56 percent of all patent lawsuits are made by patent trolls

56 percent of all patent lawsuits are made by patent trolls

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.

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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.

Lex Machina
Lex Machina proves what we've feared all along: Patent trolls are winning

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.

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Topics: Legal, Government US, Software, Software Development, Tech Industry, IT Policies

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22 comments
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  • apple is trolling

    i would count apple as troll as well but no judge/jury seems to get that
    Laurin Krystyn
    • Microsoft and "patent troll"

      SJVN assumes Microsoft is a patent troll indirectly saying so.

      "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?"

      "So few Android companies"? Even I know better than that. One example is Motorola mobile which was acquired by Google. If Microsoft is a "patent troll", then Motorola is 10x more and since it's owned by Google, that makes Google a "patent troll". Just look up the numerous lawsuits Motorola mobile has filed against Microsoft in Germany. They even succeeded once in banning all Microsoft product from being sold in the market. But Microsoft doesn't stand back and not attack "patent trolls". They actually fight and take care of the situation.

      My point is don't one company should not call other companies "patent trolls" without looking in the mirror first.
      Jabe124
      • Notice...

        ...that MS has neither settled with, nor sued Google. Is it perhaps because Google has deep enough pockets to fight it out?
        John L. Ries
        • Microsoft has sued Google

          The thing is they sued Motorola Mobile many times and since Motorola Mobile is owned by Google and all their patents go to Google, Microsoft does in fact sue Google. And vice versa of course.
          Jabe124
  • 56 percent of all patent lawsuits are made by patent trolls

    So now we know what Loverock Davidson and Owlllnet1 due all day long.
    Over and Out
    • Nobody's laughing

      If you think that insulting others is a viable form of humor, there's something seriously wrong with you.

      Instead of sounding funny, you just made yourself look pathetic.

      Grow up.
      ForeverCookie
  • 56%? Probably more like 99.99999999%

    I actually wonder if there was a single valid patent law suit in the last five years.
    jackbond
  • A source of inspiration amidst all the Trolling: Newegg

    Check out Joe Mullin's wonderful story for Ars Technica about the Soverain case entitled "How Newegg crushed the 'shopping cart' patent and saved online retail" (http://arstechnica.com/tech-policy/2013/01/how-newegg-crushed-the-shopping-cart-patent-and-saved-online-retail/). Pay special attention to his interview on page 2 of that piece with Lee Cheng, corporate counsel for Newegg. The very last lines of the story are classic, and worth remembering.

    --Ed--
    EdTittel
  • A little secret ...

    "Eben Moglen, professor of law and legal history at Columbia University"

    Let me let you in on a little secret ...

    Once lawyers leave law school we TOTALLY IGNORE law professors. Law professors basically are "ivory tower academics" who deal almost exclusively in theoretical situations.

    Even U.S. Supreme Court Chief Justice John Roberts recently said that the Supreme Court hardly ever reads articles, etc., by law professors because they don't find them useful.
    Rick_R
    • I bet they've read the GPL.

      The GPL was written by Eben Moglen and RMS, of course. And it has been upheld in Court.

      Are you over-generalizing?
      Zogg
      • GPL is a license, not an academic paper

        or is that differentiation too much for you to comprehend?
        Cynical99
        • Rude and irrelevant.

          Why are you trying to limit the scope merely to academic papers? The overly-broad claim that I am challenging was:

          "Law professors basically are "ivory tower academics" who deal almost exclusively in theoretical situations."

          And yet not only has Eben Moglen, a Law Professor, written the GPL, but he also acts as pro-bono legal counsel for (say) Debian. That's not being an "ivory tower academic" by any stretch.

          So I conclude that Rick_R is wrong and that your comment is beside the point.
          Zogg
    • RE: "A little secret ..."

      Rick_R wrote:
      "Even U.S. Supreme Court Chief Justice John Roberts recently said that the Supreme Court hardly ever reads articles, etc., by law professors because they don't find them useful."

      His reading list is most likely provided by the Koch brothers. For example:

      "Court Kills Limits on Corporate Politicking
      http://online.wsj.com/article/SB10001424052748703699204575016942930090152.html#
      Rabid Howler Monkey
    • And yet...

      ...law professors are appointed to state and federal courts on a regular basis.
      John L. Ries
  • Steven, were you sleeping?

    From the article:
    "The only real solution is a total reform of the utterly broken patent system in the US."

    I thought that the America Invents Act of 2011 fixed everything. And you didn't even mention it in the article. :/

    P.S. The whole software patent mess was created by U.S. courts and, most likely, will have to be fixed by the courts (if it ever does get fixed).
    Rabid Howler Monkey
    • Nope

      The courts did cause the problem, but as appellate courts are very reluctant to overturn their own precedents, they are very unlikely to fix it. Congress will need to do that.
      John L. Ries
  • Patent trolls can win lawsuits, others rarely do

    The biggest reasons that patent trolls are the primary lawsuit people is that they have the resources to file the suits and persue them and that since they don't manufacture anything they can't be tripped up by the firm filing a countersuit.

    I had some patents I recently sold out to a patent troll. They included some inovative software that a large firm after having a presentation on it (but not trying to negotiate for the patent) placed into an open source package for Linux. Now if I had tried to sue the firm, I could expect to need a million or two to get to decision at a minimum, since that wasn't going to happen and the firm would not negotiate, sell to a troll.
    oldsysprog
  • This is an expected result

    This isn't surprising in view of the America Invents Act of 2011 (“AIA”), which makes it significantly more difficult (if not practically impossible) to file a single patent infringement lawsuit against multiple un-related defendants. This was intended to curb lawsuits filed by non-practicing entities (what some refer to as "trolls") who, historically, would file a single lawsuit naming several alleged infringers. However, the response has been to simply file multiple lawsuits, thus increasing the number of filings by non-practicing entities.
    twc_brian
  • So, monetizing your IP is evil?

    So, if somehow you've been able to get a patent through the maze of patent laws, monetizing that patent is evil?

    Many patent owners never create products, but sell the patents to other companies. So, you've by default called the little guy a troll.

    Way over generalized for the smell test. Steven's credibility at it's normal level, non-existent
    Cynical99
    • Re: So, monetizing your IP is evil?

      How can you own an idea?
      ldo17