Enter the “Patent Troll”

With all the innovation the Internet promises, perhaps it should come as no surprise that some of the very concepts and slang used by techies and self-proclaimed “hackers” should find their way to the business of invention and patent protection.

The Obama administration recently has made headlines with a list of legislative priorities and executive actions in response to what has increasingly been viewed as a source of frivolous lawsuits, extortionate settlements and license fees, and a general roadblock to innovation—the non-practicing entity (NPE), also known more colloquially as the patent troll. Such companies buy up patents, sometimes whole portfolios of them, with no intent to manufacture or use the patented invention, per se. Instead, the purpose is to bring suits against any companies that might appear to be infringing on the patents the NPE owns.

Since 2011, when the Leahy-Smith America Invents Act (AIA) was passed, the number of patent applications has gone up. Among other innovations, the AIA changed the system of patent award from a “first to invent” to a “first inventor to file” model.  Another change made by the AIA is the courts play the main role in determining damages. And, since the AIA passed, there has been a marked increase in the number of NPEs established.  Sheer coincidence seems unlikely.

For its part, the U.S. Justice Department is beginning to look seriously at whether NPEs are disrupting competition in a number of industries, hi-tech perhaps having the highest profile.  Not surprisingly, other industries have been brought into the fray, too, from manufacturing to retail, making the issue one to be watched closely in the months ahead.

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