Numbers don't lie: Patent trolls are a plague

Recent research supports view that patent troll activity is rising -- costing America a fortune in wasted legal fees and lost jobs

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The findings should concern us all. Coining the useful term "patent monetization entity" (as a replacement for "patent troll," "nonpracticing entity," and "patent assertion entity" -- all terms with either social or technical issues), the scholars have concluded that "lawsuits filed by patent monetizers have increased significantly over the five-year period." Not only has the number of cases increased, but so has the proportion of these non-product-related litigants, from 22 percent to 40 percent of cases filed. They found that four of the top five patent litigants in America exist solely to file lawsuits.

This is the tip of the iceberg. Among their findings, the academics analyzing the Lex Machina data observed that many cases never reached court, and the main impact of patent monetization entities was probably in the costs they impose way before litigation commences. This is supported by a paper from the Congressional Research Service, which observes that the main goal of patent monetizers is to extract money from their victims without ever going to court.

The vast majority of defendants settle because patent litigation is risky, disruptive, and expensive, regardless of the merits; and many PAEs set royalty demands strategically well below litigation costs to make the business decision to settle an obvious one.

What's going on here? One clue comes from the Lex Machina research. They found that technology industry cases constitute 50 percent of all patent suits; in the software industry, Internet-related patents were litigated 7.5 to 9.5 times more frequently than non-Internet patents. When cases actually go to court, they are often unsuccessful, but most lawsuits from patent assertion entities are settled out of court.

Combine that with the evidence that the unseen menace, when threats lead to payments under nondisclosure terms so as to avoid expensive litigation, and the implication grows that this is an abuse of an out-of-date system manifesting itself. It will then come as no surprise that 1 in 6 patents today covers smartphones. Guess what those patent monetization entities want to monetize?

Software patents are far too easy to obtain; they are poor quality, with prior art invalidating them if one is able to check. But the cost of self-defense is so high that most victims, instead of fighting, simply settle and stay silent. Given the profits to be made and the low costs of failed attacks, the intellectual vultures are gathering, darkening the skies above Silicon Valley looking for victims.

The papers cited above have many proposals for dealing with the problem, but there's no common pattern among them. Perhaps Lemley's simple and elegant proposal will bear fruit in the area of software patents. But more will be needed. The cost of litigation for patent parasites must go up; there need to be penalties for failed attempts to monetize the innovation of others. Most important, the mafiosi-grade shakedowns costing America's economy so much money -- and with it the success of innovative startups and the creation of much-needed jobs -- has to end.

Doing that will definitely require changes to the law beyond the claimed benefits of the proposed SHIELD Act. It seems the researchers -- including those working directly for Congress -- are finally on the case to fuel the shift.

This article, "Numbers don't lie: Patent trolls are a plague," was originally published at Read more of the Open Sources blog and follow the latest developments in open source at For the latest business technology news, follow on Twitter.

Copyright © 2012 IDG Communications, Inc.

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