| Law & Industry Daily
Published on: Thursday, August 22, 2013

GAO Study Confirms the Obvious: Bad Patents Lead to Trolls

 
 
You might remember that in 2011, Congress passed the America Invents Act (AIA), which at the time, was heralded as it was heralded as “the first meaningful, comprehensive reforms to the nation’s patent system in nearly 60 years.”

Julie Samuels, staff attorney and the Mark Cuban Chair to Eliminate Stupid Patents at EFF

Julie Samuels

You might also have noticed that we haven’t talked much about it since then, since the law did next to nothing to really address many of the problems that users, consumers, small companies, and the tech community in general face because of a broken patent system, particularly the patent troll problem.

In the meantime, the White House, congressional leaders on both sides of the aisles, the Federal Trade Commission, and many individual states (here and here) have either taken actions, or, in the case of Congress, introduced reform legislation.

But there is one last vestige of the AIA that lingered, a study that—under the law—the Government Accountability Office (GAO) was ordered to investigate “the consequences of litigation by non-practicing entities, or by patent assertion entities, related to patent claims made under” the law.1 Today that study finally came out (no matter that the AIA mandated the study be released on Sept. 16, 2012!).

To be clear, we were excited about this study. We met with the GAO, gave them ideas about what to investigate and what we thought wasn’t working with the patent system. But the final result?

Meh.

First, the GAO’s “recommendation” essentially recommends nothing:

The Secretary of Commerce should direct the Director of PTO to consider examining trends in patent infringement litigation, including the types of patents and issues in dispute, and to consider linking this information to internal data on patent examination to improve the quality of issued patents and the patent examination process.

We agree that the Patent Office should pay more attention to what happens outside its direct ambit, such as litigation happening in the courts and the increasingly negative impact that overly broad and vague patents that arguably should not have been granted in the first place have on the world. That said, the recommendation is rather weak, calling on the PTO to “consider” thinking about these matters.

Second, the study did highlight some important troubling trends:

  • Non-practicing entities (the nice name for trolls) brought brought approximately 20 percent of the cases between 2007-2011.
  • Lawsuits involving software-related patents accounted for 89 percent of the total increase in defendants from 2007-2011. (The total increase was an astounding 129 percent.)
  • In many troll cases, the real identity of who is behind the lawsuit and who stands to benefit from it is purposely hidden.
  • An estimated 39 percent of suits involving software-related patents were brought against non-technology companies, such as retailers, hotel chains, public transit agencies, and other everyday businesses.
  • Between 2007 and 2011, two-thirds of defendants were sued over software-related patents. (An interesting aside here: the GAO study found that about 49 percent of the patents were asserted in litigation in the first five years after they were granted; other studies have shown that trolls file more than 70 percent of their suits in the last three years of a patent’s life.)
  • Before the 1980s, companies “used patents to protect ideas rather than to generate revenue,” but within the last 10 years, patent owners realized that “patents are valuable can be important to their corporate strategy.”

Here’s what the study failed to address: The harm that comes from patent trolls’ demand letters, many (most?) of which do not even result in lawsuits. The study did acknowledge this problem, but failed to really understand it. It’s not clear this was entirely GAO’s fault, as it stated that “the extent of the practice is unclear because [GAO] was not able to find reliable data on patent assertion outside of the court system.”

Therein lies the rub: because lawsuits often never get filed, there is no public record. We’re working hard to collect this data over at Trolling Effects, but until Congress requires that trolls publicly report the letters they sent, this problem likely won’t get fixed.

Interestingly, the study did hone in on something we think is really important: the fact that low-quality software patents are the real culprit here. This is not surprising since, as the study points out, by “2011 patents related to software made up more than half of all issued patents.” (Yikes!)

The study specifically found that “many recent patent infringement lawsuits are related to the prevalence of low quality patents, that is, patents with unclear property rights.” In no uncertain terms,

Unclear and overly broad patents do not provide notice about their boundaries and the uncertainty of a patents’s scope then usually needs to be resolved in court. …

And, moreover,

broad patents on concepts [that one] would not expect to be patented make it easy to infringe a patents without intending to do so, although this is not a defense since patent infringement is a strict liability offense.

So, the study confirms what we already knew: low-quality, vague patents have led to an increased patent troll problem. Great. This is the same thing the Federal Trade Commission already reported in 2011, and little has improved; arguably, if anything, the situation has worsened.

We now have reports from GAO, from the Congressional Research Service, and from the Federal Trade Commission highlighting the problem with software patents and patent trolls. We have unequivocal statements from the President and leading members of Congress that the AIA did not fix the problem.

The time for reform is now. We should stop talking about it already and get something done.


Notes

1. The law mandated certain questions that GAO was to investigate, such as: “(1) The annual volume of litigation described in subsection (a) over the 20-year period ending on the date of the enactment of this Act; (2) The volume of cases comprising such litigation that are found to be without merit after judicial review; (3) The impacts of such litigation on the time required to resolve patent claims; (4) The estimated costs, including the estimated cost of defense, associated with such litigation for patent holders, patent licensors, patent licensees, and inventors, and for users of alternate or competing innovations; (5) The economic impact of such litigation on the economy of the United States, including the impact on inventors, job creation, employers, employees, and consumers; (6) The benefit to commerce, if any, supplied by non-practicing entities or patent assertion entities that prosecute such litigation.

About the Author

Julie Samuels is a staff attorney and the Mark Cuban Chair to Eliminate Stupid Patents at the Electronic Frontier Foundation, where she focuses on intellectual property issues. Before joining San Francisco-based EFF, the Vanderbilt University Law School alumnus litigated IP cases, in Chicago, for the firms of Loeb & Loeb LLC and Sonnenschein Nath & Rosenthal.

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