Patent Trolls and their Impact: New Study Highlights Alarming Trend

By Peter Bernstein October 11, 2012

It is no secret that the rise of so called “patent trolls” has drawn the ire of people who actually invent and then try and sell the products and services they bring to market as a result of their ingenuity. 

Trolls, if you are not aware, are entities whose primary focus is deriving income from licensing and litigating patents. The lawsuits have the effect of either forcing those with legitimate interest in product realization to engage in costly litigation that destroys their ability to get to market fast and inexpensively, or settle by paying the trolls significant licensing fees.

In the tech world, there are few topics that can cause conversations to get heated at hyper speed.  How to get rid of the trolls and put a stop to what many in the industry believes is nothing short of industrial blackmail is to say the least a top industry concern. The challenge for policy makers looking to prevent or at least limit trolling has been getting a handle on just how prevalent trolling has become. The good news is we now have some data. 

Commissioned by the U.S. Government Accounting Office (GAO) a new study by UC Hastings Professor Robin Feldman, co-authored by Lex Machina’s Sara Jeruss and Joshua Walker  with Lex Machina has revealed that patent trolls are in fact a major obstacle to patent law litigation. “The America Invents Act 500: Effects of Patent Monetization Entities on U.S. LitigationDuke Law & Technology Review,” is now available for public review. It will be published in a forthcoming edition of the .  

This article confirms what most people have long suspected, i.e., patent monetization entities (aka trolls) play a dominant role in a substantial portion of patent lawsuits filed today.

Here are the numbers:

  • The sheer number of cases has increased in recent years, as well as the percentage of overall case filings represented by patent trolls, rising from 22 percent of cases filed five years ago to almost 40 percent of cases filed last year.
  • Further, because the study only looked at lawsuits filed, the wealth of cases that settle before trial compound the magnitude of the impact that patent trolls have on the patent system, and on the economy as a whole.

The 42 page study goes to great lengths in justifying the methodology used to construct the findings. Based on a look at 500 cases, the authors defined nine categories of the types of entities that file infringement actions. The key findings of the study are presented on page 24. This truly is an instance where a picture tells it all.


Source: The America Invents Act 500: Effects of Patent Monetization Entities on U.S. Litigation

The trolls are the “Monetizers” and “Suspected Monetizers.” This is not a pretty picture. However, at least it is a nice visualization that is easy for policy-makers to understand. In fact, the picture tells a story that is even worse than just reading the numbers. The authors conclude that individuals and trusts “frequently behave like patent monetizers.” 

 The combined look brings this into even starker relief.





 

 

Source: The America Invents Act 500: Effects of Patent Monetization Entities on U.S. Litigation

The entire article is an important contribution to understanding the nature of the problem posed by trolls and is worth a thorough read. Along with the data above it also contains tables on:

  • The top lawsuit filers
  • States of filing and states of incorporation that identify where monetizers are looking for friendly actions
  • A detailed tally of case outcomes 
  • A graphic of monetizer case outcomes with a corresponding graphic of operating company case outcomes, which when combined shows that a high percentage of cases settle, e.g., why trolling is so attractive

It is best to close with the final paragraph of the article. The authors state: “We hope the data will not only help to answer Congress’ initial question concerning the impact of non-practicing entities on patent litigation, but will also spur legislators to look for ways to address the impact that patent monetization entities are having on the United Sates patent litigation system, as well as the economy as a whole.” 

Hopefully, building on this study there will be further work to quantify the damage being wrought by trolls. That said, there seems to be more than sufficient evidence here to justify Congressional action.



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