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.

[mnehring]

I’m surprised the number is so low.

[SkyPilot]

I bet a good percentage of the others are selfish takers suing doctors and medical providers.

I'll never forget being at a social gathering once, standing in a circle of people I barely knew, and listening a group of very young female lawyers.

They kept throwing out the term: "medmal."

Everything was "medmal" this and "medmal" that. I took about a minute to realize this was the legal predator pet name for Medical Malpractice.

It was how they made their ill gotten salaries - suing doctors, hospitals, whatever they could target.

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

[FreeAtlanta]

Agree to meet with the little bastages and then plant them in a remote area.

I have zero patients for the patent troll cretins. They are as evil and vile as leftist democrats.

[impimp]

Why - don’t you respect intellectual property?

[Olog-hai]

The patent trolls don’t. And neither do the courts. Is it moral for costs to rise into the multiple millions merely for bringing a patent troll to trial? Or how about the $30 billion per year costs of patent trolling to industry?

The FTC has supposedly been investigating patent trolling since about two years ago. Meanwhile, the incidence and costs continue to climb. This is called “lawfare”, or the deliberate jamming of the legal system in order to paralyze it.

[impimp]

It seems you are forgetting many people in your analysis. The most important of which seems to be the original holder of the patent who receives money from the troll. Those people are legitimately helped by the troll.

[Olog-hai]

The troll is the patent holder, not a broker or lawyer for patent holders. The only thing the trolls do is jam up the legal system by threatening lawsuits in exchange for exorbitant licensing fees. The original patent holder gets nothing except the meager sum that the troll paid for the patent—since his rights to the patent are gone. Capisce? They would not have earned the moniker "trolls" otherwise.

[Squawk 8888]

Two words on how to put a stop to this: Loser pays.

[impimp]

Meager sum to you is food on the table for people’s families.

I defend these people because I too am a speculator, albeit in a different industry, and my profession is unfairly maligned by people as well.

[Olog-hai]

Get back to me when you start making sense. Speculation and patent trolling are two different things, and you are deliberately mischaracterizing the latter.

[varyouga]

While many cases are frivolous, real malpractice exists.

That's why doctors get paid. And that's why engineer's like me get paid. We take responsibility for people's lives. Literally placing our signature/stamp on decisions that can kill another person if wrong.

We have insurance for rare mistakes but no professional should be allowed to practice if they mess up too many times.

[LibertyOh]

The goal of the patent system is to encourage innovation by providing the inventor/assignee a time limited right to prevent others from practicing their invention in exchange for fully divulging what the invention is and how to work it - so that when the patent expires all will have the knowledge and freedom to practice the claimed invention. The fact that some inventor/assignees can potentially sell their rights and recoup some costs can help stimulate their filing a patent on their inventions.

I agree that the “patent trolls” have provided value to the original patent holder, who for whatever reason has decided the value received is worth more than maintaining and attempting to enforce the patent on their own. Many inventors/small companies recognize they could never fund the enforcement of the rights granted by the USPTO, so they will sell those rights to someone who can.

The article’s comment that the patent system is somehow broken and discourages innovation is simply wrong. Lots of big companies come up with innovations and get patents they don’t practice for a variety of reasons. Some simply hold them as bargaining chips in case their competition asserts against them - they will have an arsenal to return fire, particularly if they think it’s something the other guy will be using. Likewise small inventors may have incentive to invent - and file the patent application explaining the invention if they know they may see some return even if they can’t bring the product to market.

[Olog-hai]

So losses of $30 billion per year and an increase from 24 percent to 56 percent of these type of lawsuits in a year is not troubling?

Never mind that I did not see anything that claimed that all patent holders engaged in trolling behavior.

[Nervous Tick]

>> The most important of which seems to be the original holder of the patent who receives money from the troll.

You really haven’t the faintest idea how this system works — do you.

[bone52]

The reality is every company is a troll in some instances. The majority of companies have patents that cover ideas that are never incorporated in products, and so if they ever assert these, then they are a troll. Similarly, every university functions essentially as a troll with their patent portfolio.

The other truth is that without trolls small inventors would have no market in which they could sell their ideas. Without this market, big companies would be free to steal the ideas of small inventors.

While trolls aren’t perfect, they are much better than what would happen without them.

[bone52]

Amen to everything you said.

[Olog-hai]

Meanwhile the trolls are costing the economy money and tying up the courts. This kind of behavior is peculiar to this era—look at the percentage of cases just in one year. Don’t confuse patent protection with trolling, ever.

[bone52]

It would also be cheaper if we let large companies steal physical property from individuals for the sake of economic efficiency, but we are willing to bear the cost of this inefficiency because we believe that overall we are as humans, and economically are better off because the protection of property encourages incentivizes people to add value to the economy.

The trolls are only protecting property. The cost to the economy comes because companies are willing to trespass on the property of others.

Also, this isn’t peculiar to our era, the Wright brothers sought creative enforcement of their wing warping patents against everyone who tried to enter aviation. This behaviour is just people trying to maximize their return on investment.

[Olog-hai]

No, the trolls are seeking licensing fees to enrich themselves, as the owners of the patents. Read the article.