Last week, the General Accounting Office (GAO) provided a report that was requested by Congress on patent litigation in the US.
The report found that the number of patent lawsuits was fairly steady from 2000 to 2010 and increased by about a third in 2011. Most stakeholders opined that this increase was due to the impending passage of the America Invents Act that significantly changed the patent system, including the fact that multiple defendants could no longer be easily joined into a single lawsuit.
The number of defendants in such lawsuits increased by 129% from 2007 to 2011. Only about 19% of the lawsuits were brought by non-practicing entities (patent trolls), but about 89% of the increase in defendants were involved in lawsuits encompassing software-related patents.
While Congress had anticipated that reports such as this would confirm its hysteria related to patent trolls, this turned out not to be the case at all. The increase in litigation by patent trolls (called Patent Monetization Entities) was considered to be not statistically significant.
The question remains of where these non-practicing entities get their patents. The report indicates that it is as would be expected. They acquired the patents from a variety of sellers, including universities, individual inventors, failed companies, or operating companies. Some acquired their own patents from the PTO with minimal R&D efforts, some previously produced patented products but now simply asserted the patents, and some sued on behalf of individual inventors who lack the resources to bring their own lawsuits.
Instead, the report seemed to focus on patent quality. The PTO needs to pay more attention to trends in patent litigation, including the increase in software-related litigation where the claims seem to be overly broad and difficult to determine the scope. Terminology in many patents is unclear and many entities do not understand what a patent claims.
The report also noted several other reasons for increasing patent litigation. There is a perception that damage awards can also be disproportionately high compared to the actual contribution of the patent to a product as a whole. Companies are also beginning to understand that patents are more valuable than previously thought.
The report credited several PTO initiatives to address perceived problems with patent quality. First, the PTO has implemented guidelines and training to assist examiners with understanding claim definiteness. The PTO is working to implement more consistent terminology in software-related patents. Updates to the patent classification system, including attempts to harmonize with Europe should improve patent searching and planning. New PTO initiatives should provide greater transparency in patent ownership. These are in addition to the PTO’s attempts to improve patent quality by testing and review. New post-grant review procedures under the AIA should also aid in patent quality.
The report concludes that, while the focus of patent litigation discussion has been on non-practicing entities, this focus is not necessarily appropriate. The real increase is in lawsuits involving software-related patents. regardless of who is asserting the patents, whether practicing or non-practicing.
Critics of the report are, of course, dismissing it as not addressing the issues that Congress requested. Hopefully, the report will be used by Congress as it debates (or not) some of the bills regarding patent litigation that are currently pending in that body. Some of these bills seek to shift fees, limit discovery, or similar items.
The AIA was passed as a bellweather tremendous change and improvement in the patent system. The AIA, however, does little to address the real issues surrounding the patent system: patent quality and patent pendency. These issues require improvements at the PTO. The agency has done what it can, but it really needs additional resources. As long as Congress continues to steal or sequester money from the PTO, improvement there will be difficult.