Our patent problems go way beyond trolls

UPDATE: More recent data documents the serious uptick in patent troll litigation. Likely still true that the patent problem goes way beyond trolls, but they are a problem nonetheless. Recent research is here.

I did a Google Hangout with two intellectual property experts this week, and wrote an article to go along with it. The jumping off point was Tesla’s patent sharing announcement, but really it ended up being broader than that, covering the problems with our patent system and the possibility for reform.

One thing it was not really about was patent trolls, and it occurs to me based on some of the reaction to the article that I should have made this more explicit.

Here’s the chart from the post showing the explosion of patent litigation in the U.S.:



(If you’re curious about that spike at the end, read the update at the bottom of my post.)

The consequence of this dramatic increase is that patents have the effect of making innovation less profitable, rather than more so, in all industries except pharma and chemicals. In other words, when you count up the benefits to innovators from excluding others from their invention, and then subtract the cost of litigation, you get a negative number.

There are many reasons for this, among them the fact that in industries like software the “boundaries” around patents aren’t clear. So you have a patent and I have a patent and neither of us are quite sure what either of the patents does and doesn’t cover. That leads to a lot of unnecessary litigation, and beyond that just a lot of uncertainty.

But it’s worth spelling out that while patent trolls are a problem — one that needs to be addressed — they are not the primary driver of this explosion in litigation. Much of my post borrows from James Bessen of BU, one of the experts I interviewed, who has done research on this question. Here’s what he says in his book Patent Failure:

We also considered the role of patent “trolls,” which we define narrowly as individual inventors who do not commercialize or manufacture their inventions. One story claims that the increasing availability of patent litigators willing to work on contingency fees has spurred lawsuits by such trolls, who might otherwise be unable to afford litigation. The share of lawsuits initiated by public firms has not declined, however, nor has the share of lawsuits involving patents awarded to independent inventors increased. This suggests that the increase in litigation cannot be mainly attributed to patent “trolls,” at least through 1999. Of course, if we use a broader definition of “troll” that includes all sorts of patentees who opportunistically take advantage of poor patent notice to assert patents against unsuspecting firms, then troll-like behavior might be a more important explanation. Indeed, if patent notice is poor, then all sorts of patent owners might quite reasonably assert patents more broadly than they deserve. But then it is more appropriate to attribute the surge in litigation to poor patent notice, not to trolls per se.

As indefensible as the business model of companies like Intellectual Ventures is, that pure troll model does not itself explain the rise in patent litigation.

I wish I’d made this point even in passing in my HBR piece this week. It’s easy to blame the trolls, as well we should. But our patent problems go well beyond them.