During the ongoing patent reform debate, those who oppose improvements to the patent system have made some eyebrow-raising claims. For example, instead of acknowledging that the patent system could be improved by strengthening patent protection, they insist that any change to the way things are now will only harm patent holders. The claim is specious. Others have claimed that only 1 percent of patent claims go to trial, intentionally missing the point that, in part, the statistic highlights the problem.
While glibly referring to all entities that staunchly defend their property rights as “patent trolls” is an overgeneralization, there are those who abuse the patent system to harass innocent actors. And this kindles cynicism about the patent system and intellectual property protection in general.
Generally, a troll is a colloquial reference to those who seek to enforce patents opportunistically, relying on a weak or overbroad patent grant and often using a legal strategy typified by a demand letter offering settlement for relatively low dollars so a company will write a check instead of fighting on principle in court. It is a decades old, legally abusive shakedown of business, albeit with a new face.
The cost of engaging the so-called troll in a court battle is hard to ignore for a large company, and is an existential threat for a small company. Hence the threat letter gambit functionally operates as extortion. With the number of demand letters and threats to take a company to court seemingly ever increasing, there is clearly a problem. An adequate solution turns this misdirected action into economic power — the resources poured into litigation, or the threat of litigation, are economic activity that is not going towards further innovation to build a stronger economic future.
Others assert that with only about 1 percent of patent claims being resolved by trial, the economic harm is limited, missing the point entirely that it is not the number of court resolutions, but rather the number and frequency of shakedowns that drain away our economic future.
Littered across the Internet are various analyses that about 95 percent of pending lawsuits end in trial, and settlement prior to trial is in the low 90 percent range. Few — often cited as less than 1 percent of disputes — are ever settled by the court. To take one state as an example, in Florida only 0.2 percent of civil disputes even make it to trial. So to claim that only 1 percent of patent disputes end up in court is to say they are fairly common or maybe even more common in court resolution.
So what happens in those other disputes? Civil lawsuits do not just go from gripe to court; instead they follow fairly clear steps of pleadings, discovery and trial. That all assumes a lawsuit even gets underway. At any juncture, a settlement could occur. That is to say, the troll’s victim may decide to pay up regardless of the seriousness of the complaint to avoid incurring further legal costs. And caving to that shakedown drives down the percentage of cases that go to trial. The 1 percent claim is evidence, perhaps, of the success of the threatening letters and shakedowns.
There are likely many underlying problems with the system that lead to abuse. Perhaps the problem is overbroad and essentially silly patents. Or the one-size-fits-all patent law. Maybe it is a natural result of over-patenting, the strategy of seeking to patent multiples of similar innovations, not just the core technology for defensive purposes. Perhaps it is that a number of substantially similar patents flood the market when a business fails and the patents get sold. Maybe it is the creation of and increasing use of software patents. Or perhaps all of it is opportunistic trial lawyers partnered with their troll friends.
Regardless, litigation reform could solve the problem. In the end, allowing such problems to fester will only result in increasing cynicism about our patent system generally, which leads directly to a devaluation of patents in general. We need to protect our patent system from those who would leach its value to further their own get-rich-quick schemes.
Bartlett Cleland is the managing principal at Madery Bridge Associates, LLC. Bartlett is also the policy counsel for the Institute for Policy Innovation. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.
