Patent trolls now account for 67 percent of all new patent lawsuits

http://www.washingtonpost.com/blogs/the-switch/wp/2014/07/15/patent-trolls-now-account-for-67-percent-of-all-new-patent-lawsuits/

by Libertatea • 12 years ago

220 69 12 years ago

washingtonpost.com

dhimes• 12 years ago

Not much meat here- just enough to raise your blood pressure.

pizza234• 12 years ago

Is it technically correct to say that frivolous patent lawsuits "drag the economy"?

Ignoring for a moment the moral issue, if such phenomenon causes a (relatively) large amount of money to flow from (software) companies to "patent trolling" ones, isn't it still positive for the economy?

ilyanep• 12 years ago

One could make the argument that it's taking money from productive entities who would put it into R&D or future production and giving it to non-productive entities who will just use the money to sit on the patents and potentially sue more people.

te_platt• 12 years ago

No. The closest simple example is the broken window fallacy: http://en.wikipedia.org/wiki/Parable_of_the_broken_window

Guvante• 12 years ago

Apparently the broken window fallacy has absolutely nothing to do with the broken window theory: http://en.wikipedia.org/wiki/Broken_windows_theory

chc2• 12 years ago

This is a much weaker claim than the broken window fallacy, though. The parent comment addresses something that is left unsaid in the broken window fallacy — that even if it isn't objectively better for the money to go to a window-maker, it might not be worse either. It's possible that the chain of events is ultimately neutral for the system as a whole.

masklinn4• 12 years ago

isn't it still positive for the economy?

NPEs don't grow the economy, and by their activity they hinder or kill companies which do.

So no.

fzltrp4• 12 years ago

isn't it still positive for the economy?

Why? Where's the benefit for the economy? If somehow the patent trolls reinject the benefits they make (ie what they obtain from the law suit minus the lawyers/legal fees) in the economy, perhaps we could say it's maybe a positive outcome, but there are no garantee that the infringing company would not have done so. So where is the benefit for the economy?

sp332• 12 years ago

It depends how you measure. The transfer of license money is good for GDP. But if the money is going to people who just keep it instead of investing in something, then it will "drag the economy".

icebraining3• 12 years ago

This shouldn't be downvoted. In fact, it's why the GDP is not a very good measure of what we actually want to know.

toby• 12 years ago

In economic terms, this is not a transaction (both parties agree to exchange things for their mutual benefit) which is usually considered positive. It's closer to rent-seeking, which is usually considered neutral to negative.

rayiner6• 12 years ago

This is an article covering a report which covers an actual study. The actual study is here: http://www.rpxcorp.com/wp-content/uploads/2014/01/RPX-2013-N....

Chart 1 of the WaPo article is a bit misleading. The America Invents Act, passed in 2011, limited the circumstances under which multiple defendants could be joined in the same suit. So what might have been one suit with three defendants pre-AIA might be three suits, each with one defendant now. If you look at Chart 1-2 of the RPX study, on page 10, you can see that the total number of defendants peaked in 2011. The same trend holds when looking at NPE cases only (Chart 4-5 of the RPX report). Chart 10 is also interesting, which shows the number of campaigns (suits related to single patent or set of patents), down since peaking in 2011.

throwawaykf053• 12 years ago

And here's the study backing that up: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2346381

The other change that receives less attention is the Medimmune v Genentech case in 2007, which changed the playing field such that it forced many potential licensors to initiate a lawsuit to avoid getting preemptively sued for declaratory judgement: http://digitalcommons.pepperdine.edu/cgi/viewcontent.cgi?art...

This decision also correlates with another jump in lawsuits in 2007 found by other studies. Not sure why this dataset does not reflect that jump.

Also, I'm very curious about the PWC result that patent troll litigation awards are rising. I've followed a bunch of NPE cases (many of which have been discussed here), and I consistently find that trolls get much lower awards than they seek. Case in point, the TQP vs NewEgg trial where, even though they won, they got only half of the damages they sought. And that's at the higher end... From hearsay, some attorneys claim the average is around 10% of the damages sought.

What I'm finding is that accusing the plaintiff of being a "troll", regardless of whether that accusation has merit, has an automatic impact on the damages received, if at all the plaintiff prevails.

But then most of the cases I've followed have been in ED Texas. Maybe the higher awards come from other districts, e.g. Delaware?

mike_hearn• 12 years ago

Or trolls are scaling their demands appropriately and thus still ensuring they make out like the bandits they are.

anseljh• 12 years ago

Similar work was done last year based on Lex Machina data:

http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=... https://lexmachina.com/media/press/aia-500-expanded/

They use a different term, "patent monetization entity", that is a little better calibrated than NPE or troll.

jeffdavis2• 12 years ago

"...patent trolls — also known as non-practicing entities because they simply stockpile patents without making anything with them..."

I never liked that definition. It sounds like ordinary specialization in an economy, to me.

"The latest effort would have required the loser in a lawsuit to cover the winner's legal fees and for NPEs to state more clearly what was being infringed at the outset."

Now we're talking: address the real problem. The real problem is not NPEs; the real problem is that they can impose huge costs on others at little cost to themselves, which sets them up perfectly for an extortion-like racket.

rhino369• 12 years ago

I think it's a bad definition too. But the problem is mostly unique to NPEs. There are definitely some NPEs that I wouldn't call a troll, like universities and R&D firms.

I think I could even support a patent monetization entity as long as it relied on legitimate patents and went after legitimate infringers.

The issue is few, if any, NPEs actually do that. They resort to extortion-like demand letters or use hopelessly weak patents.

jeffdavis2• 12 years ago

That's probably mostly true (I don't have the numbers).

But getting the cause wrong often results in the wrong solution -- and the problem remains and/or new avoidable problems are created.

masklinn4• 12 years ago

It sounds like ordinary specialization in an economy, to me.

It also runs counter to the purpose of patents: patents are originally a time-limited and governmentally defended monopoly on an invention to encourage its full publication[0] and ultimately the progress and improvement of society as a whole[1].

When entities can exist to do nothing but defend such monopoly against independent reinventions the incentives are completely out of phase with the original purpose: patents assumed the invention (and its trade) is the important object, not the monopoly itself.

[0] rather than trade secrets, espionage and other such focus on anything but progressing

[1] not only because the invention is available at all but because once the monopoly runs out it becomes a new baseline[2] for further invention

[2] in that it's free, it is possible to license the invention to build upon it during the monopoly phase, but I think it reasonable to assume increased activity once the invention becomes literally free for all

dougmccune• 12 years ago

I think it's always important to keep the original goal of patents in mind. A monopoly on an invention isn't a basic human right. It's a right we as a society have determined is worth giving out only because it creates a net win for society by encouraging invention. If patents no longer achieve that goal, or if they are causing more negative than positive impact, there's no universal law of humanity that says we need to keep patents around at all.

83yg49• 12 years ago

[0] The way that [1] write is [2]

[1] you

[2] kind [3] weird.

[3] of

a-priori• 12 years ago

This is why it seems to me that the core problem with the current patent system is that it's too cheap to obtain and hold large patent portfolios.

There's an analogy here to land ownership. Land is a public good. It is owned collectively by the nation-state that contains it, and the people rent exclusive rights over parcels of land. I'm talking here about the difference between allodial title (typically owned by the state) and fee simple title (owned by individuals). We do this so that the owners have an incentive to use and improve it, and everyone benefits when it owned by the people who can best do so.

Patents are similar in many ways, since inventions are also a public good. That's why patents exist in the first place: to promote the advance of our technology for the benefit of all, by granting exclusive rights to the use of a technology. And, like land, you want patents to be owned by the people who can best use it.However, in order for the system to work, there needs to be a cost to holding rights to the property to encourage people to sell the rights to someone else. With land, this is property tax; land owners have to pay a percentage of the land's value each year for the continued right to use the land exclusively.

We need a property tax for patents. Patents should have an assessed market value, and a patent owner should have to pay a percentage of that value yearly as 'rent' on the exclusive use of the invention. If they no longer feel that it's worthwhile to pay that tax for the benefit they get from holding the patent, then they can sell it to another party. It could be (and probably should be) a closed system, where all taxes collected should be put into a fund that the government uses to buy patents itself. When it does so, the patent gets returned to the public domain, and anyone can use it from then on. In that way, you may be able to get rid of patent term lengths.

SilasX3• 12 years ago

It also runs counter to the purpose of patents: patents are originally a time-limited and governmentally defended monopoly on an invention to encourage its full publication[0] and ultimately the progress and improvement of society as a whole

I don't see how that's counter at all. If you accept that the inventor has a right to that temporary monopoly, how could you not accept that they have the right to sell it, in return for the present value of the innovation, to someone else?

You would need to make some argument about how the mere fact of a non-inventor holding it, even after buying it from the inventor, and doing the exact things an optimally informed inventor would do, defeats the goals you outline, and you haven't done so. (I really can't imagine what such an argument would look like, either.)

You're absolutely correct that litigation over trivial, independently-reinvented stuff does run contrary to the purpose of patents, but that's a separate issue from whether inventors should be able to transfer the rights to a litigation specialist -- not every inventor is good in the courtroom, nor should we expect them to be.

rayiner6• 12 years ago

This sort of discussion reminds me of the hypothetical: an alien race, passively observing the earth, notices people frantically shopping in December, and also celebrating Christmas at the end of the month. They thus conclude that the shopping caused Christmas to happen. Obviously they get the causation wrong: anticipation of Christmas caused the shopping to happen.

Now, when discussing NPE's, people say something along the lines of: "they can't create any value, because any invention they buy already exists." Obviously this is fallacious: the anticipation of selling a patent portfolio, to an NPE or some other party, can cause people to engage in expensive R&D. Indeed, all contractual and property rights operate in this way. Litigation might come after a transaction goes sideways, but anticipation of having the option to litigate allows transactions to occur that would not otherwise occur.

NB: The above should not be taken as an argument that the value created by the existence of NPE's outweighs the costs imposed by troll suits.

lotsofmangos• 12 years ago

I want a troll suit.

ScottBurson2• 12 years ago

Yes, I've posted to this effect several times on HN, and the point generally encounters a fair amount of disagreement. I'm glad to see your post at the top of this page.

All trolls are NPEs, probably, but not all NPEs are trolls. Universities and independent inventors are generally NPEs, but AFAIK rarely engage in trolling behavior. The paradigmatic troll, I think, is the company suing people for infringing its scan-to-email patent. What we have here is (a) a patent that never should have been issued [0]; (b) an NPE suing defenseless small companies (c) whom it has no direct evidence are infringing. That, to me, is trolling.

[0] I long for a ruling from the Supreme Court that makes the obviousness test meaningful again, since the Federal Circuit has so thoroughly gutted it. They had a perfect setup in Alice, but blew it, in my opinion, by making the patentable subject matter test the basis of their ruling (which I think will fail to give the lower courts any guidance they can understand). I would rather they had said that simply computerizing an existing manual process is, in 2014, thoroughly and unarguably obvious.

JoshTriplett4• 12 years ago

All trolls are NPEs, probably, but not all NPEs are trolls.

I'd disagree with the characterization that all trolls are NPEs, as well. A company that technically produces a product implementing a patent, but nonetheless engages in trollish tactics (e.g. barratrous lawsuits inviting quick settlements for just under the cost to litigate; scattershot lawsuits against large portions of an industry; or in general tactics that stifle innovation and suppress development activities) still qualifies as a troll.

And on the other hand, I wouldn't give universities and similar organizations a free pass to being patent-fueled leeches.

Then again, I'm not convinced that there's such a thing as a legitimate patent lawsuit, either.

bobcostas55• 12 years ago

The real problem is that bogus patents are being granted in the first place.

cheepin• 12 years ago

I got a 404. Anyone got a cached copy?

fzltrp4• 12 years ago

The original point of patents is to provide protection to inventors and give them a head start in implementing their inventions. A company which hold patents without implementing them is basically not following the spirit of the law. Hence, there should be a drastic "countdown" to a patent viability, which would be dispelled by a producing a viable, marketed application of that patent. I would suggest a 6 months timeframe, non renewable. For software patents, given the very abstract nature of the invention, 3 months should be enough, and the patent lifetime itself should not exceed 3 years - 12 times the countdown to market (3 years is already quite long in the software industry, although not in the law one). This should be retroactive. Note that I'd rather see the concept of software patents completely invalidated, but I understand that the issue is quite complex.

Oh, and what should be done in the case of patent transfers? Should the new holder be subjected to that countdown as well? What if the products tied to a patent is eol'ed? Should the countdown be restarted? I do think so. It's all about the practical side of things.

icebraining3• 12 years ago

A company which hold patents without implementing them is basically not following the spirit of the law.

Playing Devil's advocate, what about a company like ARM, which designs and patents new CPU designs and then licenses them to others? We can't claim their patents aren't implemented. Should they be forced to make the CPUs themselves?

And if not, what would prevent NPEs from licensing to one small company and then suing everyone else?

fzltrp4• 12 years ago

Playing Devil's advocate

Actually you raise a good point. ARM has been always doing that though, they built their own cpus when they started, iirc. That would have large consequences on their current business model, it's true.

And if not, what would prevent NPEs from licensing to one small company and then suing everyone else?

It's already happening. When one of those company win a lawsuit, it is usually followed by them selling a license to whomever they sued...

Which is the lesser evil? Forcing patent holders into producing practical implementation of their patents, or allowing NPEs to exist?

I guess my idea doesn't really hold waters. Most probably smarter people already have thought about that possibility and saw the issues you hinted at. Oh well.

prof_hobart2• 12 years ago

Who actually produces it (you or a partner) is, at least in my mind, neither here nor there. A huge chunk of manufacturing is outsourced/subcontracted these days anyway, so it's pretty difficult to say who is the actual manufacturer of a product anyway.

The key question for me is the motivation for the patent - did you come up with some novel idea in order to get it manufactured (and are using patent protection primarily to stop someone ripping off your invention), or did you come up with (or buy) an idea and patent it purely in the hope that some other company independently comes up with the same idea and you can then sue them for patent infringement?

georgemcbay• 12 years ago

"The original point of patents is to provide protection to inventors and give them a head start in implementing their inventions"

Not really true; the original point of patents (in the US, anyway) in the minds of Jefferson and others who (in some cases begrudgingly) defined them was to enhance the amount common, public knowledge by enticing inventors to publicly document their inventions rather than hold them as trade secrets. The "protection" and "head start" bits are really the payment made in return for that public documentation, but not the actual reason for the system to exist. The idea that patents exist to protect "the little guy" is a modern idea, ironically invented and propagated primarily by big corporations and "big law".

This makes most modern software patents (which are routinely violated by people reinventing fairly trivial systems even when having no prior knowledge of the existing patent implementations) all the more ridiculous.

fzltrp4• 12 years ago

Yes, this is correct. Thank you for pointing that out.

If a company is producing new ideas, and stock pile them in the form of patents, are they playing the game correctly?

Is it (just) an issue in the case of sotware patent?

Fando• 12 years ago

It is ironic that driving the progress of the currently broken patent system are the laborious efforts of patent trolls.

Zigurd• 12 years ago

Several people on this thread correctly diagnose the problem is not NPEs but "it's too cheap to obtain and hold large patent portfolios."

Once a patent is awarded ANY application that references other patents should be able to re-open examination of those patents if the applicant can show evidence of the existence of prior art or articulate a reason for obviousness or other reason for invalidation. Patent examiners should get bonuses for passing patents that stand up to such scrutiny and get decreases in bonus if they let through patents that are subsequently invalidated.

There should also be a bounty for invalidating patents through an administrative process, not requiring litigation.

Patent trolls now account for 67 percent of all new patent lawsuits

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