GAO Reports Sheds Light on Impact of NPEs

The U.S. Government Accountability Office recently released a report on the impact of non-practicing entities (NPEs). The findings debunk many of the criticisms waged against so-called “patent trolls.”

The report was commissioned under the America Invents Act to examine the consequences of patent litigation by NPEs. The GAO reviewed relevant patent laws, analyzed patent infringement litigation data from 2000 to 2011, and interviewed representatives from the U.S. Patent and Trademark Office (USPTO) and other relevant stakeholders, including companies sued by NPEs.

The GAO report concludes that while the number of patent infringement lawsuits has increased in recent years, the blame should not fall squarely on the shoulders of NPEs. In fact, the GAO found that companies that manufacture products accounted for most of the lawsuits, while NPEs filed only one fifth of all lawsuits. Software patents accounted for approximately 89 percent of the increase in defendants over the ten-year study period.

The GAO report highlights that patent law changes under the AIA may also explain the rise in patent lawsuits. For instance, it notes that restricting the number of defendants in a lawsuit may have caused some plaintiffs that would have previously filed a single lawsuit with multiple defendants to instead file multiple lawsuits.

With regard to the current initiative to address “patent trolls,” the GAO makes clear that targeting litigation by NPEs will only address 20 percent of the problem. It recommends that the USPTO examine trends in patent infringement litigation and apply the findings to its internal patent examination data to improve patent quality and examination.

As the GAO concludes, “focus on the identity of the litigant—rather than the type of patent—may be misplaced.”

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