Despite US Reforms, Patent Trolls Are Thriving – For Now 26/02/2016 by Steven Seidenberg for Intellectual Property Watch Leave a Comment Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Steven Seidenberg is a freelance reporter and attorney who has been covering intellectual property developments in the US for more than 20 years. He is based in the greater New York City area and may be reached at firstname.lastname@example.org. The United States has spent over a decade trying to rein in so-called “patent trolls.” Nevertheless, a recent study suggests that patent trolls are a bigger problem than ever. Patent trolls are companies that obtain most of their revenues by licensing their patents and suing those who refuse to purchase licenses. The trolls often own vague and dubious patents, and they are quite aggressive in demanding that others license these patents. Over the years, they have forced others to pay them billions of dollars. Many economists, businesses, government officials, and patent experts believe that patent trolls are harming America’s competitiveness and its ability to innovate. So over the last five years, the US has acted vigorously against patent trolls. The country has, for instance narrowed the scope of patent-eligible inventions (thus throwing out many dubious patents, which are often owned by trolls), created rapid and relatively inexpensive administrative procedures to throw out dubious patents, made it more difficult and expensive for patent trolls (and other patentees) to file infringement suits, and made it easier for alleged infringers who successfully defend themselves in court to recover their legal fees from losing patentees. Despite all this, a recently released study [pdf] by RPX Corp. suggests that patent trolls are a greater problem than ever. The study found that the number of companies sued by patent trolls hit an all-time high in 2015. The study also found that trolls were responsible for the vast majority of America’s patent litigation in 2015. That is perhaps to be expected. During the past five years, patent trolls have filed the vast majority of new patent infringement suits. But in 2015, the trolls were responsible for 68.3 percent of new infringement suits – a record high in the five year period covered by the RPX study. Beyond the Numbers The 2015 statistics, however, were inflated by a one-time spike in new patent troll suits, as the trolls rushed to file their paperwork ahead of a new federal court rule that requires far more detail in infringement complaints. The rule went into effect in December, and there were more patent troll lawsuits filed on 30 November than on any other day in history, according to Erich Spangenberg, the founder of IP Navigation Group, a patent monetization firm. Moreover, the statistics don’t reflect some important changes in the duration, cost and viability of patent troll litigation. Thanks to a variety of patent reforms (such as the Supreme Court’s decision in Alice Corp v. CLS Bank Int’l [pdf]), infringement lawsuits are being thrown out more often and much earlier in the litigation process. As a result, defendants’ defense costs for these suits decreased in 2015, and the costs of defending against patent troll infringement suits decreased a lot, according to Prof. Colleen Chien of Santa Clara University Law School. Because it has become easier and less costly to fight patent trolls, more accused infringers are doing so, instead of just making settlements and paying off the trolls. “The number of settlements are down,” said Chien. “Defendants think they can get a better deal by fighting than by settling.” This greater willingness to fight increases patent troll litigation; but that increase is a push-back against trolls, not a sign of the trolls’ success. So the 2015 rise in patent troll litigation does not necessarily indicate that patent trolls are more active or threatening than in the past. It may be a sign that the trolls are in trouble. The Shape of Things to Come Patent reforms are making life more difficult for patent trolls, and these reforms soon will decrease the number of patent troll lawsuits, according to Jonathan R. Spivey, a partner in the law firm of Bracewell LLP. He counseled patience, saying “It will take a couple of years before we really see the impact of the reforms.” Spivey noted, for instance, that patent trolls own many dubious patents issued prior to Alice, and it will require some time for the courts and the USPTO to strike down these patents. “In another three to four years, there will be a pretty big decrease in patent troll cases compared to 2015,” said Spivey. Others, however, expect that patent trolls will continue to bedevil the US. The reforms “are shifting the bargaining power of parties, but they are not eliminating the problems” that give rise to patent trolls, said Prof. Robin Feldman, director of the Institute for Innovation Law, University of California, Hastings College of the Law. “The patent system still permits patent trolls to threaten unreasonably large damage awards,” she said. “Outsized awards and the inability to predict what damages will be awarded are driving the system. They create costs and risks, which patent trolls exploit.” The reforms make it easier for a large, well-financed company to defend itself against a trolls, but mounting a defense still can cost millions of dollars and a great deal of time from the defendant’s executives and scientists. A successful defendant may recoup its legal costs, but that is far from assured. And there is always the possibility that the defense will fail and the company will be ordered to pay a huge fee award. Thus, although recent reforms have put an accused infringer in a stronger position to fend off a patent troll, there are still plenty of incentives for the accused infringer to just settle the matter by paying off the troll. In short, recent reforms will not eliminate patent trolls, according to Feldman. The reforms simply change the bargaining strength of trolls and their prey, allowing accused infringers to buy off trolls more cheaply. “The price point may have changed after recent Supreme Court, Congressional and USPTO actions, but the behavior of patent trolling remains,” said Feldman. “The patent trolls are figuring out how to choose price points at a lower level. So you have a shifting of power, a shifting of tactics, but no knock-out blows [against patent trolls].” “Patent trolling remains a lucrative business,” added Feldman. “It continues to attract more lawsuits and more participants.” Patent trolls, and their attendant lawsuits, may not be going away any time soon. Part 2 of 2 Share this:Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Facebook (Opens in new window)Click to email this to a friend (Opens in new window)Click to print (Opens in new window) Related Steven Seidenberg may be reached at email@example.com."Despite US Reforms, Patent Trolls Are Thriving – For Now" by Intellectual Property Watch is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.