Monday, April 15, 2013

Will Patent Reform Lead to a Crackdown of Patent Trolls?

Nowadays, it seems that patent infringement battles between two mega-corporations, such as Apple versus Samsung, are always making headline news. Unfortunately, the media is ignoring a more important issue, one that the business and legal world has known about for a while—the rise of patent trolls and their controversial litigation tactics.

Patent trolls, which are also known as patent monetization entities (“PMEs”), are companies that primarily generate revenue through licensing and enforcing patents in an unduly aggressive manner with no intention of actually producing anything from the patents they possess. According to a recent study published by the University of California’s Hastings College of the Law, 56 percent of all patent infringement lawsuits in the United States in 2012 were filed by patent monetization entities (“PMEs”). Even more shocking than the previous statistic is that these patent trolls cost U.S. innovators and companies more than $29 billion each year.

Reality, illustrated by the statistics above, has caused great frustration in the business world and many have spoken out against patent troll tactics. President Obama has even characterized the trolls’ actions as nothing less than extortion. In recent months the government has been dedicating time and resources to examining the threat of patent trolls and their effect on the US economy. The Department of Justice, Federal Trade Commission and the U.S. Patent & Trademark Office have all taken the initial steps to address this issue. Congress is also acting by considering the SHIELD Act, which requires patent trolls who file lawsuits and lose to pay all the legal fees and costs incurred by the other party.

However, not everyone agrees that patent trolls are the problem nor do they believe the SHIELD Act and/or other proposals to be the solution(s). One study commissioned by PricewaterhouseCoopers concludes that the success rate of patent trolls and practicing entities are practically the same—23% for patent trolls and 34% for practicing entities—and when the case actually goes to trial, both types of entities win at a rate of about 66%. As a result some say its not the patent trolls that are the problem but rather the patent system itself. Therefore, these same parties promote the idea that general reforms of the patent system will prove more effective rather than reforms targeted solely at patent trolls.

With patent reform fever spreading rapidly in Washington, DC, 2013 will prove to be an intriguing and influential year in the field of patent law, especially given the increased attention on and potential crackdown of patent trolls.