GAO Report on Patent Lawsuits Could Help Reform Efforts

Number of defendants sued by 'trolls' tripled in four years

A new report from the Government Accountability Office on patent infringement lawsuits could give lawmakers the firepower they need to move reform legislation aimed at curbing abusive patent troll practices.

The long-awaited report underscores claims made by the White House, public interest groups and a broad coalition of industries, including advertising agencies and retailers, that patent trolls (companies whose sole business is to monetize patents) are abusing the system and causing a drain on the economy. Several lawmakers on both sides of the aisle have introduced bills.

"The perfect storm continues to form; this will help move this issue forward over the next couple of months," said Dick O'Brien, evp for the 4As, one of the groups that spoke to the GAO. "Everyone is in synch here and understands there is a problem and that something has to be done."

The GAO's study documents that the number of patent lawsuits spiked in the last few years—a 31 percent increase between 2010 and 2011. Patent trolls sued close to one-third of all defendants in patent infringement suits and accounted for about one-half of the overall increase in the number of defendants in recent years. In just four years, the number of defendants sued by patent trolls tripled.

Patent litigation is expensive, costing a defendant between $650,000 and $5 million, with discovery costs running from $350,000 to $3 million. Because of the cost, companies tend to settle rather than spend the money, even if the company accused of infringement knows the case against it is weak. Some 86 percent of cases ended or settled before even going to trial.

The report also noted that patent trolls use demand letters to extract license fees.

Groups advocating for legislation immediately latched onto the report as another opportunity to push for legislation.

"The GAO report demonstrates that abusive patent litigation is out of control, and that patent trolls and low-quality patent are to blame … This report only scratches the surface, acknowledging that much of the impact goes undetected," said Michael Beckerman, president and CEO of The Internet Association. "Congress must take action to put patent trolls out of business for good." 

Congress could be close. Right before the August recess, both chairmen of the House and Senate Judiciary committees committed to introducing omnibus patent reform bills addressing patent troll abuses when Congress returns in September. The omnibus bills being worked on by Sen. Patrick Leahy (D-Vt.) and Rep. Bob Goodlatte (R-Va.) are expected to roll up as many as half a dozen bills that have been introduced this year. 

And because the issue has caught the attention of both Democrats and Republicans, this one has a good shot.