In 2010, NPEs represented approximately 18% of patent litigation in the United States, with 47 such cases in 2000 rising dramatically to more than 550 cases in 2010. NPE litigation has increased almost 500% since 2001.
Many people complain about NPEs (a.k.a "trolls"). But few get to the heart of what the problem is and why it exists in the first place.
My belief is that the fundamental problem is the stretching of low quality patents and that this problem is fostered by secrecy.
Secrecy is a fact of the legal world. But although necessary in many circumstances, it is also overused, and serves as a cover for various flavors of malfeasance, like incompetence, corruption, and thuggery.
Personally speaking, I don't have any problem with trolls or NPEs, per se. The "problem" I have is with patent litigation where the patents are of low quality.
I don't care for patent litigations relying on patents of low quality that must be stretched beyond reason to reach the targets. Bringing such cases is quite feasible, however, because courts pay little or no attention to the patents at issue for at least a year of litigation, during which a great deal of attorney fees will have been spent.
So these patent-stretching lawsuits are filed, but the low quality nature of the patents is kept secret. The press doesn't know how to read patents. And the court process is broken.
Basically, IMHO, the root of the problem is that the cops (courts) are asleep.
Now, I don't see a problem with an NPE suing over a quality patent with solid reads on the targets. If I have any problem with that, then it's a problem with the whole idea of the government granting patents in the first place. But so long as we live in a world in which the government does that, then I'd like to see that world act rationally.
But secrecy defeats rationality.
So what we see repeatedly in the patent world is companies initiating patent lawsuits using low quality patents that were never envisioned to reach the targets. While dominated by the NPEs, this problem is not limited to the NPEs.
Companies, even "blue chip" ones, do this too. They "do this" when they take a patent in their portfolio that covers some feature of technology/market X, and stretch it to read upon technology/market Y of a target -- even though the patent was never written to contemplate technology/market Y.
When such plaintiff companies are not even active in market Y, then they are, for all intents and purposes, "trolls" -- even if in their own markets they are blue chip companies.
What makes these patent-stretching plaintiffs such a pernicious problem is that they have little or reduced incentive to settle, so long as they can continue to fund their litigations. Classic trolls do this by naming a great many defendants, and obtaining settlements from some of them. These settlements fund the litigation against the remaining defendants.
Real companies fund their "troll" litigations by diverting some of their revenue to pursue the questionable litigation.
Such patent-stretching plaintiffs are typically not subject to counter-claims because they are not practicing the business they are targeting with their patents. That makes them appear like ghosts to the targeted companies.
To me, the best solution to the patent-stretching problem would insert a patent quality check in the process. For my money, the best stage at which to insert this check would be the motion to dismiss stage immediately following the filing of a complaint.
I'll have more to say on this notion in later posts.