‘Patent trolls’ live to sue -- but they only file 20% of patent suits

One of Silicon Valley’s favorite hobbies is complaining endlessly about the rise of “patent trolls” and how they’re destroying innovation.

And by patent troll, we mean a company that doesn’t make anything but just owns a bunch of patents and uses them to sue the pants off real companies that make real products and employ real people.

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Valley companies have argued that patent trolls are responsible for a big spike in patent litigation.

That’s not quite true.

The U.S. Government Accountability Office has released a report that was commissioned as part of a patent reform bill passed in 2011. The report is supposed to look at the impact of patent trolls, known technically as “non-practicing entities” or NPEs.

Yes, NPEs appear to be contributing to a rise in patent litigation. But overall, NPEs account for only 20% of patent litigation, according to the report.

The other 80%? That comes from “practicing entities” or PE. That is, real companies. Companies such as Apple, Google, Samsung and so on.

“These data also show that companies that make products brought most of the lawsuits and that non-practicing entities (NPE) brought about a fifth of all lawsuits,” the report says.

That has important policy implications, not to mention public relations ones. The people pointing the finger at others for driving up their litigation costs are actually the ones doing most of the suing.

But in terms of fixing the problem, the report basically says that if legislators focus on NPEs and limit their power or ability to litigate, they’re only going to address 20% of the problem.

The real focus, the report says, is the quality of patents. Software patents account for 89% of patent litigation. The problem is that many patents are too vague or broad, essentially opening the door to endless litigation.

“The report says the focus on the identity of the litigant rather than the type of patent may be misplaced,” said Owen Byrd, general counsel of Lex Machina, the Menlo Park firm that provided much of the data for the GAO report. “That’s additional fresh thinking.”

The GAO suggests that the U.S. Patent and Trademark Office find ways to mine the data from patent litigation as it considers new patent applications.

Overall, the report says the number of patent-related lawsuits between 2000 and 2010 “fluctuated slightly.” Since the patent reform bill, the number of suits increased by one-third. But that is more likely due to a technicality that requires plaintiffs to sue companies separately rather than filing a single lawsuit against multiple defendants.

“I think what the GAO has done is pointed out that it’s a sophisticated problem,” Byrd said.


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