56 percent of all patent lawsuits are made by patent trolls

ZDNet ^ | 4/11/13 | Steven J. Vaughan-Nichols

[LibWhacker]

Summary: According to a new, comprehensive report by Lex Machina, more than half of all patent lawsuits in the US now come from patent trolls.

Patent lawsuits are used as weapons in business wars between companies such as Oracle vs. Google and Apple vs. Samsung. Behind the intellectual property (IP) headlines, however, Lex Machina, a Silicon Valley startup, has found that patent troll lawsuits have increased from 24 percent of cases filed in 2007 to 56% in 2012.

According to the Electronic Frontier Foundation, a "patent troll uses patents as legal weapons, instead of actually creating any new products or coming up with new ideas." They collect their patents for pennies on the dollar from companies down on their luck. Since the Patent & Trademark Office (PTO) has a bad habit of issuing very broad patents for ideas that are neither new nor revolutionary, it's easy for a patent troll, which typically has no other business, to send out threatening letters to anyone who might conceivably infringe their patents. These letters usually threaten a lawsuit unless the alleged infringer agrees to pay a licensing fee. These charges can range from tens of thousands to hundreds of thousands of dollars.

Patent trolling is a very successful business.

Lex Machina, which started as a Stanford University Law School and Computer Science department project, has found that:

"Cases filed by monetizers [i.e. trolls] rarely proceed to trial, usually settling early in the case. 75 percent of terminated cases filed by monetizers ended in a settlement, as did 72 percent of terminated cases filed by operating companies. Less than 1 percent of monetizer cases were decided at or after trial, and less than 2 percent of monetizer cases were decided on summary judgment. Of the summary judgment cases, the authors did not find a single decision in which the monetizer prevailed. Of the trial determinations, monetizers won half of the time, though this represented only 0.3 percent of all terminated monetizer cases."

That's actually worse than it sounds. You see, most patent troll shakedowns never get to trial. Lex Machina states, "Much monetization behavior, such as bargaining, posturing and payment, concludes without any party filing a lawsuit." As a result, the authors conclude that "increasing anecdotal evidence suggests that patent litigation represents only the tip of the iceberg, and that the vast majority of patent monetization activity never progresses to the point at which a patent infringement lawsuit is filed."

Eben Moglen, professor of law and legal history at Columbia University, and the chairman of Software Freedom Law Center, agreed with Lex Machina's conclusions. "I think they are consistent with the experience of those who work in the area," said Moglen, "They show why community defense [such as the Open Invention Network patent defense consortium] is so important, and why in the end it will be so effective at preventing rent-seeking behavior by these entities."

Why do businesses pay rather than fight? Because it's cheaper to pay up than fight. By 2008, the average patent judgment had risen to a mind-boggling $17.8-million. The cost of losing has only gone up since then. True, as Lex Machina has shown, the odds are vastly against you losing; but even if you win, it's costly to fight a patent troll.

The American Intellectual Property Law Association reported in 2011 that if you defend against a less than $1-million patent shakedown, your total legal bill will average $650,000. The costs, of course, only shoot upward as the amounts go upward. Matthew Bye, Google's senior competition counsel, wrote on April 5 that patent trolls cost the U.S. economy nearly $30 billion a year.

With numbers like that, is it any wonder that so many Android companies have settled with Microsoft rather than fighting their patent claims in court? Is it really so surprising that so few companies, such as RackSpace, are taking patent trolls head on?

The only real solution is a total reform of the utterly broken patent system in the US. Patents were meant to encourage innovation. Today, they only discourage it.

[impimp]

When a financial transaction takes place money goes from one party to another. Why is is hard for you to understand that money goes from the troll to the patent holder when they sell the patent to the troll (the new holder of the patent)?

[LibertyOh]

I assume you are referring to Google’s senior competition counsel’s complaint that “patent trolls cost the U.S. economy nearly $30 billion a year.” The same company that bought Motorola Mobility for over $12B and then used the acquired patents to file suit against Apple. Kettle- Pot.

Such assertions are ill founded. Those that perceive themselves as victims will try to sway public sympathy in their direction by allegations of unfairness or impropriety, and where possible find statistics to back them up. That isn’t to say there is no value - there is value, the economy is huge and I’m sure someone could formulate a reasonable basis for value added to the economy. Again - more innovation filed as patent applications ultimately making more knowledge available for competitive use, particularly on patent expiration, when the inventor knows he has at least some short term reward.

[Olog-hai]

What is the ill foundation and the actual figures?

[bone52]

The trolls are protecting their property rights and trying to get just compensation for trespasses on what they own.

[Olog-hai]

There has been such a rise in need for alleged protection within one year?

[Born to Conserve]

“Loser pays”. Problem solved.

[bone52]

So, they finally decided to try to enforce their rights. Maybe it is because the economy is picking-up and they have more money for enforcement actions, or maybe it is because the economy is slowing down and they need more money coming in. Does it really matter why?

If the actions are that frivolous, the court could grant sanctions against the attorney. The reason it doesn’t happen is because the suits aren’t that outrageous.

[Olog-hai]

Lots of maybes in that reply. And Hillary already asked a similar question to “does it really matter”. Something that costs the economy a sum as large as $30 billion per year certainly matters.

[bone52]

My point is that it doesn’t matter why more people are asserting their rights, and like I said before, you preventing someone from trespassing on your property also costs society something, but that doesn’t mean you don’t have the right to exclude them from your yard. Further, the cost to society is smaller than the benefit of the system.

[WalterSobchak2012]

Patent trolling isn't speculation, it is extortion litigation.

Several of my patents are in the hands of patent trolls.

No variation on what is described in these patents has been done anywhere, by anyone in a decade and will never be done again. Arguably you couldn't even infringe on one of the patents without using a proprietary software complier.

But they have filed eight lawsuits claiming infringement. There is no possible way these lawsuits aren't frivolous.

When I retired the company offered to sell me my patents for $1500, but I didn't think they were worth $15.00.

[Olog-hai]

Given the trend of industrialism and so-called postmodernism in the USA, I would have to disagree on that point. And the definition of asserting one’s rights is something that the left has very much subverted (note the abortionists, gays et cetera), so any remarkable spike of alleged “rights assertion” (i.e. other than those the Constitution defends, such as those in the Bill of Rights) has to be scrutinized as to whether or not this is so. You may have the right to grab up a liquidated company’s patent assets for peanuts and then go after other companies for exorbitant licensing fees, but if you help the economy head downwards at a dangerous rate while doing it, what good have you done?

Beyond mere rights are moral questions, and the Founding Fathers stressed that this country would survive only when you have a moral and religious people not only governing, but in the majority.

[LibertyOh]

Based on the article and links backwards, the numbers come from a Boston University publication at: http://www.bu.edu/law/faculty/scholarship/workingpapers/documents/BessenJ_MeurerM062512rev062812.pdf

At some point, but not soon due to other priorities, I will review the study and its statistical foundation. Mark Twain had some comments on statistics. The bottom line is the current trend is to characterize Non Practicing Entities (NPE’s) in a bad light when they seek compensation, while many large companies could be accused of essentially using the system in a similar way whenever they obtain a patent they don’t put into practice, but retain for reasons you can deduce.

[LibertyOh]

This comment about Constitutional Rights cannot go unanswered. Read your constitution - the founders put the concept of inventor rights in the original document - didn’t have to after the fact add it in as an amendment.

Article 1. Section 8. “The Congress shall have the power ... (Clause 8)
To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries;”

Exclusive Right to the invention (Discoveries) means the inventors (and whoever they assign this right to) can exclude others from practicing their invention.

This is the only use of the term “Right” in the original Constitution! Congress made the laws, until Congress changes the laws the Constitution gave Congress the power to create, the owner of that RIGHT can assert it. Your attempt to distinguish between an inventor’s rights (even if assigned to someone else - which Congress passed a law to do) and other rights delineated in later amendments to the Constitution fails to recognize that these aren’t “alleged ‘rights’” but the ONLY original rights included in the Constitution.

[MaxMax]

I began inventing a product then realized that if I didn't patient every different aspect
of my idea that it would be done by a copycat by changing the details. Then I realized that if
this were done by another person or company, I could be sued regardless if I invented my product first.

Bottom line is that they do not care about the rules, all they want is a settlement
on the backs of the inventor. So if somebody wants to invent anything, they are
in for a long process of covering every angle of their idea. This happens with software all the time.

In the end the extra effort to protect an idea is worth it, and unavoidable.

[SueRae]

Ping for later. The “patent troll” label is also being applied too broadly...there are plenty of legitimate patent holders lumped in there that are being infringed upon and are litigating for compensation. There is also a big concerted effort by the big guns in the tech industry to squash the little inventor...and they are going for a political solution...once again an attack on innovation in this country. The new patent law favors the if guys, the little guys...not so much.

[Nervous Tick]

>> Why is is hard for you to understand that money goes from the troll to the patent holder when they sell the patent to the troll (the new holder of the patent)?

Because I know people who have been royally raped by patent trolls. And guess what? They **ARE** (or, in some cases, **WERE**) the patent holders!

Cop a clue. Patent trolls are NOT righteous. They are among the lowest scumsucking vermin walking the planet.

[St_Thomas_Aquinas]

Also, I wonder how many people hire scum sucking lawyers to go on Disability?

I think I just saw my first disability claim ad. I can't remember if it was for assistance filing, or a legal service. Or maybe there's no difference.

This unprecedented 15% unemployment rate is costing us in many ways. I've been laid off twice in three years. This time is worse than 2009. In my industry, the only jobs are contract positions. I had one interview for a traditional job with benefits. I think we all know why.

Thanks Zippy, the commiecrats, and the flaccid GOPe!

[Justa]

Right, patent trolls work both ways but mostly against the inventor/patent holder. Their most despicable act is to sue an inventor for infringement on another patent knowing the inventor has insufficient capital to defend against the claim. The troll’s objective is to win a settlement from the inventor, gain control of the patent or nullify it.

They usually pick on the small inventors vice the corporations as the latter have extensive legal resources.

[SkyPilot]

I am not doubting that real issue exists where legal remedy is required.

The problem in America is that the legal system is completely out of control. It is largely lawyers in state, local, and Federal legislatures that write the laws, lawyers that prosecute (or do not) the laws, and lawyers who "interpret" what our natural laws from God are supposed to be (in their eyes).

Literally placing our signature/stamp on decisions that can kill another person if wrong.

Malpractice suits have caused our medical system to be the most expensive in the world, bar none.

I have heard arguments where people have tried to argue this is not the case, and the more you listen to them, the more they sound like a guilty child who broke the lamp, digger themselves deeper into the hole with each excuse.

Moreover, malpractice cases can linger for years - and this also benefits the bottom feeders who make semi-careers out of each and every case.

The lawyers have enriched themselves at the trough, and we wonder why Medicare, Medicaid, and private health insurance have bankrupted this nation.

[SkyPilot]

I've been laid off twice in three years. This time is worse than 2009. In my industry, the only jobs are contract positions. I had one interview for a traditional job with benefits. I think we all know why.

I hear you. I have changed jobs 3 times in 6 years.

I am retired military, so I have TRICARE. Under Obama and "The Destroyer" Chuck Hagel, my insurance is under full scale attack.

Meanwhile, the takers who never lifted a finger for this nation get everything for "free."