NCPA - National Center for Policy Analysis

Combating Patent Trolls

November 6, 2013

American businesses, consumers and lawmakers have grown increasingly frustrated with often frivolous lawsuits filed by so-called "patent trolls," or entities that hold patents and assert them against others but don't design, develop or manufacture any actual products, says attorney Michael Rosen.

Patent trolls are also known as "non-practicing entities" (NPEs) or "patent assertion entities" (PAEs), namely, companies formed with the purpose of threatening or filing suit on the basis of their patent holdings.

The patent statute imposes no requirement that a patent holder actually practice its patent; a patent is a negative, exclusionary right that confers no corresponding responsibility upon the patent holder to design or make anything.

  • Specifically, according to a White House analysis, victims of patent trolls paid $29 billion to fight or settle infringement claims in 2011 alone.
  • In addition, 62 percent of all patent lawsuits in America involve claims by patent trolls -- a marked increase from 2006, when 19 percent of suits involved trolls' claims.
  • Moreover, 40 percent of tech startups who were sued by patent trolls "reported a significant impact on their business."

There is no question that the patent troll problem has worsened in recent years, both in perception and in reality. Several PAEs have begun targeting consumers, end users, and even nonprofits with demand letters and litigation -- attacks that are legally permissible but inherently suspect, as the recipients of those letters and lawsuits are least able and willing to hire attorneys to fight back against them.

We must be skeptical of Congress's ability to confront these issues, and not just because of Washington's recent fiscal fiascoes. Striking a balance between patent rights and consumer protection in the context of patent litigation is not one of Congress's strengths.

Source: Michael M. Rosen, "The Right Way to Combat Patent Trolls," The American, October 22, 2013.


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