Today's Date: September 19, 2014 Search | Home | Contact | Services | Patent Attorney | Patent Search | Provisional Patent Application | Patent Application | Software Patent | Confidentiality Agreements

GAO Report Unmasks the Mythical Patent Troll Problem


Written by Gene Quinn
President & Founder of IPWatchdog, Inc.
Patent Attorney, Reg. No. 44,294
Zies, Widerman & Malek
Blog | Twitter | Facebook | LinkedIn
Posted: August 26, 2013 @ 6:00 pm
Tell A Friend!


Editor’s Note: Portions of this article are adapted from Problem Child: A Third Grade Approach to Patent Owners, originally published on the Patent Practice Center. For more about the GAO Report please see Manus Cooney’s article titled GAO Report Finds No NPE Patent Litigation Crisis.

________________

Recently we published a five-part series that debunked many prevalent myths about patent trolls. See A Fractured Fairy Tale: Separating Fact and Fiction on Patent Trolls, written by Steve Moore of Kelley Drye. While a bit long, it should be considered mandatory reading if you want to understand the underlying facts instead of just buying into the hype and hyperbole associated with the so-called “patent troll problem.” Similarly, if you want to get a good, non-biased view of patent litigation in the United States you absolutely have to read the recent report of the Government Accountability Office, which is an independent, nonpartisan agency that works for Congress.

Moore, with co-authors Marvin Wachs and Timothy Moore, concludes that when you really look at the facts and underlying dynamics of patents and patent litigation, there really isn’t a problem at all. The GAO report released on August 22, 2013 confirms the extensive research by Moore. The GAO report explains that the number of patent litigations only slightly fluctuated between 200o and 2010, with a one-third increase in 2011, which the report attributed to changes to patent laws ushered in by the America Invents Act and not as the result of any problematic increase in litigations initiated by patent trolls. This increase in patent litigation was by design. While Congress may not have been aware that an increase in litigation would occur, the truth is that the design of the AIA was guaranteed to lead to one of two things. First, the joinder and consolidation provisions of the AIA would either substantially curb patent trolling because it is now much more difficult, if not impossible, to bring a single lawsuit with many dozens (or hundreds) of defendants. Second, increase in the number of patent infringement lawsuits because patent owners must sue infringing defendants one at a time, or at least in much smaller groups. It would seem that the AIA did not stop patent litigation, so the result is a greater number of lawsuits. See also The America Invents Act at Work.

Still further, the GAO found that “companies that make products brought most of the lawsuits and that nonpracticing entities (NPE) brought about a fifth of all lawsuits.” So there isn’t a patent troll problem at all despite the protestations of the Silicon Valley elite who think every patent they get sued on is invalid and every patentee plaintiff is a patent troll.



PTAB Past, Present, and Future

FREE WEBINAR: Join Gene Quinn and Scott McKeown as they discuss the reality and consequences of post grant administrative proceedings at the United States Patent and Trademark Office before the Patent Trial and Appeal Board (PTAB). CLICK HERE to REGISTER.

DATE/TIME: Tuesday, September 23, 11:00am to 12:00pm Eastern


Manufacturing Companies Sue 4 to 1 Compared with NPEs

Clearly, with oonly 20% of all patent infringement lawsuits commenced by so-called non-practicing entities the facts just do not show a patent litigation problem. This is particularly true when you consider the reality that independent inventors, research and development companies and Universities all qualify as non-practicing entities. Certainly there are some bad actors who file patent infringement litigation, but a meaningful portion of that 20% are those who no one in their right mind would ever characterize as a patent troll or who are engaging in litigation abuse. So the reality is that the GAO report, after thoughtful and extensive analysis and fact gathering, shows what industry observers already knew — there is neither a patent litigation problem nor a non-practicing entity problem. To the extent that there is a problem it is with bad actors who make up a small portion of all those who initiate a patent infringement action. See Enforcement of Bad Patents is the Problem. Thus the reforms proposed by the infringer-lobby and moving through Congress that seek to punish the entire industry are the sort of heavy-handed solution in search of a problem one might expect to find in a Banana Republic.

I think there is clearly litigation abuse, and some of that abuse probably does rise to the level of patent misuse. But we have laws on the books to handle that kind of litigation misconduct, which is exactly what it is — litigation misconduct. To try and sweep an entire class of patent owners together in a pile in order to address the few, easily identifiable miscreants is just plain stupid. We all knew that it was wrong when we were in third grade and the teacher punished everyone because one or two kids didn’t follow the rules.

Perhaps those crying wolf and claiming there is an enormous problem that requires a heavy-handed approach that punishes all patent owners didn’t learn that lesson like the rest of us.  Perhaps those who want to punish all patent owners, weaken all patent rights and fundamentally alter the patent system as we know it didn’t learn the same lessons in grade school because they were the “problem child” (to quote AC/DC) that led to us all losing recess in the third grade! Or maybe they were that clueless third-grade teacher who just didn’t have the sense or patience to figure out who the problem children really were. Let’s just punish everyone (queue evil laugh track)…

But thanks to the GAO report, as well as the work of other industry individuals such as Moore, we know the truth. There is no problem with the patent system. Litigation abuse is a problem in isolated cases, but that does not mean that there is a problem with the patent system as a whole or patents generally speaking. The problem is that certain nefarious bad actors use a patent as part of a shake-down to force defendants to settle for pennies on the dollar or pay hundreds of thousands of dollars (at a minimum) to mount a defense. Sending cease and desist letters seeking $500 or $1,000 to avoid patent litigation. But is that a problem with the patent system? No, absolutely not! The problem is with using judicial inefficiencies and the sloth of the system to force settlements. Such nuisance shake-downs are not new the the judicial process, although they are relatively new to patent litigation. But district courts have the power to put a stop to this if they want. See Judges Can Make Patent Trolls Pay.

GAO Report Concludes Focus on NPE Misplaced

Returning to the GAO Report, the conclusion is particularly interesting because it explains that the focus on the type of litigant (i.e., whether the litigant is a maker or non-practicing entity) is misplaced. In the conclusion to the report the GAO explains:

Public discussion surrounding patent infringement litigation often focuses on the increasing role of NPEs. However, our analysis indicates that regardless of the type of litigant, lawsuits involving software-related patents accounted for about 89 percent of the increase in defendants between 2007 and 2011, and most of the suits brought by PMEs involved software-related patents. This suggests that the focus on the identity of the litigant—rather than the type of patent—may be misplaced.

This is hardly surprising given that even casual, objective observation of patent litigation has long shown none of the dramatic problems suggested by those advocating for a weaker patent system and curbs on patent litigation.

Where Do We Go from Here?

The GAO report raises two interesting questions. First, will Congress push forward with further patent reform efforts that would weaken the patent system and make it more costly to bring patent infringement claims despite the independent GAO report that shows no widespread problems that require legislative fixes? Second, will the fact that software-related innovations are found in 50% of all patented innovations finally cause critics, recalcitrant patent examiners, the PTAB and certain judges to finally come to grips with the undeniable reality that software is a critical area of innovation and such inventions deserve patent protection?

Let’s start with the later. The chart below, which was included in the GAO report, shows that by 2011 half of all patents granted in the United States included software to some degree.

Not surprisingly, the GAO report also explains this increase as being attributed to the growth in importance of computers in our day-to-day lives. No conspiracy against those who write code or nefarious actions to bottle up technology. Quite reasonably, the GAO report says that “the number of software-related patents grew as computers were integrated into a greater expanse of everyday product.” Indeed, you can’t even drive from point A to point B in your automobile of choice without software any more. Disable software and you turn that car into a giant paperweight. Software is a part of more and more. If we do as the PTAB presumably would prefer (see Did the PTAB Just Kill Software?) and as half of the Federal Circuit has voted to do (see Federal Circuit Nightmare) software would not be patent eligible. Exactly how 5 out of 10 judges on the Federal Circuit could rule that software is patent ineligible is bizarre given that the Supreme Court has definitively ruled that software is patent eligible subject matter. See Diamond v. Diehr.

In the upcoming weeks the question will turn to whether Congress will disregard the independent GAO report and continue to move forward with respect to so-called patent reform legislation aimed at addressing a patent troll problem that doesn’t exist. Only time will tell and predicting what Congress will do when the fight turns political is difficult. There is an enormous lobby behind continually modifying the patent system to make rights weaker and to make it harder to enforce patents. Despite the fact that there is not a problem to be solved here Congress may well take the key from these well funded high-tech companies that want to gut the patent system. Yet with the GAO exposing the reality that there is no patent troll problem it will be interesting to see how the line of attack morphs in an effort to extract a punitive solution on the patent system where there is no problem in the first place.

- - - - - - - - - -

For information on this and related topics please see these archives:

Tags: , , , , , , , , , ,
Posted in: Congress, Gene Quinn, IP News, IPWatchdog.com Articles, Patent Litigation, Patent Troll Basics, Patent Trolls, Patents

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

43 comments
Leave a comment »

  1. Gene,

    Big “surprise” that the GAO found there was no “patent troll” problem! Congress has more important business to deal with, including providing the American public with a real “budget” for the first time in years, rather than chasing after a nonexistent, mythical “patent troll” problem.

  2. Most would agree that patent litigation is expensive. However, the overall expense could be reduced by front-loading the expense and devoting more resources to weeding out bad cases before they are allowed to proceed. Some kind of right to sue based on a re-exam or post-grant review might make sense.

  3. EG-

    I agree. With all the problems facing the U.S. it would be embarrassing beyond belief for Congress to waste even a single minute dealing with something that the GAO says is a non-problem.

    -Gene

  4. Some kind of right to sue based on a re-exam or post-grant review might make sense.

    You have got to be kidding me.

    Ron, I have seen your gold-plated views in posts past. They did not work then. They do not work now.

  5. The fact is that only a small percentage of issued patents ever get litigated. A little further scrutiny of those patents prior to all-out litigation would make a ton of sense. To apply that costly level of scrutiny/examination to all applications, which I am not now nor ever have proposed, would be the unworkable “gold plated” strawman that is being Anon-ymously attacked here.

  6. As I stated Ron, your ideas on a gold-plated system (your tiered idea approach) have been posted before, and found to be dreadfully inadequate.

    There is no ‘strawman’ being attacked.

    Yes, it is correct that only a tiny percentage of patents are litigated. That is a world of difference though between that and a denial of the right of acces to the courts. It was your denial of right of access that set me off.

  7. And please, leave out the “anonymous” posting is automatically suspect line of reasoning.

    That you want to talk about strawman and you include that line of reasoning is a bit much.

  8. Unless court costs go to zero there will always be a financial barrier to access. Making the initial hurdle higher but the overall cost lower would improve access to justice for legitimate cases while helping reduce the frivolous/nuisance cases that trolls thrive on.

  9. Ron,

    Really? Have you not been paying attention to the series of articles debunking the ‘Troll’ myth? And then you errantly suggest that court access is somehow affected because ‘Trolls’ are blocking access by more deserving parties?

    Have you lost all sense of reason?

    Further, financial constraints simple do not (and cannot) compare to legal constraints.

    I hardly know where to begin to attempt a rational exchange given such an abysmal stance. I find myself even more astonished than I was with your first post. Backing up a bad idea with such poor legal reasoning is convincing – but only for the opposite view of the one you intended.

  10. None of the articles deny the fact that there are some bad actors out there, but they don’t fall into neat classifications such as NPEs, PAEs, etc.

  11. And please tone down the ad hominen. The second and fourth paragraphs of comment 9 are nothing but gratuitous content-free name-calling.

  12. (sending again because I got a browser error when sent the first time — if this got posted twice, please delete the duplicate)

    One always needs to be careful about statistics. The GAO report does not, in fact, refute what other studies have shown in terms of more recent trends. The problem is that the GAO “one-fifth” summary refers to a range of years from 2007-2011 and their analysis stopped in 2011 and didn’t look at 2012. Look at the actual GAO report:

    http://www.gao.gov/assets/660/657103.pdf

    It’s important to read the full quotes preceding Figure 4:

    “Operating companies brought most of the patent infringement lawsuits from 2007 to 2011. According to our analysis of data for this period, operating companies and related entities brought an estimated 68 percent of all lawsuits.34 PMEs and likely PMEs brought 19 percent of the lawsuits.35 PMEs and likely PMEs brought 17 percent of all lawsuits in 2007 and 24 percent in 2011, although this increase was not statistically significant. In contrast, operating companies and related entities filed 76 percent of the lawsuits in 2007 and 59 percent in 2011, a statistically significant decrease.36 Individual inventors brought about 8 percent of the lawsuits, and research firms and universities brought less than 3 percent over the 5 year span. In about 3 percent of the lawsuits there was insufficient evidence to determine the type of plaintiff (see fig. 4).”

    “(36)Our analysis of litigation data from RPX showed similar results. Specifically, RPX’s classification of all infringement suits from 2007 to 2011 shows that operating companies brought 69 percent of lawsuits, and firms that RPX classified as patent assertion entities (PAE) brought 25 percent. RPX’s PAE category excluded universities and individual inventors acting as NPEs, making it similar to Lex Machina’s PME category. Individual inventors brought about 6 percent of the lawsuits, and universities brought less than 1 percent. Operating companies litigating patents that do not relate to the technology of their primary business sector—classified as noncompeting entities by RPX—brought less than 1 percent of all lawsuits. Additionally, lawsuits filed by PAEs increased by about a third from 2007 to 2010 and, in 2011, doubled over the previous year, and lawsuits brought by operating companies decreased by about 6 percent from 2007 to 2010 and, in 2011, increased by about 3 percent over the previous year.”

    Now look at the RPX data they are talking about in the following link:

    http://www.patentlyo.com/patent/2013/03/chien-patent-trolls.html

    where the quote from the GAO report was that “lawsuits filed by PAEs increased by about a third from 2007 to 2010 and, in 2011, doubled over the previous year” but the GAO didn’t look at 2012 where RPX showed the majority of patent lawsuits, 62%, were filed by NPEs.

    To claim that there is no PAE problem by conveniently looking at an average of previous years and not looking at the most recent trend of rapid growth nor the most recent full year for which statistics are available is certainly cherry-picking. One need not look at the subset of software patent lawsuits to see PAE suits in the majority. It happened overall out of all patent lawsuits in 2012.

    I also dispute the statements in this article that “Litigation abuse is a problem in isolated cases” or that “The problem is that certain nefarious bad actors use a patent as part of a shake-down to force defendants to settle for pennies on the dollar.” However, Gene already knows what I think about this and I’m not going to rehash that here. Those of you who have been at companies sued by PAEs (and some operating companies as well) who can’t even put forth a claims construction (or preliminary infringement) chart that makes any sense (i.e. a case that has no merit) know what I am talking about.

  13. Richard-

    Of course you dispute these facts. Your idea of a troll is anyone who is suing you!

    Still, there is a solution to deal with bad claims asserted. Until defendants decide to fight rather than pay $500, $1,000 or $50,000 there is not much anyone can do. So the defendants are the ones creating their own problems. Settle for a small fraction of nuisance value and all you do is paint a bulls-eye on your back.

    -Gene

  14. Richard-

    One more thing…

    I find it amusing that you want to use RPX data instead of the independent, unbiased and non-partisan data from the GAO. Here is what Colleen Chien’s article on Patently-O says about RPX:

    “RPX is a publicly-traded company that provides solutions to troll threats for its member companies…” So RPX is biased, partisan and completely dependent on those who have an interest in the outcome of their research.

    -Gene

  15. As a high-tech entrepreneur who has been on _both_ sides of patent infringement disputes, i think the responsibility for efficiently and fairly resolving such disputes should be shared by both plaintiff and defendant. I believe that the cost of a commercial crowd-sourced prior art search is in the low 5 figures. I don’t think that’s too much ask of a patent owner who is serious about enforcing their patent, and it would deter the troll who is merely trying to extort a nuisance settlement in that same dollar range.

  16. Ad Hominem, Ron?

    Hardly.

    Parsing my post into paragraphs and then selecting only the paragraphs you find distasteful and ignoring the paragraphs in which I address the substance (or more correctly the lack of substance) in your position is not ad hominem.

    My questioning your sense of reason is valid. Your stance is abysmal. If you do not want your position described accurately, I suggest that you either strengthen your position, or refrain from sharing your position. Do not ask me to be quiet when I am accurately responding to what you present.

    As an additional point, you once again advocate crowd-sourcing, while neglecting to take into account the fact that the USPTO programs were failures. It is simply impermissible to ignore reality and expect to be taken seriously. This is not ad hominem. This is me asking you to provide at least a semblance of real life backing to your position instead of pure wishful thinking.

  17. Not sure if this has been posted earlier:
    Qualcomm grants $2M to Northwestern’s law school to investigate patents’ role in innovation:

    http://www.abajournal.com/news/article/qualcomm_gifts_2m_to_northwesterns_law_school_to_investigate_patent_roles/?utm_source=maestro&utm_medium=email&utm_campaign=tech_monthly

  18. step back,

    Isn’t Qualcomm a patent troll?

    (ok, so the humor was a little lame)

  19. Do New Zealand legislators talk about code or talk “in codes”?

    GARETH HUGHES (Green) : Kia ora, Mr Speaker. … Software should not be patented, because what we are talking about is code. It is like we are talking about maths. Copyright is fine. This is about protecting New Zealand’s thriving, growing information and communications technology and software development industry. Foss has muddied the waters with the introduction of two new words—only two words—“as such”, which is what is scaring our thriving industry. The industry, quite rightly I think, is describing it as a stab in the back. They are describing it as being thrown under the bus. These are not your extremists. These are people like the New Zealand Institute of IT Professionals. We are talking about the Open Source Society. We are talking about InternetNZ. We are talking about some very respected, very influential people, and we hope the Government listens to them, because it has introduced this huge legal—

    source: http://www.parliament.nz/en-nz/pb/debates/debates/50HansD_20120912_00000016/patents-bill-%E2%80%94-second-reading

  20. The “new” and improved New Zealand Patent Law banning computer programs.

    Click on “15 Other exclusions” in the following page:

    http://www.legislation.govt.nz/bill/government/2008/0235/latest/DLM1419043.html

  21. Is math copyrightable? (note, I am asking about actual math)

    In New Zealand?
    In the US?

    Anywhere?

  22. One thing that does rather bother me about these numbers being quoted in this paper, and in the GAO paper is that they don’t break the numbers down by industry. Surely there are a lot of patent suits that happen in the bio industry, but nearly 100% of those are bound to be other manufactureres, not trolls. The same surely goes for many other fields, chemicals etc. All those numbers get factored in and thus the 1/5 are NPE number, would seem to cover up the fact that in certain arts, like the one mentioned that is seated in silicon valley, sees a greater number of NPE suits than others, and perhaps that is where the issue arrises most. Surely we don’t hear about Merck complaining about trolls yet all of their suits are factored in with the suits from the people who are complaining about a problem.

  23. No answer to my queries at 21?

    Where are all the ‘software is maths’ folks?

  24. Still trolling, Anon? I guess they’re not biting today.

  25. Anon,

    Anyone can, and many often do, cobble together a series of verbs and nouns that sound like proper English but on closer inspection turn out to be nonsensical wordsmithing.

    Was it brillig, and jabberwhacky too? Oh do beware the jabberwhack my friend.

  26. Ron,

    I have to chuckle at your suggestion that I am “Trolling,” as it appears that you are being less than gracious in retaliation over my recent comments to you.

    Step back provided a very interesting side note to this thread, which sparked a critical thought. So often we hear from the anti-software patent people that “software is maths” and generally from the same people “copyright is enough protection.” These views need to be explored in a little more detail than what has been done before.

    Now I can take the floor and explain what these statements mean, and move on with my points. However, I would rather have proponents of these views engage a conversation in order to, among other things,
    a) make sure that I do not misrepresent their views,
    b) defend their views, and
    c) come to a realization through our dialoague the limitations of these views.

    Why would you consider this “Trolling?”

  27. Anon, I apologize but I couldn’t resist the triple entendre on the word troll.

  28. No problem Ron – I too recognized the opportunity (and it gave me an opportunity as well to provide a more indepth invitation to those who feel strongly against software patents).

  29. Since RPX data is apparently considered to be biased, how about the same Lex Machina database that the GAO used? See the following report on the Lex Machina website showing that in 2012 56% of patent infringement lawsuits were filed by patent monetization entities:

    https://lexmachina.com/2013/04/09/lex-machina-releases-the-aia-500-expanded/

    The supposed bias in the RPX data for 2012 showed 62% rather than 56% from Lex Machina — all RPX data was somewhat higher for all years compared to Lex Machina most likely due to their definitions or determinations of a PAE, but it’s not wholly out of line.

    Now some of this large increase in 2012 may be due to the new joinder rules the AIA put into effect in September of 2012 though looking at a full year in 2013 will be more definitive as would looking at the number of defendants since I believe the average number of defendants per lawsuit to be far higher from PAEs (at least prior to the new joinder rules), though that is something I will try to get confirmed via the Lex Machina database.

  30. The GAO report supports what I just wrote, but of course only through 2011 since they did not look at 2012:

    “Our analysis of the data from 2007 through 2011 shows that PMEs tended to sue more defendants per suit than operating companies. For this period, there were about 1.9 defendants on average for suits filed by operating companies, and about 4.1 defendants on average for suits filed by PMEs. In addition, a disproportionate share of PMEs sued a relatively large number of defendants. For example, about 12 percent of PMEs sued 10 defendants or more in a single lawsuit, compared to about 3 percent of operating companies, a statistically significant difference. Thus, even with bringing about a fifth of all patent infringement lawsuits from 2007 to 2011, PMEs sued close to one-third of the overall defendants, accounting for about half of the overall increase in defendants. Additionally, the estimated total number of defendants sued by PMEs more than tripled from 834 in 2007 to 3,401 in 2011, while the increase in
    ??the total number of defendants sued by operating companies was not statistically significant.”

    Since the GAO report showed approximately 9000 defendants in 2011, the 3401 sued by PAEs in 2011 would be around 38%. I will see if I can get numbers from Lex Machina for 2012, but they already indicated the majority of lawsuits (56%) are from patent monetization entities so the percentage of defendants should be at least that high.

    Needless to say that I disagree with the assertion in this IPWatchdog® article that “there isn’t a patent troll problem at all despite the protestations of the Silicon Valley elite who think every patent they get sued on is invalid and every patentee plaintiff is a patent troll”. I suppose it just comes down to whose biased viewpoints (including my own) and selective data one wants to read.

  31. As this post slides off of IPWatchdog’s page one, I would ask again that Gene revise his archived pages to indicate the number of comments.

    I realize that the anti-software patent crowd does not want to take a closer look at what is required to earn copyright protection, and that the argument of ‘software is maths’ would defeat the ability to obtain any protection, but I would like to be able to quickly check the back records occasionally to verify the ongoing lack of response.

  32. Anon-

    That has been on my “to do” list since I noticed the problem.

    Back in June and July we had a ton of server issues. We had spammers and phishers breaking into the server and we couldn’t seem to plug it up. We finally managed to plug up the hole, but as we were scrambling to figure out how they were getting in I guess a change was inadvertently made. It seems to be working again.

    Cheers.

    -Gene

  33. Thanks Gene – much appreciated.

  34. I note that my posts at 21 and 26 should have a brighter spotlight as a colleague of mine pointed out that is Ben Klemens is receiving some notice at Patently-O ( http://www.patentlyo.com/patent/2013/09/interpreting-cls-bank-intl-v-alice.html ). This non-IP trained and avowed anti-software advocate made the precise mistake that I allude to.

    Once again, I find myself shocked that otherwise intelligent and logical people seem to lose their ability to think rationally when the topic of patents is brought up.

  35. Why doesn’t the news media tell the public what could (and likely WILL) happen now that Congress agreed to do everything that the big multinationals want them to do (including shutting out NPEs)? What’s going to happen to independent inventors and small start-ups now that Congress and Obama have implemented the AIA (the so called “America Invents Act”)? They are going to become extinct – that’s what will happen within a decade.

    The Congress (without permission of the people) made things MUCH worse by approving the many changes of the AIA (the so called, “America Invents Act”), on March 16. For the first time in U.S. history we have adopted the system favored by Europe and Japan (again, without permission of the American people) and have now gone to a “first-to-file” system, rather than a “first-to-invent” system, clearly favored by the Founders. This will have devastating impact on American innovation for many reasons, including that it will make it almost impossible for small entities to afford to obtain patents and to defend any patents they might still get. It is a dream come true for large multinationals, who will now have MUCH LESS competition from “upstarts” and independent inventors. Not to mention what will happen when industrial espionage and cyber-theft meets the AIA !!! I have worked out numerous scenarios by which American IP could not only be stolen but, now, under the AIA, also patented in the same country from which they were stolen (so called protections against this simply won’t and can’t work). But Congress (and the companies they work for) still isn’t satisfied, now they want to stamp out ALL small entities that can still give them headaches. The big companies don’t want ANY headaches anymore and they are getting everything they want from this Congress.

    I believe that the AIA is completely unconstitutional and that the other measures that are now being proposed may also be unconstitutional. The amazing thing is that there don’t appear to be any lawyers raising the question of constitutionality of these crazy proposals.

  36. The latest report from Cotropia, Kesan and Schwartz:

    http://www.ipo.org/wp-content/uploads/2013/11/PAEsReport_11.14.13.pdf

    shows smaller percentages of patent infringement lawsuits from their PAE categories of Large Aggregators and Patent Holding Companies, though when looking at the number of defendants (parties in suit excluding plaintiff) they show an increase from 31.59% in 2010 to 36.75% in 2012. The growth is still there, but the absolute numbers depend on how one categorizes a PAE. In their report, operating companies represented nearly half of patent infringement lawsuits in both 2010 and 2012 in terms of number of defendants.

  37. 2013 results are starting to roll in. As I noted above, different studies and methodologies are going to have different absolute levels, but the growth trends have been fairly consistent.

    http://www.washingtonpost.com/blogs/the-switch/wp/2014/01/31/patent-trolling-was-up-11-percent-last-year/

  38. Like most of the popular press, the above-referenced Washington Post article fails to define what a “patent troll” means. PAEs are not necessarily trolls! Nor are small inventors/start-ups who were unable to commercialize their invention because a large company decided it was easier to infringe than to work with them fairly. Any study that fails to clearly and _correctly_ define what is considered “trolling” cannot be relied upon.

  39. @Ron Hilton – Agree!

  40. If all the patent infringement lawsuits were reasonably strong cases with strong patents, then it wouldn’t matter if 100% of them were from any particular entity type, PAE or otherwise. So long as the vast majority of cases (around 92%) are settled under NDA, one can claim that they are all legitimate strong cases and that there is no problem. Even the low win rate in court for certain entity types (PAE) and/or certain patent types (software) can be waved away by claiming that defendants only take the weak cases to court but settle on the rest. There are always arguments one can make to support one’s position when the bulk of the data (merit of cases) is hidden.

  41. As for the definition — the Patent Freedom data was on NPEs that they define in the following link:

    https://www.patentfreedom.com/about-npes/background/

    They break out the sub-categories such as ones you described.

    “For instance, about 25% of “parent” NPEs tracked by PatentFreedom are enforcing only patents that they had acquired. Another 60% are asserting patents originally assigned to them, and the remaining 15% are asserting a blend of originally assigned and acquired patents. However, if we add in the more than 2,100 subsidiaries and affiliates of these entities and treat them all as standalone entities, we find that 19% of them are originally assignees, and 69% are acquirers, and 12% are blends.*

    *A better way to begin to assess the impact of acquired patents is to look at the distribution of operating company counterparties in NPE litigation over time. In 2005-2006, 37% of defendants (and plaintiffs in DJ actions) faced acquired patents and 63% faced originally assigned patents. By 2011-2012, however, that had changed quite substantially, so that 60% of defendants faced acquired patents and 40% faced originally assigned patents.”

    Obviously, PatentFreedom sells subscriptions and professional services so has that bias. I was only posting the article so give more up-to-date data because the original assertions were that the proportions were low and therefore not a problem. As I pointed out in the previous comment, even if the proportions were 100% that does not mean there is a problem — one can make claims either way but the bulk of the relevant info to evaluate case strength is hidden in confidential settlements, work papers, sealed court documents (e.g. infringement charts), etc.

  42. I would challenge the assumption that NPEs have an advantage because they are not likely to be countersued for infringment. In many cases the infringer already won the first round by refusing to license essential IP to the inventor/start-up which developed and patented an improvement upon that IP. By thus preventing the patentee from practicing their own patented improvement in the first place, they are essentially forcing them into NPE status with respect to that invention. My personal experience in founding a start-up was similar to this scenario, although the incumbent, who had originally agreed to license us the essential technology, changed their mind and sued us for infringement. In that case they were not interesting in practicing our improvement, but only suppressing it (which they successfully did, leading to an antitrust investigation). So it could be argued that they were the true “NPE” with respect to that techonology, although they effectively put us out business by acquiring and then declining to practice our invention.

  43. Richard-

    It seems that the growth in filing is reported by those who refuse to share their data and claim it to be confidential and private. Those that share the data they use, on the other hand, show no growth and conclude that there is not a PAE problem. Interesting how those finding the problem refuse to release the data that they base their assertions on.

    I prefer to rely on data that I can observe for myself. Conclusions made using confidential information are really worth nothing and seem only intended to mislead.

    -Gene