Law professor warns against current patent troll 'rhetoric'

By Jessica M. Karmasek | Feb 19, 2014

ARLINGTON, Va. (Legal Newsline) -- Count Adam Mossoff, a law professor at George Mason University, among those skeptical of the ever-growing hype surrounding so-called "patent trolls."

Mossoff, a senior scholar at GMU's Center for Protection of Intellectual Property, admits there are some "bad actors" in the business of patent licensing.

However, he says state lawmakers, state attorneys general and federal lawmakers -- many of whom are pushing for additional patent reform -- should be careful not to overreact to what he describes as "unverifiable" studies on patent trolling.

"The problem with a lot of these studies are that they're often based on 'secret data' that no one has access to," said Mossoff, who testified to as much in a U.S. Senate committee hearing in November. "They're unverifiable, according to standard academic norms."

Click here to read Mossoff's full statement to the Senate committee.

A Boston University study found, for example, that in 2011 90 percent of companies facing patent lawsuits were small businesses and the cost of patent trolls to the U.S. economy was $29 billion.

But that study, Mossoff notes, was based on less than 100 respondents.

"No reputable economist would draw the same conclusion based on that sample," he said.

A recent study by Patent Freedom found that patent trolls filed 18 percent more lawsuits last year than the year before.

According to the company, which tracks patent troll lawsuits, trolls filed more than 3,000 lawsuits in 2013 -- more than half of all patent lawsuits.

That study, too, is debatable, Mossoff says.

"There is substantial evidence that the data that was acquired was done so in a very biased, very questionable manner," he said, explaining that the respondents were told the report would be used for legal changes.

In June, the White House issued its own report, also arguing that trolls are the cause for the increase in patent litigation. It found that lawsuits filed by trolls have tripled in the last two years.

Two months later, the Government Accountability Office issued its own study. It also found a substantial increase in patent troll litigation.

But even the GAO's report referred to many of the recent studies as "nonrandom and nongeneralizable," Mossoff notes.

The root of the problem, he says, is the definition of a patent troll.

"There is no settled definition," he said.

Generally speaking, a patent troll, or non-practicing entity or patent assertion entity, purchases groups of patents without an intent to market or develop a product.

In some cases, but not all, the entity then targets other businesses with lawsuits alleging infringement of the patents it bought.

However, inventors and companies that produce patented technology are being swept up in the terminology, Mossoff says.

"There are some companies that engage in patent licensing and don't manufacture," he said.

"Some people are really good at manufacturing, some people are really good at inventing and some people aren't good at either, but they license."

But that doesn't automatically make them a "troll," Mossoff says.

Take, for example, universities.

Universities could be considered patent trolls, according to some definitions, he says.

"They're not manufacturers, they license their patented technology," Mossoff explained. "And, sometimes, they sue people who infringe on their patents."

It's another reason why federal lawmakers need to be cautious when it comes to crafting additional patent reform legislation, he says.

In December, the U.S. House of Representatives approved Rep. Bob Goodlatte's Innovation Act in an overwhelming bipartisan vote of 325-91.

The measure has since been sent to the Senate, where lawmakers are carefully considering it.

"Now (universities) can be implicated in some of the proposed changes for litigation in terms of joinder rules," Mossoff said. "They will have a financial interest in the patents being sued over. They can be brought into litigation.

"And that means more money they have to spend, and of course that trickles down. Because the money has to come from somewhere, right?"

But what of the so-called "scanner troll," MPHJ Technology Investments LLC?

The company -- which is currently suing the Federal Trade Commission in a Texas federal court for allegedly violating its constitutional rights -- has been accused of sending more than 16,000 letters to businesses, demanding them to pay $1,000 per worker for using a process of scanning and emailing an electronic document.

Is it considered a legitimate "troll," engaging in a bad practice? Or are the thousands of businesses being targeted overreacting to their demand letters?

"I can't speak on whether their patent is valid or not," Mossoff said.

"Their sending these letters without ever filing a lawsuit does have a smell factor to it, and perhaps they are a bad actor. But I would have to know their patent really, really well and talk to them about why they've chosen to engage in those behaviors."

At the end of the day, Mossoff says people should be careful not to get caught up in the current "rhetoric" about NPEs, PAEs and patent trolls.

"There's a lot of rhetoric about the nature of these companies that engage in patent licensing as opposed to manufacturing," he said. "But there's very little scientific data or very few verified studies showing there is a real problem with the patent system.

"So the concern is we don't know if there are just a few bad actors in the system or if there is a systemic problem. All we have are these very high-profile articles and complaints, which have come to dominate the current public policy debate."

But Mossoff readily admits the nation's patent system isn't perfect.

"No legal system is perfect," he pointed out. "But the patent system can be tweaked and modified to address certain issues. The massive system revisions they are currently considering are troubling.

"There has been no consideration of the cost that will be imposed on inventors and innovators. Layer that on top of the America Invents Act, which hasn't been fully implemented yet."

The AIA was signed into law by President Barack Obama in 2011, and its central provisions put into effect in March 2013.

The law switched the U.S. patent system from a "first to invent" to a "first inventor to file" system, eliminated interference proceedings and developed post-grant opposition.

"There are still a tremendous number of questions as to these new administrative procedures," Mossoff said. "We're just now starting to get some data. Yet we're talking about layering on top of these changes even more changes.

"I don't think lawmakers are aware of the costs we're creating."

It could end up being a major cost to the U.S. economy, Mossoff fears.

"They're really going after the basis of our economy," he said, pointing to the earliest American inventors.

"By definition, Charles Goodyear, Elias Howe and Thomas Edison all could be considered patent trolls, NPEs or PAEs. They sold and licensed many of their patents. But where would we be without them?"

Mossoff says much of the problem is that those dominating the policy debate over patent trolls -- like Google, Cisco and trade associations -- don't rely on patents for their business models.

"Yet they're dictating how the patent system will be changed," he said.

"Sure, this could be a major problem, or it could just be a minor blip. But we may end up killing the rooster that lays the golden egg, if we're not careful."

From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.

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