Issue Brief v2

4/20 Notes ROUGH DRAFT

Status Quo: Currently patents are important. Every year, about 600,000 patents are applied for in the US. Our best guess of how many of these patents are shelved is about 50% and our best guess of the number that is licensed is about 5%. The so and so Shapiro estimates that the value of the innovation economy, including patents, is/was around 6 trillion a year in 2010, and account for 80% of GDP growth blah. ADD RENEWAL PERCENTAGE

They are barely used, we would like a patent for ideas. sell the dream: If we had functioning markets for ideas and patents could be traded to non competing usages, if far fewer patents were shelved, many more were licensed, world would be good. Not realistic to think all patents will be used or licensed but the gains from trade could be enormous, potentially on the same magnitude as the US economy. Dominant equilibrium is infringement Perhaps the biggest problem with patents is that they are probabilistic, (Shapiro 2004 probabilistic patents). This means patents are not a right to exclude but a right to try to exclude. Because products have become more complex and it’s become ever harder to determine the inventive step that is used to realize a piece of functionality, infringement has become a dominant equilibrium. There are numerous anecdotal stories of managers ordering employees not to search for prior art so they will not be held for willful infringement which limits their damages to their profits. For a standard essential patent where firms are required to sign farand (fair reasonable and non discriminatory) agreements, it has become commonplace for judges to limit damages to the ex-ante license fee – the exact amount you would have paid to license the product in the first place.

(Note: Everybody’s better off infringing a patent. Wrap into little story, where if you want to use a patented technology you are better off infringing it than licensing it.)

Enter the patent troll. Only around 1% of patents are litigated. Of this 1%, a moderate percentage, perhaps as much as 1/5 (cite 17%. footnote that it was high-tech) were brought by firms that bought the patents that they are now enforcing. These firms bought the patents, don’t commercialize technology themselves, and they sue people to enforce patent rights. These firms are often derogatorily called patent trolls (footnote about problems in defining a patent troll). There are of course bad actors who abuse the patent system. Prominent examples include eDekka and MPHJ. Presumably in response to this, there has been a rash of recent litigation trying to take away/restrict the use of demand letters, a key weapon in the patent enforcement arsenal (don’t use these exact words).

List out regulations that involve demand letters, all innovation polici There are x innovation policy bills in front of congress, y involve demand letters, these are those:

Baby with bathwater. Demand letters are key. Because infringement is a dominant phenomenon, firms need stronger ability to enforce their patent rights, and small businesses, independent inventors need intermediaries to enforce their patent rights for them for the market of ideas to work. Cost of sueing someone, mean revenue. Show it’s super expensive and need intermediaries who are going to stand in the middle. The current mechanism already deals with bad actors like eDekka. Judge Gilstrap threw out 168 of their cases in one fowl sweep. Doesn’t seem like we need reason for intervention. would undermine market for ideas.

Make a list of all the nice data we have List the themes of all those paragraphs

Not blaming anyone. Be open about the fact that we don’t know how many suits are being brought by patent suits. We can do ‘according to’. Don’t sell reader on truth of facts, sell them on the overall picture. No hard statements (patent trolls are bad).

4/27 NOTES

Definitions: Don't want a definitional piece. Need a definition of a patent troll - grounded in basic normative economic theory.

Artifacts - Include Tables, Graphs

Tables of PAE findings Problem: Arbitrary chosen PAEs from a third party.

Framework -

Legislation - What congressional bills are considered by Congress currently.

Bad Faith - Patents are bad - The patents are not novel, non-obvious. "Prior Art" repository People know the patents are bad, but they still assert it.

Sue everyone that walks, because you don't know exactly who will infringe.

Demand Letters - 4/5 pieces of legislation.

What do patent trolls do?

Difference b/w patent troll and mid-market intermediary: patent troll sends out bad faith demand letters. Protection against bad faith demand letters are in place, but not sufficient. Don't want to ban demand letters in general.

Describe current situation of the problem regarding the market for innovation: Either you pay license fee for a patent, or take a chance on being sued and then pay a fraction of the total damages. That fraction is roughly the equivalent of the license fee.

Evidence of the system taking care of bad faith demand letters.

List of Artifacts.

1. Choice Architecture for potential patent infringer 2. State of patent litigation throughout the past 6 years 3. Graphic of what makes a bad faith demand letter/ good faith demand letter (e.g. like scam e-mails) 4. Graph of Patent Filings vs Lawsuits (is there a strong correlation between demand letters and lawsuits?) 5. Sectors where patent litigation/demand letters occur the most. E.x.. software industry is high on infringement, but pharma is low. 6. 7. 8.