Patent Reform and the Law of Unintended Consequences
November 11, 2011
Recent commentary trumpeting the benefits of the America Invents Act look to be premature. The overall trend is clear: no matter how you look at it, the NPE problem is getting worse. 2011 is already the biggest year ever for growth of NPE suits.
- Total NPE suits year-to-date are up 71% and the number of unique defendants is up 26% from the same period last year.
- There have already been 963 NPE cases filed as of October 31, 2011, impacting just over 2800 unique defendants versus 730 NPE cases filed in all of 2010 impacting just over 2900 unique defendants.
- On average, each unique defendant this year is facing 10% more NPE cases than last year.
- 186 NPE suits were filed in the immediate wake of patent reform, from September 16 – October 31, 2011, more than double from the same period last year (89 suits).
A good example of how the tea leaves are being misconstrued is the recent Dow Jones Newswire article “Patent Reform Seen Reducing Multi-Defendant Suits”. While well written and carefully researched, the article cites recent statistics (some compiled with the assistance of RPX) to suggest that fewer companies are being sued because of the joinder provision of AIA, which limits when different defendants can be joined in the same suit. While this has been true for the few weeks following passage of AIA, this is not indicative of a trend.
The joinder provision certainly will limit the number of defendants per suit. That’s the law now, and we’re seeing its impact reflected in recent case filings (in the three months before AIA there was an average of five defendants per NPE suit; since patent reform that has dropped to two defendants per case). But will the new provision necessarily translate into fewer defendants overall? Very unlikely. The NPE business model is built on asserting patents as broadly as possible. If patent reform dictates fewer defendants per case, then we will probably just see more cases filed in general. Or plaintiffs will bring their claims to the International Trade Commission, where there is no limitation on defendants per case. One thing history has taught is that NPEs will adapt. The larger lesson we may all learn from patent reform is to beware the law of unintended consequences.
It appears, then, that the more things change in the patent litigation ecosystem, the more they stay the same. AIA is clearly a well-intentioned effort to make needed change to that ecosystem, but it is still an open question whether those changes – or any legislated patent reform – can generate the kind of fundamental reduction of patent cost and risk that can be produced by market-driven efforts.