With recommendations to reform the legal system to curtail litigation brought by non-practicing entities (NPEs, also referred to as “patent trolls,” or more narrowly, “patent assertion entities”), the Manhattan Institute’s Center for Legal Policy has issued a report in its Trial Lawyers, Inc. series discussing how NPE litigation has increased 526 percent in six years at a direct cost of $29 billion in 2011, up from $7 billion in 2005. The report identifies the attorneys and companies that have profited by buying patents with the sole purpose of bringing infringement suits and coercing licenses from companies allegedly employing “downstream end uses of patented technologies,” such as Wi-Fi and one-button-scan-and-send technology.
The institute recommends that steps be taken to limit the forum shopping that has landed a large percentage of these suits in a single federal district in Texas or before the International Trade Commission (ITC) and to adopt “loser pays” mechanisms that could rein in “nuisance” litigation typically won by defendants (at a 90-percent rate nationwide) when taken to trial. According to the report, defending such litigation can be costly. The institute also supports an Obama administration proposal that would bring the ITC’s injunctive-relief standard in line with the standard applied by the U.S. Supreme Court in eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).