Patent Trolls | The Myth of the Patent Troll

Corporations that are sued for patent infringement seek to denigrate the patent holders who sue them by calling them “Patent Trolls.” Rather than face the fact that many businesses rush new products to market without first determining if the technology in those new products infringe any patents, these businesses attempt to vilify the patent holders that enforce their patents with the childish act of name calling! These businesses believe that calling the holder of an infringed patent a patent troll somehow diminishes the business’s act of patent infringement!

The NPE, PAE and Patent Troll: The legal term for a patentee that does not practice its patent (does not manufacture or sell a product or service that uses the patented invention) is a “non-practicing entity” (or “NPE”). A business that practices a patent is known as a “market participant.” The other term that has recently come into use for an NPE is a “patent assertion entity” (or “PAE”). Patent troll is simply a derogatory term for a non-practicing entity or a patent assertion entity.

The thinking of Corporate America is that it is somehow righteous for large corporations to sue other large corporations for patent infringement just as Apple recently sued Samsung – and won a $1.05 billion award – for patent infringement, but when the patentee is not a large corporation, it is a patent troll and should somehow have limited patent rights!

Who Are the Patent Trolls? Be they non-practicing entities or patent assertion entities or patent trolls, they come in several forms:

·         Universities: One of the largest sources of the new technologies we enjoy every day is the basic research done by universities that apply for patents on the new technologies they invent. Most large universities have a Technology Transfer office that commercializes the university’s patents by licensing them. The revenue universities collect in royalties for their inventions go to fund future research. However, when a university finds that one of its patents has been infringed, it has no alternative but to assert that patent, and the assertion of a university’s patent(s) may involve suing for patent infringement. Since universities are in the teaching and researching business – and are not manufacturers – they are automatically non-practicing entities. But when a university sues a large corporation for patent infringement, the institution is maligned as a “patent troll.”

·         Inventors: Many of the most prolific inventors in American history – Thomas Edison is the most notable example – were just that – inventors!  They were NOT industrialists. Alexander Graham Bell invented the telephone, then went on to build the company that became AT&T. That was because Bell had in him essentially just one great new idea. Edison had hundreds of great ideas – from the light bulb and phonograph to motion pictures and alternating current – so he focused not on commercializing his inventions himself, but on licensing his patents to businesses that could commercialize them. And when Thomas Edison found that one of his patents had been infringed, he asserted that patent. So was Thomas Edison a patent troll? Think about this. If Edison had stopped inventing, and spent thirty or forty years practicing his light bulb patent, the world would have been denied all of Edison’s subsequent inventions!

·         Teaching Hospitals and Research Labs: Just as universities conduct basic research, so do hospitals (especially teaching hospitals) and research labs. And teaching hospitals and research labs fund their basis research from the royalties they collect from the patents they license to industry. If a teaching hospital or research lab finds that is must go to court to enforce a patented invention it spent millions of dollars developing, the institution is called a “patent troll!”

·         Smaller Businesses: Sometimes a small or mid-size business comes across a new technology in the course of its research and development or its new product development efforts, and it patents that new technology. However, not every smaller business has the means to commercialize every patent it is awarded, and not every patent a business owns fits the products and services that business manufacturers and/or sells. And even though a business is not directly losing revenue from a competitor – since it is not practicing the invention – it is still losing potential licensing fees when one of its patents is infringed. And, of course, when a business asserts one of its patents – but does not practice – it is demeaned as a “patent troll.”

·         Special Entities: Sometimes special-purpose businesses are set up for the specific purpose of asserting a patent or patent portfolio. For example, an inventor has a patent that has been infringed, but he is not financially capable of financing the cost of trying a patent infringement lawsuit – which can easily run into the millions of dollars – so he partners with a patent enforcement firm (or patent assertion entity) to enforce his patent(s). Sometimes inventors or businesses need immediate cash, so they sell their patents to a patent assertion entity rather than wait the two or three years it can take to secure a settlement. And when that special-purpose business proceeds to enforce its patent(s), it is maligned as a “patent troll.”

The Basis of the Patent Troll Myth: The essential fallacy in the patent troll concept (or myth) is the belief by the most blatant infringers of patents that there are actually two classes of patent holders. There are (1.) large corporations that have the right to enforce their patents because they also practice those patents, and (2.) inventors, universities, hospitals, research labs, smaller business and patent assertion entities that have diminished patent enforcement rights because they do not practice their patents.

The concept behind the U.S. Patent system goes back to the original U.S. Constitution that was ratified by the original 13 Colonies in 1787. Article I, Section 8, Clause 8 gives Congress the responsibility to “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

Since the first Ten Amendments to the Constitution – known as the Bill of Rights – was not ratified until 1791, the American concept of a patent actually predates such commonly accepted U.S. principles as free speech, freedom of the press, due process and habeas corpus!

The Founding Fathers included nothing in the Constitution about practicing the “discoveries” they refer to.  The U.S. Constitution promises exclusive rights to “inventors” for their “discoveries,” and NOT to industrialists or manufacturers or business that commercialize an inventor’s patent.

Patent Troll and Market Participant Remedies: In fact, current U.S. patent law provides unique remedies to market participants (companies that practice their patents) over and above the remedies that area available to non-practicing entities (or patent trolls). For example, market participants are entitled to injunctive relief (a court order issued to the infringer prohibiting sale of the infringing product) by the federal courts, while non-practicing entities are not. And market participants are entitled to sue for lost profits while a non-practicing entity cannot claim lost profits. However, both market participants and non-practicing entity patent trolls are entitled to “fair and reasonable” royalties for the use of their patents.

Patent Trolls and Property Rights: Many analogies can be drawn between intellectual property rights and real property rights. If Joe Smith buys a piece of land but does not build anything on it, does he still have the right to prosecute those who trespass on his property? If Mr. Smith builds a house on that property, but never moves his family in, does he have the right to kick out squatters? No one would question or challenge Mr. Smith’s real property rights, and no one would call him a “land troll” or “house troll” or similar derogatory term!

Patent Rights and Patent Trolls: A patent is a limited monopoly granted to an inventor by the federal government. One does not need a patent to practice his or her or its invention. Any person or business can invent something and manufacture products that use that invention. No patent is required. A patent’s only purpose is to prevent others from using the patent in the products they use, manufacture or sell. That’s the “exclusive right” promised by the Founding Fathers to “inventors” for their “discoveries.”

When a person, business, university or other entity applies for and receives a patent, and that patentee – be that patent holder a person, university, business or other entity – sues for patent infringement, that is how the U.S. patent system works!

Patent Troll? Isn’t it time to get over all this patent troll nonsense!

More on Patent Trolls: For an entertaining take on patent trolls, please view our video, the Ballad of the Patent Troll.