‘Science’ publishes biased patent trolling article, regurgitating Harvard patent hatred

myth-truth-bowling-factThe peer-reviewed academic journal Science, published by the American Association for the Advancement of Science (AAAS), seems to have sprung a new leak by publishing an article in late April titled, ‘The growing problem of patent trolling.’ The summary to this piece is enough to get the gist. Essentially (and please, stop us if you’ve heard this one before), patent litigation reached near-historic levels in 2015, much of which is driven by non-practicing entities (NPEs) and data “suggests that NPEs – in particular, large patent aggregators – on average, act as ‘patent trolls,’ suing cash-rich firms seemingly irrespective of actual patent infringement.” The problem is, as Science puts it, these trolls are negatively impacting innovation at “targeted firms,” all of which suggests “a need to change U.S. IP policy, particularly to screen out trolling early in the litigation process.”

Pre-litigation review of cases to weed out instances of patent trolling sounds like a great idea, but what more weeding out do the authors want? Since the Supreme Court decided Alice v. CLS Bank nearly 70% of all software patents have been invalidated by district courts as being patent ineligible, which is almost always done at the motion to dismiss stage. Furthermore, the Patent Trial and Appeal Board (PTAB) institutes 80% of the challenges to patents they receive. Indeed, it seems that over the past 5 years with nearly every court decision and piece of legislation more rights are taken away from patent owners, patents are no longer presumed valid and district courts are disposing of an alarmingly high number of patent infringement cases on motions to dismiss. It is enormously ignorant to suggest changes to “U.S. IP policy” that would make it more difficult for patent owners. Only those unfamiliar with industry reality could make such a recklessly suggestion. Of course, familiarity with the industry is unfortunately not a prerequisite for academics hell-bent on reaching the wrong conclusion.

Sadly, this is just another in a long line of one-sided tales about patent litigation told by those with an agenda. The authors seem to have picked which facts to rely upon in order to reach a previously determined conclusion, which is particularly ironic given the definition of the word science provided by Merriam-Webster: “knowledge about or study of the natural world based on facts learned through experiments and observation.” Perhaps the vast majority of the peer-reviewed content published by Science allows for the facts to drive the analysis, but that does not seem to be the case here.

Let’s take a step back and start at the beginning, with the assertion that patent infringement litigation was incredibly high during 2015. That claim is not technically wrong, although it does take a rather skewed view of the situation and seems to ignore more recently available data.

It’s very easy to make the make the case that patent infringement caseloads did reached terrifying heights in 2015. But why are those numbers up? Well, as it turns out, the answer has at least as much to do with the effects of legislative changes to the patent system as it does with actual trolling practices. Changes wrought by passage of the America Invents Act of 2011 (AIA) make it so that plaintiffs can no longer include multiple defendants in the same lawsuit, requiring all lawful patent owners to file more cases in order to enforce their patent rights to the same degree that they could prior to the AIA. Patent trolling is not responsible for more cases being filed since 2011 — Congress is responsible. After all, did anyone really think patent owners wouldn’t sue infringers simply because they had to sue fewer at the same time in the same case?

[[Advertisement]]

It is also deeply troubling for Science to conflate non-practicing patent owners with patent trolls. See Who is a Patent Troll? First, the fact that you do no practice your invention does not mean you are a patent troll, period. Patent trolls are those who engage in bad behavior and it is flat ignorant to pretend that those who are patent owners, or those who are patent owners who do not practice their invention, are patent trolls. Thomas Edison would be a patent troll if being a non-practicing entity that licensed inventions made you properly characterized as a patent troll, and no right thinking person believes Edison was a patent troll. See Was Thomas Edison a Patent Troll? Neither do right thinking people believe that independent inventors, universities, and research and development companies who are solely in the business of inventing are patent trolls either. It is the height of self-important ignorance to conflate being a patent owner with being a patent troll.

Seriously, would Science classify IBM, General Electric, Microsoft and the many other companies that have licensing divisions as patent trolls? It has nothing to do with whether they are an operating company or a non-practicing entity, or sometimes operating and sometimes a licensing entity. What makes a patent troll a patent troll is the odious behavior. Sending tens of thousands of fraudulent demand letters to mom and pop businesses would qualify. Interestingly, those who want patent reform don’t seem interested in demand letter reform. Why is that? Everyone agrees on giving the Federal Trade Commission (FTC) more authority to fight that type of odious behavior, yet proponents of reform seem hell bent on chasing all-or-nothing reforms of the Innovation Act instead. It has to make you wonder why ire isn’t direct at the bad actors and why so much time is spent trying to tar all patent owners with the “patent troll” label.

It becomes even more troubling to conflate patent trolling directly with a higher number of cases filed when one considers the reasons behind that particular change instituted by the AIA. The AIA stipulation requiring that individual lawsuits be filed per defendant was inserted into the bill as a method of making it more difficult for NPEs to enforce patent rights against many entities at once. Whether or not that particular change has done much to curb patent system abuses is unclear. What is clear is that it’s done a good job of increasing the overall number of patent infringement cases filed, and that fact is now being used to argue for further patent reform.

“Wait, but 2015’s patent infringement caseload is still larger than 2014’s,” one might wonder. “That’s an uptick you cannot attribute to the AIA.” That’s also correct. However, that spike in 2015 is likely attributable to a different change in the patent system’s ecosystem, the abolition of Form 18, which was used to plead patent infringement in district court. In September 2014, the Judicial Conference of the U.S. unanimously voted to get rid of Rule 84 from the Federal Rules of Civil Procedure on the belief that many of the forms which the rule modeled were outdated and they weren’t being used; this included Form 18. In previous conversations with Lex Machina data scientist Brian Howard, it was pointed out that the high-water mark of patent infringement case filings seen late last November correlates strongly with the last date Form 18 could be used as a motion to plead patent infringement. The fact that there’s no clear indication that it would be more difficult to plead patent infringement without Form 18 makes it even clearer that the patent system is an ecosystem that is highly sensitive to any change.

Of course, if 2015 hit near-historic highs in terms of patent infringement litigation, you might also think it important to consider that the first quarter of 2016, which saw a very steep decline in those numbers. Indeed, the Science article ignores both the drop in patent infringement litigation during Q1 2016 and the 30% drop in patent infringement litigation filed in the Eastern District of Texas during Q1 2016. See IP Litigation Report Shows Downward Trends. As Howard pointed out in our previous overage, 2016’s first quarter could have lost some cases that were pursued earlier because of the loss of Form 18, but it’s still a fact that flies directly in the face of Science’s hypothesis. Why a peer reviewed publication that focuses on knowledge provided by facts wouldn’t take such important facts into consideration would normally seem like a mystery. Given that this type of skewed analysis of the so-called patent litigation and so-called patent troll problem always ignores facts that disprove the points made it is sadly all too typical and speaks of an agenda. So much for unbiased interested in the truth as dictated by the facts.

Moving on to the second point made by Science, it’s should be relatively easy to understand why NPEs would be regularly involved in patent litigation. NPEs do not practice the intellectual property they own to manufacture goods or provide services; they license them to other companies who do that more cost-effectively than the NPE can itself. The licensee can sell a product or service and the NPE takes a royalty. NPEs need the legal leverage of the litigation process in order to protect their very legitimate business model.

Indeed, as the laws have become so thoroughly against patent owners over the last decade what Congress and the Supreme Court have done is pushed patent owners to have to sue. For the most part it is impossible to achieve a fair licensing deal when there is ongoing infringement and the patent owner is a non-practicing entity. So rather than encouraging private settlement of disputes Congress and the Supreme Court have practically mandated that aggrieved patent owners must sue. See Fixing the patent system requires strong patent rights (discussing the Coase theorem). Following the suggestion of this ill-conceived Science article would simply do more the same. As more rights are stricken from the patent bundle achieving a private resolution becomes increasingly impossible, which will further push patent owners to court. Honestly, you’d think a group of supposed economic and business experts like the authors of this article would be more familiar with the Coase theorem than they apparently are. Suggesting a course of action that will further frustrate private resolution is simply nonsensical, and it goes against the fabric of U.S. law.

Of course, it is insulting to suggest that companies somehow have more “legitimate” rights because they practice the technology they own. This outrageous view not only insults independent inventors, biopharma research companies and universities, but it also takes a dim view of other patent owners, including large, successful corporations like semiconductor designer Qualcomm Inc. (NASDAQ:QCOM). We’ve also provided recent coverage of the marketing of a patent portfolio related to autonomous cars held by Eagle Harbor Holdings (EHH), a company which has been mischaracterized in the past as a patent troll. We have also written about Finjan Holdings, which is frequently called a non-practicing entity despite having interests in operating companies. The patent portfolios of Qualcomm, EHH and Finjan have all been built from in-house research and development; they are not patent trolls. These organizations are only conflated with trolls because patent trolls pass themselves off as licensing entities in demand letters. So, as to Science’s charge that NPEs are simply “firms that generate no products but amass portfolios for the sake of ‘enforcing’ IP rights,” we find that to be pretty sophomoric. Qualcomm’s research and development has generated plenty of products that Science’s authors themselves probably use if they own a smartphone.

Finally, as to the charge that all of these points naturally lead to the idea that the U.S. needs to pursue changes to IP policy “to screen out trolling early in the litigation process,” it should be clear that nothing is further from the truth. Any changes to the U.S. patent system, whether it’s legislative changes from AIA or the judicial system eliminating Form 18, causes a nearly violent reaction from players in the patent system. More importantly, these changes almost always create unintended consequences. The AIA, which was intended to curb abuse, created the Patent Trial and Appeal Board (PTAB) to address the issue of patent quality. However, there have been accusations that the inter partes review (IPR) has been abused in some cases by hedge funds shorting a stock after filing an IPR, which can scare investors and lower stock prices because of the low percentage of patents who go through the IPR process unscathed.

While there’s no reason to vilify individual authors for the points of view they bring to the table, consider the organizations affiliated with those authors. One thing that jumps out is that there is a heavy Harvard contingent among the authors. Two of the three are affiliated with the Harvard Business School, one of whom is also an economics professor at Harvard University, and it’s not hard to find anti-patent sentiment coming from that academic institution. The Harvard Business Review was banging the drum on the dangers of patent trolling back in October 2014, and this article’s assertion that higher levels of patent infringement litigation are proof that patent trolls are having a negative effect sounds  a strong echo right about now. Harvard seems to have an anti-patent bias, which would be fine if they weren’t trying to pass off this nonsense as fact.

Share

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com.

Join the Discussion

23 comments so far.

  • [Avatar for step back]
    step back
    May 4, 2016 04:35 pm

    Night Writer @22

    I am surprised that you are surprised (and disappointed) by the system.

    This battle of attrition against inventors and the patent system has been ongoing for a good 20 years or so (at least since 1995 via the 1995 Patent Act) . The international corpocracy has been making steady gains all along. The use of academic shills to front their propaganda is nothing new. A man desperate to feed self and family will steep to whatever humiliating low point necessary. They have the coffers of ill gotten loot, they have an unlimited army of willing shills. So the mountain of academic garbage will keep coming and coming with no end in sight. Just open your mouth to receive and say Ah.

  • [Avatar for Night Writer]
    Night Writer
    May 4, 2016 02:01 pm

    To my mind, if you can’t hold someone accountable for gross misrepresentations, then there is no real debate. It comes down to who has the most money to push their arguments. And you get these secondary sources generating garbage articles based on a foundation of nonsense.

  • [Avatar for Night Writer]
    Night Writer
    May 4, 2016 01:59 pm

    At this point, though, how in the world do you deal with these people that just fabricate these arguments devoid of what is actually happening? I continue to be astounded that anyone can with a straight face say that software patents are bad when the U.S. (almost alone in this) has software patents and has a software industry that is ten times larger than any other country’s software industry. And — yet — somehow, magically perhaps, the patents have turned bad now and must be removed. I wonder how they sleep at night. I wouldn’t be able to sleep at night making arguments like that.

  • [Avatar for Gene Quinn]
    Gene Quinn
    May 4, 2016 12:51 pm

    I have to agree with Curious. An NPE treats patent infringement much more like a copyright owner treats copyright infringement. Generally speaking, a copyright owner doesn’t want to prevent you from infringing, they would love for you to engage in widespread infringing activity. They just want to be paid for their contribution.

  • [Avatar for Curious]
    Curious
    May 4, 2016 12:06 pm

    And what are the differences between losing against NPEs and PEs? I know of one difference: a PE may be after shutting down your product. And what would be other differences?
    A PE would rather prevent the (infringing) competitor’s product from reach the marketplace. Moreover, a PE would rather place more onerous demands on the competitor so as to weak their competition.

    On the other hand, an NPE wants the infringer to succeed. More sales = larger revenue stream.

    IMHO, if you are an infringer and you are going to be sued, I would rather be sued by a NPE than a PE.

  • [Avatar for Ternary]
    Ternary
    May 4, 2016 11:49 am

    “…after settling with NPEs (or losing to them in court), companies on average reduce their research and development (R&D) investment by more than 25 percent.”

    This begs the question: and what about after settling with Practicing Entities (PEs) (or losing to them in court)? Do infringers in that case go on as if nothing happened? And what are the differences between losing against NPEs and PEs? I know of one difference: a PE may be after shutting down your product. And what would be other differences?

    But perhaps those aspects were not part of the report as not being of “scientific” interest.

  • [Avatar for Ternary]
    Ternary
    May 4, 2016 10:21 am

    I found a review of said article in http://phys.org/news/2016-04-exposes-problem-patent-aggregators-negative.html under the title: “New study exposes growing problem of patent aggregators and negative impact on innovation.”

    I cannot access the original article, but the phys.org article recites: ”Patent trolling has a negative impact on innovation activity at targeted firms. Cohen, Gurun, and Kominers estimate that after settling with NPEs (or losing to them in court), companies on average reduce their research and development (R&D) investment by more than 25 percent.” What?

    This has to be a misquote. Or it relates to a fudged “average” definition. I cannot imagine Apple after being convicted of infringing a university (NPE) owned patent reducing its R&D budget in any substantial manner. These guys rely on R&D. And Apple’s R&D budget really influences the overall average.

    And something else. How can a company lose to an NPE without actually infringing a patent? Highly unlikely! The barriers are now so high that a company determined nowadays by a court of law to infringe a patent with high probability does infringe that patent. And why would a company reduce R&D after losing an infringement case? What was its level of R&D and did it generate useful results? Clearly, that company should increase its R&D as it was proven that it benefited from another inventor’s work without adequate compensation. If its budget is so severely influenced by a conviction of infringement that it has to reduce R&D then the company is not relying predominantly on its own technology it seems.

    The AAAS is perhaps more concerned about showing its readership that it cares about R&D budgets at established companies and institutions than it is about science and R&D in general. I cannot imagine that the article, as summarized elsewhere I have to preface, has been seriously peer reviewed on its data and conclusions.

  • [Avatar for Night Writer]
    Night Writer
    May 4, 2016 09:24 am

    One thing I think everyone should take note of, though, is that it is not just patent law. I think most people restrict their behavior now out of fear. There are so many laws and the police can just selectively enforce the law if you act out.

  • [Avatar for Night Writer]
    Night Writer
    May 4, 2016 09:21 am

    I would second the suggestion that we figure out some action we can take. It also occurred to me while reading about IBM’s quantum computer that maybe university research money from the federal government has been cut back is for corporate control of research. Google and the others seem to want to control innovation.

    Also, how can we hold the law professors accountable for their misrepresentations and omissions in their vanity press pieces (law journal articles)? I did some research on filing ethics complaints against Lemley and the result was not good. I found that despite things like clear evidence of plagiarism law schools will take no action against a law professor at places like Stanford. Lemley would probably have to r@pe a co-ed in the central quad to be disciplined and even then it would probably be only a slap on the hand. This is part of the concentration of power.

  • [Avatar for Stephan Curry]
    Stephan Curry
    May 4, 2016 01:27 am

    Night Writer@3

    That woman acts out of cold Malice and shows no gratitude to people who have helped her in the past. Plus she knows continuations and divisionals are filed from a thick patent application, and You can ask Albert Smith, and he will tell you so. So this push by the Patent Reformers to limit patent application sizes is just indicative of malice being acted out against pat-pros.

  • [Avatar for nat scientist]
    nat scientist
    May 3, 2016 10:19 pm

    Yes @12 ,in Crony Capitalism,a/k/a Corporate-Socialism, it matters little to speculate what the laws may be, or even bother to influence the process unduly, but rather to act on just what existing laws are not being enforced, Great fortunes arise from forgotten crimes.

  • [Avatar for Curious]
    Curious
    May 3, 2016 10:03 pm

    through proper legal channels
    LOL … doing things through “proper legal channels” means little these days. If you want valuable information out of the government, your FOIA request better be followed up with a lawsuit when the government drags its heels.

    Likewise if you want to get an infringer to license your patented technology, your demand letter better be followed up with a lawsuit when the infringer practices “efficient infringement” and just ignores you.

    The government and patent infringers all practice the time-honored tradition of just ignore the problem with the (well-founded) hope that it will go away on its own. Not a good philosophy for doing what is right — but highly effective when “doing the right thing” is not an overriding concern.

  • [Avatar for Anon]
    Anon
    May 3, 2016 08:17 pm

    Scott and Night Writer,

    Any discussion of sources concerning “Tr011s” would not be complete without mentioning that our erstwhile companion Ron Katznelson petitioned (through proper legal channels) the White House to come clean with its treatment of “Tr011s.”

    That petition is now over a year old with not even a hint of a response from the White House.

    And while I am NOT a fan of the republicans and their ill-advised “do-nothing” attitude towards filling the vacancy on the Supreme Court bench, the next time that the President wants to get all “high and mighty,” SOMEBODY should remind him about Ron’s petition.

  • [Avatar for Curious]
    Curious
    May 3, 2016 07:36 pm

    One of the unintended consequences (maybe it was intended) of all this “reform” is to create an incredibly complex system that only the big sophisticated players can navigate through.
    It was intended. There are probably hundreds if not thousands of smaller entities right now that are having their patent(s) infringed for amounts worth 8 figures or more (many, many more for lesser amounts). However, almost none of those smaller entities are successfully enforcing their intellectual property.

    Based upon the concept of “efficient infringement,” the larger entities know that it is all but impossible for small entities to successfully litigate a patent. The cost of attorneys is way too high and it has gotten more expensive with the threat of AIA proceedings, which further delay litigation and add an additional level of cost to the process. IPERs are not making things more efficient — a well-heeled defendant is still going to argue non-infringement during trial (if they lose an IPER — which statistically is very unlikely). They will continue to find different art and will make the arguments at trial but they can afford to.

    What do inventors do when faced with a multi-year process costing many millions of dollars and great uncertainty? The answer is that they sell their patents to NPEs (some of which are the notorious “patent trolls” we hear about) for pennies on the dollar. The NPEs, who better understand the mechanics of litigation cost asymmetry, sue lots of small defendants and get small settlements because of the cost asymmetry. The bigger infringers don’t get sued because it costs too much to sue them.
    Who makes out when this happens? The patent trolls who know how to game the system and the large infringers who also know how to game the system to their advantage.
    Who loses when this happens? The inventors who get a pittance for their inventions and the smaller infringers who cannot afford to fight (if it happens to be a bad patent asserted against them).

    If patent rights were stronger, then both parties would have the incentive to engage in actual arm’s-length negotiations. Litigation costs money for both sides and is a drag for both parties, so it is more cost-effective to negotiate than litigate. However, with weak patents infringers have very little incentive to negotiate. Inventors (i.e., the ones who should be incentivized) are then left with few good choices but to sell to patent trolls.

    I would like, just once, to have one of these drive-by articles actually propose a solution by which inventors can receive their fair share without having to resort to selling their patents to patent trolls. Patent trolls exist because the innovation market is inefficient and is heavily slanted towards the infringers (hence the new buzzword of “efficient infringement”).

  • [Avatar for step back]
    step back
    May 3, 2016 01:50 pm

    I know you are suspicious of U toobs
    However, the 3 authors appear to have made one here:
    watch?v=ClpzNQVljjY
    (Append above to normal U toob url to watch)

  • [Avatar for step back]
    step back
    May 3, 2016 01:40 pm

    Hi Gene and Steve,

    Nice find.
    Since the actual article is behind a subscription wall, I was not able to go to the original source.

    However the CV of at least one of the authors is public: L. Cohen.

    First off, it’s a dude. Second it appears that the entire history of academic brainwashing (**) for this Harvard professor dude was in the economics/finance realm:

    “His award-winning research has been published in the top journals in Finance and Economics. It is also frequently described in various media outlets including The Wall Street Journal, The New York Times, The Washington Post, The Economist, and Forbes. He is the recipient of a National Science Foundation (NSF) Early Career Development Award for his research agenda on Relationships in Finance. Dr. Cohen received a PhD in finance and an MBA from the University of Chicago in 2005. He earned dual undergraduate degrees from the University of Pennsylvania – a BSE from the Wharton School and a BA in economics from the College of Arts & Sciences in 2001.”

    http://lhcohen.wix.com/academicsite#!about/cee5

    ** Speaking of brainwashing, we patent practitioners are not much better off since we get our craniums washed in the ideology of intellectual property law. So as we cast stones at the anti-patent crowd, remember that our houses are built of silicon dioxide too.

  • [Avatar for A Rational Person]
    A Rational Person
    May 3, 2016 12:09 pm

    Gene,

    Any thought of writing a letter to the editor of Science and allowing others to co-sign your letter?

  • [Avatar for Anon]
    Anon
    May 3, 2016 10:56 am

    An Ivy League connection to the Supreme Court Justices appears to add yet another “detached” aspect to their clothing line.

    I am reminded of the “agency capture” effect of the past banking crises.

  • [Avatar for nat scientist]
    nat scientist
    May 3, 2016 10:44 am

    Good catch, gentlemen.
    The sub-title for the peer-reviewed, academic journal Science that explains it all is missing. The full title is in practice: Science in the Corporate-Socialist Economy.
    Science with agenda is propaganda; by searching for narratives without rigorously testing the foundations is to grease the political grant-making machinery.
    Moonshots all around!

  • [Avatar for T]
    T
    May 3, 2016 10:09 am

    So who is going to write a letter to the editor of Science to note the deficiencies of the paper and chide Science for accepting such a shoddy piece of research?

  • [Avatar for Night Writer]
    Night Writer
    May 3, 2016 09:15 am

    Anecdotally, looking at the revenue of a couple of patent trolls I know that are public they are doing OK if not good.

    One of the unintended consequences (maybe it was intended) of all this “reform” is to create an incredibly complex system that only the big sophisticated players can navigate through.

    For example, there has been much whining about patent application size. But, if Lee cannot tell us one reason this is happening then she should be fired immediately. Can you Lee? I bet you can’t. And yet, anyone that practices real patent law knows why. It is because it is cheaper to stuff in several disclosures into one patent application and keep it alive indefinitely because of the IPRs and litigation.

    You see, Lee is a prime example of the problems. She has no idea how the system works. Lemley is exhibit two who consistently misrepresents patent law in his vanity pieces (e.g., functional claiming where Lemley withheld facts and misrepresented facts.)

  • [Avatar for Night Writer]
    Night Writer
    May 3, 2016 09:11 am

    Did they address the OMB report that said there was no troll problem? How do people square that the US has a software industry that is 10 times bigger than any other country and was build with patents? In fact, what is so interesting is the only country that compares with us is Germany and they have some patent protection for software.

    This is like the propaganda machine that brought down financial regulation. No need for reality. And, anyone cares, should think about the fact that the ones that talk about reform do not offer constructive reforms but offer reforms that cripple the entire system.

  • [Avatar for Scott]
    Scott
    May 3, 2016 08:10 am

    It would be interesting to see how this research (and other research from these authors) is funded and who reviewed and commented on the drafts before publication. I smell big-tech.