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.

Much has been written about patent trolls, which are also known by the less pejorative terms ‘non-practising entities’ (NPEs) and ‘patent assertion entities’ (PAEs). This US jurisdictional column has at times included observations regarding the status of NPEs and the impact they have had upon US businesses. The outrage fuelled by NPEs’ aggressive tactics has given rise to efforts 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.

There has always been a difficulty in defining what constitutes a patent troll with any degree of specificity. Many well-established companies that own patents which do not cover any of their products or services make them available for licensing. These 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 financing the acquisition of patent portfolios to be used as licensing assets. Some entities have obtained financing through public offerings. 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.