Patent Trolls and Their Effect on Innovation

For Non-practicing Entities

1. A patent confers no positive rights, only negative or exclusionary rights, giving patentees only the right to exclude others from using the patented invention. An essential value-component of a patent arises from the right to demand compensation under threat of litigation-based exclusion. Thus, a patent is merely a license to sue for infringement. A patent's value results from its granted monopoly and depends on a patentee's willingness and ability to enforce the patent. A failure to enforce is equivalent to a valueless patent. The value of a patent, as a monopoly, is related purely to its enforceability as opposed to the technology it protects.

2. There is no difference between a patent owned by someone who practices the invention (a practicing entity) and a patent owned by someone who does not practice the invention (non-practicing entity or NPE). Whether a patent is actually practiced or manufactured is irrelevant to patent rights. Requiring a patent holder to actually practice a patent changes the patent from an invention monopoly (which it is) to a product monopoly (which it is not). The patent quid-pro-quo requires nothing more than disclosure in return for the patent monopoly. Requiring an inventor to practice his/her invention is equivalent to requiring a singer to perform his/her copyrighted songs.

3. The legal system is equipped to deter patent litigation abuses. The law - laches, Rule 11 sanctions, 35 U.S.C. § 285 attorney’s fees - protects against those who sit on their rights or who frivolously assert their patents. Supreme Court case law, including Bilski [enhanced version available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law] (rejecting the broad patent eligibility of business methods), Quanta v. LG [enhanced version / unenhanced version] (broadly reaffirming the principle of patent exhaustion), KSR v. Teleflex [enhanced version / unenhanced version] (rejected a rigid...