Patent Trolls Laughing All the Way to the Bank

by Searcy Denney Scarola Barnhart & Shipley
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Invent something, patent it and watch your creative enterprise grow into an empire. That’s what inventors are supposed to do.

Some of them still follow the rules. Others do not. Among the more unscrupulous are so-called patent trolls who search the market looking for products over which they can sue. They claim infringement upon their ideas, which might or might not be in workable use and, often, are not.

A PriceWaterhouseCoopers study shows patent litigation increased dramatically between 2009 and 2013, and attributes it mostly to trolls. Trolls, officially referred to as nonpracticing entities (NPEs) because they either don’t make products or don’t distribute them, account for 67 percent of the lawsuits filed. The study also finds that while monetary damages as they relate to patent litigation declined during that period, trolls were making more off lawsuits than their practicing-entity counterparts. How much more? In most cases, three times the amount.

                                  Trolls small

Both Congress and the Supreme Court have responded to the issue, PriceWaterhouseCoopers reports. Legislators have tightened disclosure protocols for patent-ownership claims, while justices have issued certiorari on six cases. The Federal Trade Commission also has probed the matter. Going forward, Congress is considering legislation that would mandate lawsuit losers to pay for the winner’s court costs.

According to The Washington Post, “There’s a burgeoning push to revive patent legislation in the House, focusing on a bill known as the TROL Act. But it still has a long road ahead – and critics say the measure is much weaker than its predecessor.”

NPEs are a burden to both the court system and the U.S. economy, as thoughtless lawsuits are filed one after another. When it comes to unscrupulousness, trolls are considered the bad guys.

“In the most basic strategy, an NPE typically buys patents with broad claims that cover a wide variety of technologies and markets, and then sues a large group of alleged patent infringers in the hope to collect a licensing royalty or a settlement,” wrote Kevin Rieffel, a TechPats lawyer, in a LinkedIn article.  “NPEs typically don’t want to spend money on a trial unless they have to, and one tactic uses settlements with smaller businesses to build a ‘war chest’ for potential suits with larger companies.”

But NPEs as a whole can be the good guys. For example, institutes of higher education fall under the NPE category as researchers work toward an end goal with no intention of marketing a product. In another instance, NPE litigation can be righteous. Here’s a scenario: An inventor sells his patent to a third party with the bankroll to sue a greedy conglomerate who stole the creator’s idea.

“NPEs can waste a company’s valuable time and resources with lawsuits, yet also bring value to their patent portfolios…,” Rieffel wrote. “The word ‘troll’ is obviously a derogatory term used to connote greed and hiding (under a bridge), but the term has adopted a newer, meme-like status as trolls are currently depicted as lacking any contribution to society and merely living off of others’ misfortunes and fears.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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