90% of Tech Patent Lawsuits in 2015 Filed By 'Non-Practicing Entities,' eg Patent Trolls
It was thought that US more senior courts' consistently negative attitudes toward tech patent lawsuits would begin to discourage the filing of same.
That may have been the case with major corporations suing each other, but suits filed by 'non-performing entities' (NPEs)- legal speak for companies set up solely to file patent lawsuits - are up dramatically and now account for 90% of such suits in 2015.
Most of these suits are filed by a few entities that have no source of income other than that derived from such suits. And almost all of their suits are filed in the courts of the Eastern District of Texas, a largely rural area with virtually no technology industry. Apparently the judges in that district enjoy the power and notoriety these actions bring and fear losing their clout if they become too friendly to actual value-creating businesses. JL
New patent statistics show that patent litigation, driven by so-called "patent trolls," could reach an all-time high in 2015. It's a statistic that's sure to be highlighted by tech lobbyists and others pushing for patent reform, given that the House is likely to take up a floor vote of the Innovation Act this month.
The stats are published by United Patents, which helps companies deal with patent trolls. The stats show that 3,050 patent lawsuits were filed in the first half of the year. Of those, 2,075, or 68 percent, were filed by patent trolls, which United Patents refers to as "non-practicing entities" or NPEs.
The total number of lawsuits is up 11 percent compared to the first half of 2014 and up 35 percent from the second half of last year (see above graph). United Patents projects that will lead to an all-time high in 2015, with an estimated 6,100 lawsuits and another 1,900 projected disputes at the Patent and Trademark Appeal Board. The latter are mostly proceedings called "inter partes reviews" that challenge the validity of patents.
Patent trolls' responsibility for 68 percent of the lawsuits is up slightly from a few years ago, when they constituted 62 percent of all patent cases.
Focusing on the high-tech sector, however, the trolls' prevalence is stunning. A full 90 percent of tech patent cases are filed by patent trolls. That's compared to 85 percent in the same period last year and 82.5 percent in the second half of 2014.
The report also has data about the most active trolls and the companies most frequently sued. Incredibly, the top three filers of lawsuits—eDekka LLC, Data Carriers LLC, and Wetro Lan LLC—are all represented by the same law firm, Dallas-based Austin Hansley. All of them file lawsuits almost exclusively in the Eastern District of Texas.
The PACER public courts database suggests the #2 top troll, Data Carriers LLC, had a previous owner; before 2015, it filed most of its lawsuits in Delaware and had different outside counsel.
The #3 troll, Wetro Lan, has a patent that's said to cover Internet firewalls and was recently featured as the Electronic Frontier Foundation's "Stupid Patent of the Month." Austin Hansley, the law firm, has tangled with EFF in court, as well. The Texas firm helped Garfum.com sue small businesses over photo contests but backed down once the EFF took the case.
The No. 4 top troll, Eclipse IP, suggests that small businesses pay it "a lump sum fee of $45,000 in exchange for a paid-up worldwide license" to its portfolio of 21 patents. Eclipse IP's inventions, which include a method for updating delivery information, were created by patent lawyer Scott Horstemeyer. EFF lawyer Daniel Nazer also wrote up Horstemeyer's patent as a "Stupid Patent of the Month" and then was sued by Horstemeyer for defamation. Horstemeyer dropped the lawsuit three days after it was served.
Eclipse IP files lawsuits in East Texas, New Jersey, and Los Angeles. It's represented by Stamoulis & Weinblatt and Olive Dunne.
The No. 5 and No. 6 patent trolls, Loramax LLC and Oberalis LLC respectively, are new entities that follow a similar pattern. Loramax filed two waves of lawsuits within one week in May, while Oberalis filed two waves of patent lawsuits on June 5 and June 19. Both companies filed all their suits in East Texas and are represented by the same lawyer, Jaspal Hare of the Dallas law firm Scheef & Stone.
The top target of the NPEs hasn't changed from last year: it's Apple, the richest tech company of all, which drew 25 patent lawsuits in the first half of the year. Apple decried its status as the "top target" in a Supreme Court filing last year. The other top NPE targets in the tech sector are Amazon and Hewlett-Packard. The top 5 most-sued list also includes Actavis and Mylan Pharmaceuticals, two large generic drug makers that have regular disputes with branded drug companies.
Petitions at the Patent and Trademark Appeal Board (PTAB) are up 31 percent over the same period last year, with 90 percent of those petitions being inter partes reviews seeking to knock out patents. Of those petitions, 42 percent were filed against NPEs. Apple, Samsung, and Google were the top filers of PTAB petitions.
Unified Patents is a company that focuses on reducing NPE risk through analyzing patents and patent markets and challenging patents through PTAB proceedings. Because different organizations use different definitions of trolls/NPEs, statistics like the ones offered by Unified Patents can vary. Generally, patent trolls are companies that have no major source of income other than patent licensing and lawsuits.
As a Partner and Co-Founder of Predictiv and PredictivAsia, Jon specializes in management performance and organizational effectiveness for both domestic and international clients. He is an editor and author whose works include Invisible Advantage: How Intangilbles are Driving Business Performance. Learn more...
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