Patent defendants aren't copycats. So who's the real inventor here?

Recently, I met up with a freelance photographer who was taking some photos for a patent infringement lawsuit I was reporting on. After I introduced myself, he asked me to sum up the story: "So the plaintiff is saying this company ripped off his idea, right?"

If you wanted a one-liner to capture the popular conception of what patent lawsuits are all about, that's a pretty good one. But here's the thing: it's nearly always wrong.

It's not just that defendants in patent lawsuits aren't found guilty of copying—with very few exceptions, they aren't even accused of copying, according to a new study by two leading patent academics. Taking that data as a jumping-off point, I took a closer look at the issue of copying and other popular misconceptions about patent lawsuits in my January IPLB story, "The Inventor's Tale." The story has now been published on Law.com as well, with a different title: "How Juror Misconceptions Affect Patent Trials."

In the course of reporting this story, I traveled to Marshall, Texas, where I watched my first full patent trial. Watching that trial, Mass Engineered Design v. Ergotron, I really started to see where the rubber hits the road in patent law. I will have more reflections from that trial and the trip that I'll share here. But today I want to take a closer look at the research on copying by law professors Mark Lemley (Stanford) and Christopher Cotropia (U. of Richmond). Their fascinating study, "Copying in Patent Law," is available on SSRN.

First, the basics. One big difference between patents and other kinds of intellectual property, like copyrights and trademarks, is that patent-holders who want to sue someone for infringement don't have to show that their patents or their products were actually copied by the defendant. In fact, the issue of copying is legally irrelevant when determining whether or not someone infringed a patent. (It is relevant to willfulness—more on that below.) The flip side of that rule is that a defendant company can have a really nice story about they did their own research, invention, and development—but it doesn't matter one bit, legally speaking. Such "independent invention" stories are no defense.

"No one seems to know whether patent infringement defendants are in fact unscrupulous copyists or independent developers," writes Lemley. So he and his partner went on a hunt looking for copycats in patent disputes. How much copying did they find? Not much at all.

The researchers studied 193 patent cases and found only 21 of them—that's 10.9 percent—that contained even an allegation of any copying, whether that's copying from a patent or from a patent-holder's commercial product.

And here's the kicker: more than half of the copying allegations they did find were from pharmaceutical and chemical cases. Remember that a big chunk of patent litigation involves branded drug companies fighting generic drug makers to determine when generic drugs can be marketed—and generic drug companies, of course, are legally required to make exact copies of a branded drug. So there's good reason to consider pharma/chemical cases separately.

Once you set aside life sciences, copying in patent law goes from rare to almost nonexistent. Of the 193 cases analyzed, 76 were disputes over non-software computer related patents: only two of those cases included allegations of copying. Software patents were litigated in 67 lawsuits: again, only two plaintiffs alleged copying. To put it another way, in computers and software, less than 3% of the patent lawsuits studied involved allegations of copying, and less than 1% involved proof of copying. (see charts by industry on pages 27-28 of the paper.)

Maybe the allegations didn't show up in the documents they checked? Possible, but not too likely.  Plaintiffs have good reasons to put any copying allegations or evidence they have on the record. Such evidence makes defendants look bad and can get plaintiffs enhanced damages for willfulness, even though it is not relevant to whether or not infringement took place.

But Americans tend to believe that patent lawsuits are about copying—and they believe there's a whole lot of copying going on. These beliefs persist, even though most defendants aren't copying—and aren't even accused of copying—and often have never heard of the patent-holder or his alleged inventions.

Those who favor strong patent rights often wave the banner of the "independent inventor." I've heard many patent holders—and many patent lawyers—praise strong patents as needed to protect inventors' rights. But when we look at the litigation landscape—the public record of how patents are actually used—we find strong evidence that nearly all accused infringers developed their technology on their own.

So, who are the nation's "independent inventors?" Are they patent-holders busy denouncing patent reform? Or are they the people and companies who must defend themselves against lawsuits brought by those patent-holders?

If independent invention was a defense against a patent infringement allegation, the data suggests we would see a sharp drop in patent litigation. Would it be a 90 percent drop-off? That's not an unreasonable guess, but it's tough to know for sure. As Lemley pointed out to me, such a change could encourage some to file on more dubious claims, or could lead to more licensing as opposed to litigation.

Now, about willfulness: While copying is irrelevant to proving infringement, it is relevant to proving willfulness, and a finding of willfulness can result in triple damages for a patent-holder. So patent plaintiffs have a very strong incentive to put any copying evidence they find on the record. (That incentive lends more weight to the study's findings; if anything, they may have overstated the frequency of copying in patent disputes.)

But willfull infringement is not the same as copying. A patent-holder merely has to give notice of a patent to allege willfullness; so a willfulness accusation isn't so much a patent-holder saying "You copied me!" as it is: "You knew that I had a valid patent and you were infringing it." We can also imagine a scenario where copying is alleged but willfulness is not—for example, a defendant who deliberately copied someone else's product, but didn't know that it was patented. Willfulness allegations, unlike copying allegations, are very common, and willfulness was alleged in 81 percent of the cases in this study.

Some of Lemley and Cotropia's conclusions:

• The use of terms like "theft" and even "piracy" is wholly unjustified in the patent debate. Calling patent defendants "copyists" or thieves "is simply inaccurate," write the researchers.
• Courts are awarding greater and greater sums as a "reasonable royalty," in part to deter future patent infringement. But that makes little sense. We can't have deterrence when "the overwhelming majority of defendants are independent developers who were unaware of the existence of the patent when they made their product design decisions." 
• Not all patent licenses are just payouts to avoid or end litigation: some patent licensing does involve the actual giving of technology. But modern patent litigation, by and large, isn't about "policing failed efforts at technology transfer." It's about patent owners trying "to enforce their right of exclusivity or to collect revenue from independent creators."

More interesting findings:

• The public notice function that patents are supposed to serve? Doesn't really exist. Lemley writes: "A variety of evidence already suggests that scientists in most industries rarely read patents, and that even if they did those patents aren’t a particularly good means of conveying technical information." (Lemley's 2007 paper "Ignoring Patents" has more on that.)
• Nearly 70% of plaintiffs don't even claim the defendant knew about the patent before the lawsuit. (The day you gave a defendant notice of your patent is the day willfullness damages start accruing—so again, it's possible, but unlikely, that these facts are missing from court records.)
• Did plaintiffs find copying after discovery? Very few did. Lemley & Cotropia analyzed 98 amended complaints from their dataset; only two of the amended complaints added a copying allegation; only three of were amended to add a willfullness allegation. 
• Very few cases included non-patent allegations that might indicate copying. Of the 193 cases, only ten (5.2%) had complaints that mentioned a prior business relationship between the parties; only five (2.6%) included an allegation of misappropriating trade secrets; and only two cases (1%) involved an allegation of infringement by departing employees. 
• Lemley & Cotropia found similar results with other methods. For example, they also analyzed judge's opinions in 1,871 patent cases. Within that, they looked specifically at 226 of those opinions in which a judge ruled on willfullness (where plaintiffs have a strong incentive to bring up any copying evidence.)  Copying was only mentioned or implied in 40 of those cases (17.7%).

To be sure, this study won't be the final word on copying in patent law, and I'm certainly interested in doing more reporting in this area. And I've started making questions about copying—or the lack thereof—part of my standard questions when reporting on patent disputes.

Note to readers: Thanks for your patience during my radio silence the past few weeks! Lots of changes are underway for IPLB's web site and that has kept me very busy, but I now blog onwards.

Photo via wikimedia: "Bell speaking into telephone," 1876.

Comments

[Stephan Kinsella]

Joe,

Great post. A few comments.

First, you're right that the public thinks it's about copying; and they are wrong. Likewise, most proponents of IP (outside the self-serving patent bar) seem to have no idea about the details of patent law, yet support it anyway.

Second, the reason copying is not alleged is that, as you note, it's irrelevant. And it does not demonstrate willfulness, nor does willfulness require copying. Willfulness means you made a product that infringed on a patent, even after you knew about the patent. But this could happen even if you independently invented your product yourself, then find out about the patent (say, you get a C&D letter), adn you keep selling your product anyway--you're willfully infringing from that point on (so that means damages can be trebled for sales made while willfully infringing). So, copying is not necessary to show willful infringement.

It's also not sufficient. You might have heard about pinch-gestures on a touchscreen and you put that feature in your product, thus infringing apple's patents, albeit unwillfully, since you didn't know about the patents.

So, I don't think you can conclude that most patent suits don't involve copying just b/c copying is not alleged or proven at trial. There might be copying in 25% of the cases, but it's only alleged 2% o the time, say. This is b/c when you sue someone for infringement you have to show (a) you have a patent; (b) they are selling a product that contains all of the describd elements in one of the patent's claims. Copying is irrelevant.

(Still, I agree that copying is probably present in only a small minority of all patent infringement cases.)

Third: your article makes it clear that it's unjust that there is no independent inventor exception. Your piece does not mention, I think, the fact that the worst injustice of all is that not only is there not an exception for someone (A) who later independently invents the same thing that B invented first and patented first--there is not an exception even if A FIRST invented it. (It's true that if A invents first and B invents second, and if B files for a patent, then A later files for one, then A wins, in an interference battle or litigation; but if A never files but sells his product using a secret process, say, then after a year he is barred from filing a patent; but B is not.) So if A has a chemical plant using a trade secreted nozzle or mixing method to make some chemical for 50 years, and finally B independently invents the same technique and patents it, he can shut down A even though A is first. A general "prior use" defense is what is needed in these cases.

But the prior user defense and independent inventor defense are of limited value for a few reasons. 1. It's hard to prove, esp. for later invention, that you invented it independently, without being influenced by B's patent (which is public, and presumed to be "constructively known" by all); which is why some companies employ the "clean room" approach, but this is expensive and not usually feasible.

2. Once you know about B's patent, you are now unable to invent it on your own, even if you "would have" in the absence of B's patent. I.e., the independent inventor exception largely evaporates soon after a successful product (such as the iPhone's multi-touch) because by then everyone is "contaminated" by it (no cleanroom possible any more).

3. If B invents and patents something, and if A also invents it (earlier or later than B), then this by itself ought to show that the invention was probably obvious (an idea whose time had come) and B's patent should be invalid in general, not just a defense for A.

[Joe Mullin]

Stephan:

Thanks for your thoughtful response.

You wrote:
I don't think you can conclude that most patent suits don't involve copying just b/c copying is not alleged or proven at trial. There might be copying in 25% of the cases, but it's only alleged 2% o the time, say. This is b/c when you sue someone for infringement you have to show (a) you have a patent; (b) they are selling a product that contains all of the describd elements in one of the patent's claims. Copying is irrelevant.

(Still, I agree that copying is probably present in only a small minority of all patent infringement cases.)
-----

If I understand you right, you are saying that you believe there are copying allegations and findings that the study missed—that while only a small minority of patent cases have copying allegations/findings, it is higher than the extremely low rate of copying they found in tech cases.

It's certainly possible some cases did include copying allegations or findings but those were missed by the study. When I talked to Lemley about his work he acknowledged that possibility. But do you disagree with the point that plaintiffs have a strong incentive to present any copying evidence they might find? If nothing else, it looks terrible to a jury, something I get into in my article.

You might want to look at the paper itself, linked on my post; I would certainly be interested to hear your thoughts on it. Lemley & Cotropia used some other methods to check for allegations of copying that I didn't get into, including searching almost 1,900 published opinions in patent cases. Using that method, they found only 129 cases (6.89%) that mentioned an allegation of copying—even lower than the 10.9% rate they found looking at complaints. And again, a majority of those cases were ANDA (pharma v. generic) litigation. Copying was found in just over 1 percent of these decisions. (Remove ANDA cases, and it's less than half a percent.) This is all from pages 35-37 of the study.

But I see your point. The patent trial I watched in Texas included some evidence that the plaintiff said showed copying (an internal report on competitors by the defendant company, compiled at a trade show.) I don't think that report—which was shown to the jury—was mentioned in either the original or amended complaints.

So, the methodology is not water-tight. But still… the numbers seem really low.

-----
You write:
The prior user defense and independent inventor defense are of limited value for a few reasons. 1. It's hard to prove, esp. for later invention, that you invented it independently, without being influenced by B's patent (which is public, and presumed to be "constructively known" by all); which is why some companies employ the "clean room" approach, but this is expensive and not usually feasible.
-----

It might be hard to win on summary judgment, but I sure think that allowing those defenses would change the dynamics of a jury trial. If defendants were able to tell a story about their own research, invention, and product development—and judges told juries that if they believe the independent invention story, they must exonerate the defendants—wouldn't that make life harder for many plaintiffs? Especially the "trolls" that are only in the lawsuit business? Defendants could say "We never heard of this guy until he sued us"—and it would mean something.

To me, it's telling that even under current law, independent invention stories are told by defendants to appear sympathetic to juries—even though jurors are told those stories have no legal weight. (I get more into what juries think in my story).

You bring up the example of Apple's touch-screen patents. Now sure, if Apple filed a patent infringement lawsuit against its competitors, it could say "We were the innovator, we were first, everyone imitated us whether they admit it or not." Apple could wave its inventions around in a courtroom and threaten its competitors. But it's quite telling that Apple hasn't actually done so (at least, not yet).

But Apple is involved in litigation over touch-screen patents—as is every single one of its competitors—as defendants. They're fighting multiple lawsuits brought by independent inventors, patent-holding companies, and once-upon-a-time-companies.

I did a few quick searches and found not one, but four lawsuits in the past year involving "touch-screen" patents for mobile phones; three of the four named Apple as a defendant. (One patent-holder who didn't named every other cell phone co.; I suspect there was an attorney conflict that prevented him from suing Apple.) So, again—who's the real inventor here?