US PATENTS
THE INCREASING IMPACT OF ‘PATENT TROLLS’
There are very practical and understandable reasons why patent trolls have taken hold in the US. One reason is the legal system. Paul J. Sutton investigates.
entities’ (NPEs) and ‘patent assertion entities’ (PAEs). T is US jurisdictional column has at times included observations regarding the status of NPEs and the impact they have had upon US businesses. T e outrage fuelled by NPEs’ aggressive tactics has given rise to eff orts by state legislators to rein in and blunt their ability to operate as freely as in the past. Never before have there been so many attacks by patent trolls.
M
T ere has always been a diffi culty in defi ning what constitutes a patent troll with any degree of specifi city. Many well-established companies that own patents which do not cover any of their products or services make them available for licensing. T ese companies are not normally thought of as patent trolls. A patent troll is more commonly known as an entity that does not market products or services, but whose business plan is the acquisition of patent portfolios for the principal purpose of extracting licence fees from alleged infringers.
An increasing number of investors have shown interest in fi nancing the acquisition of patent portfolios to be used as licensing assets. Some entities have obtained fi nancing through public off erings. And then, of course, there are the inevitable shades of grey that cause a mislabelling of well-intentioned entities trying lawfully to exploit their patent and IP rights.
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uch has been written about patent trolls, which are also known by the less pejorative terms ‘non-practising
T e very word ‘troll’ carries negativity with it. However, as distasteful as some of their aggressive tactics may be, patent
in good faith seek to obtain licence fees from alleged infringers of
the patents they have
acquired are not engaged in unlawful or illegal activities. T e targets of patent trolls may not like it, but all owners of valid and infringed patents have the right to enforce such patents. T is, of course, is not to excuse the fi ling of lawsuits that have no merit. However, the blame should not be borne solely by parties that have acquired patents of questionable validity.
T e rebuttable presumption of patent validity is still the law of the land and, in the absence of bad faith on the part of the owners of presumptively valid patents, NPEs should be aff orded the same rights as other patent holders.
By way of example, for years there was debate as to whether the Bellevue, Washington-based Intellectual Ventures LLC (IV) qualifi ed as a patent troll. Founded in 2000 by Nathan Myhrvold and Edward Jung, former Microsoſt offi cers, over the years IV accumulated more than 30,000 patents, patent applications, and licence assets. Its investors included well-known names such as Microsoſt , Intel, Google, eBay, Nvidia, and Cisco. By virtue of these investments, these and other investors are believed to have sought a shield from litigation.
IV has realised licensing revenues in the billions of dollars. For years, it refrained from suing
trolls that
alleged infringers, choosing instead to go to great lengths to negotiate licence arrangements. However, as time went by and a number of alleged infringers of IV’s patents refused to accept licences, IV was forced to enforce its patent rights in the courts if it didn’t want those rights to become abandoned.
T is sleeping giant with a multibillion dollar war chest and tens of thousands of patents fi nally awoke in December 2010 and, aſt er years of not fi ling a single lawsuit, fi led its fi rst. Is IV, with its many hundreds of employees of which one fi ſt h are engineers and scientists, a patent troll? Does the fact that its employee ranks include hundreds of attorneys alter things? Clearly, IV’s signifi cant resources enable it to enforce its rights through litigation.
T e licence income realised by patent trolls has attracted the attention of many diff erent types of investors. A number of start-up companies have found the public to be an interesting source of capital through the public off ering of shares. As an example, a German national, Harry Gaus, teamed up with Toronto-based Patent Enforcement and Royalties Ltd (PEARL) to enforce a US Gaus patent against Conair Corporation. PEARL sold shares to the public and used these funds for a patent infringement action in return for a percentage of monies recovered, if any.
Gaus agreed to pay PEARL 25 percent of any monies recovered from Conair in an action naming
World Intellectual Property Review Annual 2014 41
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