One of the ongoing themes of patent reform advocates is that patent litigation is out-of-control and is overwhelming the business capabilities of operating companies. In an interesting new paper, Ron Katznelson offers a partial rebut to that argument by showing that normalized patent litigation rates have remained fairly constant over the past century.
Ron Katznelson, A Century of Patent Litigation in Perspective (2014). Available at http://ssrn.com/abstract=2503140.
The chart below shows the number of patent lawsuits filed each year as a percentage of the number of patents in-force during the given year. In the article, Katznelson explains some of the peaks and valleys, including the recent AIA-spike, the WWII dip, the heightened activities of the 20s and 30s associated with the proliferation of aadio and electronic technologies, and even the 1935 egg incubator controversy.
The dispute about the propriety of normalizing patent suits to patents in force misses the point, as does, I submit, the complaint that the patent system is jammed with “junk patents.” Normalizing is interesting because it tells you something about the data. So what is this result telling us?
For those who’ve lost sight of it, recall that something big changed in the ’80s, which turned patent law from a backwater into an important area of law. Contrasting current lititgation rates with pre-85 litigation rates doesn’t inherently tell you about the current state of affairs. It tells you how things are different now–and we KNOW they are different, because a major effort was made to reform the patent system to make it different.
Specifically, the Federal Circuit was formed, and a conscious decision was taken to reform damages calculations to make it unprofitable to deliberately infringe patents. Until then, companies rarely took a license, since if they happened to get sued, and happened to loose, they’d still only end up paying what they would have paid if they’d voluntarily taken a license in the first place (plus the cost of litigation, of course–but that was much smaller than today, in part due to the lower stakes). Treble damages and “exceptional cases” changed that.
So we deliberately increased the value of patents. As a result, people were more incented to get patents. The number of patent applications mushroomed. Among the new applications were some “junk,” obviously. Another result was that people became more likely to sue for patent infringement. An important part of that increase was non-practicing entities.
From my perspective, the interesting fact revealed by Katznelson’s normalization is that patents issued (if not patent applications) and patents litigated went up about equally. That suggests that the “problem” with junk patent litigation is neither caused by the PTO allowing junk patents nor by courts failing to weed out junk law suits. The fact that the litigation rate has risen in tandem with issued patents suggests that we’re simply seeing different symptoms of the same underlying cause–the increased value of patents.
Obviously, this doesn’t tell us anything about whether patents are too valuable, not valuable, or just about right. I submit that the situation is better now than it was in 85, but I think the pendulum has swung a bit too far, and so welcome a modest pro-defendant correction. But feel free to continue ranting on the according to taste.
Interesting comment, Qbeamus.
So we deliberately increased the value of patents.
Who, exactly, is “we”?
As a result, people were more incented to get patents. The number of patent applications mushroomed. Among the new applications were some “junk,” obviously. Another result was that people became more likely to sue for patent infringement. An important part of that increase was non-practicing entities.
Now toss in the Federal Circuit’s ridiculous and unprecedented lowering of the floor of what was worthy of a patent and you have a recipe for unmitigated disaster and abuse. That disaster is what we’re pulling out of right now, much to the chagrin of guys like Ron Katznelson who rode the wave and who apparently have deluded themselves into thinking that their success was all about their “genius” and not about government handouts to the already wealthy.
You see that? That’s exactly the wrong conclusion to come to.
Understanding the norming effect shows the exact opposite of the boogeyman “Tr011s” mantra that Malcolm wants to engage in.
There is NOT a “more likely” – the normalized data is steady state.
Thus there cannot be a “important part of the increase was non-practicing entities” – once again you need to actually understand (or be willing to understand) what the data is showing.
Note finally the “Flash of Genius” bias made evident in Malcolm’s attempted slur of Ron Katznelson. Congress (the answer to the question of ‘who is we?’) decided back in 1952 that it did NOT take a flash of genius to earn a patent. The bar was – in fact- lower than that.
Ron Katznelson: Unfortunately, as you also correctly point out, this spike anomaly was used as “propaganda” for advocating patent “reform.”
Rising litigation rates sure in heck weren’t the only reason, Ron.
But you knew that already.
And by the way, “normalizing” litigation rates against patents in force is absurd, particularly when you and I and everyone else knows about the incredible explosion of junk patents that has taken place in the last 20 years or so.
Rising “litigation rates” are just one of many symptoms of a greater problem, Ron. The fact that any patentee would base a lawsuit — and take it all the way to the Supreme Court — because a competitor’s employee might have thought about a “correlation” when looking at some old data should be more than enough for anyone to understand that the system was completely broken. But you still think the Supreme Court got Mayo wrong, don’t you, Ron? And we’re supposed to take your “nothing-to-see-here-folks” propaganda seriously? Like you’ve “debunked” some “myth” about patent litigation rates? Tell it to all the people who got threatening letters from sooper dooper awesome patent attorneys like J Mac Rust.
“And by the way, “normalizing” litigation rates against patents in force is absurd, particularly when you and I and everyone else knows about the incredible explosion of junk patents that has taken place in the last 20 years or so.”
Actually (and not surprisingly) the opposite is true.
If in fact your meme were true, the legion of junk would be directly related to “all this litigation” and the normalization would be extremely appropriate.
I do not think it any coincidence that this very pertinent normalization is “opposed” by naysayers such as you and DanH.
There is no logical reason to “pooh-pooh” this very real correlation. However, the fact that this correlation dispels the propaganda that aligns with your views is an inconvenient fact.
Try not to kick so much dust attempting to hide that fact.
If in fact your meme were true, the legion of junk would be directly related to “all this litigation” and the normalization would be extremely appropriate.
I have no idea what point you are trying to make here. Is my “meme” (whatever you believe that to be — you forgot to say) “true”, in your opinion? Or is the normalization “extremely appropriate”?
this correlation dispels the propaganda that aligns with your views
Exactly what “views” of mine are you referring to, what is the “propaganda” that “aligns with” those views, what is the “correlation” that allegedly “dispels” those views, and how do you believe this “dispeling” occurs?
Huh?
What?
(said in the best Vinnie Barbarino tones)
I don’t know exactly what your problem is, but can you please just leave me out of your comments? If you’ve got an argument against something I may or may not have said, just make it.
I so not see why you are so upset, as my post objectively describes your posting tendencies.
I am not attempting to pick an argument with you, so your last sentence is out of place. Perhaps instead you may want to reply directly to programmerfor30years’ post at 10.1.1.2.1 which does directly goes to “an argument against something [you] may or may not have said.”
Perhaps instead you may want to reply directly to programmerfor30years’ post at 10.1.1.2.1 which does directly goes to “an argument against something [you] may or may not have said.”
So now you want to moderate an argument that I’m not having with programmerfor30years? Once again, what exactly is your problem?
I do not want anything from you and do not understand your argumentative tone.
I made a friendly suggestion for what appeared to be “bugging” you.
A “thank you” would have been more appropriate.
1000 patent cases a year from 1920-1985
The from 1985-2013 it jumps to 6,300 per year.
That is a massive increase.
The author exhibits two instances of slight of hand. Firstly he has figure 1 displayed on a logarithmic scale. That changes what would have been a sharp exponential growth into a slow linear climb.
Second he divides the litigation amount by the patents in force, thereby normalizing one explosion with the other.
Both patents in force and number of cases litigated have exploded since 1985, to argue otherwise is absurd.
So we should look at the numbers without normalizing for population growth, patents available for lawsuits, or any other measure? I think his way is more accurate.
Secondly, the scale here is very, very low. Let’s put it on 0-100% if you want to keep it so dutifully unbiased.
I did reply to this earlier but the post isn’t showing up…
Ok I can see normalizing against real GDP, IE.. GDP adjusted for inflation.
But normalizing against patents in force in nonsense. If you normalize a variable against something which drives it it only tells you how hard it is being driven, not anything regards it’s actual levels.
It’s akin to saying if I divide the speed of my car by how far down I pressing the accelerator pedal it will tell me how fast I am going. It doesn’t, it tells the ratio of foot travel to car speed.
IE… He’s figured out that… more patents equals more litigation. It doesn’t prove a causal relationship, but its a pretty solid correlation.
The problem is that what he has shown works just as well for the other side of the argument…
More junk patents equals more junk lawsuits. Still the same ratio, and still junk.
If when you read the paper you guys spent a bit more time “thinking critically” instead of rubbing your hands in glee, you might have spotted that yourselves.
You have not yet read the paper, have you?
That person rubbing their hands in glee, that would be you.
You might give your preconceived notions a rest, still your jumping to the conclusions you want to reach, take a deep breath, and try to understand something outside of your little bubble.
(and believe it or not correlating the fact that you step on the gas pedal increases your speed reveals a very important relationship – the very type of relationship the well-known anti tag team of Malcolm and ‘Leo’ are trying to pooh pooh away.
a very important relationship – the very type of relationship the well-known anti tag team of Malcolm and ‘Leo’ are trying to pooh pooh away.
What on earth are you yabbering about now?
Type of relationship? What type?
Tag team? Who is this “Leo” you are referring to?
Anti-something? Anti-what?
Pooh pooh? Where am I “pooh poohing” a “relationship”?
What the heck are you talking about?
Well done, you manage one sentence in that whole post that isn’t petty missives or whining.
Why would you normalize against GDP? The cost of patent litigation already rises with GDP per capita. More precisely, the cost of litigation is made up of wages of attorneys and experts and engineers and discovery document processors and the potential damages awards, all of which already rise directly with GDP or GDP per capita.
What you want to normalize against is the number of business enterprises that can be sued. Or, just as well, national population. That gives you the chance that you will be the victim of a patent lawsuit which is what you care about in business.
Patents in force doesn’t drive litigation. We could have ten million cat laser and perpetual motion patents without adding litigation. A million new pharma or petro-polymer molecules wouldn’t create much litigation either because a quick NMR will tell you who’s infringing.
It’s vague, anticipated, submarine, trivial, obvious, overbroad, and abstract patents that create mass litigation. That and a court system that creates opportunities for extortion through litigation costs. Normalizing by patents in force doesn’t illuminate either of those things.
Real GDP is the best measure of the growth of the economy. To normalize against “cost of litigation” brings in more unknown variables, like whether attorney wages has outstripped inflation, or increased cost of litigation due to increased complexity of patents.
IE. Is there more or less litigation relative to the actual amount of economic activity, is more interesting IMO.
Patents in force probably does drive innovation IMO. Your example is nonsense. People only patent what they think will either protect them or make money. They wont patent “a million cat lasers”. People don’t patent something if they have no intent to use it. So patents in force gives an indicator of amount of patents people are willing to wield.
But i’ll grant it’d be hard to prove a causal relationship.
Actually I’ be much more interested in the data just for the software industry. I suspect the huge growth in litigation in software patents is probably being somewhat hidden in the status quo in other industrys.
Oh dear what an unfortunate typo… should be…
“Patents in force probably does drive litigation”
You also ignore a direct legislative cause.
In the best civil manner, may I suggest that you read his paper first, without having your predisposed views already locked in place?
Skimming and looking at the graphs was enough to know it was fundamentally flawed.
Hey…. not trying to be rude but why don’t you try employing some of your famed “critical thinking” when you read it instead of gulping it down like a gal who’d been wandering the desert for 3 days and suddenly found a cold can of mountain dew?
You skimmed it to find the fundamental flaw, but he should read it in depth to prove that it’s not? Programmer, that does not compute.
That’s becuase he refuses to follow my advice and try reading it without his preconceptions coloring what he wants to find.
That he attempts to twist my message and accuse me of that which he is doing – a common meme, eh?
he attempts to twist my message and accuse me of that which he is doing – a common meme, eh?
We all know that it seems that way to you. We also all know why.
…”We“…
Looks like you are listening to those voices from your toaster again and deigning to speak for everybody.
(that’s not a good sign)
I never suggested he should read it in depth, only that he think critically when he does read it.
There’s been a relatively steady 1000 cases / year in the period 1920-1985.
Then from 1985-2013 it has grown from approximately 1000 a year to 6,300 in 2013.
That is a massive rise no mater how you spin it.
Yes you can use a logarithmic scale on your graph to hide what would have been a steep exponential growth, and make it look like a gentle linear climb.
And yes you can normalize it against something else that has also shown a steep exponential growth to hide the fact that there’s been an explosion in both patents issued and the amount of litigation.
It’s a pathetic slight of hand, by dividing one by the other he hides the fact that both had exploded since the late 80s.
And it surprises me, (wait no it doesn’t), that some people here lap that kind of drivel up without even questioning it.
So what Dr. Katznelson’s analysis shows us is that the White House was full of baloney when it said that patent litigation in this century is on the rise. Imagine that: the President and his minions lying to the public. Who would have believed it?
This graph is wildly skewed to show rising patent enforcement actions since it does not account for the individual suits required by the AIA. Propaganda by statute, amazing.
You are correct – the AIA spike of 2011-2013 has nothing to do with the number of litigated patent disputes, which actually did not change much (see Sec. 3.1 “The AIA lawsuit filing surge”); Unfortunately, as you also correctly point out, this spike anomaly was used as “propaganda” for advocating patent “reform.” The paper explains that to avoid bias, the statistical analysis excludes data from the spiked AIA-biased data points and the statistical analysis result is that there was no “patent litigation explosion.”
I missed that. Thanks for setting the record straight and for accounting for that issue. I appreciate honest discussion and your effort to keep it so.
The light of truth doth once again shine bright upon the eyes of the anti-patent folk.
Wow based on that it would seem like litigation is blowin upz!
I actually read these values as support for the argument that the amount of litigation is increasing rapidly.
The normalized rate is “fairly constant” only in the sense that it is always near 0.0%. But that seems to say more about the chance of a patent being litigated than it does about the amount of litigation (even normalized).
The current rate of 0.28% is nearly double the 0.15% rate from only a few years ago (2010), and quadruple the 0.07% rate from 1980.
Isn’t a reasonable interpretation that litigation is substantially more common today than in the recent past, and also more common today than the long-term historical incidence (on the order of 0.14%)?
If it is higher, isn’t that a measure of increasing infringement due to decreasing patent protection?
There is an unholy view that “litigation must be bad” being accepted without critical thought.
That would depend on a number of factors.
Yes. Posit that there has never been a more economically rewarding time to willfully infringe a patent (lower damages, low probably of TRO, time extended proceedings, greater economic rewards for marketshare capture, etc.), it would be very rational to assume more infringement would result and, therefore, more patent enforcement proceedings. We might need the freakeconomics guys to do that calculation.
excellent analysis.
“increasing rapidly.”
That’s what blowin upz means!
Your inferences are incorrect. Read the paper and Comment 7.1 above
Yeah, and 1% is 100x more than 0.01%.
Companies facing patent lawsuits don’t care how any patents are in force; they care how much it’s going to cost them.
If you divide exponentially growing costs by another exponential growth curve, like patents in force or the population of Nigeria, it looks less steep. If you divide it by North Atlantic Cod fishery production, it looks steeper than ever. None of those numbers has any relevance to businesses in the USA.
Your lack of understanding relevancy in patent law matters is legendary.
Thanks for throwing yet another log on that bonfire.
That’s exactly right, Owen. If you’re going to normalize it, it should be against something meaningful, like GNP, adjusted for inflation.
So what if the # of lawsuits per active patent is “fairly constant?” That fact (if it is a fact) doesn’t tell us anything. If the # of lawsuits per unit of economic output is going up, however, then that suggests that patents are exacting a higher “tax” on productivity. That might be OK, if we could also demonstrate that the economic benefits from this exponentially increasing apparent innovation are increasing at least as fast.
Have the “Patents in Force” numbers here subtracted the large number of issued patents that expired early for non-payment of maintenance fees at their respective due dates?
That’s a good question.
We probably should also look at patents naturally expired (full term) but still are open for damage suits up to six years.
Paul,
Yes. You should read the full paper including Section 2.2 – “Derivation of the number of patents in force.” It does not mereley account for early termination due to failure to pay maintenance fees – it also accounts for the variation of terms for individual patents between 17 to 20 years depending on pendency due to the GATT transition.
It should please my friend DanH immensely to recognize that the waves of litigation go hand on hand with the waves of innovation that Kondratieff discusses.
Instead of saying that the sky is falling, that “Tr011s” are running amuck, or that enforcing patent rights through the proper channel of a lawsuit are “the worsts things ever,” clear rational and thoughtful contemplation would cut through the dust clouds of anti-patent propaganda.
Well done Ron.
The issue for those paying for patent suits, which is largely the defendant companies, is not their number, as here. It is their costs. It is not nearly as much a patent law problem as it is a judicial control problem, of virtually unrestrained discovery on any and all possible issues and frequently no decisions on anything until afte a full blown jury trial on all possible issues. Many patent suits could be promptly disposed with vastly less cost by summary judgements if the claims were construed by the judge early-on in the litigation, as proposed in last-term legislation.
Paul, your comment does need to be paired with a thought that is often not enunciated in all of the “Tr011”-lawsuits for patent enforcement are the worst things ever mantra:
If costs of law suits are lowered (your view slanted towards the defendant, but the costs would be lowered for both sides), you will see MORE lawsuits. The vast majority of in force patents are not involved in lawsuits. It only stands to reason that if you lower the cost, you remove a hurdle for people bringing suits as well.
You seem to want to pooh-pooh the number here as “not a concern,” but you fail to realize that death by a thousand papercuts is still death.
The flaw with this argument, anon, is that the litigation costs for plaintiffs vs. defendants are wildly asymmetrical, especially if you’re talking about NPEs. It is not uncommon for NPEs to file a patent suit and produce, in discovery, the file history and maybe a couple hundred pages of conception documents (if that), and have at most one witness they have to present for deposition. The lawyers are usually on contingency, meaning that it costs little more than filing fees to initiate a suit and get things rolling.
The defendant, on the other hand, produces a Mack truck worth of materials, source code, and presents dozens of witnesses for deposition. And of course, the defendant is paying its counsel fees since defense counsel don’t work on contingency (not sure how that would even work). The NPE plaintiff knows that it’s not going to use the vast majority of the materials it forces the defendant to produce in discovery (and often doesn’t even review them), but the NPE demands it anyway, because it increases its settlement leverage.
The NPEs only really substantial costs in litigation, in fact, are expert witnesses. But that cost often doesn’t come into play until much later in the case, after most of the non-expert discovery has completed, giving the NPE plenty of time and leverage to force a settlement before spending anything on experts.
So if you reduce litigation costs, anon, that reduction will inure disproportionately to defendants and reduce the NPEs’ greatest leverage for shakedown settlements.
Thank you!
It is patent owners that decide whether to or not to start patent suits. [Only a small percentage of patent suits are initiated as D.J. actions by threatened companies, especially now with IPRs and CBMs available.] Except for patent owners seeking injuctions against competitors, patent owners are not going to bring suits without good odds of significant financial recovery for a settlement or significant infringement damages. That now means they have to consider the danger of an IPR defense, a 101 defense, a claim ambiguitiy defense, paying attorney fee sanctions to defendants for an unfounded suit, etc.
So even if there is finally some better patent litigation cost control it is not necessarily going to lead to big increases in patent lawsuits. Rather lower litigation costs should discourage many patent suits that have been brought in anticipation of getting a cash settlement from defendants to avoid litigation costs with little or no concern on the part of the patent owner as to any actual judical test of validity or infringement of their patent. Pre-trial settlements have been occuring in approximately 97% of patent suits.
That was the exact same type of thinking behind the AIA writing on suit joinder.
Guess what.
That thinking was wrong there too.
The [unrelated] AIA anti-joinder provision was primarily to prevent everyone from being inconveniently and inapropriately trapped out in the boonies of E.D.TX by PAE suits against multiple unrelated defendants. It worked. Now defendants can move for venue transfers to far more appropriate District Courts where the witnessess and documents are, not just supporting a lucrative small town local counsul industry.
Requiring separate suits against separate defendants also gave a far more accurate and honest count of the % of suits by PAEs.
Paul,
I disagree with both the intent and the effect that you offer here.
There was a spike of cases because of the AIA – not a drop.
In fact (and before this year’s further drop), the rate of non-AIA induced cases is steady or itself dropping.
I think that you are still attempting to use the logic used by the pushers of that part of the reform, and that logic has been shown to be false.
It only stands to reason that if you lower the cost, you remove a hurdle for people bringing suits as well.
Sounds like a threat.
I agree, Paul. The problem is with the judges, courts and litigators.
“It is not nearly as much a patent law problem as it is a judicial control problem, of virtually unrestrained discovery on any and all possible issues and frequently no decisions on anything until afte a full blown jury trial on all possible issues”
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