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The Truth Behind Patent Trolls Issue Brief (view source)
Revision as of 15:56, 25 March 2016
, 15:56, 25 March 2016→Why Patent Assertion Entities are Good for Innovation and Small Businesses
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]
The patent market is illiquid, which means meaning that assets cannot be sold or exchanged easily. In illiquid markets, specialized intermediaries, like patent assertion entities, can help match patent holders to patent buyers and transfer ideas and technology from inventors to manufacturers effectively. [https://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf] This allows inventors to focus on innovation while benefiting from the knowledge and connections that intermediaries possess. [https://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf] 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/]
PAE litigation increased with the rise of technological innovation in the twenty-first century, but this does not mean that they have stifled innovation with more litigation. Rather, patent assertion entities lose 92 percent of trial cases based on merits. [https://www.fas.org/sgp/crs/misc/R42668.pdf] Some believe that this is a sign that PAEs do not have valid claims to the patents they possess; however, PAEs fail trial cases because they do not properly show infringement. Because PAEs do not manufacture or sell products, they are not liable to counterclaims. This makes them more likely to make weak infringement claims, which leads to a lower-than-average success rate in cases ruled on merit. [https://www.fas.org/sgp/crs/misc/R42668.pdf]
