After Supreme Court Decision, Patent Trolls Getting Cold Feet?


A few months ago, in Alice v. CLS Bank, the Supreme Court struck a modest blow against patent trolls. The court ruled that merely programming a computer to carry out a well-known process isn’t enough to qualify for a patent. There has to be more to it.

So how has that affected the patent troll business? Joff Wild reports on a new analysis of third-quarter patent litigation activity:

According to the research, which covers the third quarter of this year (June to September), there was a 23% drop in the number of suits filed compared to the second quarter, and a 27% year-on-year reduction.

The findings come just weeks after data released by Lex Machina showed that there had been a 40% fall in patent suits in September 2014 as compared to the same month in the previous year….The data shows that [the decline] can be almost completely explained by a drop-off in NPE suits in the high-tech sector. Litigation initiated by operating companies fell by just 19 quarter on quarter, but actions launched by NPEs dropped by 301, from 885 in Q2 to 554 — a fall of 35%.

An NPE is a “non-practicing entity”—that is, a company that doesn’t actually make use of a patent in a product of its own, but has merely purchased it for the purpose of strong-arming payments out of other users. In other words, a patent troll. So what these numbers show is that generic patent litigation fell a bit in Q3, but that patent troll litigation fell by a lot.

It’s too early to jump to conclusions about this, but it seems reasonable that this decline is at least partly related to Alice. This is good news, though Alex Tabarrok sensibly warns that before long there will probably be an uptick in patent suits as people learn the new system. So hold off on the cheering.

Still, we’ll take good news where we can get it, and this is a step in the right direction. It will be even better if Alice is a sign that the Supreme Court plans to rein in the federal circuit court that handles patents, which in recent years seems to have been far more friendly toward software patents than the Supreme Court ever intended. Stay tuned.