STATE ‘ANTI-PATENT TROLL’ LEGISLATION DISPLAYS ITS TEETH, AND ITS LIMITATIONS
In the late 1990s, a term began to circulate in the patent community that was used to describe patents owners that do not make or sell their inventions, but rather assert patents purely for licensing or litigation returns: ‘patent trolls’.
In point of fact, the phenomenon of ‘patent trolls’, ‘patent sharks’, ‘non-practicing entities’ (NPEs) or whatever moniker you choose to apply is not a new one. Patent owners with no products or plans to practice their inventions have been using the exclusionary power of patents to generate revenue since the US patent system was in its infancy.
The prevalence of so-called patent trolling has ebbed and flowed over the centuries, and some commentators have credited these cycles as drivers for patent reform. Indeed, the resurgence of NPE litigation in the late 1990s was undoubtedly a force behind the sweeping changes to patent law in 2012’s America Invents Act (AIA).
In the lead up to the AIA, reports indicated that litigation and associated settlements by NPEs were costing US industry tens of billions of dollars a year. By many measures NPE litigation continued unabated, despite the intentions of the AIA, and more recent data suggests that the cost to industry associated with defence and settlement of NPE litigation has only risen.
Economists and legal scholars offer differing views on whether NPEs and their associated costs are a necessary evil to ensure a robust patent system, or simply an evil. These varying perspectives, the fundamental nature of the US patent and court systems, and the risks of throwing out the baby with the bath water virtually ensure that NPE activity will never be eliminated entirely.
Oct-Dec 2024 issue
Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates