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/