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What Explosion in Patent Litigation?

You won’t find a lot of coverage in the news, but we’re in the midst of a surprising and sharp drop in new patent lawsuits.   

What Explosion in Patent Litigation?

*Reference line at 322 cases, representing January 2014 level.

That’s contrary to everything legislators have been hearing in Washington about an “explosion’’ of patent litigation suffocating productive enterprise and Congress needing to rush to pass additional patent system and patent litigation reforms.

New data compiled by Lex Machina, and updated by Gene Quinn of IP Watchdog, casts doubt on the whole notion that reforms are necessary. According to the data, the number of new patent cases filed in January and February of 2014 was about 25 percent lower than for the same two months last year. Only 322 new lawsuits were filed this January, a 34.3 percent drop from January 2013 and the lowest number since October 2011. The number of lawsuits rebounded somewhat in February, but it was still 16.8 percent lower than in February 2013.

Granted, two swallows don’t make a spring.  But there are sound reasons to think these numbers are significant, as we’ll explain in a moment.  At the very least, data over the past few years confirms what we and others have been saying for a long time: The much-bemoaned “explosion” in patent litigation is a fairy tale.

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Software Patents: Just Because It’s in Code Doesn’t Mean it Isn’t an Invention

Within the loud and often incoherent chorus of anti-patent “reformers,’’ there’s a particularly shrill sub-group who rail against software patents.

Software Patents: Just Because It’s in Code Doesn’t Mean it Isn’t an Invention

To hear the critics, software patents are a menace to technology, innovation and civilization as we know it. They claim the Patent and Trademark Office is approving way too many of them, often for obvious ideas that shouldn’t even qualify as inventions. They claim that software patent “monopolies” are killing innovation and blocking competition. And of course they claim that lawsuits over software patents are swamping the courts.  

Two things are missing from this debate. The first is perspective. Software is an immensely important arena of innovation, and it happens to be thriving. Sure, there are some epic patent fights over software, notably in smartphone technology. But software innovation is moving at light speed, venture capital is pouring in, and consumers are benefitting. The patents aren’t slowing anything, much less imprisoning anyone.

The second thing missing from this debate is facts, both about what software is and what’s happening with software patents and litigation. So let’s review some key points:

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Five Fairy Tales To Quash in 2014

As Congress and regulators suit up for major battles this year over “patent trolls,” let’s put a lid on the fairy tales. High-powered industry lobbyists and their allies are swamping Washington with cartoons of hairy monsters (often in suits and carrying brief cases), baring fangs and wielding spiked clubs. There’s nothing wrong with a little entertainment to push a cause, but this debate is important to inventors and facts matter.  

Five Fairy Tales To Quash in 2014

The House of Representatives passed a sweeping and flawed bill in December, just five weeks after it was introduced. The bill received only one hearing, with no testimony from inventors.The Senate will soon take up its own bill. Meanwhile, the Federal Trade Commission is conducting its own inquiry, and the Supreme Court will take up several important patent cases this term.

With a lot of activity ahead in 2014, we would like to knock down five of the most heavily-promoted fables and fairy tales.

Fairy Tale 1: Patent litigation is “exploding.” There is no shortage of gigantic patent battles, especially in the smartphone industry. But patent wars have erupted in this country with every wave of new technology, from the Sewing Machine War of 1851 to railroads, radio and aviation. As Adam Mossoff of George Mason University documents, the so-called “explosion” is a myth. The rate of patent litigation, as a share of total patents, is right in line with historical trends. From 1790 to 1860, about 1.65 percent of patents were in litigation. Today, it’s about 1.5 percent.

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Memo to Congress: Courts Are Already Reforming the Patent System

It just got more dangerous to file frivolous patent infringement lawsuits – and that’s a good thing.

Memo to Congress: Courts Are Already Reforming the Patent System

Even as Congress debates legislation to stop so-called “patent trolls,” the nation’s highest patent court has just taken an important and potentially more useful step on its own. 

In a wake-up-call of a decision on Dec. 26, the Court of Appeals for the Federal Circuit (CAFC) essentially gave lower-court judges much greater clarity – and confidence – about requiring the losing side in a patent dispute to pay its opponents’ legal bills.

In the case, Kilopass Technology Inc. v. Sidense Corp., the CAFC asked the district court to review its decision refusing to make the losing plaintiff – Kilopass – pay the defending company’s attorney fees. 

In this instance, Sidense won the original case hands down.  It also produced evidence that Kilopass’s own legal advisers had turned up red flags about its claims. But the lower court judge ruled that Sidense hadn’t proven that Kilopass acted in bad faith, and should therefore pay Sidense’s attorneys’ fees, because Sidense hadn’t shown that Kilopass executives actually knew their lawsuit would fail.

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Patent Office Overload

For people with a stake in technology and innovation, it would be hard to find a more important and a more over-worked government agency than the U.S. Patent and Trademark Office (USPTO). Yet at the very time that the agency’s budget has been cut, and it lacks a permanent director, Congress is weighing ideas to add even more to the workload.

Patent Office Overload

The USPTO examines more than a half million patent applications and grants more than 270,000 new patents a year. It’s a labor-intensive workload that has quadrupled in the past 30 years and keeps growing at a rapid clip – much faster than its budget. Right now, in fact, the across-the-board budget cuts known as “sequestration” has taken $130 million out of the revenue the PTO brings in through service fees. 

But, the USPTO isn’t facing just a money issue. The USPTO’s most recent director, David Kappos, stepped down ten months ago. The Obama administration has yet to nominate a replacement, and it would almost certainly take at least several months for the Senate to actually confirm that person. As a result, the USPTO has been led for the past ten months by the deputy director, Teresa Stanik Rea. Rea is an able public servant with a lot of expertise, but it’s hard to chart long-term strategy if you are in a caretaker role. And, Ms. Rea has announced that she, too, will be leaving the USPTO before long.

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Creating an Innovation Ecosystem

Yesterday, following a panel on “Innovation, Dynamism and Entrepreneurship” at the Global Economic Symposium in Germany, Intellectual Ventures’ co-founder and CTO, Edward Jung, was interviewed about what it takes to create an innovation ecosystem.

“The state has a very important role in innovation, and that is to essentially supply the long-term demand for the innovation to occur,” says Jung. Watch the video for more on how governments can work with the private sector to de-risk some of the biggest environmental, social and economic challenges ahead. 

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Patents and the U.S. Economy

History has shown us that patents and intellectual property are vital to a successful economy in the U.S.

Patents and the U.S. Economy

For this month’s News You Can Use, we have gathered a few stories which highlight the benefits of patent laws—both past and present—to support this point.

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Silicon Valley or Demand Mountain? (Part 2)

In my earlier post, Silicon Valley or Demand Mountain? (Part 1) I argued that hubs of innovation are not always borne out of some intrinsic idea or exceptional culture, but are built instead on demand: specifically, state-sponsored demand. Smart governments have backed some of the biggest and riskiest waves of innovation by guaranteeing demand not only for technical solutions themselves, but for the steps along the way.

Silicon Valley or Demand Mountain? (Part 2)

Why is that so important? Because unlike market-driven demand, which too often results in a winner-takes-all dynamic, state-sponsored demand creates an environment in which multiple solutions to technical problems can proliferate and coexist. The pioneers of microelectronics tried many strategies to supplant vacuum tubes, and they delivered a host of semiconductors and chip designs: germanium, silicon, aluminum, gallium arsenide, PNP, NPN, CMOS, and so on. Some of these research efforts were never implemented, but many found their way into specialized devices. The diversity of options allowed widespread adoption, paving the way for the digital revolution.

As with the microelectronics program, government incentives don’t have to line the road all the way to commercial success. At some point, companies will be ready to sell products, and market demand can take over. The US Department of Defense was the only customer for integrated circuits in 1962, but by the end of the decade consumers were buying transistor radios and pocket calculators in droves.

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Silicon Valley or Demand Mountain? (Part 1)

Everyone wants to know how to build the next Silicon Valley: an innovation hub that draws talent and capital, and that creates jobs, companies, and whole new industries. Developed-country governments scramble to subsidize technology that could be the Next Big Thing. Emerging-market policymakers hope that incentives like tax breaks and free land will induce innovators to settle and prosper there. But most of these well-meaning schemes are missing an essential ingredient: demand.

Silicon Valley or Demand Mountain? (Part 1)

Demand for innovation in specific areas of technology has been the common force behind all high-tech hot spots, as well as the most important inventions. Technological breakthroughs such as antibiotics and cars responded to a compelling need felt by a huge number of consumers. Government projects such as the United States’ Apollo program – intended to put a man on the moon – drove demand for more basic technologies (which are simply inventions that no one has asked for yet).

Silicon Valley itself was built on demand. The US Department of Defense put up tens of billions of dollars in contracts for microelectronics, a commitment that both paid down innovators’ risk and created an infrastructure that would support the growth of start-ups.

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The Next Generation of Terrorism

Nathan Myhrvold, the CEO and founder of Intellectual Ventures, is generating buzz again in Washington – but this time, it’s not about patents. Over the past few weeks, Nathan has been sharing his call-to-action about “strategic terrorism” with government officials and journalists.

The Next Generation of Terrorism

His message: just as technology has lowered the cost of almost every everything, it has lowered the “cost of lethality” to the point that very small groups can unleash weapons of mass destruction.

Worse yet, he argues, neither the U.S. government, nor any other government, is as prepared as it could be.

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