GAO: Some Inconvenient Truths About Patent Litigation


Joseph Schuman
August 28, 2013
Capitol Hill

The conventional wisdom on patent litigation problems is wrong: No one category of patent holders is responsible for the spate of lawsuits featured in recent headlines; patent quality rather than quantity is partly to blame for the problems; and both the patent system and the courts are already making changes to address existing troubles.

Those would be the bottom lines of the 56-page Government Accounting Office report on patent litigation and patent quality -- about two years in the making and sent to Congress this week -- if there were bottom lines. But it would be fair to say that there are not.

The report is so nuanced, so apparently careful not to oversimplify a complicated and economically vital area of law that readers on Capitol Hill and beyond would do well to read the whole thing and read it carefully. (Patent Truth has seen at least one news story by a respected reporter who must have skipped to the GAO's brief conclusion, and even then they got it wrong.)

Patent Truth may not agree with all the GAO's findings, but we think even most of the footnotes are worth your time, and that a sophisticated non-expert reader looking to understand the subject would find the report to be a good primer.

Take the description of the much vilified non-practicing entities, or NPEs, patent owners who don't currently manufacture products based on patents. NPEs have been targeted in some academic studies, congressional hearings, regulatory agency speeches and news reports as a more realistic-sounding synonym for so-called patent trolls.

Yet, as the GAO points out, the sweeping term includes individual inventors who can't afford or choose not to develop products based on their patents, universities that develop technologies in campus laboratories, and firms that specialize in researching and developing technologies rather than marketing and selling products.

"Experts agree that NPEs have a variety of business models, which makes it difficult to fit them neatly into any one of these categories," GAO Director of Natural Resources and Environment Frank Rusco wrote in the report to relevant House and Senate committees. "For example, even companies that produce products related to their patents -- known as practicing patent owners, or operating companies --sometimes assert patents that they own but that are not related to the products they produce, which further complicates defining an NPE."

Another inconvenient truth the GAO unearthed for critics hoping new legislation will target NPEs as a class: Companies that make products, rather than NPEs, brought most of the lawsuits that represent the increase in patent suits from 2007 to 2011, the years studied by the GAO.

This increase, incidentally, is in large part a statistical bump influenced by enactment of the 2011 American Invents Act (AIA), which mandated this GAO study in the first place. (The report was due last fall, but the GAO investigators kept investigating into this past summer.) Impending passage and implementation of the AIA appears to have artificially inflated the total number of patent infringement suits, in part because patent owners who used to be able to include multiple alleged infringers in one lawsuit must now file multiple suits.

Moreover, several legal commentators told the GAO, "such increases are common during periods of rapid technological change -- new industries lead to more patents and the number of patent infringement lawsuits also increases because there are more patents to be enforced," according to Rusco. "Similarly, one researcher working on these issues told us that, historically, major technological developments -- such as the development of automobiles, airplanes, and radio -- have also led to temporary, dramatic increases in patent infringement lawsuits."

Still the biggest cause of patent litigation, according to the GAO, seems to be poorly articulated patents.

"Patents are a property right and -- like land -- their claims define their boundaries," Rusco wrote. "When a property right is not clearly defined, it can lead to boundary disputes, although to some extent uncertainty is inherent. Consequently, legal commentators define high-quality patents as those whose claims clearly define and provide clear notice of their boundaries."

Which takes us to the part about solutions.

"The U.S. Patent and Trademark Office (PTO) has taken several recent actions that are likely to affect patent quality and litigation in the future, including agency initiatives and changes required by AIA," the GAO notes. That includes a nearly two-year-old PTO partnership with the software industry to develop more uniform software-related terminology that should in turn make more definitive many software patents.

The federal judicial system, too, is working to improve the patent expertise of district court judges in a bid to reduce the time and expense of patent infringement litigation.

But these efforts, like the AIA, are so new that it's too early to judge how patent litigation will be affected, the GAO says.

So maybe there is a bottom line to the report after all.

Before enacting a whole new overhaul of the constitutionally authorized system that has fulfilled the Founders' goal of promoting innovation for more than two centuries, let's wait to see how the changes already under way play out.