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Research: Explosion of lawsuits brought by ‘patent trolls’ erroneous

Jay Kesan
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L. Brian Stauffer

The number of lawsuits generated by “patent trolls” is wildly exaggerated, says a new paper co-written by University of Illinois law professor Jay P. Kesan.

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11/18/2013 | Phil Ciciora, Business & Law Editor | 217-333-2177; pciciora@illinois.edu

CHAMPAIGN, Ill. — The number of lawsuits generated by so-called “patent trolls” is wildly exaggerated, and is mostly the byproduct of a slight change to a federal law, says a new paper co-written by a University of Illinois expert in technology and legal issues.

Law professor Jay P. Kesan says the alleged “explosion” in patent-related litigation is mostly a mirage, which has fed into a wider perception that patent-assertion entities are out of control and need to be kept in check by Congress.

“There’s been this fascination with a certain type of patent litigant that’s commonly – and pejoratively – referred to as a ‘patent troll,’ ” said Kesan, the H. Ross & Helen Workman Research Scholar in the College of Law. “But the fundamental barrier to understanding the current patent litigation landscape has been the lack of granular and transparent data.”

According to Kesan, the fascination extends to the White House, which got involved in the debate last summer when the president’s Council of Economic Advisers issued a report titled “Patent Assertion and U.S. Innovation.”

“The report rang all sorts of alarm bells about patent-related lawsuits, the primary claim being that the number of lawsuits brought by patent-assertion entities has tripled in just the last two years,” he said.

But based on data assembled by Kesan and co-authors Christopher Anthony Cotropia, of the University of Richmond School of Law, and David L. Schwartz, of the IIT Chicago-Kent College of Law, the only real change was in the raw number of lawsuits generated, which was most likely driven by a procedural rule change to the 2011 America Invents Act.

According to Kesan, the law changed the joinder rules relating to patent litigation by prohibiting patent holders from including multiple, unrelated defendants in a single lawsuit based on commonly asserted patents.

“That change required separate lawsuits for each unrelated defendant,” Kesan said. “So there is essentially no increase if one accounts for only the number of unique patent holders or the total number of parties excluding the patentee.”

The conclusions of the research call certain findings of the report issued by the president’s economic advisers into serious question, Kesan said.

“In particular, the report considered only the raw number of lawsuits filed in 2010 and 2012,” Kesan said. “By limiting its analysis to numbers of cases filed, rather than the underlying parties involved, the report was incomplete and led to an erroneous conclusion.”

Rather than focusing on the raw number of lawsuits, a more appropriate inquiry would have focused on the total number of patent litigants, both patent holders and accused infringers, in order to more accurately gauge the actual number of patent disputes between parties, Kesan said.

“Using this approach, we found almost no difference between 2010 and 2012 in the number of litigants in patent cases,” Kesan said. “In other words, the so-called ‘explosion’ of patent-assertion entity litigation between 2010 and 2012 is simply fiction.”

To investigate the litigation, the scholars hand-coded all 7,500-plus patent holder litigants from 2010 to 2012.

In the coding, they classified the nature of the litigants into eight categories.

“We coded each patent holder as one of the following: a university; an individual inventor or family trust; a large patent aggregator; a failed start-up; a patent holding company that appears unaffiliated with the original inventor or owner; an operating company; an intellectual property holding company affiliated with an operating company; or a technology development company,” Kesan said.

To aid the effort in understanding the patent litigation landscape, Kesan and his co-authors have released the underlying data – specifically, the classifications of the litigants in all patent lawsuits filed in both 2010 and 2012 – to the public.

“We believe that releasing this data to the public, which unpacks the definition of a patent-assertion entity, provides better insight to policymakers, researchers and others interested in the patent litigation system,” he said.

The data are available at www.npedata.com.

Editor's notes: To contact Jay P. Kesan, call 217-333-7887; email kesan@illinois.edu.

 The article, “Patent Assertion Entities (PAEs) Under the Microscope: An Empirical Investigation of Patent Holders as Litigants,” is available online.

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