NPEs
FUTURE PAIN FOR PATENT NPEs
The activities of companies or individuals who accumulate patents and then file aggressive infringement lawsuits in a strategic effort to extract patent licensing revenue are being targeted from several quarters, as Paul J. Sutton explains.
Te non-practising entity (NPE), also known as the ‘patent troll’, is regarded as a pariah by many US companies, both large and small. Te terms ‘NPE’ and ‘troll’ are pejorative labels used to describe a person or entity that (a) opportunistically enforces patent rights, and (b) has no intention of actually manufacturing or selling a product, or supplying a service covered by those patent rights. NPEs are oſten companies that accumulate patents solely for extracting licence revenues from alleged infringers.
However, there is no universal agreement on exactly what constitutes an NPE. Te more popular term NPE will be used throughout this article to describe those who file aggressive patent infringement lawsuits in a strategic effort to extract patent licensing revenue. Other terms used to describe NPEs include ‘patent shark’, ‘non-manufacturing patentee’,
‘patent licensing
company’, ‘patent dealer’, ‘patent marketer’, and ‘patent licensing company’.
Tis article seeks to summarise and augment this author’s prior examination and analyses of NPE conduct, in order to provide the reader with a more comprehensive understanding of their impact upon the US legal landscape.
To be clear, the fundamental activities of NPEs, while troublesome to many, are not unlawful. In fact, as observed in other articles by this author, NPEs operate in much the same manner as a number of other companies that seek to protect and aggressively exploit their patent portfolios. Te line between them may be blurred. A difference, however, is that NPEs seek monies from existing users, as opposed to concentrating on and contributing to future technology innovations. And
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“A DIFFERENCE, HOWEVER, IS THAT NPEs SEEK MONIES FROM EXISTING USERS, AS OPPOSED TO CONCENTRATING ON AND
CONTRIBUTING TO FUTURE TECHNOLOGY INNOVATIONS.”
the monetary, legal and manpower costs associated with defending NPE patent infringement lawsuits have reached profound numbers.
Filing at the ITC
NPEs frequently target alleged infringers by filing actions at
the US International Trade
Commission (ITC). Such ITC cases are commenced with a petition-type complaint, seeking an investigation under Section 337(a)(1) (B) of the Tariff Act of 1930. Section 337 bans the importation into the US of articles that infringe valid and enforceable US patents.
Te ITC has the power to act only to protect a ‘domestic industry’, which is reflected by (a) a significant investment in plant and equipment, (b) a significant employment of
capital, or (c) a substantial investment exploitation, including engineering, research
and development, or licensing. To qualify, these activities must relate directly to the IP rights sought to be protected.
Tere is no assurance that filing a complaint will result in an investigation. Within 30 days of the complaint’s filing, the commission decides whether it will investigate. Te investigation is referred to an administrative law judge (ALJ) if an investigation is to proceed. Te ALJ sets the ground rules and the discovery schedule. Te ALJ’s determination may be reviewed by the ITC at its discretion. In addition to there being counsel for the complainant and for the respondent, ITC staff counsel will participate in the discovery process. Te final determination following this investigation will stand, unless the US president rejects it.
A number of technology companies such as Cisco are lobbying to block the ITC from hearing complaints by NPEs, claiming that NPE patent suits are a burden on US businesses. Tis effort is going nowhere. Te House Judiciary Subcommittee on IP, Competition and the Internet has heard testimony that NPEs do not qualify for using the ITC.
labour or in
Others have made claims that NPE Section 337 cases have become a burden on US companies. Tese claims have been rejected. Te rejection has taken the form of a document called Facts and Trends Regarding USITC Section 337 Investigation. Approximately one fiſth of the Section 337 cases filed over the past seven years were initiated by NPEs. According to an RPX Research study, published on March 23, 2012, the ITC is neither bound by the new America Invents Act joinder rules that limit the number
World Intellectual Property Review Annual 2013 45
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