Patent trolling is a practice where individuals or companies claim patent rights to a product without actually inventing it. This practice is often carried out by Non-practicing entities, which are called NPEs. The new legislation is meant to discourage such activities. Hopefully, this will prevent the practice from becoming a widespread problem.
Non-practicing entities (NPEs)
Using a non-practicing entity (NPE) to sue other companies is one of the most common strategies used by patent trolls. These entities collect patents, plan lawsuits, and then sue companies and individuals for patent infringement. The Federal Trade Commission calls these companies patent assertion entities. A patent prohibits the use of similar inventions for a set period of time, usually 20 years, from the date of filing. This period of time is usually very long and costly, so NPEs often try to take advantage of this fact to entice other companies to license their patents.
The NPEs that target companies may be small or medium-sized. They may target companies that have unrelated business divisions or information technology divisions. They will seek to make use of the patents to gain profit from the inventions. Ultimately, this can result in huge legal fees for a company.
NPEs may also be able to benefit financially from a patent that is infringing on a competitor’s technology. However, they often face difficulty with producers and sellers. The NPE patent may be more menacing than the competitor’s, so a successful NPE may hope that the infringer will pay the NPE instead of pursuing a lawsuit. Nevertheless, a successful litigant may have to reimburse court costs.
NPEs are important in the innovation ecosystem. They help Chinese companies increase the value of their patents by demonstrating the value of their intellectual property. Increasing the value of Chinese patents will also boost their prices and demand, which will in turn stimulate further innovation in China.
Claiming patent rights without actually having invented the product at issue
Claimants may have difficulties with the patent process if they do not have enough knowledge of the invention to determine what constitutes an adequate disclosure of the invention. The patent must also state the best mode of practicing the claimed invention. This is a requirement under 35 U.S.C. SS 112 and failure to comply can lead to rejection of the application.
New legislation to deter patent trolling
A new piece of legislation proposed by Congress could help deter patent trolling. It would strengthen the public interest test when the ITC reviews a case, requiring a genuine interest by a domestic industry. In addition, it would require the ITC to determine whether an exclusion order serves the public interest. The bill has bipartisan support, and it is expected to be signed into law soon. Its sponsors say the new legislation is needed in the interest of innovation.
As an initial step, the new legislation would set limits on the amount of money a patent troll could recover from infringement lawsuits. The idea is to reduce the buying incentive for patent trolls by limiting their compensation to the true economic value of the invention. However, such a law would raise legal issues, such as due process infringement and conflicts between federal and state laws. As such, it remains to be seen whether it will succeed in stopping patent trolling.
The new legislation is also intended to protect American manufacturers who depend on patents for their products. Patents provide a vital protection to these companies, but a plethora of bad actors can sue for money by infringing upon them. Two medical crises have placed small innovative manufacturing companies at the forefront, first with the AIDS epidemic and then the COVID-19 pandemic. To combat the damaging effects of patent troll litigation, Congress should pass new legislation that will protect the rights of American manufacturers.