Patents R Us: Information and Services for Inventors and Patent Owners

Patent Trolls and Patent Enforement Rights

Much has been written about “patent trolls,” otherwise known as non-practicing entities (NPEs). Unlike “market participants” – those who use their patents to create a product or service – NPEs are those who own patents but do not “practice” them.

And the tone of those writing about “trolls” is usually very indignant: How dare a patent owner not practice his or her or its patent – meaning, use the patented invention in a product or service – and then expect to exercise any rights with regard to that patent?

For the public, there is an air of suspicion associated with patenting something and then not producing it. But there are a number of reasons why an inventor or organization might invent a product without bringing it to market. Perhaps the inventor or company came up with a brilliant idea, but lacks the funds or facilities to manufacture it themselves. Or perhaps the invention is not relevant to the manufacturer’s other products, and the company is not prepared for a major diversification.

What if the patent owner is a university, whose researchers are inventing for the common good without any intention of manufacturing their inventions in-house? For those inventors and other entities, licensing their patents to others just makes sense.

Patents and Property Rights

As odd as it may seem, an issued patent is a piece of property much like any other. It can be bought or sold, like a piece of real estate. Perhaps it is better to compare a patent to a car: The owner can choose to either drive the car or keep it parked. But if someone steals that car, it doesn’t matter if it has been out of use for an hour or a year – the owner can call the police and report that car stolen.

The one thing that differentiates patents from other types of property is that they really only give their owner exclusionary rights. A patent, after all, is a bargain with the state that gives the patent owner the right to exclude others from using the patented invention in exchange for disclosure of the invention. The patent really only empowers its owner to do one thing – to exclude others. That’s because in order to practice the patent, it may be necessary for the patent owner to take licenses under related patents belonging to someone else!

Enforcing Patents without Practicing Them: Is That So Wrong?
But why are patents any different than a car when it comes to ownership rights? Three reasons come to mind:

• There are no “patent police.” It is the sole responsibility of the patent owner to enforce the patent when it is infringed, and to do that, the patent owner must usually go through the long, arduous and costly process of patent litigation.

• Patents represent ideas – ideas that have been expressed on paper and given the blessing of the Patent Office, but ideas nonetheless.

• Using other people’s patent rights doesn’t look like a theft. The infringer may claim that they came up with the idea first, that they are not infringing even though the product or process is identical to that covered by the patent, or that the patent was invalid from the start.

And the court of public opinion often goes along with the infringer rather than the patent owner who doesn’t practice the patent – especially if the alleged infringer is a big name with a popular product or service, like Sony or eBay. If the patent owner is an NPE, the reasoning goes, who exactly is losing money in this scenario? It’s not like the NPE can claim damages from lost sales.

But patent infringement is theft, and the company who infringes an NPE’s patent is like someone who takes the car in the above analogy for a joyride. “You’re not using it anyway!” he calls out the window as he drives by the enraged, but helpless, car owner.

“Yeah, and he looks better in the car than you do!” one of the neighbors yells, adding insult to injury!

The High Cost of Infringement – Even for an NPE

The truth is, the non-practicing patent owner does lose out when others use his intellectual property without a license. First, he deserves to collect a licensing fee for the use of the patented technology. Second, the very fact that at least one infringer is blatantly, openly using the technology without a license makes it very difficult for the patent owner to convince anyone else to take a license. And that devalues the patent. Universities, in particular, rely on licensing revenue to fund further research and development. So yes, patent infringement does have a deleterious effect on the NPE.

The good news is that while the large corporations who unashamedly infringe patents try to minimize the claims of patent owners by calling them “patent trolls,” the courts have steadfastly protected the rights of both market participants and NPEs to enforce their patents. Recently, for example, a small Canadian company succeeded in obtaining an injunction against Microsoft’s Word, forcing the software giant to scramble for a work-around solution.

But the courts have taken away the NPE’s right to an injunction. That means NPEs can’t stop the infringer from infringing – a right which now seems to be reserved for market participants. And the damages available to an NPE who does prevail in court are limited.

As long as the exact nature of patent rights is misunderstood, NPEs will continue to be seen as “trolls” and “bad guys.” And that’s a shame, because all patent owners have a right to exercise their intellectual property rights as they see fit, without having to take a loss for ideological reasons.