Report for US lawmakers gets it horribly wrong on NPEs 31 Aug 12
The Congressional Research Service, a branch of the Library of Congress which “works exclusively for the United States Congress, providing policy and legal analysis to committees and Members of both the House and Senate”, has produced a short report entitled An Overview of the "Patent Trolls" Debate. Published on 20th August, the report “reviews the current debate and controversy surrounding PAEs and their effect on innovation, examines the reasons for the rise in PAE litigation, and explores the legislative options available to Congress if it decides that these are issues that should be addressed”.
However, those expecting an even-handed discussion of NPEs, “trolls” and patent assertion entities (PAEs) may be left disappointment. The tone is set on the first page where it is stated that “PAEs generated $29 billion in revenues from defendants and licensees in 2011, a 400 percent increase over $7 billion in 2005”. Unfortunately, this is a claim that is plucked from the air with no relation to established fact, though earlier this year James Bessen and Michael Meurer reported that US companies accrued $29 billion of direct costs in 2011 thanks to the activities of NPEs. That, of course, is not the same thing at all.
In and of itself this mistake is a bit of a howler, but more importantly what we also know is that the methodology that Bessen and Meurer have used to reach the conclusions they have about NPEs has recently been subjected to a great deal of compelling criticism from David Schwartz of Chicago-Kent College of Law and Jay Kesan of the University of Illinois College of Law. Their paper, entitled Analyzing the Role of Non-Practicing Entities in the Patent System, questions a number of the conclusions the Boston pair make on the basis that the way in which they have complied the figures they present is seriously flawed, while the original sources they use are potentially compromised. Yet, there is absolutely no acknowledgement of this in the Congressional Research Service’s report. Instead, Bessen and Meurer are widely and uncritically quoted throughout, as are several other prominent critics of NPEs. There would be nothing wrong with that if equal space were given to the other side of the story, but as far as I can tell from my reading of the report that does not seem to be the case.
Does it matter? Well, yes. Although it does not purport to be an in-depth study, nevertheless this is a report intended to inform lawmakers in Congress, who are already being asked to consider legislation aimed at curbing NPE suits against a background of media reports in which terms such as “dysfunctional patent system”, “broken patent system”, “extortion racket” and the like are frequent. By failing to provide a full summary of the different arguments, the report merely adds to this mood music. When legislators look at changes to the law, it should be with as much clear and correct information as possible. Factually inaccurate, skewed (I am sure unintentionally) reportage does not help in this process. It just makes it more likely that bad decisions will be made.
The Government Accountability Office (GAO) was mandated in the America Invents Act to “to study the consequences of patent litigation by non-practicing entities (NPEs) or patent assertion entities (PAEs) in consultation with the USPTO”. The study is due by 16th September and, among other things, it will look at: “The volume of litigation in the 20 years before enactment of the AIA, the volume of cases which are found to be without merit after judicial review, the impact of litigation on the time to resolve patent claims, the costs with such litigation, its economic impact on the U.S. economy and job creation, and any benefits created by NPEs or PAEs.” In addition it is required to make “recommendations to minimize any negative impact of such patent litigation”. You have to hope that the GAO does a better job of looking at all perspectives and subjecting all evidence to proper scrutiny than the Congressional Research Service.
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