The Truth About Patent Trolls

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Patent Trolls are an innovation bogeymen, with numerous research articles and legislation addressing ways to curb troll activity. Patent Trolls, also known as Patent Assertion Entities (PAEs), generate revenue through suing or threatening to sue businesses that infringe on patents. Experts dispute terms for such corporations, labeling them as either Patent Assertion Entities (PAEs) or Non-Practicing Entities (NPEs).

The Truth About Patent Trolls
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Has title The Truth About Patent Trolls
Has owner Albert Nabiullin, Carlin Cherry
Has start date
Has deadline date
Has project status Subsume
Subsumed by: The Truth Behind Patent Trolls Issue Brief
Has sponsor McNair Center
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Hypothesis 1: Most Patent Assertion Entities are drivers of innovation, and incorrectly labeled as patent trolls.

Method 1: Find list of PAEs, sort by location, number of lawsuits filed, damages. Need to control for size of company and sector.

Top 10 PAEs in 2015, according to Unified

Patent Assertion Entities Filings, 2015
Company Name Total Lawsuits Filed¹ Lawsuits Filed in Eastern District of Texas¹
eDekka LLC 101 101
Data Carriers LLC 85 85
Shipping and Transit LLC 69
Cryptopeak Solutions LLC 66 66
Hawk Technology Systems LLC 61 3
Rothschild Connected Devices Innovations LLC 60 59
Wetro Lan LLC 56 55
Loramax LLC 50 50
Genaville LLC 50 50
Oberalis LLC 50 50

¹ Data aggregated via LexMachina

² 79% of cases filed in Southern District of Florida

648 total cases, 519 in E.D. Tex. 80.09% of all patent litigation cases filed in 2015 were filed in E.D. Texas.

A patent infringement case can be filed in any of the US districts that have personal jurisdiction over the defendant, which include states or districts where the defendant's products are sold, regardless of whether or not an office exists in that location. [1] The large number of cases filed in E.D. Texas could point to the favorable disposition of the court patent holders. See Eastern District of Texas.

Hypothesis 2: Patent litigation is increasing, but only because of the uncertain nature of technological developments and how patent claims apply to that. Patent litigation surges are consistent with major shifts in technological developments

  • High tech is the only sector where a majority of cases were NPE related

Method: Find a reliable graph of developments within the technology sector and match it to the one below [2]:

Patent litigation 2011.2015.png

We will be hard pressed to find a graph that can map technological development over the last 5 years reliably. Other measures of technological development we can use and compare to patent litigation trends: total patent grants, venture capital investment amount, R&D spending in the high tech sector...

Patent Litigation Rate: Number of patent lawsuits relative to number of patents granted. This metric was used by economist Zorina Khan when researching historical patent litigation rates. Historical patent litigation rate during the 2000s has been 1.5%.[3] We should update it with the 2008-2015 numbers (currently working with Excel).

Sub-Hypothesis: There's something fishy going on with Judge Rodney Gilstrap

Out of Judge Rodney Gilstrap's 3743 terminated cases,

  • 2354 were Likely settlement: stipulated dismissal
  • 901 were Likely settlement: plaintiff voluntary dismissal
  • 152 Procedural consolidation
  • 151 procedural interdistrict transfer
  • 40 procedural: dismissal
  • 30 Claim defendant win
  • 11 Claim win: default judgement
  • 4 Procedural: intradistrict transfer
  • 2 Claimant win
  • 2 procedural: severance
  • 62.89% of Judge Rodney Gilstrap's terminated cases ended with a likely settlement of stipulated dismissal, where the defendant paid the plaintiff money out of court, afraid of the court judgement. In contrast, only 42.57% of Judge Janis Lynn Sammartino in S.D. Cal's terminated cases ended with likely settlement.

Of Judge Janis Lynn Sammartino in S.D. Cal's 148 terminated cases

  • 63 were Likely settlement: stipulated dismissal
  • 40 were Likely settlement: plaintiff voluntary dismissal
  • 32 Procedural stay
  • 3 Procedural consolidation
  • 3 procedural interdistrict transfer
  • 4 procedural: dismissal
  • 1 Claim defendant win
  • 2 Claimant win

Hypothesis 3: Data that supports increased costs to innovation rely on broad and confusing definitions for NPEs and PAEs

  • A March 10, 2015 letter signed by 40 economists argued that papers claiming high direct costs of patent trolls misconstrue innocent NPEs, such as universities, as patent trolls. The broad definition of NPEs increases the number of cases filed by supposed trolls and the number of court fees accumulated through lawsuits.[4]
  • Adam Mossoff specifically critiques aforementioned Unified Patents data for its broad definition of NPEs.[5]

Hypothesis 4: Patent legislation should not be targeting the reform of demand letters

Recently proposed legislation includes changes to the form of demand letters. The Innovation Act in particular requires the party alleging patent infringement to include in the initial complaint:

  • Identification of each patent allegedly infringed
  • All claims (heart of the patent, defines the limits of exactly what the patent does) necessary to produce the identification of each process, machine, manufacture, or composition of matter (accused instrumentalities) that infringe the patent
  • The name, model number, description of each AI
  • How each limitation of each claim is met by the AI
  • For indiret infringement, the acts of the infringer that are inducing a direct infringement
  • Authority of the party to assert each patent

TL;DR If you believe your patent has been infringed on, you must write in your initial complaint letter VERY SPECIFIC information regarding exactly which parts of your patents have been violated and by what model/device.

If patent trolls are rampant, this measure could reduce the amount of demand letters they send out and the number of companies they accuse of infringement. However, patent holders that have a legitimate concern may find it hard to identify the exact make and model of the device(s) that infringe upon their patent, especially in the high-tech sector where products are less clearly defined.

Interesting facts that may deserve extra research

  • Historically, the Eastern District of Texas is the top patent dispute venue. In 2015, 44% of all patent litigation was filed in E.D. Texas, most of which were assigned to Judge Rodney Gilstrap

Issue Brief Draft

Blog Post Draft

Patent Troll Lit Review

Fact Sheet