8 ms·

Patent trolls now account for 67 percent of all new patent lawsuits

220 points by Libertatea 12y ago

dhimes 12y ago
Not much meat here- just enough to raise your blood pressure.
pizza234 12y ago
Is it technically correct to say that frivolous patent lawsuits "drag the economy"? Ignoring for a moment the moral issue, if such phenomenon causes a (relatively) large amount of money to flow from (software) companies to "patent trolling" ones, isn't it still positive for the economy?
- ilyanep 12y ago
  One could make the argument that it's taking money from productive entities who would put it into R&D or future production and giving it to non-productive entities who will just use the money to sit on the patents and potentially sue more people.
  - deleted 12y ago
    [deleted]
- te_platt 12y ago
  No. The closest simple example is the broken window fallacy: http://en.wikipedia.org/wiki/Parable_of_the_broken_window http://en.wikipedia.org/wiki/Parable_of_the_broken_window
  - Guvante 12y ago
    Apparently the broken window fallacy has absolutely nothing to do with the broken window theory: http://en.wikipedia.org/wiki/Broken_windows_theory http://en.wikipedia.org/wiki/Broken_windows_theory
  - chc 12y ago
    This is a much weaker claim than the broken window fallacy, though. The parent comment addresses something that is left unsaid in the broken window fallacy — that even if it isn't objectively better for the money to go to a window-maker, it might not be worse either. It's possible that the chain of events is ultimately neutral for the system as a whole.
- masklinn 12y ago
  > isn't it still positive for the economy? NPEs don't grow the economy, and by their activity they hinder or kill companies which do. So no.
- fzltrp 12y ago
  > isn't it still positive for the economy? Why? Where's the benefit for the economy? If somehow the patent trolls reinject the benefits they make (ie what they obtain from the law suit minus the lawyers/legal fees) in the economy, perhaps we could say it's maybe a positive outcome, but there are no garantee that the infringing company would not have done so. So where is the benefit for the economy?
- sp332 12y ago
  It depends how you measure. The transfer of license money is good for GDP. But if the money is going to people who just keep it instead of investing in something, then it will "drag the economy".
  - icebraining 12y ago
    This shouldn't be downvoted. In fact, it's why the GDP is not a very good measure of what we actually want to know.
- toby 12y ago
  In economic terms, this is not a transaction (both parties agree to exchange things for their mutual benefit) which is usually considered positive. It's closer to rent-seeking, which is usually considered neutral to negative.
rayiner 12y ago
This is an article covering a report which covers an actual study. The actual study is here: http://www.rpxcorp.com/wp-content/uploads/2014/01/RPX-2013-NPE-Litigation-Report.pdf http://www.rpxcorp.com/wp-content/uploads/2014/01/RPX-2013-N.... Chart 1 of the WaPo article is a bit misleading. The America Invents Act, passed in 2011, limited the circumstances under which multiple defendants could be joined in the same suit. So what might have been one suit with three defendants pre-AIA might be three suits, each with one defendant now. If you look at Chart 1-2 of the RPX study, on page 10, you can see that the total number of defendants peaked in 2011. The same trend holds when looking at NPE cases only (Chart 4-5 of the RPX report). Chart 10 is also interesting, which shows the number of campaigns (suits related to single patent or set of patents), down since peaking in 2011.
- throwawaykf05 12y ago
  And here's the study backing that up: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2346381 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2346381 The other change that receives less attention is the Medimmune v Genentech case in 2007, which changed the playing field such that it forced many potential licensors to initiate a lawsuit to avoid getting preemptively sued for declaratory judgement: http://digitalcommons.pepperdine.edu/cgi/viewcontent.cgi?article=1038&context=jbel http://digitalcommons.pepperdine.edu/cgi/viewcontent.cgi?art... This decision also correlates with another jump in lawsuits in 2007 found by other studies. Not sure why this dataset does not reflect that jump. Also, I'm very curious about the PWC result that patent troll litigation awards are rising. I've followed a bunch of NPE cases (many of which have been discussed here), and I consistently find that trolls get much lower awards than they seek. Case in point, the TQP vs NewEgg trial where, even though they won, they got only half of the damages they sought. And that's at the higher end... From hearsay, some attorneys claim the average is around 10% of the damages sought. What I'm finding is that accusing the plaintiff of being a "troll", regardless of whether that accusation has merit, has an automatic impact on the damages received, if at all the plaintiff prevails. But then most of the cases I've followed have been in ED Texas. Maybe the higher awards come from other districts, e.g. Delaware?
  - mike_hearn 12y ago
jeffdavis 12y ago
"...patent trolls — also known as non-practicing entities because they simply stockpile patents without making anything with them..." I never liked that definition. It sounds like ordinary specialization in an economy, to me. "The latest effort would have required the loser in a lawsuit to cover the winner's legal fees and for NPEs to state more clearly what was being infringed at the outset." Now we're talking: address the real problem. The real problem is not NPEs; the real problem is that they can impose huge costs on others at little cost to themselves, which sets them up perfectly for an extortion-like racket.
- rayiner 12y ago
  This sort of discussion reminds me of the hypothetical: an alien race, passively observing the earth, notices people frantically shopping in December, and also celebrating Christmas at the end of the month. They thus conclude that the shopping caused Christmas to happen. Obviously they get the causation wrong: anticipation of Christmas caused the shopping to happen. Now, when discussing NPE's, people say something along the lines of: "they can't create any value, because any invention they buy already exists." Obviously this is fallacious: the anticipation of selling a patent portfolio, to an NPE or some other party, can cause people to engage in expensive R&D. Indeed, all contractual and property rights operate in this way. Litigation might come after a transaction goes sideways, but anticipation of having the option to litigate allows transactions to occur that would not otherwise occur. NB: The above should not be taken as an argument that the value created by the existence of NPE's outweighs the costs imposed by troll suits.
  - lotsofmangos 12y ago
    I want a troll suit.
- ScottBurson 12y ago
  Yes, I've posted to this effect several times on HN, and the point generally encounters a fair amount of disagreement. I'm glad to see your post at the top of this page. All trolls are NPEs, probably, but not all NPEs are trolls. Universities and independent inventors are generally NPEs, but AFAIK rarely engage in trolling behavior. The paradigmatic troll, I think, is the company suing people for infringing its scan-to-email patent. What we have here is (a) a patent that never should have been issued [0]; (b) an NPE suing defenseless small companies (c) whom it has no direct evidence are infringing. That, to me, is trolling. [0] I long for a ruling from the Supreme Court that makes the obviousness test meaningful again, since the Federal Circuit has so thoroughly gutted it. They had a perfect setup in Alice, but blew it, in my opinion, by making the patentable subject matter test the basis of their ruling (which I think will fail to give the lower courts any guidance they can understand). I would rather they had said that simply computerizing an existing manual process is, in 2014, thoroughly and unarguably obvious.
cheepin 12y ago
I got a 404. Anyone got a cached copy?
fzltrp 12y ago
The original point of patents is to provide protection to inventors and give them a head start in implementing their inventions. A company which hold patents without implementing them is basically not following the spirit of the law. Hence, there should be a drastic "countdown" to a patent viability, which would be dispelled by a producing a viable, marketed application of that patent. I would suggest a 6 months timeframe, non renewable. For software patents, given the very abstract nature of the invention, 3 months should be enough, and the patent lifetime itself should not exceed 3 years - 12 times the countdown to market (3 years is already quite long in the software industry, although not in the law one). This should be retroactive. Note that I'd rather see the concept of software patents completely invalidated, but I understand that the issue is quite complex. Oh, and what should be done in the case of patent transfers? Should the new holder be subjected to that countdown as well? What if the products tied to a patent is eol'ed? Should the countdown be restarted? I do think so. It's all about the practical side of things.
- icebraining 12y ago
  A company which hold patents without implementing them is basically not following the spirit of the law. Playing Devil's advocate, what about a company like ARM, which designs and patents new CPU designs and then licenses them to others? We can't claim their patents aren't implemented. Should they be forced to make the CPUs themselves? And if not, what would prevent NPEs from licensing to one small company and then suing everyone else?
  - fzltrp 12y ago
    > Playing Devil's advocate Actually you raise a good point. ARM has been always doing that though, they built their own cpus when they started, iirc. That would have large consequences on their current business model, it's true. > And if not, what would prevent NPEs from licensing to one small company and then suing everyone else? It's already happening. When one of those company win a lawsuit, it is usually followed by them selling a license to whomever they sued... Which is the lesser evil? Forcing patent holders into producing practical implementation of their patents, or allowing NPEs to exist? I guess my idea doesn't really hold waters. Most probably smarter people already have thought about that possibility and saw the issues you hinted at. Oh well.
Fando 12y ago
It is ironic that driving the progress of the currently broken patent system are the laborious efforts of patent trolls.
Zigurd 12y ago
Several people on this thread correctly diagnose the problem is not NPEs but "it's too cheap to obtain and hold large patent portfolios." Once a patent is awarded ANY application that references other patents should be able to re-open examination of those patents if the applicant can show evidence of the existence of prior art or articulate a reason for obviousness or other reason for invalidation. Patent examiners should get bonuses for passing patents that stand up to such scrutiny and get decreases in bonus if they let through patents that are subsequently invalidated. There should also be a bounty for invalidating patents through an administrative process, not requiring litigation.

220 points by Libertatea 12y ago

Not much meat here- just enough to raise your blood pressure.

Is it technically correct to say that frivolous patent lawsuits "drag the economy"? Ignoring for a moment the moral issue, if such phenomenon causes a (relatively) large amount of money to flow from (software) companies to "patent trolling" ones, isn't it still positive for the economy?

ilyanep 12y ago
One could make the argument that it's taking money from productive entities who would put it into R&D or future production and giving it to non-productive entities who will just use the money to sit on the patents and potentially sue more people.
- deleted 12y ago
  [deleted]
te_platt 12y ago
No. The closest simple example is the broken window fallacy: http://en.wikipedia.org/wiki/Parable_of_the_broken_window http://en.wikipedia.org/wiki/Parable_of_the_broken_window
- Guvante 12y ago
  Apparently the broken window fallacy has absolutely nothing to do with the broken window theory: http://en.wikipedia.org/wiki/Broken_windows_theory http://en.wikipedia.org/wiki/Broken_windows_theory
- chc 12y ago
  This is a much weaker claim than the broken window fallacy, though. The parent comment addresses something that is left unsaid in the broken window fallacy — that even if it isn't objectively better for the money to go to a window-maker, it might not be worse either. It's possible that the chain of events is ultimately neutral for the system as a whole.
masklinn 12y ago
> isn't it still positive for the economy? NPEs don't grow the economy, and by their activity they hinder or kill companies which do. So no.
fzltrp 12y ago
> isn't it still positive for the economy? Why? Where's the benefit for the economy? If somehow the patent trolls reinject the benefits they make (ie what they obtain from the law suit minus the lawyers/legal fees) in the economy, perhaps we could say it's maybe a positive outcome, but there are no garantee that the infringing company would not have done so. So where is the benefit for the economy?
sp332 12y ago
It depends how you measure. The transfer of license money is good for GDP. But if the money is going to people who just keep it instead of investing in something, then it will "drag the economy".
- icebraining 12y ago
  This shouldn't be downvoted. In fact, it's why the GDP is not a very good measure of what we actually want to know.
toby 12y ago
In economic terms, this is not a transaction (both parties agree to exchange things for their mutual benefit) which is usually considered positive. It's closer to rent-seeking, which is usually considered neutral to negative.

rayiner 12y ago

This is an article covering a report which covers an actual study. The actual study is here: http://www.rpxcorp.com/wp-content/uploads/2014/01/RPX-2013-NPE-Litigation-Report.pdf http://www.rpxcorp.com/wp-content/uploads/2014/01/RPX-2013-N.... Chart 1 of the WaPo article is a bit misleading. The America Invents Act, passed in 2011, limited the circumstances under which multiple defendants could be joined in the same suit. So what might have been one suit with three defendants pre-AIA might be three suits, each with one defendant now. If you look at Chart 1-2 of the RPX study, on page 10, you can see that the total number of defendants peaked in 2011. The same trend holds when looking at NPE cases only (Chart 4-5 of the RPX report). Chart 10 is also interesting, which shows the number of campaigns (suits related to single patent or set of patents), down since peaking in 2011.

throwawaykf05 12y ago
And here's the study backing that up: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2346381 http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2346381 The other change that receives less attention is the Medimmune v Genentech case in 2007, which changed the playing field such that it forced many potential licensors to initiate a lawsuit to avoid getting preemptively sued for declaratory judgement: http://digitalcommons.pepperdine.edu/cgi/viewcontent.cgi?article=1038&context=jbel http://digitalcommons.pepperdine.edu/cgi/viewcontent.cgi?art... This decision also correlates with another jump in lawsuits in 2007 found by other studies. Not sure why this dataset does not reflect that jump. Also, I'm very curious about the PWC result that patent troll litigation awards are rising. I've followed a bunch of NPE cases (many of which have been discussed here), and I consistently find that trolls get much lower awards than they seek. Case in point, the TQP vs NewEgg trial where, even though they won, they got only half of the damages they sought. And that's at the higher end... From hearsay, some attorneys claim the average is around 10% of the damages sought. What I'm finding is that accusing the plaintiff of being a "troll", regardless of whether that accusation has merit, has an automatic impact on the damages received, if at all the plaintiff prevails. But then most of the cases I've followed have been in ED Texas. Maybe the higher awards come from other districts, e.g. Delaware?
- mike_hearn 12y ago

jeffdavis 12y ago

"...patent trolls — also known as non-practicing entities because they simply stockpile patents without making anything with them..." I never liked that definition. It sounds like ordinary specialization in an economy, to me. "The latest effort would have required the loser in a lawsuit to cover the winner's legal fees and for NPEs to state more clearly what was being infringed at the outset." Now we're talking: address the real problem. The real problem is not NPEs; the real problem is that they can impose huge costs on others at little cost to themselves, which sets them up perfectly for an extortion-like racket.

rayiner 12y ago
This sort of discussion reminds me of the hypothetical: an alien race, passively observing the earth, notices people frantically shopping in December, and also celebrating Christmas at the end of the month. They thus conclude that the shopping caused Christmas to happen. Obviously they get the causation wrong: anticipation of Christmas caused the shopping to happen. Now, when discussing NPE's, people say something along the lines of: "they can't create any value, because any invention they buy already exists." Obviously this is fallacious: the anticipation of selling a patent portfolio, to an NPE or some other party, can cause people to engage in expensive R&D. Indeed, all contractual and property rights operate in this way. Litigation might come after a transaction goes sideways, but anticipation of having the option to litigate allows transactions to occur that would not otherwise occur. NB: The above should not be taken as an argument that the value created by the existence of NPE's outweighs the costs imposed by troll suits.
- lotsofmangos 12y ago
  I want a troll suit.
ScottBurson 12y ago
Yes, I've posted to this effect several times on HN, and the point generally encounters a fair amount of disagreement. I'm glad to see your post at the top of this page. All trolls are NPEs, probably, but not all NPEs are trolls. Universities and independent inventors are generally NPEs, but AFAIK rarely engage in trolling behavior. The paradigmatic troll, I think, is the company suing people for infringing its scan-to-email patent. What we have here is (a) a patent that never should have been issued [0]; (b) an NPE suing defenseless small companies (c) whom it has no direct evidence are infringing. That, to me, is trolling. [0] I long for a ruling from the Supreme Court that makes the obviousness test meaningful again, since the Federal Circuit has so thoroughly gutted it. They had a perfect setup in Alice, but blew it, in my opinion, by making the patentable subject matter test the basis of their ruling (which I think will fail to give the lower courts any guidance they can understand). I would rather they had said that simply computerizing an existing manual process is, in 2014, thoroughly and unarguably obvious.

cheepin 12y ago

I got a 404. Anyone got a cached copy?

fzltrp 12y ago

The original point of patents is to provide protection to inventors and give them a head start in implementing their inventions. A company which hold patents without implementing them is basically not following the spirit of the law. Hence, there should be a drastic "countdown" to a patent viability, which would be dispelled by a producing a viable, marketed application of that patent. I would suggest a 6 months timeframe, non renewable. For software patents, given the very abstract nature of the invention, 3 months should be enough, and the patent lifetime itself should not exceed 3 years - 12 times the countdown to market (3 years is already quite long in the software industry, although not in the law one). This should be retroactive. Note that I'd rather see the concept of software patents completely invalidated, but I understand that the issue is quite complex. Oh, and what should be done in the case of patent transfers? Should the new holder be subjected to that countdown as well? What if the products tied to a patent is eol'ed? Should the countdown be restarted? I do think so. It's all about the practical side of things.

icebraining 12y ago
A company which hold patents without implementing them is basically not following the spirit of the law. Playing Devil's advocate, what about a company like ARM, which designs and patents new CPU designs and then licenses them to others? We can't claim their patents aren't implemented. Should they be forced to make the CPUs themselves? And if not, what would prevent NPEs from licensing to one small company and then suing everyone else?
- fzltrp 12y ago
  > Playing Devil's advocate Actually you raise a good point. ARM has been always doing that though, they built their own cpus when they started, iirc. That would have large consequences on their current business model, it's true. > And if not, what would prevent NPEs from licensing to one small company and then suing everyone else? It's already happening. When one of those company win a lawsuit, it is usually followed by them selling a license to whomever they sued... Which is the lesser evil? Forcing patent holders into producing practical implementation of their patents, or allowing NPEs to exist? I guess my idea doesn't really hold waters. Most probably smarter people already have thought about that possibility and saw the issues you hinted at. Oh well.

Fando 12y ago

It is ironic that driving the progress of the currently broken patent system are the laborious efforts of patent trolls.

Zigurd 12y ago

Several people on this thread correctly diagnose the problem is not NPEs but "it's too cheap to obtain and hold large patent portfolios." Once a patent is awarded ANY application that references other patents should be able to re-open examination of those patents if the applicant can show evidence of the existence of prior art or articulate a reason for obviousness or other reason for invalidation. Patent examiners should get bonuses for passing patents that stand up to such scrutiny and get decreases in bonus if they let through patents that are subsequently invalidated. There should also be a bounty for invalidating patents through an administrative process, not requiring litigation.