The landscape of patent law has been rapidly changing over the last several years. President Obama recently signed into law the America Invents Act (the “AIA”) which offered the first identifiable attempt by the United States government to stem the tide of claims asserted by non-practicing entities, also known pejoratively as “patent trolls.” Among the many changes included in the AIA is the requirement for non-practicing entities to file individual lawsuits against accused infringers rather than multiple defendants, thereby creating a potentially significant increase in the cost of litigation. This provision of the AIA, and other proposals directed at non-practicing entities, are often premised on the assumption that every lawsuit filed by these so-called “trolls” is frivolous.
While it’s true that a significant number of lawsuits filed by non-practicing entities have no merit, and are settled by the accused parties merely to avoid the costs associated with defending a patent infringement lawsuit, it is inaccurate and potentially counterproductive to assume that all patent litigation initiated by a non-practicing entity is meritless. Yet, recent comments by President Obama grouped all non-practicing entities together and cast them all as a significant drain on U.S. businesses and an overall drag on technology companies. The White House stated that “stopping this drain on the American economy will require swift legislative action.”
Obviously there are a significant number of non-practicing entities who are appropriately categorized as “trolls.” However, we also must consider the notion that the non-practicing entity business model can serve the underlying function of the United States patent system—to promote the sciences and advance innovation. While the changes implemented by the AIA tend to undermine this goal by disadvantaging small inventors in their ability to acquire patent grants, the non-practicing entity business model can function to restore some strength to these disadvantaged inventors. Currently, when small companies or individual inventors acquire patent grants, those patent holders then face enormous costs in connection with patent litigation if they wish to enforce the patent. This often renders them unable to vindicate the rights granted to them under their patent. Obviously a patent that cannot be enforced through litigation is practically worthless.
The emergence of a non-practicing entity model addresses this problem. Non-practicing entities are not limited to the patent trolls who assert rights in worthless patents in order to shakedown businesses. Companies such as Intellectual Ventures and Eolas Technologies are non-practicing entities who partner with smaller companies and individuals, which generally could not afford to assert their patent rights against larger entities, to provide resources enabling these small entities and individuals to vindicate their interests. As a result, some non-practicing entities actually revive the incentive for smaller entities and individuals to create patentable inventions. Since the underlying purpose of the patent system is to promote invention, these legitimate non-practicing entities may actually benefit the patent system.
Obviously the existence of unscrupulous patent trolls can be a tremendous burden on companies specializing in high tech goods. A significant number of claims are filed each year based on patents which arguably should not have been issued by the United States Patent and Trademark Office. Yet, we must be cautious in the promulgation of new legislation directed at non-practicing entities so that we do not inadvertently create additional barriers making it more difficult for small entities to obtain patents on legitimate inventions.