Troll Report

by Adam Philipp on November 14, 2012

Whether patent trolls,
Or patent monetizers,
Impact increasing

How much damage are “patent trolls” doing to America’s system for protecting intellectual property?

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In one of the “by the way” provisions of the American Invents Act of 2011, Congress ordered the Government Accountability Office (GAO) to prepare a report examining the impact of patent infringement lawsuits that have been brought by “non-practicing entities” (NPEs).

NPE is a polite term for those businesses or individuals who make money from patents without actually making anything themselves. They are often derogatorily called “patent trolls” because, like the mythological trolls of fairy tales, they collect a fee for the use of the something they didn’t build.

Of course the comparison isn’t really fair: trolls under bridges don’t own the bridge, but patent trolls do own the patents on which they collect royalties.

The GAO asked a Stanford spin-off called Lex Machina to provide the data for the report. Sara Jeruss and Joshua Walker, both affiliated with Lex Machina, worked with a professor at UC Hastings law school to assemble their own analysis of the data that was provided to the GAO. That analysis is presented in paper titled The America Invents Act 500: Effects of Patent Monetization Entities on US Litigation, which is slated for publication in the Duke Law and Technology Review.

The report proposes using different terminology than what Congress used in its request for a report. The authors concluded that the issue isn’t really operating companies versus non-operating companies. They claim the patent landscape is much more complicated than such a simplistic division. They decided to report on the activities of what they call “patent monetization entities,” or “patent monetizers” for short.

The authors did a random sample of 100 filed lawsuits per year each of the five years from 2007 to 2011. They found that activity by patent monetizers is up dramatically: from 22% of the cases filed in 2007 to nearly 40% of the cases that were filed in 2011.

The authors clearly feel this is a bad thing. In their conclusion they wrote that in addition to answering the question about the impact of NPEs that their report would

…also will spur legislators to look for ways to address the impact that patent monetization entities are having on the United States patent litigation system, as well as on the economy as a whole.

Yes, NPEs or patent monetizers are having an impact on the patent litigation system, but that’s not necessarily a bad thing. Patent monetizers can provide inventors with a way get the money they deserve from their inventions. They can help level the playing field for individual inventors or small companies whose technology is being stolen by large companies. It shouldn’t only be large companies that can protect their technology. However, it would not be a surprise if Congress did react to this impact.

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