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Patent Trolls

PATENT TROLLS: FRIENDS OR FOES? NPEs can play a useful role in the patent ecosystem

Non-practicing entities — more colourfully known as “patent trolls” — have a bad reputation. While some of the criticism is certainly deserved, the issues around non-practicing entities (NPEs) are more complicated than they may first appear.

IP hoarders

NPEs own patents but do not practice them. This may seem detrimental to a healthy, vibrant economy: if a technology is protected by a patent, having the owner withhold it from the public seems it seems counter-productive — or downright greedy if the idle patent is used purely to accrue licensing fees.

Some NPEs assert overly broad patents against large numbers of potential infringers, targeting those who have limited resources to obtain legal advice, let alone litigate. Faced with charges or infringement, these cash-strapped companies simply pay a fee to make the NPE to go away.

That mercenary subset of NPEs is a small one, however. The NPE spectrum is actually fairly broad. Many companies that develop and commercialize products have portfolios that include unused patents. Even start-ups with limited resources may have “blocking patents” covering technologies that used to be the subject of significant R&D efforts but were ultimately never practiced.

Even universities could be considered NPEs in that they do not commercialize the products they invent. (Many of us may have had a professor or two we’d consider to be ogres, but relatively few we’d be willing to call trolls.)

Managing portfolios

Where NPEs are most useful is as IP intermediaries. They can assume ownership of under-utilized patents and license them. As stated in a 2013 White House report, firms that aggregate and manage patents can bring value to society by more efficiently matching inventors to patent users in an otherwise illiquid market. NPEs are also experts at legitimately protecting patents from infringement.

In other words, NPEs oriented toward participating in the IP marketplace (versus exploiting it) can play a valuable role that should not be overlooked due to the shadow cast by a relatively few unscrupulous players.

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