In the popular media, we increasingly read and hear about a rise in patent infringement lawsuits that has been driven in large part by patent “trolls.” They may sometimes also be referred to as “patent-assertion entities” or “non-practicing entities” but regardless of their moniker, each shares one or more of the following characteristics:
• It is a corporation – often a holding company – that doesn’t produce a product covered by any of the patent’s it owns;
• It generates the bulk of its revenue from patent licensing and enforcement efforts;
• It is not run or organized by the original inventor of the patented technology; and
It tends to believe that a large number of others infringe its patent (while the accused often believe the claims are frivolous).
While manufacturing and technology companies may worry about receiving threats of a lawsuit from a patent troll, arming oneself with knowledge about the reality of recent events might just take the edge off of these legal worries so time can be spent on more productive pursuits, like one’s core business.
Many have sounded the alarm, declaring the problem to be out of control and citing statistics that more than 3 out of 5 patent infringement lawsuits are initiated by patent trolls—a 115% increase in less than two years. Still others have issued a call to action, reaching out to Congress and demanding legislation directed specifically at the hated patent troll. In fact, just last summer, Senator Amy Klobuchar identified patent trolls as a “drag on innovation” in Minnesota. But is the problem really as far-reaching as these reports seem to imply? Perhaps not. This is not to say that patent trolls do not exist. They do. Or that having to defend a patent infringement lawsuit won’t cause major disruptions for any business. It will. But a closer look at things, gives some cause for hope.
First, the explosion in patent troll litigation is somewhat of an illusion. In an effort to combat the patent troll problem, Congress enacted legislation in September 2011 making it more difficult for a patent owner to sue multiple defendants in one suit. So, whereas before a patent troll may have sued 20 defendants in one lawsuit, now it must file 20 separate law suits. Less than two years later the Government Accountability Office (GAO), an independent, nonpartisan agency that works for Congress, attributed the uptick in patent troll lawsuits directly to the 2011 legislation that prohibited joinder of multiple defendants in one suit.
Second, a sizable majority of patent troll lawsuits (some say as high as 90%) involve patents on software. Often these patents purport to cover web- or mobile-based implementations such as a recent lawsuit filed against smartphone app developers, among others. Here again, the recent GAO report attributes the problem to patents of low quality having “unclear property rights, overly broad claims, or both.” The problem is inherent in software because, unlike a mechanical device, it is intangible and difficult to clearly define.
Finally, many of the software patents that have been asserted were issued in the 1990s. As now well-recognized, the quality of software patents granted during that time leaves much to be desired. Thankfully, a great many of these patents have already expired or soon will. And more recently, patent quality has improved, which should lessen the assertion of frivolous claims over time. Thus, even without further legislative action the problem should begin to resolve itself.
Certainly, for those whose core business involves software or technology implemented over the internet, the patent troll problem can be a real and daunting threat. Strategies with which to combat these threats are varied and extend beyond the scope of this article. However, for many companies, the patent troll problem should not be a source of excessive concern. Of course, working closely with your trusted, legal advisor to understand your company’s intellectual property rights—whether owned or licensed—is a prudent step toward obtaining peace of mind relating to patent trolls and other intellectual property issues.
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