Majority of 2012 Patent Litigation Filed by 'Patent Trolls'
More than half of the patent litigation cases filed in the U.S. in 2012 were brought by companies whose sole purpose is to license patentsso-called patent trollsaccording to a new study.
An estimated 56 percent of 2012 patent lawsuits were filed by these patent monetization entitiesa substantial increase from five years ago. In 2011, that number was about 40 percent, and in 2007, it was 24 percent, the report said.
We expected to see a high level of suits filed by patent monetizers, but we didnt think it would be the majority, law professor Robin Feldman of the University of California at Hastingsone of the authors of the studytold CorpCounsel.com. Thats a significant threshold to cross, because it shows that the patent litigation system is dominated by people who dont make products.
The new study, co-authored by Sara Jeruss of patent data analysis firm Lex Machina and patent attorney Thomas Ewing, expands on an earlier report released in the fall of 2012 that found that lawsuits filed by patent monetizers nearly doubled in the five-year period between 2007 and 2011. That report, requested by the U.S. Government Accountability Office, used a smaller sampling of cases.
The new study looked at all of the patent litigation filed in 2007, 2008, 2011, and 2012, and analyzed about 13,000 cases and almost 30,000 patents asserted in those cases.
Of the 10 most frequent patent litigation filers, nine were patent monetizers and only one was a company making products, the study revealed.
Patent monetizer is the authors preferred term for describing entities whose primary focus is deriving income from licensing and litigation rather than from making products. They have also been called non-practicing entities (NPEs), patent assertion entities (PAEs), or more disparagingly, patent trolls.
The study also found woefully inadequate tools in place for notifying the public when patents have been asserted in litigation. Although federal law requires that district courts notify the Patent and Trademark Office when patents are asserted, and the Patent and Trademark Office then notifies the public, the system was not operative for roughly two-thirds of the patents asserted in our database, the report noted.
This is a problemespecially for small companies and startups, Feldman said. Its often hard to know what a patent covers, but when the public is notified that a patent has been asserted, it lets everyone know what territory the patent holder is claiming.
Other findings showed that newly issued patents are the ones most frequently litigated, while older patents are rarely asserted. This age distribution could be an indication that parties are increasingly filing for patents for the primary purpose of assertion, the report said. The age distribution might also suggest that for patents in many technical fields, such as electronics, the full 20-year term might be of less practical consequence.
The analysis of so many lawsuits also revealed an active market for patents that have expired. A patent monetizer is willing to purchase an expired patent because it can still be asserted in certain circumstances. U.S. law allows for retrospective collection of infringement damages for up to six years, the report says. This suggests the presence of what could be described as a separate market offering residual value for expired patents.
The number of defendants sued by patent monetizers decreased slightly from 2011 to 2012, the study found. This is most likely because the America Invents Actthe recently enacted patent reform lawcreated new joinder rules that initially kept monetizers from casting a broad net in their lawsuits, the report said. The long-term impact of the joinder rules, however, is unclear. And even with the reduction, the number of defendants sued by monetizers has doubled since 2007, according to the report.
The reports release comes at a time when the Federal Trade Commission and the U.S. Department of Justice have taken a keen interest in the impact of patent monetizers on businesses, consumers, competition, and innovationand are considering taking action to curb their activity.
Legislators are also considering a proposed law dubbed the SHIELD Act that could curb litigation prompted by patent monetizers. And tech companies are taking their own steps to discourage such lawsuits. Twitter has introduced an Innovators Patent Agreement, which says its patents will only be used for defensive purposes. Google Inc. is trying to develop cooperative licensing agreements with other companies. And Microsoft Corp. recently introduced its Patent Trackeran online tool that allows anyone to search for and view the companys patents.