To promote the Progress of Science and useful Arts?…

October 22, 2012


The intellectual-property clause of the United States Constitution (Art. I, Sect. 8, Clause 8):
“The Congress shall have Power . . . [t]o Promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”



Readers of this blog will know that I am concerned about rapacious and reactionary corporate attitudes to intellectual property rights– see, e.g., “Patently Absurd…,,” ”Caution! Pile up ahead…,” or “I was aiming for my foot, but I seem to have shot myself in the thigh…,” all posts that focus on the dangers of (and to) incumbents who substitute extended rights for innovation; enforcement, for service.  It’s cold comfort to read confirmation of that concern in Simon Phipps’ report on the economic impact of patent trolls– the logical extension of the problem: corporations that exists only to exploit patents– in Infoworld

…Among the other measures in the America Invents Act, passed by Congress about a year ago, section 34 requires the nonpartisan Government Accountability Office (GAO) to conduct a study on the effects of patent trolls on the economy. The GAO in turn went to a group of academics associated with the Stanford IP Clearinghouse (now called Lex Machina) to gather the data required. Those academics have now supplied the data to the GAO and published their own assessment of the research. Covering a five-year period from 2007 to 2011, it rigorously identifies and classifies patent activities across all industries and uses a statistically significant sample to draw conclusions.

The findings should concern us all. Coining the useful term “patent monetization entity” (as a replacement for “patent troll,” “nonpracticing entity,” and “patent assertion entity” — all terms with either social or technical issues), the scholars have concluded that “lawsuits filed by patent monetizers have increased significantly over the five-year period.” Not only has the number of cases increased, but so has the proportion of these non-product-related litigants, from 22 percent to 40 percent of cases filed. They found that four of the top five patent litigants in America exist solely to file lawsuits.

This is the tip of the iceberg. Among their findings, the academics analyzing the Lex Machina data observed that many cases never reached court, and the main impact of patent monetization entities was probably in the costs they impose way before litigation commences. This is supported by a paper from the Congressional Research Service [pdf], which observes that the main goal of patent monetizers is to extract money from their victims without ever going to court.

The vast majority of defendants settle because patent litigation is risky, disruptive, and expensive, regardless of the merits; and many PAEs set royalty demands strategically well below litigation costs to make the business decision to settle an obvious one.

What’s going on here? One clue comes from the Lex Machina research. They found that technology industry cases constitute 50 percent of all patent suits; in the software industry, Internet-related patents were litigated 7.5 to 9.5 times more frequently than non-Internet patents. When cases actually go to court, they are often unsuccessful, but most lawsuits from patent assertion entities are settled out of court.

Combine that with the evidence that the unseen menace, when threats lead to payments under nondisclosure terms so as to avoid expensive litigation, and the implication grows that this is an abuse of an out-of-date system manifesting itself. It will then come as no surprise that 1 in 6 patents today covers smartphones. Guess what those patent monetization entities want to monetize?…

Just last week, speaking to the London paper Metro, Amazon’s Jeff Bezos (a man who has been known himself to use intellectual property as a weapon) lamented,

Patents are supposed to encourage innovation and we’re starting to be in a world where they might start to stifle innovation. Governments may need to look at the patent system and see if those laws need to be modified because I don’t think some of these battles are healthy for society.





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