On March 10, 2015, 40 law professors and economists wrote to congress urging caution over the data behind recent patent reform. Primarily, the scholars expressed “deep concerns with the many flawed, unreliable, or incomplete studies about the American patent system.” The letter urges caution over relying on information from “those bent on attacking [patent] trolls” and claims that such data “is either inaccurate or does not support the conclusions for which it is cited.”
Of particular concern is a study by Boston University professors James Bessen and Michael Meurer which claimed that patent litigation generated by non-practicing entities, (so-called “patent trolls”), directly cost U.S. businesses of $29 billion a year. The letter contends that this data is exaggerated, inaccurate, and deeply flawed. In support of this proposition, the scholars cites various studies that question the validity of this figure and provide explanation as to the limitations of other studies. One such study is the paper “Analyzing the Role of Non-Practicing Entities in the Patent System” by David Schwartz (Chicago-Kent College of Law) and Jay Kesan (University of Illinois College of Law), which discusses the various misrepresentations relied upon to achieve the $29 billion figure. Among those inaccuracies is the method of counting transactions where property rights are acquired as a “cost,” which allows Bessen and Meurer to incorrectly include sums of money in their estimate that are not considered costs by accounts or economists. Further, the authors argue that Bessen and Meurer “rest upon a questionable and very broad definition of NPE” and that there is a lack of credible information on benefits of NPEs since “the benefits of NPE litigation is based upon an analysis of very limited information, namely SEC filings from 10 publicly traded NPEs.”
This letter serves as a stark contrast from a recent letter to Congress from 51 law professors and economists encouraging patent reform. In that letter, the economists and legal scholars argue that patents serve as a deterrent to innovation because potential innovators are afraid of getting sued for patent infringement. In response to the aforementioned studies, the scholars argue that a “reliance on flawed data will lead to legislation that goes well beyond what is needed to curb abusive litigation practices, causing unintended negative consequences for inventors, small businesses, and emerging entrepreneurs.” Thus, as the letter points out, it is critical that Congress make its decision based on reliable data in order to ensure balanced and targeted legislation.