Formerly Practicing Entities: Part I

Jason Bourgeois
IP Portfolio Manager

For many in the patent space, the pejorative label “patent troll” is the first thing to spring to mind when they hear of an entity vigorously enforcing its intellectual property rights. This label has been used to describe a wide range of entities, from companies that have never and will never produce anything to Fortune 500 giants that produce the majority of goods we use on a daily basis and just about every type of company in between.

Why are some enforcement actions “trolling” and others justifiable? Why are some companies so hostile to intellectual property rights? And what about the special case: the small company, the solo inventor who gave it their best shot in a turbulent marketplace, and was eventually run out of business by larger, better capitalized rivals leaving him with nothing but the portfolio of patents he managed to generate by pursuing his goal? This is the case we will discuss in this series of articles. It is the situation that many of our clients faced at one time and one which we excel at leveraging.

Start-ups are founded on a core idea or innovation that the founders believe will earn them a share of the market. In order to prevent this innovation from being implemented by their competitors and larger companies operating in their space, start-ups will generally file patent applications for their intellectual property and follow on innovations. Many start-ups are founded based on patents their founders have already been granted. The core principle of the patent system is to protect innovation for a limited term before it is granted to the public domain. This is the tradeoff a patentee agrees to by disclosing the fundamental aspects of his invention to the USPTO. In exchange for this disclosure, the patentee is granted the right to exclude others from the market place. That is, to sue others for infringement of his patent rights. The goal is to simultaneously encourage innovation and enrich the public domain.

The idea of deterrence is central to the concept of the patent system. It is crucial to remember that a patent is not a license to do or make something, it is a license to exclude others. Often, inventors are leery of enforcing their patents. This is due to the stigma surrounding litigation and possibly what they see as a tremendous cost barrier. A patent that is unenforced is not particularly valuable. The stigma of patent litigation is misplaced and due in large part to anti-patent attitudes held by many large companies. By anti-patent, we mean patents not owned by them as large multi-nationals account for a large percentage of the patent litigation in this country. The cost burden is alleviated by contingent fee attorneys and patent monetization experts like IP Valuation Partners.

In Part II we will discuss small companies, the business ecosystem that they inhabit and  what to do with your patents when that ecosystem turns against you.

 

 



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