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What’s a patent troll?

On Behalf of | Jun 20, 2023 | Patent Law

A “patent troll” is an unpleasant term used to describe a company that acquires and enforces patents, primarily for the purpose of extracting licensing fees or suing other companies for alleged infringement. In more polite terms, they’re often called “patent assertion entities (PAEs)” or “non-practicing entities (NPEs),” but their place in modern commerce is very controversial.

Patent trolls do not manufacture or market anything. Instead, they rely on asserting their patents against other companies and demanding payment or licensing fees, sometimes through litigation, for their income.

What do critics say about PAEs/NPAs?

The term “patent troll” is used with contempt because critics say these entities exploit the patent system and hinder innovation rather than contribute to it. Some acquire patents from bankrupt companies or inventors and then use those patents to target businesses that unwittingly infringe upon them. They often choose to sue in jurisdictions known for being favorable to patent holders, increasing the pressure on defendants to settle rather than endure lengthy and expensive litigation.

Detractors argue that PAEs/NPAs stifle technological progress by filing frivolous lawsuits, targeting both large and small companies. Essentially, they’re regarded as intellectual property “stick-up artists” that contribute nothing worthwhile to modern life.

The issue of patent trolls has sparked debates about patent reform, with calls for stricter regulations to discourage abusive litigation practices and to ensure that patents are used to promote innovation rather than hinder it.

Could critics be way off track?

PAEs/NPAs do have plenty of supporters. Proponents argue that PAEs/NPEs acquire patents from inventors or companies who are not using them and may not have the resources to commercialize their inventions, ultimately monetizing patents that would otherwise go stagnant. By purchasing these patents, PAEs/NPEs can provide financial compensation to inventors and enable them to recover some value from their ideas.

PAEs/NPEs can act as intermediaries between patent holders and companies that may be interested in licensing or using the patented technology. They facilitate negotiations and agreements, making it easier for inventors to reach potential licensees and profit from their inventions. They can also level the playing field for smaller inventors or companies when larger companies are using patented technology without permission or proper compensation. PAEs/NPEs can assist in asserting these patents and better ensuring that inventors receive appropriate compensation for their innovative ideas.

The debate concerning the role of NPEs in innovation remains complex, and opinions on the matter differ – even among experts, but one thing is for certain: It’s wise to stay abreast of ongoing legislative interest in the issue. Whatever your patent needs, seeking experienced legal guidance can help.