The Truth About Patent Trolls – An Honest Look at What’s Really Happening and at Stake

The Truth About Patent Trolls – An Honest Look at What’s Really Happening and at Stake

By Mary Fales, April 16, 2014

Introduction

There has been lots of hoopla recently in the media about the evils of patent trolls. They have been depicted as savage monsters devouring the U.S. economy in the form of billions of dollars a year.[1]   Anti-troll proponents don’t just stop at the derogatory name “troll,” but label them “bottom feeders.”[2] They accuse trolls of costing the U.S. economy “tens of billions of dollars a year,”[3] “smothering innovation,”[4] and are “a real-world nightmare.”[5] Sounds pretty horrible, but how much of this is true? By the way, what exactly is a “patent troll?”

As one sorts through the plethora of articles, papers, and commentary regarding trolls there seems to be confusion. I decided to make the journey into middle earth to observe the beasts firsthand. It turns out there is a lot more at stake than some troll attacks. What’s really at stake is nothing less than the U.S.’s dominance as a global intellectual property (IP) leader, but not because of what you probably think. When it comes to patent trolls, we need to go in with long term well thought out small changes, so we don’t jeopardize our economy further.

Background

A Troll by Any Other Name

Patent trolls, first coined by Intel’s counsel Peter Detkin, [6] are not clearly defined and come by different names: patent assertion entity (PAE)[7], patent holding company (PHC)[8] and non-practicing entity (NPE).[9] Believe it or not there’s more. Consider the name “patent monetization entities (PME),”[10] or “patent licensing companies.”[11] Senator McCaskill, on February 27, 2014, in a press release when introducing her patent troll bill the, “The Transparency in Assertions of Patents Act,” called trolls “bottom feeders.”[12] The senator’s definition of a patent trolls is a PAE which according to her doesn’t “produce any goods or services with their patents.”[13]

However, the senator’s definition, as with all troll definitions, has some issues.[14] Consider, the fact that many universities develop and patent their research but never produce or manufacture their inventions.[15]  Are they a “bottom feeder?” You can hardly claim universities are smothering innovation. And yes; they do license and enforce their patents.[16] One of the more concerning troll definitions floating around in the media is the idea that in order to be valuable in terms of sharing intellectual information a company has to produce a product or service in order to be a legitimate holder and asserter of their patents.[17] But that simply isn’t true. For example, a university may have filed on IP they didn’t commercially exploit outside of licensing.[18] This information, via being patented, is now available to the public and other companies will get ideas based on the universities’ disclosure.  This kind of intellectual information transfer happens all the time.[19] Isn’t this valuable sharing of intellectual information?

What about the independent inventor? Most people don’t realize they fit into this definition as well.[20] For example, an individual inventor may patent their idea, but can’t afford to manufacture or produce it. Are they a troll? What about companies that have some products they patent and manufacture, but also have patents generated from their R&D that they don’t manufacture. Are they half-troll, or a troll at all? My point being, can we really separate out and distinctly define the troll we want to target?  Perhaps we can understand what a troll is by their behavior?

Well, adding to the overall confusion, there seems to be a spectrum of “troll behaviors” in that some behave more socially reprehensibly than others, but all get branded “troll.” Jeff John Robert’s of GiGaom calls Intellectual Ventures (IV), “the King Troll.”[21] What’s interesting about IV, is the company obtains some income from filing patent law suits, but they use the income to hire scientists and engineers to innovate valuable intellectual property.[22] IV’s CTO Edward Jung explains, “[o]ur whole reason to exist is to create better ways of coming up with inventions.”[23] It’s hard to accuse IV of smothering innovation when the opposite seems true.

Contrast IV with the company Personal Audio who claims they own a patent that reads on podcasting. Yes; that is correct, “podcasting!”[24] They have recently sued a popular podcast show on the Internet “The Adam Carolla Show."[25] Even if Personal Audio has some products or services they patent, going after an affordable popular social medium such as podcasting, is pretty reprehensible troll behavior. In fact, for some reason it reminds me of an episode on The Simpsons® when Mr. Burns blocks the sun from shining on Springfield. The truth is, not only can we not define a target troll based on their patent holdings-commercial enterprise, but we can’t define one very well based on behavior either. A patent licensing company enforcing their rights as a Plaintiff will look just like Personal Audio. It’s a difficult problem.

Nonetheless, no matter what type of “troll” we’re talking about, in general, it is assumed a patent troll buys up patents and sues businesses in order to gain revenue without having a service, or product they themselves manufacture.  As one can readily imagine, there is a danger in broadly defining trolls.  Depending on how you label a troll affects the data that is being collected and distributed. What about legislation passing bills that are “anti-troll?” Which of the trolls I described above gets slaughtered? How we define trolls can have serious negative repercussions.

The definition of a troll matters. It matters not only because we’re slurring valuable respectable companies and individual contributors, but we could end up slaughtering the “innocent” along with the real targets in legislation. The innocent slaughter may be costly if legislators don’t get it right.[26] It’s easy to understand articles like the one written by General Counsel Don Rosenberg of Qualcomm, Inc. where he calls for congress to “take care to operate with a scalpel, not a cleaver.”[27] A troll by any other name matters.

How Long Have Trolls Existed?

Contrary to recent media coverage, patent trolls have been around a while, and depending on your definition of troll they have been around for centuries.[28] Robert H. Resis, makes a good argument that the first patent troll was probably Eli Whitney back in the 1790s.[29] Eli Whitney’s business had closed shop three years after his patent issued on the cotton gin. He wasn’t able to make it a commercial success, but he exerted his patent rights by suing plantation owners for many years.[30] Eli Whitney fits within the troll definition: he wasn’t able to manufacture his invention, but gained revenue by asserting it against others. There are many other examples in history, [31] but it is true that troll activity has increased especially within the last twenty years.

We’ve had many patent wars[32] over the years that eat into millions of dollars, and to be fair, all patent litigation has increased.[33] But what makes trolls thrive of late? It’s a result of several factors. First, we have the American rule in that each party pays for their own legal fees and costs. This means if a troll is suing a defendant who can’t afford the high pre-trial costs of discovery let alone the millions of dollars to litigate, that defendant will most likely settle –and quickly.[34]  This encouragers trolls to sue, because they know a business more often than not is going to pay the license fee rather than go to court.[35] Settling immediately is often the best sound business decision for many that face going out of business.[36]  Along the same rationale, contingency fees[37] have allowed trolls to flourish. If a troll doesn’t have to risk attorney fees unless they win, they have even more incentive to sue.[38]

Adding to the plot, trolls send out ambiguous demand letters to “infringers.”[39] Trolls can be prolific in the amount of letters they send. For example, one PAE was reported to have sent 8,000 notice letters regarding its WiFi patents.[40] It cost a lot of money just to evaluate a trolls patents and compare it to alleged “infringement,” so businesses will want to avoid the costs of just ascertaining if they’re actually infringing or not. In fact, ambiguity is a weapon trolls wield often.

Trolls use the fact that many poor quality patents are issued and have overly broad and/ or ambiguous claim boundaries.[41] Overly broad claims pretty much grantees there are many potential infringers.[42] This is especially true of some software and business method patents. Their very nature tends to lend itself to overly broad claims with many “infringers.”[43] The truth is many of these programs or methods are already in the public domain and shouldn’t be patentable at all. It’s worth noting that Bessen in his book Patent Failure suggests that it is the poor notice, or the overly broad poor quality patents being asserted that leads to the increase in all patent lawsuits, and not just that of trolls. However, trolls have certainly seen an advantage in pursuing the patent system’s weakness.[44]

We have a good patent system,[45] but it’s not perfect. The USPTO has granted too many poor quality patents that shouldn’t have been granted.[46] This is due to several factors. The USPTO has many patent applications filed and little time and resources to effectively examine them.[47] They do a pretty amazing job considering the mountain of applications they’re up against. Add to the growing mountain, the challenge of new and quickly changing technology.[48]  Plus, certain case law has made it possible for a large number of overly broad patents to grant. For example, the Supreme Court in Diamond v. Diehr (1981) ruled that the use of a computer program in the rubber making process didn’t make it unpatentable. The patent office interpreted correctly that software patents were eligible subject matter. [49] Another famous case that opened the floodgates for all manners of broad method claims was State Street Bank (1998) in which the Court ruled that a formula in the form of a computer program was patentable if it produced a useful or tangible result.[50] Software patents have increased over the years. According to the GAO report, “[b]y 2011 patents related to software made up more than half of all issued patents.”[51] What is interesting about most software patents is the very nature of programing is not that creative.[52] A variety of programmers will program the code the same way. Thus, if you obtain a patent on a software program, it’s highly likely that many users would have independently programmed the same thing.[53] That’s one of the reasons why organizations like the League for Programming Freedom didn’t want software to have IP protection.[54]

Other things that have led to troll success was the Pre-AIA multiple joinder in 35 U.S.C. § 299.[55] The joinder allowed for multiple defendants to be added to the lawsuit if a common patent was infringed. This allowed trolls to add many defendants to a single lawsuit which maximizes their outcome while at the same time minimizing their costs, because they have one lawsuit to fund.[56]

Finally, we have to understand trolls aren’t on a level playing field.[57] Typically, when two competitors are fighting over the market with their patents, they both have a product or service that they have patented. So if one company sues another, usually the companies countersue, thus making the fight if you will even.[58] Often, this counter-sue-reality encourages companies to cross-license and perhaps avoid lawsuits altogether.[59] That was certainly the majority of the cases during the software patent wars of the 1990s.[60] In fact, obtaining patents as a defense strategy is common amongst technical giants.[61] Trolls however, don’t typically have a product or service and are not vulnerable to being countersued. Since they do not produce any products, they have very little at stake to lose from a countersuit. In fact, what infringement are you claiming they have done at all in order to be countersued?[62]

Basically, trolls take advantage of low risk patent lawsuits that conversely have a high rate of payout.  Trolls may be reprehensible to some, but as a business model goes, you can hardly blame them for doing it.

Trolls: the Good, Bad, and Unknown

The Bad

Since trolls have very little to lose by suing, and everything to gain, that makes them rather litigious. According to the President’s Counsel of Economic Advisers, trolls now file as many as “60% of all patent lawsuits in the US.”[63] All these lawsuits can weigh down the court system. They’re considered frivolous lawsuits that take precious court resources away from “legitimate” parties.[64] Not only do trolls cost the court system, but they cost innocent businesses lots of money as well.[65]

Trolls can make businesses with shallow pockets go out of business, prevent them from hiring more people, or waste their profits with frivolous lawsuits. This money is better used elsewhere.[66] It’s especially, concerning to the government when the small businesses are attacked, because they generate many jobs and pay taxes and therefore affect the U.S. economy. Trolls are accused of doing this, without directly adding IP benefits to society in return.[67]

Trolls who don’t innovate, produce any goods, or service are not adding to the overall intellectual benefits directly, and their aggressive litigation behaviors may hinder others from wanting to innovate and operate out of fear.[68] Broadly speaking, we allow limited monopolies to inventors, which is a cost to society, because we receive the long-term benefit of their inventions given to the public.[69] So trolls who only assert patent rights, don’t directly benefit society by innovating which is what the patent system is supposed to reward. Moreover, the fear of being sued by a troll may discourage others from starting a company and innovating.[70]

The Good

If you think about it, trolls are a creative innovation in themselves.  They saw an innovative way to model a business.  As a result they have created a market for patents that normally wouldn’t exist.[71] This market sometimes is referred to as an intermediary market[72], secondary market, capital market for invention[73], or patent brokerage market.[74] Many inventors don’t have the financial means to manufacture or produce their innovations. So trolls in a way create a market for these inventors, because they purchase their patents. Consider the Forbes article where they draw a compelling portrait of how a troll can help the insolvent innovator: “[p]atent trolls are often the buyer of last resort for an inventor who cannot afford to develop his or her invention.”[75]

In conjunction, the benefit of an “intermediary” for the patent market, is that business who can develop and manufacture the inventions, can save time and money by having the intermediary find the patents they need.[76] However, this is more along the lines of a patent broker versus a “bottom feeder” business model.[77]

An argument can be made that trolls encourage innovation and aren’t smothering it. For example, IV developed “3,000” patents itself.[78] And Robert Berman encourages inventors if they invent something, they can “come” to him and he will help them monetize it.[79]

When we look at the good and bad we learn we have lots of unknowns. How much of a drain are trolls on the courts? They seem mainly to settle.[80] I’ve interviewed two patent litigators who don’t think trolls aren’t that big of a problem, but gave the impression, they’re an ordinary part of doing business.[81] Also, what is unknown is just how many “mom & pops” trolls have forced out of business. It appears that trolls mainly like to go after companies with deep pockets. Apple has been a favorite troll meal for years being sued by them “92 times in the past three years alone."[82] The cost to the economy is also greatly unknown, in spite of Bessen’s commendable attempts to put a number to it.  Finally, we really don’t know if trolls smother innovation or not.

Proposed Anti-Troll Legislation: the Good, Bad, and Unknown

The Good

Legislators in recent years have come up with some bills to try and address the troll problem.  In December of 2013, the house passed Bob Goodlatte’s bill the Innovation Act.[83] Goodlatte’s bill has some transparency requirements. Currently, many trolls hide behind shell companies, so the bill requires plaintiffs to disclose who the owner of a patent is before litigation.[84] In addition, plaintiffs have to explain the specific infringement, which helps get rid of the ambiguous demand letter being sent.[85] Senator McCaskill’s bill which was introduced to the senate on February 2014 has similar transparency requirements[86] Given the fact that these transparencies requirements have little downside and produce some upside, they seem like good proposals to help deal with trolls.

Since trolls have little to risk in suing under the American Rule, Chairman Goodlette’s bill also has a fee-shifting component. The idea being the looser of the patent suit would have to pay the winner’s attorney fees.  This seems like a reasonable idea given that trolls take advantage of the American Rule and contingency fees[87] (low risk to sue). A recent study by legal scholars John R. Allison, Mark A. Lemley, and Joshua Walker found that 92.4 percent of merit judgments for patent suits (once-litigated study group) were found for the defendants,[88] so having a fee-shifting plan that shifts the fees to the defendant sounds like it would help deter aggressive patent trolls.

The Bad

At the same time, fee-shifting creates a real problem. It is pro-defendant. Thus, it’s going to make a legitimate plaintiff action harder to pursue and deter them from enforcing their rights.[89] Everyone knows that going to court is risky, because the outcome is somewhat unpredictable. Trolls happily take on the risk, because they have little to lose. That’s why fee-shifting is so tempting, because it adds some serious risk to a frivolous Plaintiff. However, those “mom & pops,” facing fee-shifting, will be a lot less likely to assert their legitimate rights against a true infringer, because their risk has been increased.[90]

Also consider, even with fee-shifting in place, victim-defendants most likely will not be able to afford the costs to make it to a trial to take advantage of the fee-shift. Some victim-defendants may be lucky to find a law firm that loans costs and works on a contingency basis, but I think fee-shifting won’t make much of a dent. The facts are the enormous costs of discovery alone is still going to pressure victim-defendants to settle.  In fact, fee-shifting being pro-defendant may even make deliberate infringing more prevalent.[91]

Along the same lines as fee-shifting, Senator Orrin Hatch is working on a plaintiff Bond for defendant’s legal fees.[92] But that bond requirement has the same potential issue of discouraging legitimate plaintiffs with small pockets from asserting their patent rights against an infringer. They simply may not have the money to “put up a bond.”

While transparency seems like a good idea, fee-shifting is more of an unknown. It could backfire and have negative unforeseeable consequences.  It’s interesting to note, that we already allow for fee-shifting under 35 U.S.C. § 285. The statute allows for fee-shifting in patent cases when the suit is brought in bad faith and baseless, or for other misconduct during litigation. So why hasn’t that statute made a dent already against patent trolls? It’s something that may take on more of a role in the future.[93]

Why the Sudden Need for “Prompt” Legislative Action?

If trolls have been around for over twenty years, and even longer than that, why the sudden need for “prompt legislative action?” FTC Commissioner Julie Brill calls congress to “act expeditiously to take whatever enforcement actions are warranted to stop inappropriate abuse.”[94] Certainly some of the urgency is a result of the media’s bandwagon hype and misinformation,[95] but I think the real reasons may be closer to home than congress wants to admit. Could it be that congress knew passing the AIA would hurt small business?[96]

Congress Knew Passing the AIA Would Harm Small Business

When President Obama signed the AIA into effect on September 16, 2011, legislation was aware that the AIA could harm small businesses[97] In fact, a study of the AIA effects on small businesses was ordered.[98] It’s supposed to be complete in 2016.[99]  It’s worthy of theorizing that perhaps the recent legislations call to arms on patent trolls of the last few years has more to do with legislation’s knowledge that small businesses have already been harmed significantly by the AIA.  Patent protection is important for small business[100] who make up a significant part of the U.S. economy.

However, the AIA being a “first-to-file” system has made it harder for small business without deep pockets to pursue patent protection.  The AIA has tried to address this with their “micro-entity” filing fees, amongst other things, but the truth is most of the patent filing costs come from patent practitioners who draft and file the patents. Companies with deep pockets can hire all the practitioners they want to file quickly for them, while small business will lose out on priority dates due to lack of funds.[101]

The U.S. Economy Hasn’t Recovered

I’m not going to dive into the complicated discussion of U.S. economics, but it’s worth mentioning that legislators probably feel some real pressure to protect an economy that hasn’t fully recovered yet.[102] If small businesses are significant to the U.S. economy and trolls are attacking them, then of course legislators are going to want to tuck the “newborn chicks” under their legislative wings. In other words, legislators may be distracted by the short-term need and not considering the long term affects enough.[103]

Hang on! Thor has Already Been Here With his Hammer

The Market is Already Defending Itself

Some companies have already generated some unique ideas to battle trolls. Take for example, IPXI an intellectual property exchange company established in 2007, that thinks providing more transparency is part of the solution to abusive litigation tactics.[104] IPXI makes publically available the owners of patents that go through the exchange. The exchange also has a committee that evaluates the value of the patents.[105]

In 2009 company called RPX bought up patents in part for the purpose of keeping them out of troll hands.[106] It’s basically a patent pool company that will allow members to use their patents for a nominal fee, but never plans on asserting their portfolio.[107] If enough companies did this, there wouldn’t be any patents for trolls to purchase. The thought of preventing trolls from buying up patents is an idea that is being explored.

Twitter™ launched their Innovator’s Patent Agreement (IPA) and part of the purpose was to keep patents out of troll hands.[108] The IPA is designed such that the inventor places a condition on the patent that it can never be used for offensive purposes and the promise follows the patent, so that no matter who gets ahold of it, the condition remains.[109] The owner remains in control of who can assert the patent offensively, so if a legitimate dispute arose, the patent could still be used to protect the patent holder’s rights. The market may be able to battle trolls effectively with creative ideas, but legislation and the courts have also placed effective anti-troll mines.[110]

We’ve Already Put into Action Anti-Troll Devices

We have learned from history. Poor patent quality was the result of a lot of litigation back in the late 1790s.[111] Congress responded and made changes to insure only quality patents were granted.[112] Today, legislators recognize that high volumes of overly broad patents are a problem, because they have enabled trolls to abuse the patent system. Partly in response to this, legislators switched to the “first-to-file” through the AIA. Switching to “first-to-file” has many benefits, one of which is that it will introduce tons of new art and reduce some of the overly broad patents granted. Moreover, Section 34 of the AIA mandated a GAO study of the consequences of NPE litigation and provide a recommendation.[113] That recommendation was that the USPTO’s examination process should be evaluated to produce higher quality patents. A theme we find running through many of the scholarly writings.[114] 

In conjunction, the AIA amended the Joinder 35 U.S.C. § 299 statute (rule 20) to help reduce the troll abuse of adding multiple defendants.[115] The pre-AIA joinder had two prongs to it and the courts were split on how they interpreted the statute. The minority interpreted the rule as allowing a plaintiff to add multiple defendants to one lawsuit so long as “the defendants had infringed the same patent.”[116] This interpretation allowed trolls to sue multiple defendants in favorable forums.[117] The AIA joinder now reads that defendants can’t be joined solely on the basis of infringing the same patent, but need to be “arising out of the same transaction, occurrence, or series of transactions.”[118]

In addition, the AIA allows for a 9 month post grant challenge which will help reduce the number of “invalid” patents.[119] Some comments made in the media are that the AIA has failed.[120] Wait a second; let’s get some perspective.  It has taken twenty years to create the perfect storm for trolls, and the AIA regarding most of the patent changes, only just took effect in March 16, 2013. It will be effective, but we need to give it some more time. Improvements aren’t going to be instantaneous. Besides the AIA, the courts in fact have done a fairly good job of balancing the costs associated with patents.[121]

The Supreme Court even back in the 2006 made decisions to reign in the type of subject matter and claims that exacerbate the troll problem.[122]  In addition, the courts have been making decisions that help victim-defendants. Take for example the case of Eon-Net LP v. Flagstar Bancorp in 2011.[123] Eon-Net had sued many companies where the outcome was dismissal or early settlement. Eon-Net LP then sued Flagstar Bancorp.[124] Ultimately, the CAFC found under 35 U.S.C. § 285 that the lawsuit was objectively baseless, filed in bad faith, and for an improper purpose.[125] Specifically, that "the appetite for licensing revenue cannot overpower a litigant’s and its counsel’s obligation to file cases reasonably based in law and fact and to litigate those cases in good faith."[126] This decision certainly suggests that the courts can deal with patent trolls in a fairly effective manner using 35 U.S.C. § 285.

If we’ve already put into motion anti-troll market changes, statutes, and court decisions, then why are we flailing around in the media as if the problem hasn’t been addressed and the entire U.S. economy will collapse unless congress does something immediately about it?

Why is the Troll Debate So Convoluted?

For Starters the Data Isn’t Accurate

There aren’t any real facts. We’re all just guessing. Anti-troll proponents use “facts” as if they were undisputable. These “facts” get passed from article to article like the telephone game.[127] Consider this “fact” from an article written by Kris Frieswick, “In 2011, patent trolls cost U.S. companies more than $29 billion in legal fees and settlement costs.”[128] Compare that “fact,” to Michael Beckerman’s, “...literally. U.S. businesses paid out $29 billion to patent trolls in 2011. And when lawyer fees and other indirect costs are added in, the total cost to the U.S. economy came to $80 billion.”[129] However, an article written by James Bessen, Jennifer Ford, and Michael J. Meurer state that, “[t]he mean wealth lost per lawsuit is $122 million in 2010 dollars and the median loss is $20.4 million ... These estimates are, of course, much larger than the direct cost of legal fees.”[130] Keep in mind that the Bessen article itself says “[t]hese findings should be interpreted cautiously.”[131] But many articles quote and misquote Bessen as if it were a scientific fact.

What percentage of patent law suits are from trolls? According to the Bessen article, “In 2010, firms operating in the United States found themselves in lawsuits initiated by non-practicing entities (NPEs) more than 2,600 times.”[132] Compare this to the GAO’s findings that about “2,500” patent infringement lawsuits were filed in 2010.[133] And that, “PMEs brought about 19 percent of the lawsuits ... and 24 percent in 2011.”[134] That means according to the GAO, in 2011, trolls were responsible for 24% of about 3,300 lawsuits in 2011 which equals about 790 lawsuits.[135] Contrast that with PAE’s “in 2011” having brought “45% of all cases” which is about “1500” lawsuits.[136]

Certainly, some of these contradictions arise from the way the data is measured and presented.  Consider my relief to learn that others inquiring into the troll debate came to the same conclusion. Namely that, “there is little hard data, and much of the data that exists is mixed or inconclusive.”[137] Part of the inconsistencies is due to what they consider a troll. Remember universities are a type of NPE, but are typically not considered a troll by anti-troll proponents[138] So depending on what you call a troll and place into the “troll bucket” will effect the numbers.

Another reason why the data may be skewed is that some of the agencies presenting the data and reports have a position bias like “Patent Freedom.”[139]

As much we want solid data, it appears difficult to obtain. I think that is why some companies are concerned[140] with any quick decisions regarding the troll problems. It’s a real concern that our patent system may be significantly changed based on poor data and media hype.

The Policy Concerns aren’t Straightforward & There’s Big Money on Both Sides of the Issue

The media, in general, is grossly underestimating the interdependent complexity of intellectual property issues.[141] To be fair, both sides often give recognition to the other’s viewpoint, but end up claiming their viewpoint is the correct one. However, both sides are tossing discreet theories around as if they had hard core facts, and as if they can fully explain how the IP theories intertwine with our economy. 

For example, many anti-troll proponents accuse trolls of hurting the economy. While others bring up the fact that trolls are adding to the economy with their intermediary markets. Trolls are probably hurting more than helping, but no one knows really how much. Bessen et al., in their article try and address this “transfer” of wealth[142] However, David Schwartz and Jay Kesan in their Cornell law review critiquing Bessen’s “data,” concluding “[w]e believe that further empirical information ... would be useful to analyze the role of NPEs in the patent system.”[143]

There are claims that trolls are smothering innovation. However, when we look at the USPTO’s application filing and grant numbers they show steady upward trends. For example, 484,955 patent applications were filed and 79,526 granted in 2007.[144] In 2010 520,277 were filed and 107,791 granted.[145] That means around a 10% increase in filings between 2007 and 2010 and around a 30% increase in grants. In spite of all the recent NPE activity the upward trend still continues.[146] So then what? Are we going to debate whether patent filings are a true measure of inventiveness.[147]

We’re told trollish lawsuits revolve around overly broad software patents.  That said, it’s interesting to learn that at least within the smartphone wars that 80% of the software patents asserted actually were held valid.[148]  That indicates that the policy issues regarding software patents may not be as simple as thought.[149] Again, there is a danger in trying to over simplify a complicated issue. Just like we’re lumping many companies into the troll bucket, we want to lump all software patents in one bucket as well. I fully sympathize wanting to grasp the complex issues, but this isn’t easy subject matter. Besides the data, there are public policies at play.

Patent law policy in itself is contentious: too many to list here. Take for example, the Supreme Court has traditionally held an anti-monopoly[150] stance. Anti-monopoly sounds like it will encourage competition and therefore the economy, but when the Court began holding more patents valid and enforceable in the 1980s the U.S.’s economy strengthened.[151]

Adding to the confusion is big interests lobbying for their companies optimum outcome on both sides of the debate. For example, Apple, Microsoft, and IBM all want patent reform and anti-troll legislation, but don’t want software patents to lose any protection.[152] While Google wants anti-troll legislation and cross-licensing arrangements.[153] With everything so convoluted, how can we effectively address the problem? We need to learn more about what we don’t know meanwhile concentrating on what we do know.

What Do we Know?

IP is Critical to the U.S. Economy

Even before the U.S. Constitution colonies allowed for patent monopolies in order to attract valuable technology and resources to newly undeveloped lands.[154] Individual States seeing the benefit of patents allowed patent monopolies in a variety of terms and conditions before the national system under the Constitution.[155]  Since the Constitution our country has been developing our patent system for hundreds of years.  There have been turbulent times throughout,[156] but the undisputed fact is IP is necessary for economic growth.[157] As the U.S. trade deficit increased from labor moving offshore, in the 1980s President Reagan’s administration fought for patent laws that would protect not only our IP, but the IP of other countries.[158] The courts who had been traditionally anti-monopoly began upholding patents in court.[159] The U.S. emerged as global IP leader. In the mid 1990s the U.S. IP exports were well over 50% of all U.S. exports.[160]  In 2012, using only IP royalties and license fees, it was estimated that the U.S. exported $120.8 billion.[161] Without the financial incentives of being able to obtain patents, most companies and individuals would not invest their time and money into innovation.[162]  The U.S. economic power is rooted firmly in IP. “IP-intensive industries accounted for about $5.06 trillion in value added, or 34.8 percent of U.S. gross domestic product (GDP), in 2010.”[163] We need to protect our IP system in order to maintain our economy, and we need to make sure that going after an annoyance like trolls won’t jeopardize it, because a lot is at stake.

The Supreme Court Opened the Software Patent Doors and Can Close Them

I’m not arrogant enough to claim to be able to read The Supreme Court Justice’s minds, but it doesn’t take much thought to realize trolls may be a consideration in regards to Alice Corporation v. CLS Bank International.[164] The strong relationship between software patents and trolls can’t be overlooked. Let’s face it, the facts are trolls acquire software and business method patents, because they lend themselves to being broad and infringed by many users. Software patents increased as a result of Diamond v. Dierh. Other countries that have stricter patent laws regarding software like India and Japan, don’t seem to have much of a Troll problem at all.[165] In fact, India’s 2005 Patent Act greatly reduced the amount of troll issues they were having.[166] Plus, it’s not the first time the Court has made efforts to reign in the overly broad patents that have a high social cost.[167] This is what the court does well according to Cass & Hylton.[168] It seems reasonable the Supreme Court could be reconsidering their previous decision on allowing software patents to be patent eligible subject matter under 35 U.S.C. § 101. 

The issues surrounding software patents are complicated. Many large companies that heavily support the U.S. economy rely on them.[169] However, they have been controversial and many think they should never have been patentable subject matter in the first place.[170] The truth is we have them now, companies have invested and become dependent on them, and taking away their protection completely under 35 U.S.C. § 101 seems catastrophic. It’s like thinking we can pluck Mercury out of our solar system and nothing negative will result. More is at stake than troll attacks. What’s at stake is the U.S. economy itself.  We’ve put into action safe anti-troll changes, but we need to give them time to work.

Conclusion

Trolls, are a problem, but the truth is no one knows just how big of a problem they are. We need more accurate data and well reasoned educated thought to address them. We’ve already moved to good places for the long run with AIA, the market, and court support. We just need to give these measures time to work. Let’s not harm the U.S.’s economy and global IP leadership by trying to swat away some trolls. If we make hasty decisions, we could be in a lot more trouble than we are today.

[1] James Bessen et al., The Private and Social Costs of Patent Trolls, 34 Regulation 26, 26 (2012).

[2] Jessica M. Karmasek, McCaskill Introduces Own Legislation Aimed at ‘Bottom-Feeder’ Patent Trolls, The Southeast Texas’ Legal Journal, March 5, 2014, http://setexasrecord.com/news/294666-mccaskill-introduces-own-legislation-aimed-at-bottom-feeder-patent-trolls (Last Visited Apr. 14, 2014).

[3]Id.

[4] John Kelly, Are Patent Trolls Smothering Innovation, How Stuff Works (Apr. 15, 2014), http://science.howstuffworks.com/innovation/everyday-innovations/patent-trolls2.htm (last visited Apr. 15, 2014)(Re: George B. Sheldon’s gasoline-engine-driven carriage).

[5] George LeVines, As Coakley Ramps up Patent Troll Fight, LevelUp says it has spent $1m Dealing with Claims, BetaBoston (Nov. 8, 2013), http://www.boston.com/business/innovation/blogs/inside-the-hive/2013/11/06/bdc-blogtroll/kyYKQdIxJ7I2fzoIKegOgN/blog.html (last visited Apr. 15, 2014).

[6] Tracie L. Bryant, The America Invents Act: Slaying Trolls, Limited Joinder, 25 Harv. J.L. & Tech. 673, 676 (2012).

[7] Press Release, Senator McCaskill, McCaskill Introduces Bill to Crack Down on Patent Trolls (Feb. 27, 2014), available at http://www.mccaskill.senate.gov/?p=press_release&id=12097.

[8] Amir Efrati, Patent-Holding Company (A Troll?) Stung By Own Litigation, Wall St. J. (Aug. 20, 2007),

http://blogs.wsj.com/law/2007/08/20/patent-holding-company-a-troll-stung-by-own-litigation/ (last visited Apr. 16, 2014).

[9] Rob Goodier, Patent Trolls: How Bad is the Problem, Popular Mechanics (Oct. 25, 2011), http://www.popularmechanics.com/technology/gadgets/news/patent-trolls-how-bad-is-the-problem (last visited Apr. 15, 2014).

[10] U.S. Gov’t Accountability Office, GAO-13-465, Intellectual Property: Assessing Factors That Affect Patent Infringement Litigation Could Help Improve Patent Quality 2 (2013).

[11] Adam Mossoff, The Myth of the ‘Patent Troll’ Litigation Explosion, Truth on the Market (2013), http://truthonthemarket.com/2013/08/12/the-myth-of-the-patent-troll-litigation-explosion/(Last Visited Apr. 15, 2014).

[12] Press Release, Senator McCaskill, McCaskill Introduces Bill to Crack Down on Patent Trolls (Feb. 27, 2014), available at http://www.mccaskill.senate.gov/?p=press_release&id=12097.

[13] Jessica M. Karmasek, McCaskill Introduces Own Legislation Aimed at ‘Bottom-Feeder’ Patent Trolls, The Southeast Texas’ Legal Journal, March 5, 2014, http://setexasrecord.com/news/294666-mccaskill-introduces-own-legislation-aimed-at-bottom-feeder-patent-trolls (Last Visited Apr. 14, 2014).

[14] U.S. Gov’t Accountability Office, GAO-13-465, Intellectual Property: Assessing Factors That Affect Patent Infringement Litigation Could Help Improve Patent Quality 19 (2013).

[15] David L. Schwartz & Jay P. Kesan, Analyzing the Role of Non-Practicing Entities in the Patent System, 99 Cornell L. Rev. 425, 429 (2014).

[16] Jacob H. Rooksby, Innovation and Litigation: Tension Between Universities and Patents and How to Fix Them, 15 Yale J.L. & Tech. 312 (2013); See Duke’s Office of Licensing and Ventures, http://olv.duke.edu/index (last visited Apr. 15, 2014).

[17] Press Release, Senator McCaskill, McCaskill Introduces Bill to Crack Down on Patent Trolls (Feb. 27, 2014), available at http://www.mccaskill.senate.gov/?p=press_release&id=12097

[18] Jacob H. Rooksby, Innovation and Litigation: Tension Between Universities and Patents and How to Fix Them, 15 Yale J.L. & Tech. 312 (2013); See Duke’s Office of Licensing and Ventures, http://olv.duke.edu/index (last visited Apr. 15, 2014).

[19] Commercializing Expired Patents, Al Patents,  http://www.aipatents.com/commercializing-expired-patents/ (last visted Apr. 16, 2014).

[20] David L. Schwartz & Jay P. Kesan, Analyzing the Role of Non-Practicing Entities in the Patent System, 99 Cornell L. Rev. 425, 430 (2014).

[21] Jeff John Roberts, Google to Meet Patent Troll King Intellectual Ventures in Court, Gigaom (Jan. 20, 2014), http://gigaom.com/2014/01/20/google-to-meet-patent-troll-king-intellectual-ventures-in-court/.

[22] Intellectual Ventures, http://www.intellectualventures.com (last visited Apr. 16, 2014).

[23] Jason Pontin, Q&A: Edward Jung: The CTO of Intellectual Ventures believes we Need a new Model of Innovation to Solve our Biggest Problems, MIT Tech Review (Dec. 22, 2011), http://www.technologyreview.com/news/426466/qa-edward-jung/.

[24] Can Adam Carolla Defeat a Patent Troll and Save Podcasting?, Daily Finance (Apr. 15, 2014), http://www.dailyfinance.com/on/adam-carolla-patent-troll-podcasting-lawsuit-stakes/.

[25] Can Adam Carolla Defeat a Patent Troll and Save Podcasting?, Daily Finance (Apr. 15, 2014), http://www.dailyfinance.com/on/adam-carolla-patent-troll-podcasting-lawsuit-stakes/.

[26] http://www.savetheinventor.com

[27] Don Rosenberg, First Rule of Patent Reform: Do No Harm, Wall St. J. (Sept. 10, 2013), available at http://online.wsj.com/news/articles/SB10001424127887324432404579053633559235404.

[28] Robert H. Resis, History of the Patent Troll and Lessons Learned, 17 Intellectual Property Litigation (Winter 2006), available at http://www.bannerwitcoff.com/_docs/library/articles/HistoryOfPatentTroll.pdf.

[29] Id.

[30] Id.

[31] John Kelly, Are Patent Trolls Smothering Innovation, How Stuff Works (Apr. 15, 2014), http://science.howstuffworks.com/innovation/everyday-innovations/patent-trolls2.htm (last visited Apr. 15, 2014)(Re: George B. Sheldon’s gasoline-engine-driven carriage).

[32] Fred Warshofsky, The Patent Wars (1994).

[33] James Bessen & Michael J. Meurer, Patent Failure 129 (2008).

[34] President’s Couns. Of Econ. Advisers, the Nat’l Econ. Couns., and the Off. Of Sci. & Tech., Patent assertion and U.S. innovation 7 (2013), available at http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf.

[35] Stefania Fusco, Markets and Patent Enforcement: A Comparative Investigation of Non-Practicing Entities in the Us and Europe (unpublished) 101, 108 (Mar. 8, 2013), (on file with Stanford) available at https://www.law.stanford.edu/organizations/programs-and-centers/transatlantic-technology-law-forum/patent-trolls-a-comparative-investigation-of-non-practicin.

[36] Kris Frieswick, The Troll Toll, Inc. 59 (Feb. 2013), http://www.krisfrieswick.com/Files/inc_0213.pdf (last visited Apr. 15, 2014).

[37] William R. Towns, U.S. Contingency Fees: A Level Playing Field?, WIPO Magazine (Feb. 2010), http://www.wipo.int/wipo_magazine/en/2010/01/article_0002.html (last visited Apr. 15, 2014).

[38] James Bessen & Michael J. Meurer, Patent Failure 17 (2008).

[39] Kris Frieswick, The Troll Toll, Inc. 59 (Feb. 2013), http://www.krisfrieswick.com/Files/inc_0213.pdf (last visited Apr. 15, 2014).

[40] President’s Couns. Of Econ. Advisers, the Nat’l Econ. Couns., and the Off. Of Sci. & Tech., Patent assertion and U.S. innovation 6 (2013), available at http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf.

[41] James Bessen & Michael J. Meurer, Patent Failure (2008).

[42] Fred Warshofsky, The Patent Wars 166-172 (1994).

[43] Id.

[44] James Bessen & Michael J. Meurer, Patent Failure 3, 17, 160 (2008).

[45] Jeffrey Kluger, The Spark of Invention, Time 84,89 (Nov. 25, 2013).

[46] James Bessen & Michael J. Meurer, Patent Failure (2008).

[47] John Kelly, Are Patent Trolls Smothering Innovation, How Stuff Works (Apr. 15, 2014), http://science.howstuffworks.com/innovation/everyday-innovations/patent-trolls2.htm (last visited Apr. 15, 2014).

[48] Fred Warshofsky, The Patent Wars 52-54 (1994).

[49] Id. at 161-162.

[50] U.S. Gov’t Accountability Office, GAO-13-465, Intellectual Property: Assessing Factors That Affect Patent Infringement Litigation Could Help Improve Patent Quality 13 (2013).

[51] Id.

[52] see Warshofsky, supra note 49, at 166.

[53] Id.

[54] Id. at 172.

[55] Tracie L. Bryant, The America Invents Act: Slaying Trolls, Limited Joinder, 25 Harv. J.L. & Tech. 673, 682 (2012).

[56] Id. at 675.

[57] Rob Goodier, Patent Trolls: How Bad is the Problem, Popular Mechanics (Oct. 25, 2011), http://www.popularmechanics.com/technology/gadgets/news/patent-trolls-how-bad-is-the-problem (last visited Apr. 15, 2014).

[58] Id.

[59] President’s Couns. Of Econ. Advisers, the Nat’l Econ. Couns., and the Off. Of Sci. & Tech., Patent assertion and U.S. innovation 5 (2013), available at http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf.

[60] Fred Warshofsky, The Patent Wars 170 (1994).

[61] Id. at 171.

[62] John Kelly, Are Patent Trolls Smothering Innovation, How Stuff Works (Apr. 15, 2014), http://science.howstuffworks.com/innovation/everyday-innovations/patent-trolls2.htm (last visited Apr. 15, 2014); Rob Goodier, Patent Trolls: How Bad is the Problem, Popular Mechanics (Oct. 25, 2011), http://www.popularmechanics.com/technology/gadgets/news/patent-trolls-how-bad-is-the-problem (last visited Apr. 15, 2014).

[63] President’s Couns. Of Econ. Advisers, the Nat’l Econ. Couns., and the Off. Of Sci. & Tech., Patent assertion and U.S. innovation 12 (2013), available at http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf.

[64] Dennis Crouch, Further Thoughts on Fee-Shifting From Judges Rader and O’Malley, Patently-O (Dec. 28, 2013), http://patentlyo.com/patent/2013/12/further-thoughts-on-fee-shifting-from-judges-rader-and-omalley.html (last visited Apr. 15, 2014).

[65] James Bessen et al., The Private and Social Costs of Patent Trolls, 34 Regulation 26, 26 (2012).

[66] President’s Couns. Of Econ. Advisers, the Nat’l Econ. Couns., and the Off. Of Sci. & Tech., Patent assertion and U.S. innovation 7 (2013), available at http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf.

[67] James Bessen et al., The Private and Social Costs of Patent Trolls, 34 Regulation 26, 31 (2012).

[68] President’s Couns. Of Econ. Advisers, the Nat’l Econ. Couns., and the Off. Of Sci. & Tech., Patent assertion and U.S. innovation 2 (2013), available at http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf.

[69] Ronald A. Cass & Keith N. Hylton, Laws of Creation, 7 (2013).

[70] President’s Couns. Of Econ. Advisers, the Nat’l Econ. Couns., and the Off. Of Sci. & Tech., Patent assertion and U.S. innovation 2 (2013), available at http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf.

[71] President’s Couns. Of Econ. Advisers, the Nat’l Econ. Couns., and the Off. Of Sci. & Tech., Patent assertion and U.S. innovation 3 (2013), available at http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf.

[72] President’s Couns. Of Econ. Advisers, the Nat’l Econ. Couns., and the Off. Of Sci. & Tech., Patent assertion and U.S. innovation 3 (2013), available at

[73] John Kelly, Are Patent Trolls Smothering Innovation, How Stuff Works (Apr. 15, 2014), http://science.howstuffworks.com/innovation/everyday-innovations/patent-trolls2.htm (last visited Apr. 15, 2014).

[74] Id.

[75] Contributor, Capital Flows (Avik Roy, ed.), Thank Heaven for Those Patent Trolls, Forbes (Nov. 24, 2013), http://www.forbes.com/sites/realspin/2014/01/24/thank-heavens-for-those-patent-trolls/ (last visited Apr. 15, 2014).

[76] President’s Couns. Of Econ. Advisers, the Nat’l Econ. Couns., and the Off. Of Sci. & Tech., Patent assertion and U.S. innovation 3 (2013).

[77] Id.

[78] Jason Pontin, Q&A: Edward Jung: The CTO of Intellectual Ventures believes we Need a new Model of Innovation to Solve our Biggest Problems, MIT Tech Review (Dec. 22, 2011), http://www.technologyreview.com/news/426466/qa-edward-jung/ (last visited Apr. 15, 2014).

[79] Katy Bachman, Confessions of a Patent Troll, ADWEEK (July 22, 2013), http://www.adweek.com/news/advertising-branding/confessions-patent-troll-151324 (last visited Apr. 15, 2014).

[80] Tracie L. Bryant, The America Invents Act: Slaying Trolls, Limited Joinder, 25 Harv. J.L. & Tech. 673, 679 (2012).

[81] Anonymous, Sr. Patent Litigator, in San Diego, Cal. (Mar. 21 2014);  Anonymous, Patent Litigator, Partner, in San Diego, Cal. (Mar. 22, 2014).

[82] Joe Mullin, Apple: We’re the patent trolls’ top target, facing 92 lawsuits in 3 years, ars technica (Feb. 9, 2014), http://arstechnica.com/tech-policy/2014/02/apple-top-target-of-patent-trolls-faced-92-lawsuits-in-three-years/ (last visited Apr. 14, 2015).

[83] Press Release, Rep. Bob Goodlatte, House Passes Innovation Act To Make Reforms To Our Patent System (Dec. 5, 2013), available at http://goodlatte.house.gov/press_releases/476.

[84] Id.

[85] Id.

[86] Press Release, Senator McCaskill, McCaskill Introduces Bill to Crack Down on Patent Trolls (Feb. 27, 2014), available at http://www.mccaskill.senate.gov/?p=press_release&id=12097.

[87] William R. Towns, U.S. Contingency Fees: A Level Playing Field?, WIPO Magazine (Feb. 2010), http://www.wipo.int/wipo_magazine/en/2010/01/article_0002.html.

[88] John R. Allison et al., Patent Quality and Settlement Among Repeat Patent Litigants, 99 GEO. L.J. 677 (2011).

[89] David Ranii, News & Observer: Some Fear Proposed Patent Legislation Could Hurt Inventors, Innovation Alliance (Apr. 5, 2014), http:/innovationalliance.net/patent-news/news-observer-fear-proposed-patent-legislation-hurt-inventors-david-ranii/ (last visited Apr. 16, 2014).

[90] (Contributor), The Goodlatte Act: Not Anti-Troll, But Very Definitely Anti-Plaintiff, Intellectual Asset Management 4, 4-7 (Feb. 2014).

[91] Id. at 4.

[92] Kate Tummarello & Julian Hattem, This Week in Tech: Senate to mark up ‘patent troll’ bill, The Hill (Apr. 07, 2014),

http://thehill.com/blogs/hillicon-valley/technology/202789-this-week-in-tech-senate-to-mark-up-patent-troll-bill (last visited Apr. 14, 2014).

[93] Dennis Crouch, Further Thoughts on Fee-Shifting From Judges Rader and O’Malley, Patently-O (Dec. 28, 2013), http://patentlyo.com/patent/2013/12/further-thoughts-on-fee-shifting-from-judges-rader-and-omalley.html (last visited Apr. 15, 2014).

[94] (Contributor), AAI Urges Speedy Action Against Abusive Patent Trolls, The American Antitrust Institute (Feb. 06 2014), http://www.antitrustinstitute.org/content/american-antitrust-institute-urges-speedy-action-against-abusive-patent-trolls (last visited Apr. 15, 2014).

[95] Adam Mossoff, The Myth of the ‘Patent Troll’ Litigation Explosion, Truth on the Market (2013), http://truthonthemarket.com/2013/08/12/the-myth-of-the-patent-troll-litigation-explosion/(last visited Apr. 15, 2014).

[96] Justine Wong, CWSL 3L student, Seminar on IP and Technology, CWSL Spring, 2014, Student Presentation, How the America Invents Act Harms Small Businesses (Mar. 26, 2014).

[97] Id.

[98] (Contributor), Effects of First-to-File on Small Businesses, America Invents Act, http://www.aiarulemaking.com/aia-studies-reports/effects-first-file-small-business.php (last visited on Apr. 15, 2014).

[99] Id.

[100] USPTO, International Patent Protection for Small Businesses, (2012), available at http://www.aiarulemaking.com/media/documents/international-protection-for-small-businesses-report-to-congress.pdf.

[101] Daniel Cahoy & Lynda J. Oswalld, The Changing Face of US Patent Law and Its Impact on Business Strategy, 70-72 (2013).

[102] Andre Kohut, Resurgent Public Optimism On The Economy? Don’t Hold Your Breath, Pew Research Center (Mar. 17, 2014), http://www.pewresearch.org/fact-tank/2014/03/17/resurgent-public-optimism-on-the-economy-dont-hold-your-breath/ (last visited Apr. 15, 2014).

[103] David J. Kappos, Investing in America’s Future Through Innovation: How the Debate Over the Smart Phone Patent Wars (Re)Raises Issues at the Foundation of Long-Term Incentive Systems, 16 Stan.Tech. L. Rev. 485 (2013).

[104] Ian McClure, A Market-Based Alternative to Patent System Challenges, WIPO (Feb. 2014), http://www.wipo.int/wipo_magazine/en/2014/01/article_0005.html (last visited Apr. 15, 2014).

[105] Id.

[106] Saul Hansell, Trolling for Patents to Fight Patent Trolls, The N. Y. Times (Mar. 30, 2009), http://bits.blogs.nytimes.com/2009/03/30/trolling-for-patents-to-fight-patent-trolls/?_php=true&_type=blogs&_r=0 (last visited Apr. 15, 2014).

[107] Id.

[108] Daniel Nazer, Twitter Launches Innovator’s Patent Agreement, Electronic Frontier Foundation (May 21, 2013), https://www.eff.org/deeplinks/2013/05/twitter-launches-innovators-patent-agreement (last visited Apr. 15, 2014).

[109] Id.

[110] Id.

[111] Fred Warshofsky, The Patent Wars, 47 (1994).

[112] Id. at 48.

[113] U.S. Gov’t Accountability Office, GAO-13-465, Intellectual Property: Assessing Factors That Affect Patent Infringement Litigation Could Help Improve Patent Quality 13 (2013).

[114] James Bessen & Michael J. Meurer, Patent Failure (2008).

[115] Tracie L. Bryant, The America Invents Act: Slaying Trolls, Limited Joinder, 25 Harv. J.L. & Tech. 673, 683 (2012).

[116] Id.

[117] Id.

[118] Id.

[119] David J. Kappos, Investing in America’s Future Through Innovation: How the Debate Over the Smart Phone Patent Wars (Re)Raises Issues at the Foundation of Long-Term Incentive Systems, 16 Stan. Tech. L. Rev. 485, 494 (2013).

[120] Scott A. McKeown, AIA Post Grant Proceedings Begin To Impact NPE Assertions, Patents Post-Grant (Dec. 27, 2012), http://www.patentspostgrant.com/lang/en/2012/12/aia-patentability-proceedings-shut-down-npe (Apr. 15, 2014).

[121] Ronald A. Cass & Keith N. Hylton, Laws of Creation, 173, 209-221 (2013).

[122] Id. at 162-163.

[123] Jason Rantanen, Eon-Net v. Flagstar Bancorp: Exceptional Case After Remand, Patently-O (Aug. 3, 2011), http://patentlyo.com/patent/2011/08/eon-net-v-flagstar-bancorp-attorneys-fees-after-remand.html (last visited Apr. 15, 2014).

[124] Id.

[125] Id.

[126] John Kelly, Are Patent Trolls Smothering Innovation, How Stuff Works (Apr. 15, 2014), http://science.howstuffworks.com/innovation/everyday-innovations/patent-trolls2.htm (last visited Apr. 15, 2014).

[127] The telephone game is played by a person whispering a message into another’s ear, this person then whispers what they heard into the next person’s ear, and so on until the last person repeats the message out loud. The end message never represents the original.

[128] Kris Frieswick, The Troll Toll, Inc. 59 (Feb. 2013), http://www.krisfrieswick.com/Files/inc_0213.pdf (last visited Apr. 15, 2014).

[129] Michael Beckerman, Patent Trolls Damage Innovation Here And Across The Country, The Day (Sept. 22 2013), http://www.shorepublishing.com/article/20130922/OP05/309229962/-1/op (last visited Apr. 15, 2014).

[130] James Bessen et al., The Private and Social Costs of Patent Trolls, 34 Regulation 26, 31 (2012).

[131] Id.

[132] Id.

[133] U.S. Gov’t Accountability Office, GAO-13-465, Intellectual Property: Assessing Factors That Affect Patent Infringement Litigation Could Help Improve Patent Quality 14 (2013) (see Fig. 2).

[134] Id. at 17.

[135] Id. at 14, 17.

[136] President’s Couns. Of Econ. Advisers, the Nat’l Econ. Couns., and the Off. Of Sci. & Tech., Patent assertion and U.S. innovation 5 (2013), available at http://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf.

[137] David L. Schwartz & Jay P. Kesan, Analyzing the Role of Non-Practicing Entities in the Patent System, 99 Cornell L. Rev. 425, 427  (2014).

[138] Id. at 426, 429.

[139] Adam Mossoff,  The Myth of the ‘Patent Troll’ Litigation Explosion, Truth on the Market (2013), http://truthonthemarket.com/2013/08/12/the-myth-of-the-patent-troll-litigation-explosion/ (last visited Apr. 15, 2014).

[140] Don Rosenberg, First Rule of Patent Reform: Do No Harm, Wall St. J. (Sept. 10, 2013), available at http://online.wsj.com/news/articles/SB10001424127887324432404579053633559235404.

[141] Ronald A. Cass & Keith N. Hylton, Laws of Creation, 7 (2013) (authors try and explain complicated IP concepts with simplified cost/ benefit economical viewpoints).

[142] James Bessen et al., The Private and Social Costs of Patent Trolls, 34 Regulation 26, 32 (2012).

[143] David L. Schwartz & Jay P. Kesan, Analyzing the Role of Non-Practicing Entities in the Patent System, 99 Cornell L. Rev. 425, 450 (2014).

[144] USPTO PTMT, U.S. Patent Statistics Chart Calendar Years 1963-2013, available at http://www.uspto.gov/web/offices/ac/ido/oeip/taf/us_stat.htm.

[145] Id.

[146] Id.

[147] Prof. Brown H. Hall, University of Ca. Berkeley, Using Patent Data as Indicators, (June 2013), available at http://eml.berkeley.edu/~bhhall/papers/BHH13_using_patent_data.pdf.

[148] David J. Kappos, Investing in America’s Future Through Innovation: How the Debate Over the Smart Phone Patent Wars (Re)Raises Issues at the Foundation of Long-Term Incentive Systems, 16 Stan. Tech. L. Rev. 485, 488 (2013).

[149] Stefania Fusco, Markets and Patent Enforcement: A Comparative Investigation of Non-Practicing Entities in the Us and Europe (unpublished) 101, 108 (Mar. 8, 2013), (on file with Stanford) available at https://www.law.stanford.edu/organizations/programs-and-centers/transatlantic-technology-law-forum/patent-trolls-a-comparative-investigation-of-non-practicin.

[150] Fred Warshofsky, The Patent Wars, 8 (1994).

[151] Id. at 261.

[152] Dustin Volz, IBM, Microsoft, and Friends Renew Fight Against Patent-Troll Measure, National Journal (Jan. 30, 2014), http://www.nationaljournal.com/technology/ibm-microsoft-and-friends-renew-fight-against-patent-troll-measure-20140130 (last visited Apr. 15, 2014).

[153] Matthew Bye, It’s time to take action against patent trolls and patent privateering, Google (Apr. 5, 2013), http://googlepublicpolicy.blogspot.com/2013/04/its-time-to-take-action-against-patent.html (last visited Apr. 15, 2014).

[154] Fred Warshofsky, The Patent Wars, 32 (1994).

[155] Id. at 35.

[156] Robert P. Merges & John F. Duffy, Patent Law and Policy: Cases and Materials 7-13 (3d ed. 2002).

[157] Ronald A. Cass & Keith N. Hylton, Laws of Creation, 46 (2013); Fred Warshofsky, The Patent Wars, 1-30 (1994); CLIP, The Impact of the Acquisition and use of Patents on the Smartphone Industry (Dec. 13, 2012).

[158] Fred Warshofsky, The Patent Wars, 7 (1994).

[159] Robert P. Merges & John F. Duffy, Patent Law and Policy: Cases and Materials 7-13 (3d ed. 2002).

[160] Fred Warshofsky, The Patent Wars, 7 (1994).

[161] Kimberly Amadeo, The U.S. Trade Deficit, About.com (Mar. 8, 2013), http://useconomy.about.com/od/tradepolicy/p/Trade_Deficit.htm (last visited Apr. 15, 2014).

[162] Don Rosenberg, First Rule of Patent Reform: Do No Harm, Wall St. J. (Sept. 10, 2013), available at http://online.wsj.com/news/articles/SB10001424127887324432404579053633559235404.

[163] Econ. And Statistics Administration & USPTO, Intellectual Property and the U.S. Economy: Industries in Focus (Mar. 2012), http://www.uspto.gov/news/publications/IP_Report_March_2012.pdf.

[164] Supreme Court of the united States, www.supremecourt.gov (last visited Apr. 15, 2014) (docket No. 13-298).

[165] Lisa Mueller, Patent Trolls: A Global Perspective, Bric Wall (Feb. 16, 2014), http://bricwallblog.wordpress.com/2014/02/16/patent-trolls-a-global-perspective/ (last visited Apr. 15, 2014).

[166] Id.

[167] See Bilski et al v. Kappos, 561 U.S. (2010)

[168] Ronald A. Cass & Keith N. Hylton, Laws of Creation, 46 (2013); Fred Warshofsky, The Patent Wars, 1-30 (1994); CLIP, The Impact of the Acquisition and use of Patents on the Smartphone Industry (Dec. 13, 2012).

[169] Dustin Volz, IBM, Microsoft, and Friends Renew Fight Against Patent-Troll Measure, National Journal (Jan. 30, 2014), http://www.nationaljournal.com/technology/ibm-microsoft-and-friends-renew-fight-against-patent-troll-measure-20140130 (last visited Apr. 15, 2014); Don Rosenberg, First Rule of Patent Reform: Do No Harm, Wall St. J. (Sept. 10, 2013), available at http://online.wsj.com/news/articles/SB10001424127887324432404579053633559235404.

[170] Fred Warshofsky, The Patent Wars 172 (1994) (predicting in 1995 the troll issues we currently face now).