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'Congressional watchdog' reports patent trolling rising fast

129% more defendants in recent years, 89% of those in software-patent lawsuits

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The US Government Accountability Office (GAO), the independent, nonpartisan "congressional watchdog" charged with reporting to that branch of government how tax dollars are spent, has released its long-awaited report on patent infringement lawsuits, and has concluded that such suits are on the rise.

From 2000 to 2010, the number of patent infringement lawsuits in the federal courts fluctuated slightly, and from 2010 to 2011 it increased by about a third.

Patent litigation between 2000 to 2010 "fluctuated slightly," the report's summary notes, but that from 2010 to 2011 it increased by about a third. A detailed study of a "representative sample" of 500 lawsuits between 2007 and 2011 found that the number of defendants during that period increased by 129 per cent.

"These data also show that companies that make products brought most of the lawsuits," the report states, "and that nonpracticing entities (NPE) brought about a fifth of all lawsuits."

The GAO also notes that lawsuits involving software-related patents accounted for about 89 per cent of the increase in defendants between 2007 and 2011.

In their conversations with "stakeholders knowledgeable in patent litigation," several of those stakeholders told the GAO that the claims in software-related patents are often overly board, unclear, or both.

Although the stakeholders speaking with the GAO cited the lure of large monetary awards "even for ideas that make only small contributions to a product" as an incentive for increased patent-infringement litigation, and that the flurry of large awards increased awareness of the value of patents, others cited recent legislation as increasing the number of patent lawsuits:

Some stakeholders GAO interviewed said that the increase in 2011 was most likely influenced by the anticipation of changes in the 2011 Leahy-Smith America Invents Act (AIA), which made several significant changes to the U.S. patent system, including limiting the number of defendants in a lawsuit, causing some plaintiffs that would have previously filed a single lawsuit with multiple defendants to break the lawsuit into multiple lawsuits.

In one section of the full 57-page report (PDF), the GAO focuses in on the litigation practices of "patent monetization entities" (PMEs), which the GAO single out as a subset of "nonpracticing entities" (NPEs). The GAO defines NPEs as "individual inventors who may choose not to develop products based on their patents," while PMEs are NPEs that "simply buy patents from others for the purpose of asserting them for profit."

In their detailed analysis of the period from 2007 through 2011, the GAO found that PMEs tended to sue more defendants per suit than did companies who actually made products – 4.1 defendants per suit for PMEs versus 1.9 per suit for operating companies.

Also, more PMEs sued 10 defendants or more per suit than did operating companies: 12 per cent for PMEs versus 3 per cent for operating companies. In addition, the total number of defendants sued by PMEs more than tripled during the period of increased scrutiny by the GAO, while the total number of defendants sued by operating companies was essentially unchanged.

"Thus, even with bringing about a fifth of all patent infringement lawsuits from 2007 to 2011, PMEs sued close to one-third of the overall defendants, accounting for about half of the overall increase in defendants," the GAO reports.

The word "troll", by the way, does not appear in the GAO report. ®

Bootnote

Speaking of trolls, Minnesota Attorney General Lori Swanson did not observe the GAO's linguistic delicacy when announcing a court order and settlement concerning the notorious "scanner troll", MPHJ Technology, which attempts to extort charge per-employee licensing fees for the act of scanning documents for email messages.

"Patent trolls shake down small businesses to pay 'license fees' they may not owe to avoid threats of costly litigation," said Swanson in a statement. "While this settlement and court order may affect one patent troller, the practice of 'patent trolling' will continue until Congress enacts laws to prohibit such activity."

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