ITC  decisions can be appealed to the U.S. Court of Appeals for the Federal  Circuit. 1). Number of Patent Infringement Lawsuits Increased Significantly in 2011 and the Number of Defendants Increased between 2007 and 2011

From 2000 to 2010, the number of patent infringement lawsuits fluctuated  slightly, and from 2010 to 2011, the number increased about 31 percent. This  analysis also shows that operating companies brought most of these  lawsuits and that lawsuits involving software-related patents accounted  for about 89 percent of the increase in defendants during this period. In addition, our analysis of a generalizable sample of data  from 2007 through 2011 estimates that the number of overall defendants  in patent infringement suits increased by about 129 percent over the 5- year period (see fig. Universities. Our analysis of patent infringement lawsuit data from 2007 to 2011 shows  that on average about 46 percent of the lawsuits involved software- related patents. Stakeholders Said That Some Patents Have Unclear Property Rights and Make Overly Broad Claims

Several of the stakeholders we spoke with, including representatives from  PMEs, operating companies, and legal commentators, said that many  recent patent infringement lawsuits are related to the prevalence of low- quality patents; that is, patents with unclear property rights, overly broad  claims, or both. Stakeholders Noted the Recognition of Patents as a Valuable Asset May Have Contributed to Recent Patent Issuance and Litigation

Several stakeholders, including PMEs and legal commentators, we  interviewed said that the recognition that patents are a more valuable  asset than once assumed may have contributed to recent patent issuance  trends and patent infringement lawsuits. For example,  representatives from one small software company we spoke with said that  they could develop a product in a little as 2 months with only a few  programmers. New Initiatives in the Courts May Affect Patent Litigation

The federal court system is implementing some new initiatives to improve  the handling of patent cases. Efforts to Improve Courts’ Handling of Patent Cases

In January 2011, Congress established a pilot program in certain U.S.  district courts to encourage the enhancement of expertise in patent cases  among district court judges. In general, several stakeholders  we spoke with agreed that it is too early to tell what impact the patent pilot  project will ultimately have on patent litigation. Despite these cases, some stakeholders said that the  judicial system has contributed to recent problems in patent infringement  litigation and is either unable or unwilling to rectify them. PTO Has Taken Actions to Improve Patent Quality and Implement New AIA Proceedings That May Affect Patent Litigation in the Future

PTO has taken several recent actions that are likely to affect patent  quality and patent litigation in the future, including agency initiatives and  changes required by AIA. In November 2011, in response to the recommendations from FTC’s  2011 report, PTO acknowledged that more uniform terminology would  help to improve the quality of software-related patents and began  working to establish a partnership with the software industry to  address this issue. In February 2013, PTO officials said that they generally try to adapt to  developments in patent law and industry to improve patent quality, as  they are doing with their new examination guidelines and their software- related patent partnership. However, the agency does not currently use  information on patent litigation in initiating actions like these. However,  some staff in PTO’s Office of the Chief Economist have suggested that  analyzing relationships between the types of patents involved in  infringement litigation and internal patent examination data, including the  timeline between the filing and grant of a patent and changes in the  wording of claims could potentially benefit patent quality and examination  by identifying meaningful patterns in the examination of patents that end  up in court. According to some stakeholders, these  proceedings are most likely to be used by companies that have been  sued for patent infringement. Recommendation for Executive Action

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. Appendix I: Objectives, Scope, and Methodology

Section 34 of the Leahy-Smith America Invents Act (AIA) mandated that  GAO conduct a study on the consequences of patent litigation by  nonpracticing entities (NPE). Our objectives were to determine: (1) what  is known about the volume and characteristics of recent patent litigation  activity; (2) what is known about the key factors that contribute to recent  patent litigation trends; (3) what developments in the judicial system may  affect patent litigation; and (4) what actions, if any, has the Patent and  Trademark Office (PTO) recently taken that may affect patent litigation in  the future. We found that these data were  sufficiently reliable for purposes of this report.
Why GAO Did This Study

Legal commentators, technology companies, Congress, and others have raised questions about patent infringement lawsuits by entities that own patents but do not make products. Such entities may include universities licensing patents developed by university research, companies focused on licensing patents they developed, or companies that buy patents from others for the purposes of asserting the patents for profit.
Section 34 of AIA mandated that GAO conduct a study on the consequences of patent litigation by NPEs. This report examines (1) the volume and characteristics of recent patent litigation activity; (2) views of stakeholders knowledgeable in patent litigation on 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, PTO has recently taken that may affect patent litigation in the future. GAO reviewed relevant laws, analyzed patent infringement litigation data from 2000 to 2011, and interviewed officials from PTO and knowledgeable stakeholders, including representatives of companies involved in patent litigation.

What GAO Found

From 2000 to 2010, the number of patent infringement lawsuits in the federal courts fluctuated slightly, and from 2010 to 2011, the number of such lawsuits increased by about a third. Some stakeholders GAO interviewed said that the increase in 2011 was most likely influenced by the anticipation of changes in the 2011 Leahy-Smith America Invents Act (AIA), which made several significant changes to the U.S. patent system, including limiting the number of defendants in a lawsuit, causing some plaintiffs that would have previously filed a single lawsuit with multiple defendants to break the lawsuit into multiple lawsuits. In addition, GAO's detailed analysis of a representative sample of 500 lawsuits from 2007 to 2011 shows that the number of overall defendants in patent infringement lawsuits increased by about 129 percent over this period. These data also show that companies that make products brought most of the lawsuits and that nonpracticing entities (NPE) brought about a fifth of all lawsuits. GAO's analysis of these data also found that lawsuits involving software-related patents accounted for about 89 percent of the increase in defendants over this period.
Stakeholders knowledgeable in patent litigation identified three key factors that likely contributed to many recent patent infringement lawsuits. First, several stakeholders GAO interviewed said that many such lawsuits are related to the prevalence of patents with unclear property rights; for example, several of these stakeholders noted that software-related patents often had overly broad or unclear claims or both. Second, some stakeholders said that the potential for large monetary awards from the courts, even for ideas that make only small contributions to a product, can be an incentive for patent owners to file infringement lawsuits. Third, several stakeholders said that the recognition by companies that patents are a more valuable asset than once assumed may have contributed to recent patent infringement lawsuits.
The judicial system is implementing new initiatives to improve the handling of patent cases in the federal courts, including (1) a patent pilot program, to encourage the enhancement of expertise in patent cases among district court judges, and (2) new rules in some federal court districts that are designed to reduce the time and expense of patent infringement litigation. Recent court decisions may also affect how monetary awards are calculated, among other things. Several stakeholders said that it is too early to tell what effect these initiatives will have on patent litigation.
The U.S. Patent and Trademark Office (PTO) has taken several recent actions that are likely to affect patent quality and litigation in the future, including agency initiatives and changes required by AIA. For example, in November 2011, PTO began working with the software industry to develop more uniform terminology for software-related patents. PTO officials said that they generally try to adapt to developments in patent law and industry to improve patent quality. However, the agency does not currently use information on patent litigation in initiating such actions; some PTO staff said that the types of patents involved in infringement litigation could be linked to PTO's internal data on the patent examination process, and a 2003 National Academies study showed that such analysis could be used to improve patent quality and examination by exposing patterns in the examination of patents that end up in court.

What GAO Recommends

GAO recommends that PTO consider examining trends in patent infringement litigation and consider linking this information to internal patent examination data to improve patent quality and examination. PTO commented on a draft of this report and agreed with key findings and this recommendation.