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Patent assertion entities that do not engage in abusive litigation are often burdened by the association with the term "patent troll." [http://www.bna.com/challenges-of-defining-a-patent-troll/] Proposed patent legislation in the 114th Congress fails to make a clear distinction between PAEs and patent trolls. The House Innovation Act (H.R. 9) and the Senate PATENT Act (S. 1137), two major bills proposing patent reform in the current Congress, do not differentiate between legitimate patent holders and patent trolls and threaten to make litigation even more costly and risky for all patent holders.
The patent market is In illiquid, meaning that assets markets where asets cannot be sold or exchanged easily. In illiquid markets, specialized intermediaries, like patent assertion entities, can help match patent holders to patent buyers and transfer ideas and technology from inventors to manufacturers effectively. This allows inventors to focus on innovation while benefiting from the knowledge and connections that intermediaries possess. Patent assertion entities are able to incentivize innovation through the effective brokerage of patents. [https://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf] They manage risks for small inventors and inform manufacturers or inventors of the usefulness of having another inventor's patent in their patent portfolio. [http://www.bna.com/challenges-of-defining-a-patent-troll/] PAE litigation increased with the rise of technological innovation in the twenty-first century, but this does not mean that PAEs have stifled innovation with increased amounts of litigation. Rather, patent assertion entities lose 92 percent of trial cases based on merits. Some believe that this is a sign that PAEs do not have valid claims to the patents they possess; however, PAEs fail trial cases because they do not always properly show infringement. Because PAEs do not manufacture or sell products, they are not liable to counterclaims. This makes them more likely to make weak infringement claims, which leads to a lower-than-average success rate in cases ruled on merit. [https://www.fas.org/sgp/crs/misc/R42668.pdf]
Legislators propose granting Skeptics of the Federal Trade Commission Commission’s (FTC) more power to enforce demand letters effectiveness may question how well the commission would handle patent trolls that have heavy financial and curb patent troll activitylitigation muscle. However, their efforts are misguided given these skeptics should remember that the Federal Trade Commission has already demonstrated willingness and ability to address patent trolls. In the 2014 investigation regarding MPHJ Technology Investments, LLC, the FTC found more than 16,000 demand letters sent to small businesses. Subsequently, the FTC prohibited MPHJ from asserting "false or unsubstantiated representations" regarding a patent's licensing activity or the potentiality and imminence of a lawsuit.[https://www.ftc.gov/system/files/documents/cases/150317mphjtechdo.pdf] However, the FTC did not award any damages to small businesses that fell victim to this patent troll.
Authors of The bad faith standard in legislation such as the [[Targeting Rogue and Opaque Letters (TROL) Act]] may argue provides a high standard that their proposed legislation creates more power for the FTC to determine "bad faith" demand lettersmust meet in its patent trolls investigations. Bad faith refers to "'clear and convincing evidence' that the infringement assertions are 'objectively baseless' to avoid dismissal on summary judgment or a motion to dismiss."[http://patentlyo.com/patent/2013/05/what-is-happening-in-vermont-patent-law-reform-from-the-bottom-up.html] HoweverIn the case of an FTC investigation, the commission would have to show that a demand letter written by an alleged patent troll demonstrated bad faith assertions. Some examples of these bad faith assertions include, but are not limited to, falsely claiming the existence of a pending lawsuit, previous patent infringements, and even the valid ownership of a patent. The authors of the issue brief will note that determining the bad faith nature of bad faith demand letters sets an unreasonably a high standard for the FTC to meet. In order to meet this However, such a high standard, the FTC would have to enter into the demand letter author's state of mind will protect legitimate patent assertion entities against unreasonable investigations and determine that the author's assertions are "objectively baselesssanctions."
*have courts be more consistent on Legislation that enacts sweeping reform of the patent system will not help curb patent troll activity. This type of reform only weakens patent protection for legitimate patent holders and patent trolls alike and does not deter patent trolls from engaging in abusive or frivolous litigation. The [[Innovation Act]] and [[PATENT Act]] would exceed what is needed to reduce the activity done by a small number of patent trolls by raising the costs and risks for all legitimate patent holders to enforce their rulings patent rights in court or defend themselves from larger companies. Any legislation that would alter the current patent system should target the specific actions used by patent trolls and procedures (so should not everyone goes propose broad reforms that change the procedure used to enforce patents. For example, legislation like the recently proposed [[STRONG Patents Act]] gives the FTC the power to Edetermine that certain demand letters are in "bad faith" and penalize the companies that issue these letters, but also specifically protects mistakes that were made in good faith.D Congress last passed comprehensive patent reform only five years ago, in 2011, and the unintended consequences from those changes are still appearing. [https://www.congress.gov/bill/114th-congress/senate-bill/632/text#toc-id645863c82106422dbabf0358ad52716d] Without carefully analyzing the potential effects of broad reform, Congress should not rush to combat the small amount of abusive litigation activity with sweeping changes that negatively affect everyone. Texas ==Comment/Notes== General notes:*Statistics and facts should be drawn less from case studies*Take a look at the top 10 patent trolls identified by Unified Patents, quick look at whether they are patent trolls*Estimate of how many more patent trolls there are?*Read Jim Besson’s paper (Albert is writing a lit review on it)*Look at literature on trolls What is a Patent Troll section:*First statistical fact is a case study fact. “MPHJ sent demand letters to more than 16,000 small businesses, each letter demanding license fees of at least $1000 per worker”. Less case study ish, more specific regulation data Why PAEs are good for Innovation and Small Businesses:*“Most small and medium-sized businesses are unable to afford the costs associated with patent litigation and are prevented from commercializing or licensing over 95 percent of current active patents” is not from a reliable cited source sources that targets show legal fees for patent litigation is 20,000. get real article. what are the costs associated? mean revenue of small business is this, cost of prosecuting patent owners acting in bad faithinfringement lawsuit is estimated at this…, therefore… “Therefore, many smaller-sized businesses rely on patent assertion entities to protect their patents and defend against expensive litigation.” not true. many small businesses don’t own patents. *innovation act “patent assertion entities can help match patent holders to patent buyers and transfer ideas and technology from inventors to manufacturers effectively.” not righttrue. they sue people who have infringed on the patent. patent auctions match people. US census bureau fact. 90% of small businesses have under 20 employeesShow small businesses cannot afford this amount of money. SBA fact is wrong. My Sectionsystematic number, number of demand letters by FTC, STRONG patents act betterinstead of case study. “appears to be, could be, might be” intellectual ventures legitimate patent monetization firm. Describe it, buys and develops own patented technologies. Two problems with this. People x claim that the increase in patent litigation is …there is no evidence to support this. (check there is no evidence) Do we need to empower the FTC?MPHJ – case study don’t have market for ideas but we’d like itpoisoning it with demand letter litigation [[Category:Patent]]
The Truth Behind Patent Trolls Issue Brief (view source)
Revision as of 13:40, 21 September 2020
, 13:40, 21 September 2020no edit summary
{{Project|Has project output=Content,Guide|Has image= |Has title=The Truth Behind Patent Trolls Issue Brief|Has owner=|Has start date=|Has deadline=|Has keywords=|Has sponsor=McNair Center|Has notes=|Has project status=Tabled|Is dependent on=|Does subsume=The Truth About Patent Trolls}} This is the issue brief based off findings in [[The Truth Behind About Patent Trolls]] page.
==Introduction==
<section begin=trolls />
Patent trolls have galvanized legislators to create legal solutions to economic problems. Legislation considered in the current congressional cycle seeks to curb patent troll activity through restricting enforcement methods for patents, such as demand letters. This issue brief is designed to provide an overview of patent troll activity and provide recommendations for proponents of patents and innovation as they seek to curb patent troll activity.
<section end=trolls />
==What is a Patent Troll?==
No agreed-upon definition of patent troll exists. The term patent troll is used interchangeably with the terms non-practicing entities (NPEs) and patent assertion entities (PAEs). Despite similar sounding names, several key differences exist between the three terms.
Non-practicing entities own patents, but do not necessarily create products out of these patents. This behavior is pretty common; 95% of patents are never used commercially [http://www.wired.com/2015/01/fixing-broken-patent-system/]. Universities are examples of non-practicing entities. Faculty members may file for patents based on their work in a laboratory and receive a patent. Then, those faculty move on to a different project and do not use the patent they hold.
Patent assertion entities (PAEs) are a type of non-practicing entity that generate a majority of their revenue through licensing patents they own. For example, a large firm may buy up a thousand patents. Instead of creating products derived from those patents, they license these patents to other firms that wish to create those products. If another firm infringes on a patent, the patent-assertion entity may send a demand letter to the company with a warning. The demand letter warns the infringer that they are subject to a lawsuit if they do not acquire proper licensing of a patent. '''(Maybe present some story to get the point across easier.)'''
These demand letters serve as the tipping point between patent assertion entities and patent trolls. Whereas PAEs assert the fair value of their patent against the infringer, patent trolls inflate the amount of damages felt as a result of infringement. Patent trolls may threaten a firm with exorbitant lawsuit costs, and then provide a quick way out of a lawsuit through a license. The supposed infringer, fearful of a high lawsuit costs, may just pay the licensing fee. However, the supposed infringer may not even have infringed on any patent.
Patent trolls may also target a slew of companies that tangentially intersect the sphere of the patent. One famous example of a patent troll is MPHJ Technology Investment, which who claimed to have patents that cover any networked "scan-to-email" function. MPHJ sent out demand letters to more than 16,000 small businesses. Each , each letter demanded demanding license fees in the of at least $1000 rangeper worker.
*Show venn diagram on patenttrollsdata3.xlsx on sheet 1 if relationship between NPE, PAE, and PT is not clear
==Why Patent Assertion Entities are Good for Innovation and Small Businesses==
The current U.S. patent system restricts the market for innovation with high transaction costs and legal risks. [http://www.wired.com/2015/01/fixing-broken-patent-system/] Most small and medium-sized businesses are unable to afford the costs associated with patent litigation and are prevented from commercializing or licensing over 95 percent of current active patents. [http://www.wired.com/2015/01/fixing-broken-patent-system/] Therefore, many smaller-sized businesses rely on patent assertion entities to protect their patents and defend against expensive litigation. Patent assertion entities aggregate and manage patents and have the expertise to legitimately protect patents from infringement. [https://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf]
According to the U.S. Census Bureau, small businesses (with less than 500 20 employees) made up 9989.7 6 percent of employer firms in the United States in 2012. [httpshttp://wwwsbecouncil.sba.govorg/sitesabout-us/defaultfacts-and-data/files/FAQ_Sept_2012.pdf] Small firms produce more patents per employee than large companies and help drive innovation in the United States economy. The patents they develop have a greater impact and are often more technologically important than those of large firms. [http://www.imamidejo.si/resources/files/doc/analiza%20patentov%20v%20msp%20usa.pdf] The Small Business Administration reported that "although small firms account for only 8 percent of patents granted, they account for 24 percent of the patents in the top 100 emerging clusters." [http://sbecouncil.org/about-us/facts-and-data/] Because small businesses and emerging companies are not always able to protect their patents on their own and account for much of the innovation driving emerging industries today, they need patent assertion entities who have the power to protect their patents for them.
==Are Patent Trolls Really that Big of a Problem? + Why Stricter Demand Letter Requirements Isn't the Solution==
Supporters of current legislation against patent trolls claim that the huge increase in patent litigation cases proves that patent trolls, just like eDekka, are increasing in number and prevalence. Many of them point to stricter demand letter requirements as the solution. The Innovation Act that is currently under consideration in the House demands that any claims of patent infringement must be accompanied by a very specific initial complaint letter, including information such as the name, exact model number, and description of each alleged infringement.
There are two problems with this. First, the increase in patent litigation cannot be attributed to an increase in patent trolls. Patent litigation is increasing, but only because of the uncertain nature of technological advancements and the application of patent claims to these new developments. Patent litigation surges are consistent with major shifts in technological developments. When patent filings and lawsuits are graphed together, both lines have an obviously positive slope, and generally move in tandem. '''(Show the graph)''' There has been an increase in lawsuits, but it is proportional to the increased filings. '''(Show the graph)''' Thus, patent trolls exist but their prevalence has been greatly exaggerated by the media.
Second, stringent demand letter requirements are not an efficient solution to curbing patent trolls. The proposed reforms against demand letters by the Innovation act are too broad; they have the potential to stifle innovation. Patent owners acting in good faith would not be able to legitimately enforce their patent rights, creating an ineffective patent system and reducing the incentives for innovation. Qualcomm Incorporated, one of the leading companies within the telecommunications sector, manages a portfolio that contains at least 13,000 US patents. As a company that relies on the current patent system to protect its innovations, Qualcomm stated that "the appropriate goal of the legislation should be to identify, and empower the FTC to address, only those demand letters that are sent in bad faith" [http://www.ipwatchdog.com/2015/03/04/demand-letter-legislation-must-be-narrowly-tailored/id=55365/].
==Recommendations on Curbing Patent Troll Activity==
