Posts Tagged: "non-practicing entities"

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 App Developers Alliance is joining with law schools nationwide to help startups battle patent trolls. The Law School Patent Troll Defense Network is a consortium of law school clinics that will provide free legal representation to small app developers and other entrepreneurs that have been threatened or sued by patent trolls. Clinics participating in the Network may also represent the Alliance in major patent cases affecting developers and the app community.

I recently received an e-mail from a colleague who is embarking on an interesting research project. This colleague, who would like to remain publicly anonymous for the time being so as to be able to conduct the underlying research privately and without influence. The researcher is seeking to interview a number of different industry participants for a research study on patent assertion entities.

Last week ZDNet ran an article about how Kaspersky Lab took on and prevailed against Lodsys, one of the more notorious patent trolls operating presently. Lodsys first appeared on the scene several months ago when it started chasing Apple App Developers and demanding that they take a license to the Lodsys patent portfolio, and then later going after Google Developers who provide Apps for the Android operating system. Essentially, the model followed by Lodsys is to sue everyone, big and small and everywhere in between. Lodsys purchased its patents from Intellectual Ventures, who as they were amassing a giant patent portfolio lead the industry to believe it was for the benevolent purpose of taking patents out of the hands of patent trolls, thereby insulating them from such lawsuits. IV has at times found it easier to sell patents to willing patent trolls or has used various shell companies, but also now files lawsuits of their own.

When the question “What is the future of BlackBerry?” was entered into the virtual Magic 8 Ball the response was: “Don’t count on it.” Hardly scientific, only mildly amusing, but as far as predictions it is certainly within the envelope of possibilities. Still, the company continues amassing a portfolio of US patents. But this all begs the question about the direction the company will follow with new private ownership. Will they morph into a licensing juggernaut? Might they give up being a manufacturing company altogether and turn their considerable portfolio on the industry? Will the patent portfolio be auctioned off to the highest bidder?

With the FTC taking this step now I don’t know how Congress can move forward with patent reform legislation that purports to address the so-called patent troll problem. Perhaps they will move forward, but at a time when the Congress has so many issues to deal with is patent reform prior to yet another in-depth government report really where times should be spent? As of the writing of this article we do not have a budget for FY 2014, or even a continuing resolution and the debt ceiling debate looms in the backdrop. Perhaps Congress and the FTC should be spending time fixing other problems rather than tinkering with an issue the GAO says doesn’t need to be fixed.

Many of you are privy to the problem of excessive patents. You have all seen the articles about yet another cellphone company infringing on yet another patent, but what you’re left with are questions of what all this activity means and how to use that information to act in your best interest– whether you are the CEO of a company…

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, with joinder provisions in the AIA guaranteeing an increase in patent litigations. Still, the GAO report further 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.

Instead of condemning NPES, the GAO emphasized at the very outset of its report that our nation’s history is filled with examples of inventors who did not develop products based on the patented technologies… [O]verall, the report directly and indirectly supports the view that there is no patent litigation crisis and that, to the extent that there are problems with the patent system, they are linked primarily to patent quality – not the identity of the patent owner (e.g. NPE, PAE, PME, operating company or whatever name one chooses to use).

But how could Universities ever be characterized as non-practicing entities in the first place? If we are going to be intellectually honest there is no way you can characterize Universities as non-practicing entities. University innovations have laid the foundation for thousands of startup companies since 1980; in fact well in excess of 7,000 startup companies have been formed. These startup companies are not just high-tech companies, they are the highest tech companies based on the most cutting edge research and innovation our country has to offer. These companies are not imaginary or mythical, but rather they are real, tangible and operating companies; they exist! These startup companies are also U.S. formed companies that are located in the U.S. and employ U.S. workers. Now that is a jobs plan if I ever saw one!

How we deal with the problems uncovered herein is something for deliberate consideration, not the activity of an automaton. For example, this paper demonstrates that patents asserted by inventors and inventor based companies generally do not fare as well as patents of other entities. However, in the United States none of us would want to stop all such entities from trying to market and license their ideas. Most of us would agree that the independent inventor has been the heart of innovation in the United States for a very long time. We have too many memories of the stories of the Wright Brothers, Chester Carlton of Xerox fame, of Eli Whitney and the cotton gin, of Edison, and of Farnsworth — the farmer boy who invented the television.

As can be seen from Fig. 12, 25% of the cases brought against the retailer were actually brought by Producer companies. The other 75% of cases could indeed be classified as NPE suits. However, of these suits, 30% were by independent inventor or independent inventor related companies, and the other 45% of cases were brought by other NPEs. Interestingly of the “other NPEs”, we found all of the patents asserted against this retailer were patents originally obtained from Producers. Of these patents, one-third came from big corporate America and the remaining two-thirds from smaller Producing companies. That means nearly 65% of this retailers troubles, which it directly attributes to “trolls” asserting bad patents, are actually related to patents that derived from Producing companies. Of its cases that was resolved, pacer suggests none were tried and each was mutually dismissed within 4 months to 13 months.

Myth 4: Patents of NPEs fare much more poorly in reexamination proceedings brought during litigation than those of Producers. Truth: When one includes independent inventors and independent inventors in the mix of NPEs, the patents being asserted by NPEs may be said to fare slightly more poorly in reexamination proceedings than those patents asserted by Producers. However, if one removes these independent inventor entities from the mix of NPEs, the patents held by non-independent inventor based NPEs were seen to do at least as well, if not better, than the average asserted patent of the Producers which was likewise thrown into reexamination during litigation.

There are many myths that are attached to the fable of the so-called “patent troll.” Acting like the MythBusters, we probed some of them. For example, the success rate of NPEs overall across 267 random cases indicates that the litigation outcome for NPE suits looks very similar to litigation outcome for Producer suits. However, when individual inventor suits and individual inventor company suits were removed from the mix of overall NPEs, we found that non-independent inventor NPEs had an outcome profile that looked significantly better than the Producers, both in very likely favorable and likely unfavorable outcomes in litigation.