Patent trolls: friend or foe?

• Author: Robert L. Stoll
• Position: Partner, Drinker Biddle & Reath LLP, Washington, USA and former USPTO, Commissioner for Patents
• Pages: 21-23

p. 21WIPO | MAGAZINE

By Robert L. St oll, Partner,

Drinker Bid dle & Reath LLP,

Washington , USA and former USPTO

Commissioner for Patents

Trolls of lore were ugly creatures who lived under br idges,

charged travelers to safely cros s raging waters and threatened

harm to those who refused to pay. Trolls and their kindred spirits

have haunted the nightmares of our child ren for generations.

But in 1999, a lawyer at Intel Corporation, Peter Detkin, beg an

using the term to describe com panies with no products that

brought what he believed were mer itless patent suits. The term

has since gained curre ncy and is now widely used to cha rac-

terize the activities of non-practicing entities (NPEs) or patent

assertion entitie s (PAEs). The fact that Mr. Detkin went on to

co-found Intellectual Ventures – widel y perceived as an arche-

typal modern day patent troll – h as caused many a wry s mile

within the IP community. Perhaps our collective subconscious

childhood fear of the origi nal troll is one of the reasons why it is

easy for the media, our elec ted leaders and even some sav vy

CEOs to vilify modern trol ls for everything they d o. I guess Mr.

Detkin rues the day he bega n using the term.

Although this article focuses on the experiences of the US,

patent litigation issues attr ibuted to NPEs already exist in other

jurisdictions. Germa ny, for example, is a venue of preference

in Europe for NPEs. Earlier this year, the Republic of Korea

modied its laws to protect local technology companies from

NPEs who had sued a major technol ogy rm there multiple

times. As the monetization of patents continue s to grow around

the world it will not be long before the se issues gain traction in

many other jurisdictions.

DEFINING A TROLL

What denes a troll? Most would agree th at companies that

don’t make products and whose function i s to buy up patents

to assert against other s would be in that category. But there

seems to be as many permutations to this ba sic formulation as

there are companies. What about large manufacturing compa-

nies that have divisions that purc hase patent portfolios for the

purpose of asserti on? What about companies that spin off their

unused patent portfolio to a wholly or partially owned subsidiary

that asserts those patents? What abo ut companies that buy

up portfolios for defensive purposes, compelling membership

by companies to join for protection? What about universities?

They don’t make products. Most would say that univer sities

don’t t into the category because they license to companies

that make the products covered by their patents. But w hat if

the university sells i ts patents to an NPE with an agreement to

share in the prots?

As the foregoing suggests, dening a troll is very difcult. Some

would even claim that Thomas Edis on, one of the most prolic

inventors in the US, was an early troll, see king licenses for patents

that he did not plan to manufacture.

The monetization of patents in the marketpl ace can spur innova-

tion and drive economic g rowth and job creation. Many inven-

tors just like to invent. Some have no interest in manufactur ing

anything, but would prefer to go back to the la b and hunt for

the next new breakthrou gh. In trolls, inventors and others in the

secondary mar ket have a purchaser willing to pay for valuabl e

patents: an entity that will help them rea p the benets of their

efforts. It is widel y recognized that patents are proper ty and,

like any other property, can be free ly bought and sold, as long

as there are no antitrust issue s.

Until the onset of the troll era, small inventors, cre ditors in bank-

rupt companies with large patent portfolios and companies

with many patents in technologies th at they no longer planned

to use, had few options to monetize them. In some instances,

large companies refus ed to purchase or license thes e assets,

taking a gamble that they cou ld continue infringing because the

costs of asserting patents pre empted the owners’ ability to en-

force their rights. Faced with expens ive enforcement and limited

secondary markets, some in the nancial services industries

and in the emerging technol ogies sector who were unfamil iar

with the patent world chose not to play in the patent san dbox.

The evolving use of patents by trolls require d new strategies and

new business plans for many powerful companies. The disrup-

tion caused by abusive litigation b ehavior in the corporate world

has generated uncer tainty and fear. Where we usually applaud

innovation both in the scientic arena a nd in the creation of

wealth in the challenging wo rld of the money markets, the rise

of the troll has many crying fou l!

PATENT TROLLS:

friend or foe?

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