Report Shows Patent Trolls Are Thriving 135
eldavojohn writes "The 2009 Patent Litigation Study has been released by Price Waterhouse Coopers. It shows evidence that patent trolls are growing and doing quite well. Using a very conservative view of a non-practicing entity (referred to as NPE in the report), PWC noted that 'damage awards for NPEs have averaged more than double those for practicing entities since 1995' and 'certain federal district courts (particularly Virginia Eastern and Texas Eastern) continue to be more favorable to patent holders, with shorter time-to-trial, higher success rates, and higher median damages awards.' The report paints a dire picture of the state of patent lawsuits and especially those brought by NPEs and also shows that in the past eighteen years the number of patent cases filed yearly is on the rise significantly when normalized against the number of patents granted yearly."
When Normalized... (Score:3, Informative)
the number of patent cases filed yearly is on the rise significantly when normalized against the number of patents granted yearly.
Number of patents granted are also on the rise significantly when normalized against GDP.
Re:"...shorter time-to-trial..." (Score:5, Informative)
A shorter time to trial is not more favorable to a defendant UNLESS a preliminary injunction is issued. The plaintiffs hold an overwhelming advantage. They get to spend months or years preparing their case, having their motions ready, doing research and investigation, finding experts, etc. They get to chose the time and venue of the suit. Once they file, they can drown the defendant in motions for preliminary injunction, summary judgment, etc. The defendant has to play catch-up because they have no idea what's going on with the plaintiff's patents. They have to play defense on PI motions without a lot of discovery. Rushing a case to judgment is very unfair to defendants who did not have the time the plaintiff had in figuring out their case.
Re:What I want to know is... (Score:5, Informative)
how come patent trolls are awarded patents in the first place? Would it be possible to make an applicant show proof that they are in the planning stages or are currently using what they are trying to patent?
That's called a 'working requirement' or a requirement to practice the invention. A few countries have such a requirement (Turkey, for example), but the requirement is usually riddled with exceptions that make it essentially toothless. There are several reasons why a strong working requirement is a bad idea, as I explained in a comment [slashdot.org] on a recent Slashdot story [slashdot.org] that suggested forbidding patent ownership by or assignment to non-practicing entities.
In the US patents are personal property--and thus freely assignable--by statute. 35 U.S.C. 261 [uspto.gov]. Assignability is also guaranteed by Article 28 of the TRIPS Agreement [wto.org], which is a treaty that the US is party to. So changing the assignability of patents would require amending the law and withdrawing from or amending a very important international treaty.
And even if the law were changed, it would mean that hundreds of patent holding companies would suddenly lose their patent rights because of an action by the government. That's called a taking, and the ex-patent holders would be able to sue the government for the value of the patents. It would be a massive litigation and cost the tax payer an enormous amount of money.
But anyway, how would we implement such a requirement? We could require that patents only be assigned to an entity that intended to practice the invention. Sounds great, right? No more patent holding companies, therefore no more trolls. There are at least five big problems with that:
1. Not all patents can be freely practiced because of other patents surrounding the technology. Imagine I own a startup company. If I invent a new transistor design I can't be expected to practice it myself: other companies have patents on things like manufacturing processes, bus designs, chip packaging, etc. I would have to license dozens of other patents in order to sell chips with my new transistor design. But that's backwards. Instead, I should license my one patent to companies like Intel and AMD and let them do the manufacturing and sales. But a requirement to practice means I couldn't do that; I'd have to practice it myself.
2. And what about pure research institutions like universities? They can't be expected to also become manufacturers.
3. But suppose we say it's worth making universities sell their patents. So now the patent will be owned by a single practicing entity. The patent can no longer stay with the university and be licensed to whoever will pay the fee. The end result is less competition in the market place for the finished product.
4. Okay, suppose we say that it's sufficient that the patent owner license the patent to at least one entity that is going to practice it. But then the law is too narrow. Almost no patent trolls actually rely on litigation damages for income; it's too uncertain and the margins are too narrow--and often negative. Litigation is just a tool to extract a licensing fee. So the end result is that the trolls can point to a manufacturer who licenses the patent and nothing changes.
5. What about patents on technologies that are ahead of their time? For example, suppose I invented an amazing new transistor design. It will make computers much faster but it requires X-ray lithography in order to work. Well, X-ray lithography is not cost-effective yet, so I can't really practice my invention. Does my patent just evaporate? How does that spur innovation?
As you can see, there are a lot of problems with such a proposal.
Re:What I want to know is... (Score:5, Informative)
It'd be a nightmare. The guy who invented pulse wipers has sued every car company for royalties now; when he first invented them, he presented the idea to 2 car companies, who dismissed him because his idea was non-useful. They immediately implemented pulse wipers, followed by every other car manufacturer. After several years of legal bullshit, he managed to start making some headway and getting judgments against them for the theft of his idea.
Patents are marketable. Some folks like to sit back on a patent and wait for someone else to re-invent it, rather than go out there and risk someone finding a way to work around your idea so you can't sue them for it. If they successfully work around it, then they don't have to license the patent from you and can't be successfully sued, so there is incentive to attempt to come up with a similar-but-legally-different implementation. On the other hand, waiting for the entire industry to implement your invention and then suing everyone in the world is a shit move.
Forbidding inventors from profiting from their inventions would be a disaster. It would prevent small-shop inventors without the capital to make a real, marketable product from capitalizing on their work at all. I could design a new type of nuclear reactor, but I can't build any significant components for it and thus my invention is impossible for me to actually manufacture (I'd need hundreds of millions of dollars). I could license the design to someone else, of course. There may not be a market for new nuclear reactors at this time, though; maybe I need to wait 10 years....
What a mess, yes? The system has to make these considerations, but in doing so it leaves itself open for abuse. In failing to do so, however, it also leaves itself open for abuse.
Re:Don't Abbreviate (Score:3, Informative)
For universities it's easy: as most of them benefit from public funds, they shouldn't be able to patent anything and release it all under the public domain for the public's benefit.
Well, you have to repeal/amend the Bayh-Dole Act [wikipedia.org] that essentially gave universities the right to patent their findings. I think before that the patents went to the United States government if they funded the research. I know that our friends at the University of Wisconsin (Madison) have courted the government to keep funding them by offering Institutional Patent Agreements [warf.org]. Does WARF sound familiar to you? It should [slashdot.org].
There's a lengthy blog post about this [mfeldstein.com] that has good quotes and points from both sides including:
Georgia Tech professor Mark Allen said "In a number of circumstances, the competitive advantage afforded through exclusivity [that is, patent monopoly] may be absolutely critical to justify the risk undertaken by a company in developing a product from a promising early-stage university technology, as it was in the case of Cardiomems." Professor Allen, also Chief Technology Officer at Cariomems, did not reveal his compensation from privately-held Cardiomems using the patented technology from his Georgia Tech research.
Susan B. Butts, Dow Chemical Company, had a different perspective: "Although the Bayh-Dole Act has enabled the transfer of technology developed with federal funds from US universities to industry it has also contributed to a contentious climate around the issue of intellectual property (IP) rights which discourages research collaborations between industry and US universities. Second, most foreign universities, which do not have the IP expectations created by Bayh-Dole, allow industry research sponsors to own or control inventions resulting from the research that they fund. This much more favorable treatment of IP is causing companies to do more of their sponsored research abroad [emphasis added]."
And, you know, with how much value we place on intellectual property elsewhere it would seem that the amount of funding and rewards universities are getting for this research is down right laughable. So the Bayh-Dole Act was a very simple solution: let both parties involved benefit from the research and allow the university to reap the benefits of licensing and royalties.
What's a better alternative method for appropriate rewards?
Re:Don't Abbreviate (Score:3, Informative)
As an anecdote to this, I'm in grad school now, and I'm funded based on patents my school received in the 40s and 50s. (And a bunch since then, but there are a couple from way back when which turned into millions of dollars for the school, which was then invested into the research endowment of the school.)
Which is better? Patenting something, and then using the money from that to fund tens to hundreds of thousands of students, or releasing it to the US for free? I can see the argument both ways. But in my mind, the chance that one of those students ALSO went on to do something which also benefited society is pretty damn large. Based on the research that's been done at my school in the last 50 years, I'm willing to bet that the US was better off with the school keeping the patents, and milking them for all the research they could get out of them.
Re:Prima Faciae Corruption? (Score:4, Informative)
Being from Eastern Texas, I feel like I can speak with some authority in the matter. I've known many of these judges and lawyers (and bar-tended a few of their private functions) and I have found that they are idiots. It's really that simple. There is no conspiracy, there is only a mindset of "If someone sues someone else, then the defendant must deserve it".