Header graphic for print
WinTech Legal Insight for Start-Up and Established Technology Businesses

Patent Trolls, Defensive Groups, and Pooling

Posted in Intellectual Property, Patent Law

A common topic of patent reform discussions are patent trolls.[1] Patent trolls, who often gather patent portfolios and assert patents against others in an effort to collect licensing fees or patent infringement damages, are often criticized as a flaw in the current patent system that hurts the very innovation that the patent system is intended to encourage. However, the definition of a patent troll is far from settled.

Patent trolls, sometimes referred to as non-practicing entities (NPEs), typically do not provide products or services, which prevents a threatened company from countersuing as a defensive tactic. However, some pundits have recognized that carve outs are necessary to exclude universities and research groups from the definition of patent troll, as many do not provide products or services.

In response to the increasing expense and threat of litigation with patent trolls, some defensive patent groups have arisen. These defensive patent groups often seek third party financing to purchase patents for defensive purposes, such as purchasing patents that patent trolls might otherwise purchase or to allow the counter assertion of such patents in litigation. Typically, companies will pay a fee to purchase a bundle of patent rights from the defensive patent group. Defensive patent groups do not provide products or services and collect fees for patent rights, but how should they be distinguished from patent trolls? While some defensive patent groups have explicitly committed to using patents solely for defensive purposes, others have not ruled out the possibility of using acquired patents offensively.

Patent pooling is a consortium of two or more companies cross-licensing patents related to a particular technology. Various companies may band together to acquire patents in specific technology areas. The members of the consortium may form a new entity, which does not provide any products or services. The purchased patents may be licensed to consortium members, licensed to non-members for a fee, and sold individually or as a whole.  However, the purchased patents can also be utilized offensively in an effort to collect licensing fees or patent infringement damages.

None of the patent acquisition groups discussed above provides products or services.  One might argue that patent trolls are distinguished by their use of patents offensively or solely to collect licensing fees and patent infringement damages. However, defensive patent groups and patent pooling groups collect fees to become a member of the group. Further, some appear to be willing to assert patents offensively to collect patent infringement damages. Are all, some, or none of these groups patent trolls? As these patent collectives continue to evolve and change, it becomes more difficult to identify what is and isn’t a patent troll. This leaves legislators for patent reform in a difficult position attempting to define what continues to evolve.

[1] Patent trolls are referred to by several different names, such as non-practicing entities (NPEs), patent assertion entities (PAEs), patent pirates, patent sharks, and numerous other names.