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Massive Litigation Spike in Response to America Invents Act


Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog, Inc.
Principal Lecturer, PLI Patent Bar Review Course
Posted: October 23, 2013 @ 5:03 pm

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Professor Robin Feldman, UC Hastings

There has been much discussion about the so-called massive growth of patent litigation in the United States. Those that are pressing for further reforms of the patent system complain that litigation is rampant and something needs to be done to stop it. This is all despite an August report by the independent Government Accountability Office that concluded that there was not a problematic rise in patent litigation and that really nothing needed to be done. See GAO Report Finds No NPE Litigation Crisis and GAO Report Unmasks Mythical Patent Troll Problem.

Enter Professor Robin Feldman, who has become the preeminent researcher on issues of patent litigation, particularly as it refers to so-called patent monetizers. Professor Feldman has found striking new data on patent trolling and the effects of the America Invents Act, which to me suggests that the AIA has clearly been successful in its intended goal of reducing the number of defendants in a single patent infringement litigation.

Professor Feldman’s new analysis was developed by breaking down the massive data set she collected into a month-by-month analysis of patent infringement lawsuits. The data examines all patent lawsuits over four key years, which represents approximately 15,000 patent infringement lawsuits and 30,000 patents asserted. Not surprisingly to those of us who have closely followed the America Invents Act, but there was an enormous spike in litigation leading up to the implementation of the AIA in September 2011. The following graph tells the story.

In her article analyzing this data Professor Feldman wrote:

“First, there is a dramatic spike in the number of defendants sued by monetizers in the month before the America Invents Act was signed into law. In other words, monetizers rushed to the courthouse to get their lawsuits filed before the Act became effective. The spike was so extreme that we had to work with the scale of the graph to present it on one sheet.”

Professor Feldman also wrote:

“The month-to-month data for the remainder of 2011 and all of 2012 suggest that the America Invents Act had some effect on reducing the numbers of defendants sued, although the numbers were still historically quite high. Even these behavioral changes, however, appear to have been short-lived. By late 2012, the number of defendants sued by monetizers rises. Although more time and information would be necessary to reach definitive conclusions, the data suggest that either the lure of monetization continues to increase overall or parties are finding ways to work around whatever discipline was imposed by the new rules. In short, the month-by-month data suggest that while the America Invents Act may have slowed the train somewhat for a time, it is still barreling down the tracks.”

While I do like Professor Feldman’s research, which contributes greatly to the debate with objective information, it does not seem to me that the graph necessarily supports the conclusion that patent litigation activity is starting to rise again at unexpected, pre-AIA levels. A close look at the graph shows that for some months the number of defendants sued per month by monetizers in 2007 outpaced the number of defendants sued per month by monetizers in 2012. Before we could conclude that patent litigation is “still barreling down the tracks” we need more data and we also have to take into consideration a number of marketplace realities driving innovation, patents and the enforcement of patents.

Furthermore, the entire point of the patent infringement litigation reforms in the AIA was to make it more difficult, if not impossible, for patent owners to sue large numbers of defendants in a single litigation. That was likely very wise because when dozens or hundreds of defendants are sued in a single case that unfairly compromises their right to mount an individual defense. But these joinder rules were not intended to prevent patent litigation, just make it more fair for defendants not to be bundled together in cases where there really was no commonality of facts aside from the patent being asserted. We knew that would mean either patent plaintiffs would give up suing, which was extremely unlikely and extraordinarily naive in my opinion, or that patent plaintiffs would sue fewer defendants per case but likely bring more litigations in order to enforce their patents. The fact that the AIA has worked exactly as intended, to cause more patent litigations with fewer defendants to be brought is hardly a sign of any patent litigation problem if you ask me.

There has also been much discussion about the fact that the smartphone patent wars have contributed enormously to the number of patent litigations filed over the last several years. While it may seem difficult to believe, it was not until 2007 that the smartphone crazy took control in the general population with the introduction of the first Apple iPhone. The first Android phone was not introduced until October 2008. Certainly there were previous smartphones by Blackberry, Palm and others, but not until these devices hit the consumer mainstream did things really start to get interesting on the patent front. Thus, if we are going to consider whether there is a problematic increase in the number of patent infringement lawsuits we really also need to consider the underlying technical and market realities that drive patenting and patent enforcement and not just the number. This is particularly true given that there has always been a significant uptick in patent enforcement with exciting, revolutionary new technologies. For example there were nearly 600 patent infringement litigations brought dealing with the phone in the late 1800s. See The Telephone Cases.

The truth is that there has been an explosion in the amount of patent activity in the smartphone space. According to patent attorney Ed Robinson, “The smartphone market accounts for less than 1% of the United States’ annual GDP (by U.S. sales) but encompasses about 16% of all U.S. patents.” See Number of Patents for Smartphone Technologies Has Exploded. By some estimates patents that more broadly relate to “mobile technologies” account for 25% of patent issued in the U.S. See Mobile-Related Patents Are Increasing. This has led to a explosion of litigation in this area— litigation that is brought by major companies such as Google, Apple, Samsung and others who are hardly considered non-practicising entities or patent monetizers.

Still further, the GAO report 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. With only 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.

This additional information inserted into the debate by Professor Feldman will not cause the debate to go away, that is for certain. It seems to me that the data supports the conclusion of the GAO that there is not a patent litigation problem in the United States.

Professor Feldman’s new data will be included in The AIA 500 Expanded: Effects of Patent Monetization Entities (forthcoming 2013 UCLA Journal of Law & Tech). An earlier draft of the paper was cited by the White House in its report on Patent Assertion for the conclusion that almost 60% of patent lawsuits filed in 2012 were filed by monetizers. The article is available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2247195. The new month-by-month data begins on page 60.

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Posted in: America Invents Act, 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.

 

7 comments
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  1. Unfortunately many people do seem to have supported the AIA because they naively thought it would lead to less patent litigation and why exactly is a lot of patent litigation a problem? If people are infringing patents they should be prosecuted. If the issue is the patents being enforced shouldn’t have been issued then the problem is higher up the chain and that should be where things are focused (though I don’t believe there is a problem there either).

  2. “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. ”

    I would be interested to know the breakdown by field. If almost all the “trolls” or NPE’s making up the 1/5 are hitting the silicon valley folks then that might explain why they’re so especially upset about them compared to, say, chem, bio, mechanical/auto, and standard electronics manufacturers etc,

  3. John, don’t forget that a lot of Silicon Valley is software related and there is semi-religion among programmers that software should not be patented. So they have the point of view that if all they are doing is selling software, any allegation that they are thereby infringing a patent is spurious, and the patentee is a nefarious vandal.

  4. I think it’s the blackmail of the cease-and-desist letter and the offer to settle that people resent. I get the impression that the 3 commenters here are probably lawyers. How can litigation possibly be bad, if there are fees to be earned? Why should someone complain if they get sued for some ambiguous or ridiculously broad claims that were passed on years ago, before the PTO employed any examiners who knew or understood a thing about software? But mark my words, someday you’ll be tangentially involved in a car accident that isn’t your fault, or sued by a neighbor because they don’t like your dog. Then you’ll see how wonderful endless continuances and depositions can be to your business or your life.

  5. Jerry-

    I’d like to invite you to review our other writings on the issue of patent litigation. Over and over again I acknowledge that there is real, substantial patent litigation abuse. Over and over again I write about the “extortion-like” activity that is harming individuals and small businesses. There is no doubt that there is real evil, and it sounds as if you have unfortunately been on the receiving end.

    The unfortunate problem is that many well funded corporations are exaggerating the patent litigation problem and lumping all patent holders into the same boat. Microsoft, for example, has the audacity to say they do not infringe valid patents despite losing many patent infringement cases where they have infringed the writes of small companies. So the giant corporations want to weaken the patent system, which will not solve abusive litigation. If abusive patent litigation goes away they will simply find another harassing alternative.

    We need to focus on the problem and get relief. That means district court judges need to better police their courtrooms. But it is not fair to say that attorneys see no problem with patent litigation. The exact opposite is true. But punishing innovators who have been ripped off is not the solution for solving the evil that lurks as the result of abusive patent litigation.

    Take a look at:

    http://www.ipwatchdog.com/2013/10/07/fighting-patent-trolls-is-the-real-solution/id=45633/

    http://www.ipwatchdog.com/2013/02/28/chief-judge-rader-speaks-out-about-patent-litigation-abuse/

    http://www.ipwatchdog.com/2011/08/04/indicia-of-extortion-federal-circuit-slams-patent-troll/id=18568/

    http://www.ipwatchdog.com/2012/12/09/troll-turning-point-federal-circuit-breathes-life-into-rule-11/

    http://www.ipwatchdog.com/2011/05/24/extortion-patent-style-small-business-in-the-troll-crosshairs/

  6. It would be very informative to see the plaintiff count results by entity size. For it certainly seems that the AIA will supress litigation by a small entity. Goodlatte’s bill should also raise the barrier for small entities while giving the supporters of his bill, Google, Microsoft, Apple and other PAEs like them a free hand.

  7. I believe the AIA is completely unconstitutional for many, many reasons which I cannot go into here. It’s important that the Supreme Court review this absurd and discriminatory legislation as soon as possible – hopefully on an emergency basis. what ever happened to “equal protection” under the law? What ever happened to not erecting unconstitutional burdens to exercising one’s rights under the Constitution (like exorbitant fees)? What about cyber-theft of IP? Does the AIA provide complete protection against that?