patent attorney firms busy. Numerous UPC actions were prepared, but some were never filed.

However, this lucrative preparatory phase is now over and there are still too few cases to satisfy the large teams of lawyers and patent attorneys.

NPEs reluctant to file cases

Of the 160 UPC proceedings, 67 are infringement actions and 24 are revocation actions. It is particularly striking that actions relating to consumer goods and medical devices currently dominate UPC cases. There are also 22 actions relating to mobile phone patents, most of which concern SEPs. However, the UPC has not yet seen the labour-intensive actions brought by NPEs.

In the past, NPEs have accounted for a large proportion of the actions brought before national patent courts such as Munich Regional Court. However, they have so far been reluctant to bring actions before the UPC, not least because the costs are high, as patent litigators report. In addition, one patent litigator told JUVE Patent, it is still uncertain whether the new court will take a friendly stance towards SEP holders similar to the Munich Regional Court. The risk of losing an SEP through a revocation action at the UPC is a further deterrent.

“It is still uncertain whether the UPC will take a friendly stance towards SEP holders”

Uncertainty can also be felt in national SEP actions. Some lawyers report that major NPEs continued to launch extensive litigation campaigns in 2023. Others report that the UPC’s teething problems and the difficult situation in the financial markets have scared off some NPEs in the US from filing suit. There are also signs of a shift away from traditional mobile communications standards and towards other standards such as video coding and wifi, or entirely different technologies such as batteries for electric cars.

This is topped off by political uncertainty and a difficult economic environment. Interest rates are high. Companies are tightening their purse strings. Some patent holders may think twice before filing a lawsuit.

Adapting growth strategies

In the long term, it is politically desirable that the number of national patent lawsuits decreases in favour of UPC lawsuits. However, this development may come faster than expected and in economically uncertain times.

Law firms therefore need to rethink their growth strategies. As they need large teams for UPC cases, this poses a certain dilemma. For boutiques in particular, this will be a challenge in terms of budgeting while also maintaining sufficient capacities for UPC cases. Continental European law firms must also bear in mind that patent attorney firms can compete in UPC actions. Furthermore, litigation firms from London are noticeably muscling into the UPC business.

“The fewer chambers and judges at national courts, the smaller the pool of judges for the UPC”

The events surrounding the closure of the 7th Civil Chamber in Mannheim also bring another aspect to the fore: judges. There are rumours from Mannheim that the chamber’s closure was also due to a lack of patent judges. The fewer chambers and judges at the national patent courts, the smaller the pool of legally qualified judges from which the UPC can draw. Therefore, the UPC must have the issue of new talent on its radar.

In the long term, the UPC will need its own recruiting programme to train young judges. Its own academy in Budapest is a good start. However, since good patent judges are primarily trained on the job, working on specific cases, the ‘learning by doing’ approach can sometimes take a while to produce results. If patent cases in Europe continue to decline, it seems likely that the patent expertise of new judges will decline with it.