Sunny: Hello everyone. My name is Sunny McCall. I am Momentum’s Vice President of Content and Experience and Program Director of Momentum’s upcoming IP Counsel Exchange on Post-Grant Patent Challenges at the PTAB. It is my great pleasure today to be here with Karl Harris. Karl, welcome.
Karl: Thanks Sunny, happy to be here.
Sunny: Thanks so much Karl. By way of background for our listeners today, Karl currently serves as Vice President of products for Lex Machina, leading all product management, development and strategy for the company. Prior to Lex Machina, Karl worked as a Fellow at X/Seed Capital Management, and previously as Vice President of Product Management and VP of Engineering for Flurry, the provider of the largest mobile analytics and monetization platform. Karl also holds a J.D. from Stanford Law School, a M.S. and A.B. in Computer Sciences.
Jumping right in here, Karl, and as per your bio which I just shared with our listeners, prior to Lex Machina, I see that you worked at a venture capital firm and held the position of VP of Engineering, and even worked at a law firm supporting the patent litigation and prosecution groups, while working to obtain your J.D. Given your diverse background and experience, I am curious to learn what it was that ultimately drew you to Lex Machina and how you feel that each of your prior work experiences has prepared you for your current role?
Karl: Great, well, first I will talk a little bit about what drew me to Lex Machina. So in my prior life as a software engineer and also as part of the founding team of a mobile analytics company called Flurry, I’ve really seen data and analytics transform the web, and I have also actively help transform the mobile space with Flurry’s analytics platform. So these are spaces where you use data to make all of your decisions. You would never consider making any sort of decision whether it be a business decision, a product decision, an engineering decision, without data to help support what you are doing.
And also having been to law school and having worked briefly at a law firm, it’s very clear that the law is an industry that’s screaming for an analytics transformation. It’s literally an industry in which decisions are frequently made without any data at all; and at best they are made with what we call anecdata, which is basically taking a few data points and then drawing conclusions from those few data points. And Lex Machina is really all about bringing data-driven decision making to the law and what we call legal analytics and that’s really what attracted me to Lex Machina based on my background in bringing data-driven decision-making to the mobile space and to the web.
In terms of the second part of your question, and how I feel my work experience has prepared me for my role, I mean I would say a couple of different things. So number one, Lex Machina is really a legal technology company. Formerly a startup, now of course we’ve been acquired by Lexis, and my general experience is in startups at fund raising through Flurry and also working at X/Seed Capital and building and running product engineering teams at Flurry, really prepared me well for this particular role. Furthermore we are a data and analytics company, which is exactly what Flurry was. And then having been to law school and working at Fish & Richardson, I do have some perspective on how the law works as a business. And really putting it all together, bringing data-driven decision-making, analytics and technology to the law was really a perfect fit with everything that I’ve done in the past.
Sunny: Thank you for that detailed background Karl. I understand that Lex Machina as you’ve just stated mines litigation data revealing insights never before available about judges, lawyers, parties and patents. Without giving away too much of the secret sauce, I would love to learn more about how Lex Machina connects the dots of various data collection points to provide it’s users with the best litigation intel possible.
Karl: Okay, so what we really do at Lex Machina is we download all the briefs, motions, filings and dockets from litigation that occurs in the federal district courts. And so as I am sure most of your listeners are aware, there’s the government system called PACER which stands for Public Access to Court Electronic Records. Which is the filing system of record for all of the federal district courts.
So what we do is we download that information from PACER for the practice areas that we provide legal analytics for which currently include patent, trademark and copyright litigation. And use a variety of natural language processing and machine learning tools to make sense of all of the data from PACER, which by the way is literally just a bunch of raw PDFs and docket information that’s typed in from the clerks. And so what we do with our technology platform is we first figure out who’s involved in a litigation, so what judge, what lawyer, what law firm, what party, what patent – if it’s a patent litigation – and then go through and try to make sense from the docket of what really happened in a particular litigation. So what were the key motions that were filed? Who filed them? What judge ruled on them? What was the ruling for the particular motion? And then how did the case actually terminate? What was the case resolution? So did it end on a Motion for Summary Judgment? Did it go to trial? Did the claim defendant get a winning outcome or was it the plaintiff? All those types of things through our natural language processing algorithms which go through and do a couple of key things. One is anti-normalization which I talked about before. And then the second is really what we call clustering and linking the different events that happened in litigation to provide a big picture of what happened in particular cases.
Sunny: Thank you Karl. I was just reading an article about Lex Machina’s recently released findings from its Third Annual Patent Litigation Year End Review Report. For our listeners today who might not be familiar with your report, could you share a few top line observations with us from 2015?
Karl: Absolutely. So I would say three kind of key observations. First, big picture, patent litigation activity remains closest to historic highs. And because we are a data company, I would love to support that with some data. So overall patent litigation filings were up in 2015 from 2014. But not back to its 2013 peak. So there were 5819 patent cases filed in 2015 versus 5070 in 2014, and just over 6000 in 2013. So in summary, patent litigation is up 15% from last year but down 5% from the historic peak in 2013. So patent litigation is not going away.
An interesting trend, kind of second key takeaway here, is that patent litigation is increasing significantly in the Eastern District of Texas. But really at the expense of volume in Delaware. So your listeners have probably heard about the phenomenon in the Eastern District of Texas which is perceived to be a very plaintiff-friendly patent litigation venue. And litigation activity is really exploding in the Eastern District of Texas.
In 2015, 44% of all patent cases were filed in just this one district, the Eastern District of Texas. And that’s up significantly from 28% in 2014 and 24% in 2013. And that increase is mirrored with a corresponding decrease in the District of Delaware, which had 22% of patent cases in 2013 but only 19% in 2014 and 9% in 2015. So the Eastern District of Texas phenomenon is increasing and getting worse so to speak.
And then finally, the third key takeaway, what’s going on with this shift between Eastern District of Texas and Delaware. Really what it is, is that high volume plaintiffs are choosing the Eastern District of Texas more than Delaware. And definition of a high volume plaintiff is a plaintiff that has been involved in more than 10 patent litigations. And to give you a quick data point, in the second quarter of 2015, there were 692 cases filed in the Eastern District of Texas by high volume plaintiffs which is a 65% increase over Q2 2014. And then in Delaware they are only 25 cases filed by high volume plaintiffs in Q2 2015 which is an 80% decrease over Q2 2014.
So again, three kind of interesting takeaways, big picture patent litigation is back up at close to historic highs. There’s a shift in litigation between Delaware and the Eastern District of Texas and that’s largely driven by high volume plaintiffs choosing Texas over Delaware in the last year.
Sunny: Thank you Karl. About one year ago, I understand that Lex Machina began to integrate patent trial and appeal board data into its platform now offering patent litigators even greater insight into party and patent litigation histories. Thinking for a moment about the full spectrum of data offered across your platforms, District Court, ITC and now PTAB data, have you noticed any trends in data searches or information most requested by your users?
Karl: Well, the key thing here is that PTAB is now a critical piece of any patent litigation strategy. So if you are involved in any District Court patent litigation you have to consider the possibility of PTAB being used as a venue to challenge the validity of the patent at issue in the case. And furthermore, PTAB is now a critical piece of any District Court strategy itself, especially for defendants. Like if you are on the defense side, and you think that the best way forward is to challenge the validity of the patent, you really need to consider whether you want to do that in PTAB. And if so, how do you do that and which law firm do you want to use to represent you in PTAB?
Just as a quick example to show how this plays out in real life, if you take Samsung, so big company, they are actually the defendant in 92% of its patent litigations. But in PTAB, they are the aggressor which means they are the petitioner 94% of the time. So PTAB is being used as a venue by these large tech companies that receive a lot of patent litigation, to go out and then challenge the validity of those patents that they then are either currently seeing or will later see in District Court. So PTAB is critical.
The ITC on the other hand has really been a discreet piece of any patent strategy. There are only about 40 Section 337, which is the intellectual property section, only about 40 IP cases per year over the last five years and that’s been really steady. So summary, PTAB is a big deal. It’s here to stay. There’s over 1500 PTAB trials per year and it’s a critical piece of any litigation strategy. And we see that from our users when they are interested in understanding how PTAB plays a role in any of their strategies whether patents have been challenged at PTAB versus District Court, etc. Users are always asking about PTAB and always using it to help set their litigation strategies.
Sunny: Thank you Karl and now in closing as we look forward into 2016 and thinking exclusively for a moment about the PTAB, any top line thoughts or forecasts you can share with our listeners today on patent practice before the PTAB, looking prospectively into 2016.
Karl: Absolutely. So I would say two things. Number one is PTAB is here to stay. Kind of like we mentioned in the last question, PTAB litigation is steady. It’s not going away. It’s a critical part of any litigation strategy. Again, over 1500 PTAB trial filings per year in the last three years. So like I said PTAB is here to stay. And second, PTAB is actually kind of a specialty practice. So if you are looking for somebody to represent you in the PTAB trial on either side as the petitioner or the patent owner, you definitely want to look for either particular law firms or particular lawyers have lots of experience in front of PTAB.
And just some interesting data points, the law firms that are most active in PTAB, are the law firms that you probably would have heard of in other patent litigation. So for example Fish & Richardson represents petitioners the most. Finnegan & Henderson are close second. DLA Piper, Cooley, Norton Rose Fulbright are all on the top of the list. But there are also law firms that specialize on representing patent owners that you don’t necessarily hear of when you see the top list. For example Sterne Kessler is the law firm that represented patent owners most in 2015.
And among those law firms that handle other pieces of patent litigation, there are partners and associates that specialize specifically in PTAB trial. So if you are looking for someone to represent you, you can of course use Lex Machina. But you want to make sure that you are using somebody that has experience in PTAB because there are a lot of law firms and attorneys with a lot of experience at PTAB and you want to make sure that you know what you are getting into, when you choose your counsel.
Sunny: Well Karl, thank you so much. It’s been a pleasure to chit-chat with you here today, and hear a little bit more about all the exciting things you all had going on over there Lex Machina. Really looking forward to hearing you speak at our upcoming flagship event in San Jose in a few months. Thank you so much Karl.
Karl: Thank you Sunny. I appreciate it.