Patent Trolls (Blog Post)
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Abstract
A Blog Post on what patent trolls are and some potential ways to combat them.
Blog Post
From the bridges of our favorite storybooks to the deepest parts of internet forums, trolls seem to persistently haunt mankind. Thanks to a practice disproportionately located in the Eastern district of Texas they now haunt our courtrooms. Patent trolls, sometimes misdefined more professionally as non-practicing entities (NPEs) or patent assertion entities (PAEs), don't wield clubs like their fantasy namesakes but are every part as dangerous and troublesome. As reported by Wired, 95% of patents are never used commercially and are rather held by NPEs. Most non-practicing entities, universities being a good example, file patents off of in-house innovations with no intent to commercialize or derive profit.
This is in contrast to patent assertion entities, which generate a majority of their revenue through licensing the 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. With most NPEs and PAEs, if another entity infringes on a patent, the NPE or PAE would in good faith send a demand letter to the infringing entity with a warning. This demand letter warns the infringing entity that they are subject to a lawsuit if they do not acquire the proper licensing of the patent.
Patent trolls push this practice to the extreme. Whereas NPEs and PAEs might assert the fair value of their patent against the infringing entity, patent trolls usually inflate the amount of damages due deserved. Patent trolls may further threaten a firm with exorbitant lawsuit costs, and then provide an easy means out of the lawsuit through expensive licensing or settlement. The accused infringing entity, who may not have even infringed on any patent, often times pays the licensing fees or settles out of court to avoid bad publicity, legal fees or the time spent resolving the situation.
Patent trolls may also target a slew of companies that tangentially intersect the sphere of a 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. Patent trolls also seem to disproportionately affect small businesses. eDekka, widely considered one of the top patent trolling firms, filed lawsuits against 101 companies for patent infringement in 2015, 55% of which are considered small businesses under SBA regulations.
References
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