At long last, the Government Accountability Office (GAO) has submitted its report on patent litigation to the Committees on the Judiciary of the US Senate and House of Representatives, as authorized under the America Invents Act (AIA). Unfortunately, the report is a day late and a dollar short. Actually, the report is more than a day late – the AIA required that the GAO submit its report within 1 year of its enactment. The AIA was enacted in 2011. The report is also more than a dollar short – the GAO ignored Section 34 of the AIA which specified the contents of the study (namely patent litigation initiated by Non-Practicing Entities (NPEs)), choosing instead to focus on a set of issues not within its Congressional remit.
First, let me provide some context. In general, the report furthers the public dialogue on patent litigation, which is always helpful. So too is its focus on patent quality, and the need to improve patent claim clarity to make it easier for us all to understand the boundary between infringement and non-infringement. But in summarily reaching the surprising conclusion that NPEs are not the main cause of the increase in patent litigation, the GAO inexplicably turned its attention to an issue of its own manufacture, namely software patents.
As stated above, the GAO was not even asked to look at software patents….with good reason. Software patents – no matter how defined – should be judged against the same principles of patentability as any other patents. Patents should be granted for inventions that satisfy the criteria for patentability regardless of technology. Technology-specific requirements for patentability risk subjecting our patent system to the same special interests that distort our tax code. The patent system is intended to promote all innovation, not favor one type of innovation over another.
Assuming for the moment that we wanted to single out software patents as a topic for study, the GAO applied a deeply flawed categorization to determine what is and is not a software patent. The GAO report concluded that more than half of recently issued patents are for software. It appears the GAO essentially considered every patent relating to electrical technologies to be a software patent. But many new methods of operating electrical devices are embodied in device hardware, not software; accordingly, the GAO’s conclusions on how many software patents have issued, and the inferences the GAO draws from those conclusions, are highly questionable.
With their erroneous conclusions as a base, is it any wonder that the GAO found software patents to be the subject of a substantial portion of patent litigation? Is it any surprise that the majority of shoppers in grocery stores located in New York are residents of New York? Furthermore, the study assumes all patent litigation is bad and implies something is wrong with any patent involved in litigation, but we know that is not true. Some infringers will not voluntarily license a valid patent, and some licensors and licensees can not reach agreement on royalty rates. Litigation has long had, and will continue to have, a key role in protecting and enforcing patent rights. Perhaps the GAO should have done what it was instructed to do and focused more attention on litigation abuse, not the mere volume of litigation.
We need to maintain our perspective. The software industry is among the most innovative and successful of all industries worldwide. See the graphic below courtesy of the Business Software Alliance.
Most of the leading software companies are US owned and based, which is due in part to the strong protections for investment and innovation that are provided by software patents in the US. We should think long and hard before we abrogate the protections to the US software industry provided by US patents. Our nation’s economic future, and even our jobs, are at stake. The success of the software industry and the importance of patents in protecting software innovation are well documented. See for example the works of Columbia Law Professor Ronald Mann. See also my previous articles published in Wired and Smartplanet.
As for NPEs, the GAO downplayed their impact, focusing instead on the total number of patent infringement lawsuits. But as we previously reported in our earlier blog entry, NPEs are clearly the source of real growth in patent litigation. See the graph below from Patent Freedom, indicating that the number of counterparties (defendants plus declaratory judgment plaintiffs) in patent suits involving NPEs has increased at a compound annual growth rate of over 30% during the last decade:
The GAO report glosses over this fact with only a brief reference to accounting by number of defendants buried deep in the report. But make no mistake about it – the NPE business model, not software patents, is the main reason patent litigation has increased.
One final point. NPEs often assert patents against products and services that include software. We can debate why that is…maybe infringements are easier to discover given publication of user manuals, redbooks, and the like on the internet…but that debate would overlook a more fundamental point. Implementing patent reforms specific to software, even if successful in reducing litigation relating to software patents, will not solve the patent litigation problem. NPEs will simply assert more patents relating to other technologies – we’re already starting to see this. It is fine to try to pinpoint the root cause of patent litigation, but our reforms should be targeted to specific issues and universal in scope, based on principles and behaviors, rather than specific technologies.