The GAO Issues a Report on Patent Litigation Trends -- It Turns Out that the Sky Is Not Falling

by McDonnell Boehnen Hulbert & Berghoff LLP

Government Accountability Office (GAO) SealAs we have previously reported, the patent system is under attack, and has been for quite some time.  Generally, these attacks either begin with the assumption that the patent system is "broken," or that conclusion is reached after a review of anecdotal accounts of alleged patent abuses.  Rarely are these attacks supported by any actual numbers, and there has been a complete dearth of scientific or statistically based studies to support them.  Perhaps not coincidently, when passing the America Invents Act ("the AIA"), Congress attempted to rectify this situation by tasking the GAO (Governmental Accountability Office) to conduct a study of the consequences of litigation by non-practicing entities or patent monetization entities ("PMEs") (referred to more derogatorily in the mainstream press as "Patent Trolls").  The resulting report, entitled "Intellectual Property: Assessing Factors that Affect Patent Infringement Litigation Could Help Improve Patent Quality" ("GAO Report"), was sent to the congressional committees on August 22, 2013.  The Report itself contains some observations regarding the increase in patent litigation, some possible suggestions explaining these observations, and one recommendation:

We are recommending that the Secretary of Commerce direct the Director of PTO to consider examining trends in patent infringement litigation, including the types of patents and issues in dispute, and to consider linking this information to internal data on patent examination to improve the quality of issued patents and the patent examination process.

GAO Report, p. 46.  Even though this was an ambitious report, the GAO was upfront with the limitations of its research.  Indeed, the Report noted that the Comptroller General sent a letter to the chairs and ranking members of these congressional committees before the passage of the AIA, informing them that reliable data was either not already available or could not be obtained.  See id., p. 4 n.10.  Nevertheless, far from concluding that the patent system was "broken," the conclusions actually reached by the GAO suggest that even though there may have recently been an increase in low-quality patents, particularly related to software, it is not a cause for alarm.  In fact, the GAO noted trends in both the federal courts and the Patent Office that are already seeking to correct these perceived problems.

As background on the Report, section 34 of the AIA charges the Comptroller General to conduct a study that should include the following information:

(1)    The annual volume of litigation described in subsection (a) over the 20-year period ending on the date of the enactment of this act.

(2)    The volume of cases comprising such litigation that are found to be without merit after judicial review.

(3)    The impacts of such litigation on the time required to resolve patent claims.

(4)    The estimated costs, including the estimated cost of defense, associated with such ligation for patent holders, patent licensors, patent licensees, and inventors, and for users of alternate or competing innovations.

(5)    The economic impact of such litigation on the economy of the United States, including the impact on inventors, job creation, employers, employees, and consumers.

(6)    The benefit to commerce, if any, supplied by non-practicing entities or patent assertion entities that prosecute such litigation.

AIA, § 34(b).  Because of the aforementioned concerns regarding the existence (or lack thereof) of reliable data, the GAO reinterpreted the objectives of its study to be:

(1)    What is known about the volume and characteristics of recent patent litigation activity;

(2)    the views of stakeholders knowledgeable in patent litigation on what is known about the key factors that have contributed to recent patent litigation;

(3)    what developments in the judicial system may affect patent litigation; and

(4)    what actions, if any, has PTO recently taken that may affect patent litigation in the future.

GAO Report, p. 4.  This deviation is likely to draw criticisms that the GAO did not actually conduct the study they were tasked to perform.  However, in response to the GAO's previously noted concerns, Senator Leahy stated on the record that any resulting report should include any limitations on the data and methodology used.  See id., p. 4, n.10.  The GAO took this opening to develop its own objectives for the Report, which it believed were consistent with these noted limitations.  Id.

GAO Report CoverThe data that the GAO used to assess recent patent litigation was obtained from Lex Machina, a firm that collects such data.  The Report indicated that Lex Machina used all data for patent infringement lawsuits filed between 2000 and 2011, and also selected a random, generalizable sample of 500 lawsuits -- 100 per year from 2007 to 2011.  This sample size allowed the GAO to make conclusions regarding each of these years with a margin of error of ± 10 percentage points for any particular year, but ± 5 percentage points for all of the years.  The GAO also used data obtained from speaking with 44 stakeholders, which included 10 representatives from operating companies who had been sued in recent years (including representatives from software, computer hardware, retailers, and pharmaceutical industries); 8 representatives from PMEs that had regularly sued others; 14 legal commentators, economists, and consultants; representatives from 2 universities, 2 patent brokers, 4 VCs, and 4 individual inventors.  The GAO clearly attempted to solicit the opinions of a representative cross-section of stakeholders.  Nevertheless, any results stemming from these interviews must be viewed with caution because of the size of the sample was necessarily small, and any data obtained is inherently limited by the biases of the particular stakeholders that were consulted.

Perhaps the most interesting results, and likely the most reliable, came from the GAO's analysis of the Lex Machina data.  The GAO found that patent lawsuits fluctuated slightly between 2000 and 2010, but in 2011 there was a 31% increase.  Contrary to the conventional wisdom, however, the GAO found that it was operating companies, not PMEs, that brought the majority of patent infringement lawsuits in the 2007 and 2011 timeframe.  See GAO Report, p. 17.  In fact, in that timeframe, PMEs and likely PMEs were found to have only brought 19 percent the studied lawsuits.  This number does appear to be increasing, with PMEs being found to be responsible for 24 percent of the lawsuits in 2011, but the Report did note that this increase was not statistically significant.  Perhaps the common perception regarding PMEs stems from the fact that they tended to sue more defendants per suit than operating companies.  For example, between 2007 and 2011, operating companies sued on average 1.9 defendants per suit, whereas for PMEs, the number was closer to 4.1 defendants on average.  In fact, the GAO found that PMEs in this timeframe had sued close to 1/3 of all defendants.  The GAO did attribute the increase in patent litigation to the type of patents, and not the entities brining suit.  In the 2007 to 2011 timeframe, 46% of all lawsuits involved software-related patents, with 64% of all defendants facing such suits.  Unfortunately, the GAO was not able to independently determine a cost for all of this litigation, either to the parties directly or to the industries involved.  Moreover, the Report noted that it was limited to cases that had been litigated, and therefore they were unable to determine the cost of patent assertion that occurred outside of the court system.

As for the remainder of the Report, even though the results of the stakeholder interviews should be viewed with caution, the observations and conclusions are informative.  There were three key factors identified that have likely contributed to the increase in recent patent infringement lawsuits:

(1)    unclear and overly broad patents;

(2)    the potential for disproportionately large damage awards; and

(3)    the increasing recognition that patents are a valuable asset.

GAO Report, p. 28.  The first factor relates to the alleged prevalence of low-quality patents.  This view was predominately related to software-related patents.  The Report identified several reasons why stakeholders believed that these software patents were overly broad.  First, the lack of clear terminology in the computer software industry has resulted in the use of unclear terminology in software patents.  Second, the use of functional language in such patents has allowed the patent owners in these industries to claim that their patents not only cover the small improvement described, but claim that they cover entire technologies or potential future technologies.  Third, even though patent infringement is strict liability (being unaware of a patent is not a defense to infringement), the presence of such broad patents results in more infringers that had no intent to so infringe.  Relatedly, some stakeholders pointed out that the sheer number of patents makes it difficult to search for those that might be relevant to a particular technology they are developing.  Also, even if the relevant patents are identified, it can be difficult to identify the owners, because the Patent Office does not currently require notification of changes in ownership.  Interestingly, even though some of the stakeholders interviewed blamed PMEs for the rise in patent infringement litigation, others did note that it was likely the prevalence of low quality patents that played a bigger factor.

The GAO Report did identify several trends that may have a positive impact on the identified increase in patent litigation.  First, the Report noted that the federal court system is implementing new initiatives to handle patent cases.  For example, in January 2011, Congress established a pilot program in certain districts to encourage expertise among district court judges.  So far, 14 federal districts have been designated to participate in this 10-year pilot program.  In addition, in September 2011, the Advisory Council for the Federal Circuit issued a model order to address e-discovery issues targeted to patent cases.  It is too early to tell, however, what impact these e-discovery rules will have.  Finally, the case law is evolving, and as a result could address some of these problems.  The Report highlighted recent decisions about what constitutes patentable subject matter, or what is required to satisfy the obviousness and definiteness requirements.  The Report noted that such decision could help combat the identified overly-broad and ill-defined patents.

The Report also noted that the Patent Office has taken steps to improve patent quality.  For example, in February 2011, the Patent Office issued supplemental guidelines related to the definiteness requirement.  These guidelines specifically addressed the examination of claims with functional language.  Also, in November 2011, the Patent Office began working with the software industry to address the issue of non-uniform terminology in software related patents.  In addition, the Office launched a new patent classification system in January 2013 called the Cooperative Patent Classification (CPC).  Finally, the Report noted that the Patent Office has been working to solve the issue of patent ownership transparency.  Of course, all of these initiatives are in addition to the Patent Office's implementation of the post-grant review proceedings that are mandated by the AIA.

As indicated at the outset, the only recommendation included in the Report was directed to the Patent Office.  Before the Report was sent to the congressional committees, the GAO sent a copy to the Patent Office to review.  Appendix II of the Report is a letter from Acting Under Secretary and Acting Director Teresa Stanek Rea to the GAO that commends them for their efforts, and concurs with the recommendation.  Specifically, the Patent Office's response to the recommendation was:

The USPTO appreciates GAO's recommendation.  The USPTO currently uses information relating to cases involved in patent litigation, and agrees that it would be appropriate to consider making better use of such information by examining trends in patent infringement litigation.  The USPTO also agrees that as part of its ongoing effort to improve the quality of issued patents and the patent examination process, it would be appropriate to consider linking trends in patent litigation to internal data on patent examination.

GAO Report, App. II.  Perhaps this recommendation, along with all of the identified initiatives, will help improve the quality of software patents, and as a result help to restore some faith in the U.S. patent system.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© McDonnell Boehnen Hulbert & Berghoff LLP | Attorney Advertising

Written by:

McDonnell Boehnen Hulbert & Berghoff LLP

McDonnell Boehnen Hulbert & Berghoff LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.