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Patent trolling pays: Since 2010, trolls have made 3 times as much money in court as real companies

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Who deserves more money from a jury: a company that uses its patents to sue a competitor using its technology? Or a band of lawyers and investors that sues whole industries through shell companies?

The answer is the latter group — who are better known as patent trolls. In the latest depressing indictment of the U.S. patent system, this chart shows how, from 2010-2013, so-called “non-practicing entities” (trolls) cashed out at three times the rate of real companies:

Patent troll screenshot

The chart shows how the median damage awards for trolls was $8.5 million, which is just one of many sobering statistics published by the law firm Goodwin Procter as part of a manual that provides tips for fighting patent trolls.

Michael Strapp, a partner at Goodwin and one of the guide’s authors, explained by phone that the disproportionate damage awards for trolls is the result of several factors.

These include the economic model of patent trolling, which in many cases entails the troll building up a legal war chest by squeezing settlements from dozens of smaller companies, and then suing a big fish. Such big fish, like Google or Apple, are more capable than small firms of absorbing a loss — which, in turn, can lead to higher than usual damage awards.

Another factor for the high figure, Strapp said, relates to another dysfunctional feature of America’s patent system: the trolls’ ability to choose a handful of notorious venues. Unlike ordinary patent plaintiffs, which sue evenly across the company, the trolls flock to East Texas and Delaware:

Troll venues

Despite higher court rulings intending to limit the jurisdiction of East Texas and Delaware, trolls are suing in these places at higher than ever rates — in no small part because the local judges, perhaps recognizing that the troll lawsuits help the local economy, are reluctant to grant venue changes.

These stats are a sobering reminder that, even as patent reform advocates have won some key battles at the Supreme Court, the trolls are still winning the war.

As Strapp noted, the court’s “Alice” ruling this summer on software patents means that more such patents are vulnerable to invalidity challenges — but that this nonetheless requires a defendant to spend large amounts of money to bring the case to trial. According to Strapp, only about 5 percent of patent lawsuits even get this far, as defendants recognize it is more efficient to settle instead.

As such, the basic business model of trolls like Intellectual Ventures is still intact.

All of this suggests that a renewed push for patent reform, such as that touted by Sen. John Cornyn (R-Tx), will be necessary to fix a system that, despite recent patches, remains fundamentally broken.

25 Responses to “Patent trolling pays: Since 2010, trolls have made 3 times as much money in court as real companies”

  1. Robert Ziegler

    The system is broken – there is no protection of IP for anyone that can’t afford to write checks north of $1M – the defendant has no counter / recovery as in normal commercial law cases – the other side are lawyers prosecuting on contingency, by a company off-shore with no tangible assets – and if you can sustain the $ and time – what recovery is allowed (rarely allowed), your momentary celebration of a win, will be met with a notification from your counsel that the other guys just filed bankruptcy. Add to this that your win doesn’t help the other poor slob being sued by the same attorneys – every infringement case is separable and stand-alone. Right now the only real answer is to follow Elon Musk and give it to the world…

    • Art1Sec8

      The system is not broken and that catchall phrase is propagated by the infringer’s lobby to provide cover to achieve their goal of weakening and/or destroying patent rights. Some may consider this hyperbole but the movers behind the anti-patent coalition believe their current market position will sustain them forever. Dream on.
      As to the other points raised:
      The people who cannot write checks for north of $1M are usually the victims (inventors) of large tech companies.
      The “risk” to venture backed companies given the changes in the law and the advent of the IPR process has been diminished.
      As for the bankruptcy risk isn’t that what Texaco did after they lost the Pennzoil case?!
      Fee shifting has already occurred in the last several weeks and will continue for the near term but that may begin to swing both ways –
      If a plaintiff loses because his patents are found invalid – then the other defendants at risk from those patents will benefit. If the patents are found non infringing then others will continue to need to defend themselves.
      If people were willing to engage in an honest assessment and discussion of the current process then we could enact actual reform which would strengthen patents and protects inventors and innovators. The current fight is funded by multi-national corporations whose only interested is protecting themselves from being held to account. They want all the benefits of US law with none of the costs.

  2. Richard Falk

    The award size and venue by themselves are not an issue. The only real core issue is whether the cases have merit — are the patent claims valid and is there actual infringement. Unfortunately, since the vast majority of cases are settled with non-disclosure agreements, the truth is difficult to prove since those on each side simply claim that the results at trial are biased one way or the other (i.e. not representative of the cases that were settled).

    Nevertheless, it should be pretty obvious that if one can make money via threatened litigation to force settlements due to the high cost of such litigation and that the penalties for the pursuit of weak cases are minimal, then the only thing holding back the pursuit of cases with little or no merit would be the morality of the lawyers hired on contingency by the NPEs or the morality of the NPEs themselves. Since some NPEs are public companies, they have a fiduciary responsibility to their shareholders to make money, not to ensure that only cases with merit are pursued. This is a general civil litigation abuse problem not limited to patents as noted in the following 2008 survey of trial lawyers:

    According to ACTL Task Force Chairman Paul C. Saunders, “the costs and burdens of discovery are driving litigation away from the court system and forcing settlements based on the costs, as opposed to the merits.” Also, 83% of respondents agreed that “Litigation costs drive some cases to settle that should not settle on the merits”. While rules have improved regarding discovery, the costs of litigation are nevertheless still very high.

    Until recently with the latest Supreme Court ruling in Octane Fitness v. Icon Health and Fitness, there were virtually no fee shifting awards under the old standard whereas there have been at least 9 such awards since the Octane ruling. Also, prior to Eon-Net v. Flagstar Bancorp, sanctions against attorneys for pursuit of meritless cases were extremely rare and even after Eon-Net they are still fairly uncommon absent litigation misconduct. Finally, even fee-shifting doesn’t work against shell company subsidiaries that have no revenue and the only asset being the patent-in-suit. Even proposed legislation identifying the party-of-interest can be circumvented by setting up foreign subsidiaries owning the domestic corporate shell companies thereby creating a jurisdictional corporate veil. The core issue is one of attorney conduct and holding the attorneys jointly and severally liable and/or doling out sanctions will make such penalties change actual behavior.

    Even when companies do fight back and not settle, the Plaintiff can simply drop the case before their patent can become invalidated in court as happened against Kaspersky Labs twice:

    The first case cost $2.5 million over 3-1/2 years where all the other 34 companies settled while in the second case there were 54 companies who settled with Kaspersky being the lone fighter at unknown cost (probably $1-2 million). Since these were fights on patent validity via disclosure of prior art, a win would not be for just one company as with non-infringement.

    As for EDTX, look at the following stats that show the problem of EDTX from 2012 court data:

    …………………….……………. AVG ….. EDTX
    No Court Action ……….. 20.2% .. 27.8%
    Before Pretrial …….……. 69.4% .. 69.0%
    During or After Pretrial .. 9.2% …. 1.7%
    Nonjury Trial ….…………… 0.37% … 0.35%
    Jury Trial …………………….. 0.82% … 1.2%

    The average percentage of summary judgments is around 4.2% (mostly out of the 9.2% in the “During or After Pretrial” category). If one excludes the earlier actions (No Court Action and Before Pretrial), then the average percentage of cases ended during or after pretrial is 88.5% while for EDTX it is 52.3%. As for “Jury Trial”, if one excludes the first two actions (No Court Action and Before Pretrial) when most settlements occur, then the average for all districts is 7.9% while for EDTX it is 37% so 4.7 times as many cases go to trial in EDTX compared to the average.

    Even these stats implying a low percentage of summary judgments in EDTX underestimate the problem because one has to file a motion for leave to file summary judgment:

    It isn’t just that jury trials are riskier in terms of outcome, but that the costs are much higher than when a case is determined via summary judgment.

    Abuse cuts both ways and there are companies who have abused small inventors by using their power to infringe and not settle amicably with such inventors, but two wrongs do not make a right. Abuse is abuse regardless of the actor.

    • >> Abuse cuts both ways and there are companies who have abused small inventors by using their power to infringe and not settle amicably with such inventors, but two wrongs do not make a right.

      So I’m not alone in seeing the bullying that exists by large corporations when the use their power to infringe and not settle, abusing small inventors. True, two wrongs don’t make a right. Moreover, if one wrong (trolling) is a response to the other (infringement), if you eliminate the first wrong (infringement), then you eliminate the second (trolling).

      Again, the problem is infringement and bullying by large corporations.

      It’s the same thing here with my comments. If Roberts would write without bias, then I wouldn’t respond by trolling in his comments, pointing out his error. If he does write with bias, then the trolling must continue. Eliminate the bias, eliminate trolling comments.

      • Richard Falk

        No, if companies settled fairly with inventors you would still have trolling abuse. How could you possibly think that for the subset of cases that have little or no merit that the PAEs are doing that solely because companies didn’t settle with the inventors directly for cases that had merit? Do you honestly think that PAEs and their contingency-fee lawyers are pursuing the cases with little or no merit solely out of some sort of vengeance rather than simple greed? PAEs have a definite positive role in society for monetizing patents and balancing power, but that is not a proper reason for the abusive behavior.

        How do you explain other historical civil litigation abuse such from auto insurance fraud to securities class action to medical malpractice to CA Section 17200, Prop 65, and ADA, to patent marking? Are all of these simply getting even for those defendants who abused the system? While it is true in most of these areas there were some defendants who broke the respective laws or regulations (which makes sense since that’s why such laws or regulations were put forth in the first place), there is absolutely positively no excuse for litigation abuse regardless of the actor.

        Such excuses for abuse that border on the childish “he hit me first” or the adult “she deserved to be hit because [fill in any lame excuse]” is never justified — ever. Abuse is abuse, period.

    • Richard Falk

      I want to update the average and EDTX statistics with the latest data from 2013 which comes via, then the “Statistics” tab, then “Judicial Business of the U.S. Courts” link on the left, then the “U.S. District Courts – Civil” link under the “DETAILED STATISTICAL TABLES” section on the lower right, then Tables C-4 and C-4A with links below:

      where all I did was convert the raw data into percentages relative to the first Total column. The data for 2013 (12-month period ending September 30th) shows the following:

      ………………………………….. Patent ……. All ……. All …….. All ……. All …….. All …… All
      …………………….………………. AVG …… AVG .. EDTX .. CDCA … DE …… NDIL . SDNY
      Percent of all Patent Cases …….. 100% .. 10.1% ….. 14.1% .. 6.9% …. 5.5% . 5.5%
      Percent that are Patent Cases …. 5.9% . 36.6% … 11.4% .. 53.1% …. 6.8% . 7.0%
      No Court Action ……….. 30.0% … 21.2% .. 29.2% . 38.5% . 34.5% . 26.8% . 11.3%
      Before Pretrial …….……. 55.9% … 67.4% .. 68.4% . 59.2% . 57.6% . 64.6% . 63.8%
      During or After Pretrial .. 11.9% … 10.1% ….. 1.18% .. 1.23% … 5.3% …. 7.5% . 23.4%
      Nonjury Trial ….…………… 0.89% … 0.38% .. 0.18% . 0.40% … 1.8% . 0.24% . 0.54%
      Jury Trial …………………….. 1.26% … 0.84% … 1.00% . 0.68% . 0.81% . 0.85% . 0.94%
      Percent Jury Trial* ……….. 9.0% ….. 7.4% … 42.4% . 29.4% . 10.2% … 9.9% .. 3.8%

      *excluding No Court Action and Before Pretrial when most settlements occur

      The statistics for the percentage of all patent cases each district has and the percent of all civil cases within a district that are patent (intellectual property) cases come from the following link:

      Here again the very low percentage in “During or After Pretrial” is due to the very low number of cases determined by summary judgment so factoring out the first two categories of No Court Action and Before Pretrial which are mostly settlements, we have 9.0% jury trials on average for all districts for patent cases, 7.4% jury trials on average for all cases, and a whopping 42.4% jury trials on average in the Eastern District of Texas (EDTX). Interestingly, the Central District of California (CDCA) also has a fairly high 29.4% going to jury trials, but they have many non-patent civil cases. Delaware is a better example since it has even a higher percentage of its cases being patent cases than even in EDTX and it has only 10.2% going to jury trials, which is closer to the national average.

  3. NotNIdiot

    And as usual, it’s all about how small companies are targeted by trolls, when three of the companies trying hardest in Washington to kill the patent system, Google, Apple and Intel, have a combined market cap of over $1 trillion. Little guys?

  4. NotNIdiot

    I met JJ Roberts in 2013 to discuss this issue, and I have not come across a less educated and more stridently partial person on the patent issue, period. The fact he remains employed by a media organization is stunning. I recall he mentioned Apple as a company that innovates and patents correctly. When I mentioned that Apple’s devices wouldn’t be able to connect to networks without the work done by others, some of it a decade before Apple’s products, he closed his eyes and rubbed his forehead… he just didn’t want to know. If anyone is blindly pushing an agenda, it’s him.

      • And this is who employs Roberts: GigaOm, backed by True Ventures, Alloy Ventures, and Reed Elsevier Ventures.

        True Ventures is a VC firm that invests in mobile, software, and curated web.
        Alloy Ventures invests in biotech, enterprise software, and hardware + software.
        Reed Elsevier invests in analytics, apps, and advertising.

        Just search google and for “Giga Omni Media”.

        In light of this information, let alone his actual writing, it is obvious that Roberts writes with a bias against the patent system, which all of these VC firms surely have to deal with infringement suits on a continual basis, and it directly affects their return.

        One solution? Have Roberts Astro-Turf the Internet against the U.S. Patent System with his articles.Just read his illogical and/or non-existent responses to my many comments in his articles.

  5. ‘trolls have made 3 times as much money in court as real companies’

    Can you say ‘dissemble’? Just because they call it patent “reform” doesn’t mean it is.

    Property rights and jobs in America are now hanging from a frayed thread. These changes are killing our small and startup firms and the jobs they would have created. When government fails to uniformly and justly enforce property rights they contribute to the wealth and the power of the well placed few, suppress the economic potential of the rest, and support giant monopolies that enslave the public. Some in Congress and the White House continue to follow the lead of their giant multinational campaign donors like lambs…pulling America along to the slaughter.

    All this patent troll and ‘reform’ talk is mere dissembling by China, huge multinational thieves and their paid puppets. They have already damaged the American patent system so that property rights are teetering on lawlessness. Simply put, their intent is to legalize theft -to twist and weaken the patent system so it can only be used by them and no one else. Then they can steal at will and destroy their small competitors AND WITH THEM THE JOBS THEY WOULD HAVE CREATED. Meanwhile, the huge multinationals ship more and more American jobs to China and elsewhere overseas.

    Do you know how to make a Stradivarius violin? Neither does anyone else. Why? There was no protection for creations in his day so he like everyone else protected their creations by keeping them secret. Civilization has lost countless creations and discoveries over the ages for the same reason. Think we should get rid of or weaken patent rights? Think again.

    Most important for America is what the patent system does for America’s economy. Our founders: Jefferson, Franklin, Madison and others felt so strongly about the rights of inventors that they included inventors rights to their creations and discoveries in the Constitution. They understood the trade off. Inventors are given a limited monopoly and in turn society gets the benefits of their inventions (telephone, computer, airplane, automobile, lighting, etc) into perpetuity AND THE JOBS the commercialization of those inventions bring. For 200 years the patent system has not only fueled the American economy, but the world’s. If we weaken the patent system, we force inventors underground like Stradivarius and in turn weaken our economy and job creation. For a robust and stable economy America depends on a strong patent system accessible to all -large and small, not the watered down weak system the large multinationals and China are foisting on America.

    For the truth, please see

  6. John Willkie

    Where are the figures on companies who are infringed upon but decide to do nothing but bear the loss? Do innovations actually come from large companies? Why is Google (the big culprit here) still doing “search” when what we want is “find?” Why have they innovated not a whit in their main business in at least a decade?

    The anti-patent (and anti-innovation) creed in this blog has had recent effect with me. Just yesterday, while looking into an interesting venture capital firm, I noticed that Om Malik was an investor. Everything else about the firm seemed just fine. But a firm with Om Malik as a featured investor is a non-starter for me.

    Then, on the way out, I looked at the list of portfolio companies. If any of those provided innovations, I was not aware of any. Go Om!

  7. This is a disturbing trend, especially the fact that trolls are having so much success shopping around for favorable litigation venues (and that DE and TX seem overly happy to oblige and benefit).

    Judging by the two earlier comments, apparently patent trolls can ~astroturf too. There are a lot of valid arguments to be had when it comes to patents in general, but those outlined in your article are so overtly problematic; they’re issues only trolls or their paid advocates could love or favor.

    • Thanks for your comments, Jack. You’re quite right that the patent debate attracts its share of “astro-turfers” — people paid to make spurious arguments in an effort to legitimize the trolls’ activities.

      While astro-turfing is hardly unique to patent trolling, its existence here shows the ample resources of the troll lobby.

      It’s ironic too since the patent system is nominally a tool to promote innovation, yet the system now employs many people, including lobbyists and lawyers, who make their living imposing useless costs on people who do innovate.

      • Art1Sec8

        If astro-turfing is a description of people who know what is actually happening as opposed to propagandists then guilty as charged.
        Jack – check the transfer rates out of EDTX and DDE today – venue shopping has been dealt with through the Volkswagon ruling.
        As for the “problems” outlined in the article – the point raised is the “facts” offered by the Goodwin Proctor primer are not complete and therefor not accurate. Jury award does not equal monies paid. If you have data regarding what money has been exchanged you should share it. What is ironic is that Goodwin Proctor would publish this “tutorial” given their IP contingency practice!
        As for “innovation” that is a cover used by this author and others to justify the efforts of the infringers lobby to choke/throttle individual inventors and other small patent owners who have found the means to fight back.
        Why is it that large tech companies don’t encourage and in some cases forbid their engineers from conducting searches to see what is being filed for at the USPTO?
        Further, if you understood how patents are used by corporations – both tactically and strategically – you would understand why the damages awards they seek are smaller in the first place: there interest is not money but in putting their competitor out of business or at a minimum getting their products off the shelves – is that your idea of innovation?!

      • Jeff, You might want to seriously look in the mirror. Aren’t you paid to write your articles with your obvious bias? Who’s astro-turfing now?

        Fact: I am no astro-turfer. I have told you before in my comments in your articles. I am a sole inventor. Never litigated against anyone. Never licensed either. I have never received any resources of any troll lobby. I invent, which contributes to the great innovation of USA that makes it the world leader in creativity. But what is happening right now because of people like you with your astro-turfed agenda is the rights of those who actually do innovate and invent like me are being stripped away. Someone has to stand up and fight for innovation, and that’s what I’m doing. Do you seriously want large corporations to overrun true inventors like me?

        >> It’s ironic too since the patent system is nominally a tool to promote innovation, yet the system now employs many people, including lobbyists and lawyers, who make their living imposing useless costs on people who do innovate.

        Do you consider me a person who does not innovate?
        More importantly, look at YOU ROBERTS. DO YOU INNOVATE? You are the one complaining about “costs being imposed” on you, yet you do not innovate anything except a bias. See for yourself:

        Quoted from that article:
        >> In the Apple case, does GPNE deserve a royalty on the sale of every iPhone — a royalty that will be passed directly on to the consumer? You can decide for yourself.

        My response in the comments:
        >> The answer to this question depends on whether nor not Apple infringed. If so, then Apple needs to stop stealing others’ ideas. and this is the risk Apple takes with its consumers. If they do indeed infringe and then must raise the price, and if that encourages consumers to start looking at cheaper, competitive products, then THIS VERY THING is what us capitalists call “healthy competition at work”. Infringers can either stop stealing, or produce something else.

        So before you can complain, Roberts, how about you innovate something.

        • Mike, replying to you seems to only set off more diatribes, so I’ll just note that I never said YOU are an astro-turfer — even if your views seem to ally with them.

          I also stand by my initial point that the patent troll lobby does appear to pay people to post propaganda on Gigaom and other sites (the IP addresses provide one clue).

          • Art1Sec8

            I encourage you to point out the propaganda that you refer to?!
            Goodwin Proctor’s data is incomplete – your not refuting it means you don’t have the data regarding what payments have actually been made over the years. Nor does it seem to occur to you that a large percentage of those payments were made because the alleged infringers had in fact infringed valid patents.
            Goodwin Proctor has represented entities which you would consider trolls and has done it on a contingent basis – you have not disputed that.
            The transfer rates out of EDTX and DDE have increased in the last 2 years – which has resulted in more cases being filed in the NDCA and other venues.
            Obfuscating by raising the “astroturf” straw man only highlights the feebleness of your position but you carry on as Mike has pointed out you are paid to do it!

          • The key word in your comment: APPEAR.
            In other words, no proof. Just appears so.

            So what if I use a VPN and mask my IP address, then? Like I’m doing now? I see GigaOm now has a new comment section and new TOS and Privacy Policy. Trying to gather info on your commentors? Are you an investigative reporter now?

            In any case, why hide my comment about GigaOm’s VC backers? You expose Patrick’s employer below, yet when I bring to light your employer and the VC firms that back GigaOm, you delete the comment. And you can truthfully live with yourself after doing that?

            One way you make money is via advertising. I know that my comments make your articles more interesting (and truthful). So what gives, Roberts?

  8. I agree with Art1Sec8.

    I’ll also add this: the reason trolls exist is because of infringement by those “big fish” that you mentioned. Large enterprises and their massive budgets bully small inventors through the legal system to where they cannot afford to assert/enforce their I.P. Ultimately, when faced with this reality, small inventors are then forced to resort to selling their IP to NPEs so that they can have their IP asserted against those who are infringing.

    So again, the problem is not trolls. The problem begins with infringers. Stop the infringement/stealing, then the trolls will have nothing to sue about.

    And yes, as Art1Sec8 stated:
    “The actual issue is how much money the infringers made by stealing someone else’s invention before they were held to account…”

    So where is your data on that, Roberts. Or are you still pushing your “anti patent system”, GigaOm-silicon-valley-backed agenda.

  9. Art1Sec8

    Figures can lie and liars can figures and then there are statistics.

    Please supply the data showing how much money the patent licensing companies actually received. A jury award does not mean money changed hands.

    The actual issue is how much money the infringers made by stealing someone else’s invention before they were held to account – if at all. You should review Nathan Myhrvold’s testimony to the US Senate in 2006 to get a sense of that reality.