The last decade was a boom time for patent trolls. Their names and lawsuits made the news; This American Life dedicated two hour-long episodes to them. The number of defendants in patent troll lawsuits increased sixfold from 2003 through last year. But now the tides seem to be turning for them: After growing very rapidly since 2009, the number of lawsuits filed by "non-practicing entities" will be significantly lower this year compared to 2013. Although the level of litigation will still be at a historic high, is this indicative that they are finally being reigned in?
I talked to several patent litigation experts—both legal scholars and industry experts—and all agreed that a series of recent Supreme Court decisions has put a crimp in the patent troll's business model. Two key ingredients of the patent troll's business model are: 1) a litigation process that is very costly for defendants, and, 2) patents that are overly broad or vague so that they can be interpreted to cover commonly used technologies and hence snare many defendants. Given the cost, many defendants are willing to pay the troll to avoid a lawsuit even if the suit is not justified.
These ingredients have provided ample business opportunity for patent trolls. Patent lawsuits can be very expensive to defend, especially because plaintiffs can, at very little cost to themselves, cause defendants to rack up millions of dollars in costs for legal discovery before the plaintiff even establishes what the alleged infringement is. Ever since the appellate court for patent cases (the Court of Appeals for the Federal Circuit) loosened standards for patenting software during the 1990s, the Patent Office has issued tens of thousands of vague, overly broad software patents, including patents that cover methods of doing business using software. Indeed, in a study last year, the Government Accountability Office attributed 89 percent of the increase in patent litigation to software patents.