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Summary:

A study of 500 patent lawsuits found that those brought by patent trolls, which the study’s authors call “monetizers,” account for nearly 40 percent of the cases brought in 2011. Of course, their study doesn’t account for the untold thousands that never make it to court.

According to a study released on Tuesday, patent trolls likely accounted for nearly 40 percent of patent lawsuits filed in 2011, but that number doesn’t even begin to tell the whole story.

The study, which was commissionedby the Government Accountability Office, is encapsulated in a Duke Law and Technology Review article titled “The America Invents Act 500: Effects of Patent Monetization Entities on US Litigation.” The authors — Sara Jeruss of Lex Machina, Robin Feldman of the University of California, Hastings, and Joshua Walker of Simpson Thacher & Bartlett LLP (and founding CEO of Lex Machina) — analyzed 500 random patent lawsuits since 2007 (100 per year) and concluded the number filed by suspected patent trolls (called “monetizers” in the study) rose from 22 percent in 2007 to almost 40 percent in 2011. Of the five biggest lawsuit filers among their sample set, four are monetizers.

This increase shouldn’t be surprising.  Our Jeff Roberts regularly covers such lawsuits in the technology world, including recently filed cases against Foursquare; a power trio of Facebook , Walmart and Disney; and pretty much everyone who built a product based on Hadoop. It’s this state of affairs that has spurred U.S. appellate judge Richard Posner to call the patent system dysfunctional, and has researchers, entrepreneuers and even Google devising methods to improve it.

Source: Jeruss et al. Suspected monetizers and individuals/trusts fall under “monetizer” label.

The problem could be particularly bad online. A 2012 Stanford Technology Law Review article found that patents relating to the internet are litigated almost 10 times more than non-internet patents. In a GigaOM post on Monday, Twitter General Counsel Ben Lee described a recent trial victory over a patent troll and said his company has been hit with three lawsuits from trolls in the past month and a half alone.

However, the new study notes, an increase in patent lawsuits can’t possibly account for what must be an extraordinary number of threats, forced licensing deals and other legal tactics that never make their way to court:

“Based on anecdotal evidence, albeit a mountain of such anecdotes, the vast majority of monetization activity never progresses to the point at which the patent holder actually files an infringement lawsuit. Given the costs of litigating infringement suits, the uncertainty of the outcome, and the potential for outsized judgment awards, companies may capitulate to a patent monetizer’s demands, rather than face the ordeal of a trial.”

A recent survey from the American Intellectual Property Law Association found the median cost of legal fees in a patent litigation ranges from $650,000 to $5 million depending on how much money is at stake. And researchers at Boston University recently concluded that patent trolls are have drained $500 billion from the economy since 1990.  A proposed law, which Twitter’s Lee supports, would force patent trolls to pay defendants’ legal fees if defendants prevail.

Although the “America Invents Act 500″ authors note there are limitations to their study and methodology, it would appear their classifications of operating entities (i.e., companies actually using patents) and monetizers is accurate. They note the concentration of lawsuits brought by monetizers in the plaintiff-friendly Texas federal court system, as well as the outcome of cases brought by trolls. That group is more likely to settle rather than go to trial, and more likely to get their claims dismissed via summary judgment or default judgment.

Source: Jeruss et al

Feature image courtesy of Shutterstock user zimmytws.

  1. How have patent trolls drained $500 billion from the economy? Where is the money going? It’s only switching hands and not disappearing.

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