Trolls are a significant feature of the patent system. They account for a large number of suits, now a majority of all patent assertions in the country and an even higher percentage in the information technology (IT) industries. They win both larger judgments and larger settlements than do “practicing entities” (“PEs”) -- those that practice patents and are not principally in the business of collecting money from others that practice them. And they do so despite complaints that trolls assert weak patents and some evidence that troll patents are more likely to lose in court.
Nonetheless, we think the focus on patent trolls obscures a more complex set of challenges confronting the patent system. In this paper, we make three points. First, patent trolls are not a unitary phenomenon. We see at least three different troll business models developing, and those models have different effects on the patent system. Second, patent assertions by practicing entities can create just as many problems as assertions by patent trolls. The nature of many industries obscures some of the costs of those assertions, but that does not mean they are cost-free. In addition, practicing entities are increasingly engaging in “patent privateering,” in which product-producing companies take on many of the attributes of trolls. Put differently, while trolls exploit problems with the patent system, they are not the only ones that do so. Third, many of the problems associated with trolls are in fact problems that stem from the disaggregation of complementary patents into too many different hands. That in turn suggests that groups like Intellectual Ventures might be reducing, not worsening, these problems (though, as we will see, the overall effects are ambiguous), while “patent privateers” that spin off patents in order for others to assert them might make things worse. For this reason, patent reformers and antitrust authorities should worry less about aggregation of patent rights and more about disaggregation of those rights, sometimes accomplished by spinning them out to others.
Understanding the economics of patent assertions by both trolls and practicing entities allows us to move beyond labels and the search for “bad actors,” focusing instead on aspects of the patent system itself that give rise to the problems and on specific, objectionable conduct in which both trolls and practicing entities sometimes engage. Patent trolls alone are not the problem; they are a symptom of larger problems with the patent system. Treating the symptom will not solve the problems. In a very real sense, critics have been missing the forest for the trolls. Exposing the larger problems allows us to contemplate changes in patent law that will actually tackle the underlying pathologies of the patent system and the abusive conduct they enable.In response 'On Mass Patent Aggregators' by David L. Schwartz in (2014) 114 Columbia Law Review Sidebar 51 comments
Lemley & Melamed's article provides a refreshingly balanced and nuanced view of the litigation system. Their article defends, at least partially, mass patent aggregators. However, mass patent aggregators are much more complicated than Lemley and Melamed's article describes. This Essay explains many of the complexities that surround the acquisition and enforcement of patents by mass patent aggregators. Some of these complexities cut in favor of Lemley & Melamed's conclusions, but others do not.Schwartz states
the debate about patent trolls is everywhere. From the op-ed pages of The Wall Street Journal and The New York Times to President Obama’s Council of Economic Advisors to Judge Richard Posner the nearly unanimous view appears to be that patent “trolls” are evil. The argument is that since patent trolls do not manufacture any products, they are merely siphoning money from the “true” innovative firms, the manufacturers. This argument is exaggerated and overly simplistic. If the failure to manufacture products is the problem, it is curious that almost none of the proposed changes to the patent system require manufacture.ure to manufacture products is the problem, it is curious that almost none of the proposed changes to the patent system require manufacture. While there are patent holders who abuse and exploit the patent litigation system, there also are patent holders with meritorious claims who have been unfairly denied compensation. This is true for companies that both do and do not manufacture. The critics also lump together a wide variety of seemingly different actors, including individual inventors, failed startups, research and development companies, mass patent aggregators, and Wall Street speculators who buy a single patent for purposes of enforcement. The correct analysis of the costs and benefits of patent trolls is quite complicated, and far beyond the simple narrative based upon whether the owner of the patent manufactures products.
Lemley and Melamed’s Article, Missing the Forest for the Trolls, provides a refreshingly balanced and nuanced view of what Lemley and Melamed refer to as “patent trolls.” With respect to the label, instead of “patent troll,” this Essay uses the more neutral term “non-practicing entity,” or “NPE” for short. In Lemley and Melamed’s measured Article, they situate NPEs and aggregators within a sophisticated view of the patent litigation system. They even proceed to defend, at least partially, mass patent aggregators, a type of NPE that is almost universally vilified in the press. However, Lemley and Melamed omit many complexities that surround the acquisition and enforcement of patents by mass patent aggregators. Some of these complexities cut in favor of Lemley and Melamed’s conclusions, but others do not. These complexities should be taken into account in any assessment of whether aggregators do more social and economic harm than good.
This Essay first highlights and underscores several of Lemley and Melamed’s points. Then, Part II explains unappreciated complexities relating to mass patent aggregators, including both positive and negative contributions. Finally, Part III offers a broad view of the recent focus on increased enforcement of patents.