Missing the Forest for the Trolls

By:  Mark A. Lemley & A. Douglas Melamed

 

Patent trolls are increasingly blamed for the growing costs of patent litigation and seemingly excessive damages awards and patent royalties. There is much to support these allegations. Trolls now account for a majority of all patent assertions, win both larger judgments and larger settlements than do firms that practice patents, and do so despite complaints and some evidence that they assert weak patents. Nonetheless, we think the focus on trolls obscures more complex and fundamental problems with the patent system. There are at least three different troll business models that have varying effects on the patent system. Based on our review of the economics of patent assertions, we find that patent assertions by practicing entities can create problems that, while sometimes different from, are at least as costly as those created by trolls. Many of the problems associated with trolls are in fact problems that stem from the disaggregation of complementary patents into multiple hands. Our review takes us beyond labels and the search for “bad actors” and leads us to focus instead on aspects of the patent system that give rise to the problems, and on changes in patent law that will ameliorate them. These changes include updating standards for issuing patents and patent remedies, implementing measures to reduce abusive patent litigation, and heightened legal scrutiny of disaggregation of patent portfolios. We conclude that trolls are a symptom of larger flaws in the patent system and that those who have focused on trolls have, in effect, been missing the forest for the trolls.

 

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