Patent Trolling Has Been Crazy Profitable, But Thanks To Supreme Court, New Lawsuits Are Declining

from the a-good-early-sign dept

There's some new data out about patent lawsuits that paint an interesting picture. First, the law firm Goodwin Procter put out a new manual for fighting patent trolls (found via GigaOm), showing that patent trolling has been immensely profitable. It shows how the median damages awarded to trolls has been much higher than to operating companies, which is the exact opposite of what you'd think it should be -- companies that are actually competing in the space have at least a slightly more legitimate claim than those simply setting up toll booths. But it's the trolls who get rewarded: It's worth noting that even this chart significantly underplays things, since very few patent trolling efforts actually reach court in the first place. Many, many companies just pay up when threatened, and many more settle after cases have been filed rather than actually allowing a trial to reach conclusion and have damages awarded (if any).

But... that all may be changing. We've been writing a lot about how the Supreme Court's ruling in Alice v. CLS Bank had resulted in the courts rapidly invalidating a bunch of crappy software patents, and that may be taking a toll. Legal analytics firm Lex Machina has been crunching the numbers and noticed a significant and noticeable drop off in September patent lawsuit filings. Historically, there's usually a summer lull in patent lawsuit filings, but they pick back up in September (back to school patent trolling!). And, each year the number of patent filings in September keeps going up and up and up. In 2011, there were 385 patent lawsuits filed in September, and in 2012, it was 460. In 2013, it was 548. And yet, here in 2014, there were just 329 cases filed in September, a noticeable drop. Lex Machina has a bunch of charts showing the data, but this one is the most telling to me: You can see a bunch of lawsuits rushed to get filed prior to the Supreme Court hearing the case, and then a pretty steady stream over the summer. As we've noted, right when the ruling came out, it wasn't entirely clear how far reaching it would be -- but within about a month people began to realize that it really was going to invalidate a large number of bad patents, and then the lawsuits started dropping rapidly. It will be interesting to see how this plays out over the rest of the year.

Filed Under: patent trolling, patents
Companies: alice, cls bank, lex machina

Patent Reform Needs Fee Shifting Provisions, Because Judges Almost Never Award Attorneys' Fees

from the necessary-reform dept

One of the key parts of the attempts to reform the patent system is the fee shifting provision, which would make it so patent trolls who bring bogus lawsuits will be required to pay the attorneys' fees of those they sued. Some patent system defenders, including the chief judge of CAFC, the appeals court who hears all patent appeals, say that this isn't needed because courts already have the power to award attorney fees. However, as we've pointed out, the law on that notes that this power can only be used in "exceptional cases."

New data from Lex Machina -- an awesome startup that is compiling all sorts of legal data -- shows that courts almost never award attorneys fees, and the rate at which they're doing so continues to go down, even as the number of patent lawsuits has gone up. From 2010 through 2012, 997 patent judgments were contested -- and only six had attorneys fees granted. Yes, less than 1%. So, for those arguing that fee shifting is already allowed under the law... it's simply not happening. Patent reform needs a strong fee shifting component to ward off so many bogus lawsuits.

Update: There's been some discussion in the comments about the data, which require some further clarification. The six awards are the cases where attorneys fees were granted based on "litigation misconduct or frivolous, bad-faith litigation." Some have pointed out that fees have been awarded in some other cases, but those were for default, willful infringement or inequitable conduct -- which are issues unrelated to the point being made here. It's the frivolous, bad-faith litigation that's the problem, which happens all the time, and attorneys' fees are almost never granted in such cases, leading trolls to file frivolous cases all too frequently. Separately, some have argued that the 997 is inappropriate because defendants in many of those cases did not seek attorneys' fees, but that actually supports the point, rather than takes away from it. Given how rare and unlikely it is for a court to award attorneys' fees, most defendants don't see any value in wasting even more legal effort in trying to get those fees, knowing they're almost certainly not going to come.

Filed Under: fee shifting, patent reform, patent trolls
Companies: lex machina