Is there a patent troll crisis? Conventional wisdom holds that there is. But a notable dissenter is David Kappos, who headed the United States Patent Office from 2009 to 2013. Kappos, who is now a lawyer at Cravath, Swain & Moore, contends that the "panicked calls for immediate action" are based on "anecdotal stories or even less -- unbound rhetoric." He claims the facts show that "the building is not on fire."
But new data from 2013 shows that Kappos is wrong. Last year, patent trolls filed 18 percent more lawsuits than in 2012, suing 11 percent more companies. Patent Freedom, a company that tracks patent troll lawsuits, found that trolls filed 3,134 suits in 2013 -- that's about 52 percent of all patent lawsuits. The new data lays to rest doubts about whether the patent system is in need of an overhaul.
Kappos's arguments might seem surprising to anyone who has followed the activity over patent trolls in Washington and in many state capitals during the last year. There have, indeed, been (panic-free) calls for action, but these have referenced a significant body of empirical research. The White House called for action on this issue last June and issued a report based on over a dozen academic studies arguing that patent trolls are responsible for a major harmful increase in patent litigation. The Government Accountability Office (GAO) also issued a study in August, finding a major increase in patent troll litigation.
The House subsequently passed a patent reform bill by a 325 to 91 vote margin in December. The issue is now being considered in the Senate. And, following the lead of Vermont, state legislatures have also begun passing anti-troll laws.
Kappos denies that trolls have increased patent litigation, dismissing almost all of the academic research on the subject. His reason? Some of those studies have not made all of their data publicly available (see an academic discussion of this issue). Patent trolls insist on non-disclosure agreements when they settle lawsuits, so some of the data cannot be released publicly; other data is proprietary, gathered by firms that provide services based on that data.
Nevertheless, the findings of these various academic studies have been replicated by different researchers. I have signed a non-disclosure that allowed me to look at Patent Freedom's data. I found that the firm's methodology is sound, and its results are consistent with other data on patent litigation.
The studies, using different data sources and different methodologies, all agree that patent trolls have contributed substantially to the rise in litigation. Similarly, the GAO report found that between 2007 and 2011, the share of lawsuits filed by trolls rose 40 percent, and the number of defendants tripled, accounting for about half the total increase in patent defendants.
The one fact that Kappos does cite is that the number of patent troll defendants did not increase from 2010 to 2012. This chart shows the number of unique operating companies sued by patent trolls each year:
It's true that the number of defendants fell slightly between 2010 and 2012. Does this mean that patent troll litigation is not rising? Hardly. The reason for the surge in patent defendants in 2010 and 2011 is that a new law was passed in 2011, the America Invents Act. This law prevented patent trolls from naming multiple, unrelated defendants in the same lawsuit. Some trolls sue dozens of companies at a time. The America Invents Act makes the trolls file separate lawsuits, which is more expensive. Anticipating the new law, patent trolls filed more multiple-party lawsuits in 2010 and 2011 to avoid this extra cost.
But what the entire figure reveals is that those two years were exceptional. The last decade has seen a steady increasing trend in patent troll defendants, shown by the trendline. That trend includes the last two years, after the America Invents Act was passed. And in 2013, the number of patent troll defendants began to increase again.
So the evidence indicates that the patent crisis is real. Patent trolls have dramatically increased the number of companies sued for patent infringement. Kappos's focus on just two years of data is highly misleading. The data also show that the America Invents Act has done little to slow the rapid growth of patent troll lawsuits.
This week, a group of trade associations and companies formed the Main Street Patent Coalition to fight for patent reform. The coalition represents small tech start-ups, Web companies, retailers, banks, grocery chains and other businesses. They are acting because the dramatic expansion of patent troll lawsuits deeply affects them. For these groups, the building is, indeed, on fire.
James Bessen does research on technology and innovation at Boston University School of Law. He is the co-author of "Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk." He is currently writing "Learning by Doing," a new book about technology and jobs. You can follow him on Twitter.