One of the real problems with the debate over patent litigation abuse is that it hasn’t focused on litigation abuse at all. Instead, the debate has focused on attempts to characterize patent owners with pejorative labels, such as calling anyone who has the audacity to seek to enforce their rights a “patent troll.” Unfortunately, the term “patent troll” has evolved to mean “anyone who sues me alleging patent infringement.” This has led the media, the public and Members of Congress to incorrectly believe that there is a “patent troll problem,” which has influenced decision-makers all the way from Capitol Hill to the United States Supreme Court, who increasingly seems to be deciding patent cases with one eye firmly on what is a completely non-existent problem.
You have probably heard the narrative start something like this: there is an explosion of patent litigation. The objective reality, however, is that there has not been an explosion of patent litigation. The Government Accountability Office, after an exhaustive review of patent litigation, concluded that there was no patent litigation crisis. The same GAO report also found that 80% of the patent lawsuits filed are brought by operating companies suing other operating companies. Thus, those who profess there to be rampant problems associated with patent trolls and non-practicing entities suing for patent infringement are simply telling a tale that the factual data doesn’t support.
More recently Lex Machina has come forward with some eye opening statistics as well. A recent report from Lex Machina concludes: “Plaintiffs filed 329 new federal patent cases in September 2014, a 40% decrease from the 549 cases filed in September 2013.” Indeed, if you dive deeper into the 2013 and 2014 statistics you see that through the first nine months of 2013 there were 4,548 patent infringement lawsuits filed, but during the first nine months of 2014 there were only 3,887 patent infringement lawsuits filed, which represents a 15% reduction in patent litigation in 2014 compared with 2013. Furthermore, in 7 of the 9 months during 2014 there have been fewer patent infringement lawsuits filed during 2014 than during 2013. The statistics and independent GAO report just do not support a narrative that proclaims there to be a run away problem with patent litigation run amok.
So how has such a factually baseless narrative been able to dominate the discussion? This propaganda was promoted by some of the elite Silicon Valley companies over the years, with Google leading the charge. But Google is a high-tech company. Why would they want to damage the patent system by spreading half-truths and reckless misrepresentations?
Despite what some have been led to believe, Google is a company that was founded on strong patent protection, having filed two patent applications prior to even obtaining the domain name Google.com. These patents related to Google’s proprietary page rank algorithm. The Google search algorithms, protected by patents, were how Google moved from fledgling start-up to eventually dominate the likes of Yahoo! and Microsoft. Simply stated, like virtually every other Silicon Valley start-up Google relied on the exclusive rights provided by patents and now that they are dominant they would prefer the patent system to evaporate so that the next round of dorm-room start-ups won’t be able to challenge Google in the same way that Google supplanted Yahoo! and Microsoft. The truth is Google is just one groundbreaking algorithm away from becoming old news.
Google is hardly monolithic. There are some within Google who really like patents, severely overpaying for a rather low quality Motorola patent portfolio, as well as being a top 10 patenting company in the United States. Still, Google has teams of lobbyists in Washington, DC, promoting the demise of the patent system. Unfortunately the half truths and misrepresentations about the patent system promoted by Google and others have gained mainstream acceptance.
To a large extent Apple, Microsoft and many other Silicon Valley innovators went along with the anti-patent rhetoric perfected by the Google machine because they were facing what they called a “patent troll problem.” This caused even innovation based leaders to throw in with Google and others in an attempt to vilify innovators and a patent system run amok. Such a myopic strategy risked the innovative future of these companies by putting their own patent portfolios in grave jeopardy in order to address the problems they were having with a relatively small number of truly bad actors who were clearly abusing the litigation process.
Sure, there are bad patents, but the problem with bad patents is not nearly what you have heard it to be. During 2013 there were over 571,000 patent applications filed, with nearly 288,000 patents issued. See Patent Statistics Table. Even if the United States Patent and Trademark Office is correct 99.5% of the time that would mean that 1,440 patents during 2013 were issued that shouldn’t have been issued. It is unrealistic to expect perfection in any system, particularly when there are nearly 8,500 patent examiners, who are the front line decision-makers. With that number of individual decision-makers and the volume the USPTO handles in a given year there will be some mistakes. That doesn’t mean that the system should be or needs to be scrapped. But Google and others who abhor the patent system would have the public believe that the Patent Office issues low quality patents routinely. Everyone familiar with the industry who wants to be honest will tell you that the far bigger problem is that the USPTO doesn’t issue patents that should be issued. It is extremely difficult to get patents in some areas, particularly on software technologies. That is the reality and anyone who says otherwise is simply not being honest.
Still, many of the Silicon Valley elite have for many years complained about a patent litigation explosion that doesn’t exist and a Patent Office that seems to enjoy issuing low quality patents. Neither represents reality, but the truth has been drowned out in order to forward an anti-patent agenda. But why?
The Silicon Valley elite who have been bemoaning the patent system and patent trolls succeeded beyond their wildest dreams, convincing everyone of problems that don’t exist. So successful has this misinformation campaign been that now patents owned by everyone in the high-tech sector are at least worth less, if not completely worthless, given reforms that ushered in the Patent Trial and Appeal Board and a number of truly awful patent eligibility decisions by the Supreme Court. By taking a short-sighted view of the litigation problems they were facing they took direct aim on the patent system, their own patent portfolios and the essence of their competitive advantage. Institutional shareholders in any company that has lobbied for patent weakening policies and court rulings should be appalled and may well want to seek out attorneys specializing in shareholder lawsuits. With the patent laws as they are now many patent portfolios should be written down substantially, if not nearly completely written off altogether.
With the tide overwhelmingly flowing in an anti-patent direction, many of the most identifiable companies in Silicon Valley innovators have finally split with Google and are now coming out strong for patents and American innovation. A case in point is the Partnership for American Innovation (PAI). Recently the Partnership for American Innovation (PAI), which is comprised of Apple, DuPont, Ford, GE, IBM, Microsoft and Pfizer, submitted comments responsive to a request for public information published in the Federal Register back on July 29, 2014, titled Strategy for American Innovation. Some may recall that in February 2011, President Obama released a Strategy for American Innovation, which described the importance of innovation as a driver of U.S. economic growth and prosperity, and the critical role the government plays in supporting the innovation ecosystem. It is now time to update the national innovation strategy, and the PAI has come out to explain the critical role innovation plays in the U.S. economy. Time will tell whether this pro-innovation, pro-patent organization will be able to turn public sentiment, and more importantly influence Congress.
The trouble with so-called “patent reform” efforts, both on Capitol Hill and within an increasingly political Supreme Court, is that the changes made are crippling those that innovate and need patents. At the same time the changes do not offer relief to those that are being targeted by the bad actors because the changes in the law are not designed to fix the existing litigation abuse problems. Yet, through legislative attempts and Court decisions we are dismantling the patent system. In the meantime, no one seems to be asking the critical question: what about innovation?
Why will anyone invest the extraordinary sums of money to create the innovations we want without an expectation of exclusivity that will allow for a recoupment of the investment plus a reasonable return on investment? The Truly Staggering Cost of Inventing New Drugs unveils a Forbes study finding: “The average drug developed by a major pharmaceutical company costs at least $4 billion, and it can be as much as $11 billon.” The cold reality is that no company will spend between $4 billion and $11 billion without patents. And it is pure fiction to believe that software development doesn’t follow the same economic realities. When IBM produces one of their large scale projects there will have been many hundreds of people work on the software solution or at least several years. The same is true for a new Apple operating system, or the next version of Microsoft Windows. It is pure fantasy to believe that software programs are written over a long weekend by a single person who is merely a second year engineering student. Software that is compatible, secure and actually works is rare these days and takes real development effort, which costs real sums of money.
The quickest way to get less innovation is to destroy the patent system. This should be self evident to everyone, but sadly there are many intellectually challenged individuals who refuse to believe this objective truth. If patents inhibit innovation then why don’t countries without a patent system have run away innovation? If patents get in the way of innovation why do countries with the strongest patent rights have the most innovation? If patents get in the way of technological advancement then why haven’t we seen smartphones stagnate?
The example always used is that patents inhibit innovation and the proof pointed to is the smartphone industry. Really? Talk about breathtakingly dishonest. Smartphones as we know them have existed only since late 2007. Every generation is faster, thinner, providing more battery life, with stronger screens and better cameras. There are a million apps that can be loaded to your smartphone and every new edition is so much better you have to have it compared with your now 1 year outdated model. The truth is that the smarphone industry proves beyond a shadow of a doubt that patents don’t inhibit innovation. Everyone bemoans the vast number of patent lawsuits over smartphones, which is still only about 20% of the number of patent lawsuits filed during the original telephone patent wars, but at the same time that there is this alleged patent thicket phones get better, stronger, faster and provide far more functionality. How could anyone who is at all intellectually honest believe the smartphone industry proves patents inhibit innovation. That is laughably untrue.
Of course, the anti-patent critics will look at the mountains of evidence that objectively disprove their bogus claims and the best they can do is cry about “correlation not being causation.” Allow me to translate for you: “I am going to ignore all the objective, factual and historical evidence you have and then pretend that you have no evidence. I will then proudly conclude that since you have no evidence my position, based on faulty logic, inaccuracies and misrepresentations, clearly shows I am correct and you are wrong.”
When the best a anti-patent critic can do is say “correlation is not causation” we have won the argument. They will soon excuse themselves from the debate, calling you some derogatory name on the way out. They won’t remain in the discussion because at best they are first-level thinkers who can only parrot the propaganda that they have heard second-hand. In the fact of objective reality and hard factual evidence they cannot come back with anything because they have nothing based in fact to support their arguments. Like an emperor without any clothes they prefer to remain blissfully ignorant.
Anti-patent critics are wrong, pure and simple. They are intellectually dishonest. They have been lied to by those with an agenda to destroy the patent system. Patent acquisition or licensing is not per se evil. What is evil are the actions of those that take advantage of judicial inefficiencies, employing extortion-like tactics and fear. Sadly, very little of the discussion has been about the real problem, instead the debate erroneously claims that the patent system is to blame. Bad actors are to blame and the media, public and Congress have been sold a bill of goods by those who want to destroy the patent system in the United States.