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Vast Majority Of Software Patents In Lawsuits Lose

Publication Date: 
September 24, 2010
Source: 
Techdirt
Author: 
Mike Masnick

Professor Mark Lemley, CodEx founder Joshua Walker's study co-authored with John Allison, "Patent Quality and Settlement among Repeat Patent Litigants," is summarized in this blog post from TechDirt:

Well, this is interesting (and quite surprising). A new study by John Allison, Mark Lemley, Joshua Walker looked at highly litigated patents to see how well they did in court, and came up with some really unexpected findings. The summary of the findings are as follows:

We designed this study to explore the effects of repeat play on litigation behavior, contributing to a literature on the economics of civil procedure as well as the substance of patent law. But what we found was dramatic and unexpected: The patents and patentees that occupy the most time and attention in court and in public policy debates -- the very patents that economists consider the most valuable -- are astonishingly weak. Non-practicing entities and software patentees almost never win their cases. That may be a good thing, if you believe that most software patents are bad or that NPEs are bad for society. But it certainly means that the patent system is wasting more of its time than expected dealing with weak patents. And it also suggests that both our measures of patent value and our theories of litigation behavior need some serious reconsideration.

...

On the one hand, it should give substantial ammunition to those who argue against software patents and who want to restrain patent trolls. If software and NPE patents are overwhelmingly bad -- either invalid or overclaimed -- the social benefit of allowing them may well be outweighed by the harm they cause. At the same time, however, one could read this evidence as proof that the system is working -- that the bad patents are being weeded out of the system and are not stifling innovation.

The truth probably lies somewhere in between. The latter claim -- that the widespread invalidation of software and NPE-owned patents shows that the system is working -- seems altogether too facile. After all, roughly 90% of those cases settled without judgment. While those settlements are confidential, we expect that the vast majority involved some sort of payment to the patent plaintiff -- a payment that the outcomes data suggests might represent not the acquisition of real legal rights but a nuisance settlement over a likely-invalid patent. At the same time, the fact that these patents are so weak should -- at least once exposed -- limit the value of those settlements, and quiet concerns that software or troll patentees will actually shut down very many innovative products.

...

If the payoff for victory at the end of the day is $1 billion, a 10% chance of success doesn't sound so bad.