On Wednesday, the United States Supreme Court will hear arguments in a patent-law dispute that will determine whether software inventors spend the next decade developing better products or tied up in lawsuits filed by trial lawyers.
The patent in Limelight Networks v. Akamai Technologies has to do with the software methods that let you see movies and other video streamed from the Internet without the picture breaking up or the sound going bad. But the larger issue in the case is the way that the Federal Circuit, the circuit court that specializes in patents, threw out decades of law and precedent and opened the door to massive litigation. Both Limelight and Akamai are substantial companies fighting over technologies that each is using today. But the Federal Circuit ruling has opened the door for very different kinds of suits.
Too much litigation is already a major problem in the world of patents, particularly patents over methods, or ways of doing things, of which software patents are a prime example. Allowing overly broad patents on methods invites litigation that pounces on new technologies as they come to market, in a gotcha game of filing lawsuits for infringement. If the Federal Circuit’s ruling in Akamai stands, the hunting ground of such legal predators will grow vastly bigger.
The cost to consumers is already significant. According to a study by Boston University law professors Mike Meurer and Jim Bessen, the “patent tax” adds 20 percent to software and electronic research-and-development costs, with the direct costs of litigation initiated by the patent trolls in 2011 totaling $29 billion — up from only $7 billion in 2005. When indirect costs are factored in, the annual cost grows to $80 billion.
It should not have come to this. The legal standard that a bare majority of the Federal Circuit threw out was simple and just. The standard was that everyone involved in the infringement of a patented multistep method had to be under the legal control of one person or organization.
In other words, say you design an app that includes a step that appears in someone’s patent. Say that patent also has other elements that appear in the Apple or Android programs of the tablet where your app is downloaded. Finally, what if yet another part of that patent appears in a telecommunications company’s programs for operating cell systems — and together they cover all the steps in the patent. There is virtually zero chance that you or the cell-phone maker or the telecom company can determine that a few lines of your code together with a few lines of the others violate somebody’s patent.
Today, the owner of that patent cannot sue the app designer or the cell-phone producer or the telecom company for infringement. But if the Federal Circuit’s rule stands, he could — and because suing is now big business, probably would. The number of patent lawsuits filed by companies that buy up patents for litigation purposes grew from 466 in 2006 to 2,914 in 2012, an increase of 526 percent in just six years. In 2011, 2,150 companies were forced to mount 5,842 defenses against these kinds of patent lawsuits — up from only 1,401 defenses in 2005. Do we really need more?
Here are the questions facing the Supreme Court: Should America’s innovators spend their time and money fighting lawyers in the business of abusing their access to the courts, or should they spend it developing and selling new products?
Developing a new product is one of the hardest tasks in the American economy. By some counts, only one in 20,000 ideas succeeds in making it to market. For software developers, the Federal Circuit’s rule adds to the threat of litigation and the accompanying costs in moving from idea to marketplace.
Several bills for reforming patent litigation are pending in Congress and in state legislatures. The Supreme Court will have an opportunity on Wednesday to ensure that in the area of patents of method, the law remains on the side of American innovation. Let’s hope it rises to the occasion.
— Shubha Ghosh is a professor of law at the University of Wisconsin Law School.