Difference between revisions of "The Truth Behind Patent Trolls"
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No agreed-upon definition of patent troll exists. The term patent troll is used interchangeably with the terms non-practicing entities (NPEs) and patent assertion entities (PAEs). Despite similar sounding names, several key differences exist between the three terms. | No agreed-upon definition of patent troll exists. The term patent troll is used interchangeably with the terms non-practicing entities (NPEs) and patent assertion entities (PAEs). Despite similar sounding names, several key differences exist between the three terms. | ||
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² 79% of cases filed in Southern District of Florida | ² 79% of cases filed in Southern District of Florida | ||
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| + | The current U.S. patent system restricts the market for innovation with high transaction costs and legal risks. [http://www.wired.com/2015/01/fixing-broken-patent-system/] Most small and medium-sized businesses are unable to afford the costs associated with patent litigation and are prevented from commercializing or licensing over 95 percent of current active patents. [http://www.wired.com/2015/01/fixing-broken-patent-system/] Therefore, many smaller-sized businesses rely on patent assertion entities to protect their patents and defend against expensive litigation. Patent assertion entities aggregate and manage patents and have the expertise to legitimately protect patents from infringement. [https://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf] | ||
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| + | In illiquid markets where asets cannot be sold or exchanged easily, patent assertion entities can help match patent holders to patent buyers and transfer ideas and technology from inventors to manufacturers effectively. This allows inventors to focus on innovation while benefiting from the knowledge and connections that intermediaries possess. Patent assertion entities are able to incentivize innovation through the effective brokerage of patents. [https://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf] They manage risks for small inventors and inform manufacturers or inventors of the usefulness of having another inventor's patent in their patent portfolio. [http://www.bna.com/challenges-of-defining-a-patent-troll/] | ||
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| + | According to the U.S. Census Bureau, small businesses with less than 20 employees made up 89.6 percent of employer firms in the United States in 2012. [http://sbecouncil.org/about-us/facts-and-data/] Small firms produce more patents per employee than large companies and help drive innovation in the United States economy. The patents they develop have a greater impact and are often more technologically important than those of large firms. [http://www.imamidejo.si/resources/files/doc/analiza%20patentov%20v%20msp%20usa.pdf] The Small Business Administration reported that "although small firms account for only 8 percent of patents granted, they account for 24 percent of the patents in the top 100 emerging clusters." [http://sbecouncil.org/about-us/facts-and-data/] Because small businesses and emerging companies are not always able to protect their patents on their own and account for much of the innovation driving emerging industries today, they need patent assertion entities who have the power to protect their patents for them. | ||
Revision as of 12:11, 9 June 2016
Definition
No agreed-upon definition of patent troll exists. The term patent troll is used interchangeably with the terms non-practicing entities (NPEs) and patent assertion entities (PAEs). Despite similar sounding names, several key differences exist between the three terms.
Non-practicing entities(NPEs) own patents, but do not necessarily create products out of these patents. This behavior is common; 95% of patents are never used commercially [1]. Universities are examples of non-practicing entities. Faculty members may file for patents based on their work in a laboratory and receive a patent. Then, those faculty move on to a different project and do not use the patent they hold.
Patent assertion entities (PAEs) are a type of non-practicing entity that generate a majority of their revenue through licensing patents they own. For example, a large firm may buy up a thousand patents. Instead of creating products derived from those patents, they license these patents to other firms that wish to create those products. If another firm infringes on a patent, the patent-assertion entity may send a demand letter to the company with a warning. The demand letter warns the infringer that they are subject to a lawsuit if they do not acquire proper licensing of a patent.
These demand letters serve as the tipping point between patent assertion entities and patent trolls. Whereas PAEs assert the fair value of their patent against the infringer, patent trolls inflate the amount of damages felt as a result of infringement. Patent trolls may threaten a firm with exorbitant lawsuit costs, and then provide a quick way out of a lawsuit through a license. The supposed infringer, fearful of a high lawsuit costs, may just pay the licensing fee. However, the supposed infringer may not even have infringed on any patent.
Patent trolls may also target a slew of companies that tangentially intersect the sphere of the patent. One famous example of a patent troll is MPHJ Technology Investment, who claimed to have patents that cover any networked "scan-to-email" function. MPHJ sent demand letters to more than 16,000 small businesses, each letter demanding license fees of at least $1000 per worker.
Top 10 PAEs in 2015, according to Unified
| Company Name | Total Lawsuits Filed¹ | Lawsuits Filed in Eastern District of Texas¹ |
| eDekka LLC | 101 | 101 |
| Data Carriers LLC | 85 | 85 |
| Shipping and Transit LLC | 69 | 0² |
| Cryptopeak Solutions LLC | 66 | 66 |
| Hawk Technology Systems LLC | 61 | 3 |
| Rothschild Connected Devices Innovations LLC | 60 | 59 |
| Wetro Lan LLC | 56 | 55 |
| Loramax LLC | 50 | 50 |
| Genaville LLC | 50 | 50 |
| Oberalis LLC | 50 | 50 |
¹ Data aggregated via LexMachina
² 79% of cases filed in Southern District of Florida
Patent Assertion Entities and Small Business
The current U.S. patent system restricts the market for innovation with high transaction costs and legal risks. [2] Most small and medium-sized businesses are unable to afford the costs associated with patent litigation and are prevented from commercializing or licensing over 95 percent of current active patents. [3] Therefore, many smaller-sized businesses rely on patent assertion entities to protect their patents and defend against expensive litigation. Patent assertion entities aggregate and manage patents and have the expertise to legitimately protect patents from infringement. [4]
In illiquid markets where asets cannot be sold or exchanged easily, patent assertion entities can help match patent holders to patent buyers and transfer ideas and technology from inventors to manufacturers effectively. This allows inventors to focus on innovation while benefiting from the knowledge and connections that intermediaries possess. Patent assertion entities are able to incentivize innovation through the effective brokerage of patents. [5] They manage risks for small inventors and inform manufacturers or inventors of the usefulness of having another inventor's patent in their patent portfolio. [6]
According to the U.S. Census Bureau, small businesses with less than 20 employees made up 89.6 percent of employer firms in the United States in 2012. [7] Small firms produce more patents per employee than large companies and help drive innovation in the United States economy. The patents they develop have a greater impact and are often more technologically important than those of large firms. [8] The Small Business Administration reported that "although small firms account for only 8 percent of patents granted, they account for 24 percent of the patents in the top 100 emerging clusters." [9] Because small businesses and emerging companies are not always able to protect their patents on their own and account for much of the innovation driving emerging industries today, they need patent assertion entities who have the power to protect their patents for them.
