Software patents and patent trolls are hurting the country
A new paper has come out, and it debunks some key assumptions made about patents. I think this paper is good evidence that software patents and patent trolls are hurting the United States. The weak patents that software patents and patent trolls create (and litigate) are clogging the courts and stifling innovation. Instead of creating jobs by making and selling great products, our innovators get stuck in court… and stuck behind the rest of the world. If the U.S. legislature wants people to have jobs, we need to make it legal to create jobs.
The paper is “Patent Quality and Settlement among Repeat Patent Litigants” by John R. Allison, Mark A. Lemley, and Joshua Walker (September 16, 2010) ; a brief on-line summary is available. What’s remarkable is that they were pro these kinds of things, at least going in, but their study found results they were not expecting.
Their study examined “repeat patent plaintiffs”, which they defined as those who sue eight or more times on the same patents. These suits have “a disproportionate effect on the patent system [because they] are responsible for a sizeable fraction of all patent lawsuits. Their patents should be among the strongest, according to all economic measures of patent quality… But, to our surprise, we find that when they do go to trial or judgment, overwhelmingly they lose. This result seems to be driven by two parallel findings: both software patents and patents owned by non-practicing entities (so-called “patent trolls”) fare extremely poorly in court.” Basically, software patents and patents from patent trolls are remarkably weak; when people stand up to the extortion, the patent-holders often lose in court. This usually only happens after the victims have spent millions of dollars and years of time defending themselves, draining money and time away from productive pursuits.
Their paper’s introduction shows that the “differences are dramatic. Once-litigated patents win in court almost 50% of the time, while the most-litigated - and putatively most valuable - patents win in court only 10.7% of the time”. The fundamental problems are patent trolls (aka non-practicing entities or NPEs) and software patents: “Software patentees win only 12.9% of their cases, while NPEs win only 9.2%”. In short, “It appears that as a society, we are spending a disproportionate amount of time and money litigating a class of weak patents.”
Delving into the statistics, it is clear that this is not just a slight difference. “One of the most striking findings is the weakness of software and NPE-owned patents in the overall dataset… it seems likely that software patents are dragging down the averages. … There have been numerous complaints about the quality of software patents; our data may give some empirical support to those assertions. If we consider just patent owner wins and defendant wins on the merits, non-software patent owners win 37.1% of their cases across both the most-litigated and once-litigated data sets, while software patentees win only 12.9%. If we include default judgments, non-software patent owners win 51.1% of their cases, while software patentees win only 12.9%. Something similar can be said about suits brought by NPEs. NPE suits, like software suits, are a large percentage of the most-litigated cases… If we consider just patent owner wins and defendant wins on the merits, product owners win 40% of their cases across both the most-litigated and once- litigated data sets, while NPEs win only 8%. If we include default judgments, product-producing companies win 50% of their cases, while NPEs win only 9.2%.”
What’s remarkable is that the authors were not against software patents or NPEs. Indeed, “the authors have elsewhere expressed skepticism over efforts to eliminate particular types of patents, and one has argued that we shouldn’t single out patent trolls for special treatment.”
Yet with a bias for software patents and patent trolls, they admitted that this data is strong evidence that software patents and patent trolls are a serious problem. They state that “it is important to recognize that software patents and patents asserted by NPEs are both taking disproportionate resources in patent litigation, and that the social benefit from those cases appears to be slight… Society is spending a large chunk of its patent law resources dealing with what are - for whatever reason - the weakest cases. [This gives] substantial ammunition to those who argue against software patents and who want to restrain patent trolls. If software and NPE patents are overwhelmingly bad - either invalid or overclaimed - the social benefit of allowing them may well be outweighed by the harm they cause.”
One claim some make is that “the system is working - that the bad patents are being weeded out of the system and are not stifling innovation.” But as the authors note, this “seems altogether too facile. After all, roughly 90% of those cases settled without judgment. While those settlements are confidential, we expect that the vast majority involved some sort of payment to the patent plaintiff - a payment that the outcomes data suggests might represent not the acquisition of real legal rights but a nuisance settlement over a likely-invalid patent”.
In short, “If software and NPE patents are overwhelmingly bad - either invalid or overclaimed - the social benefit of allowing them may well be outweighed by the harm they cause… The patents and patentees that occupy the most time and attention in court and in public policy debates - the very patents that economists consider the most valuable - are astonishingly weak. Non-practicing entities [NPEs, aka patent trolls] and software patentees almost never win their cases. That may be a good thing, if you believe that most software patents are bad or that NPEs are bad for society. But it certainly means that the patent system is wasting more of its time than expected dealing with weak patents.”
If you are interested in more, see my essay explaining why software patents should be eliminated.
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