In a speech given to the Eastern District of Texas Bar Association last week, director of the U.S. Patent and Trademark Office (USPTO) Andrei Iancu cast aspersions on those of us concerned about the threat “patent trolls” pose to innovation:
Remarkably, in what I believe amounts to Orwellian “doublespeak,” those who’ve been advancing the patent troll narrative argue that they do so because they are actually pro-innovation. That by their highlighting, relentlessly, the dangers in the patent system, they actually encourage innovation. Right!
After hearing about the Big Bad Wolf eating Little Red Riding Hood and her Grandma, would kids be more eager to go into the woods and more eager to take risks? Come on! What encourages more innovation? Susann Keohane, Bob Metcalfe, Thomas Edison, the Wright Brothers, Frances Arnold—or scary monster stories?
What encourages more folks to take risks and become entrepreneurs and inventors? Is it stories highlighting the success of risk-taking and the personal and public gratification of invention, or is it stories highlighting green monsters under bridges and the faults in the patent system?
His thesis is, essentially, that those of us concerned about the dangers of patent trolls, also called patent assertion entities, or PAEs, (firms whose “business model focuses not on developing or commercializing patented inventions but on buying and asserting patents”) are needlessly scaring innovators, preventing them from producing creative works.
His argument is curious for a number of reasons. First, in his laundry list of innovators, he’s included a number of prominent inventors-cum-patent trolls, Edison and the Wright Brothers in particular. Indeed, while there is some evidence that the recent uptick in PAEs isn’t anomalous compared to the history of the U.S. IP system, it could just as easily be said that patent trolls are still a problem, just not a new one.
Second, to get to the heart of the matter, his argument is an exercise in question begging. If patent trolls are a problem, then innovators should be scared, much like how if there is a wolf, little girls with monochromatic fashion tastes visiting grandmother should be scared.
What does the literature say about the risk of patent trolls? First, with respect to whether or not the problem exists, the answer is a clear yes. A 2013 report from the Obama Administration found that 62% of patent suits were attributable to “trolls,” and a recent report from Willis Towers Watson found that only about 5% of patent cases wind up in court, and 50% to 70% of defendants were sued by non-competitors.
Second, beyond the $800 billion in increased costs consumers have to pay because of intellectual monopoly, the costs of patent trolling are in the billions. One study found $29 billion in direct costs to firms in 2011. Niskanen’s James Bessen wrote in Harvard Business Review that another study found a 14% decline ($22 billion) in venture capital investing caused by trolling. Another study found that, relative to patented medical imaging products, sales of imaging products declined by one-third and was “linked to a lack of incremental product innovation during the period of litigation.”
Finally, it’s worth pointing out that despite Iancu’s lauding of innovators and their patents, his speech is absent of hard data refuting the claims he’s attempting to address.
Keeping innovators tied down in the courts creates its own type of dystopia. It turns the people Iancu wants to encourage into Franz Kafka’s Poseidon: too bogged down navigating bureaucracy to do what they’re supposed to.
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