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Don’t think of a Patent Troll

  • 16 December 2014
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“Don’t think of an Elephant” “Don’t think of a Patent Troll”. With the kind permission of George Lakoff we have transferred the title of his famous book “Don’t think of an Elephant” into the world of patents, specifically to the European debate on patent trolls, where an obsession with this term (a little unthought-out in my opinion) is relegating the real importance of the so-called “Non Practice Entities” to the sidelines.

Lets us put these two terms into context.

Patent Trolls

On the one hand we have the term “patent trolls” for labelling opportunistic licensors, a well-known and even fashionable term which does not need more explaining, but is it anything new?

As in other facets of life, history always repeats itself, and what nowadays is the phenomenon of “patent trolls” was, in the middle of the 19th century in the US, that of “patent sharks”. Although today they are focused on the ICT sector, in days gone by they were focused on the railroads and agricultural instruments.

Both came about in the light of legislative changes that created legal loopholes in which it was possible to obtain profits with opportunistic activities, allowing the cost of having a patent and claiming it before a court, with or without reason, to be tiny compared to the profits that could be obtained.

In Europe alone we find ourselves in the midst of an intense debate to recalibrate the system, and the cost of patents and the efficiency of the courts are two of the key topics. Luckily we do not find ourselves before a “New World” to be discovered and the study of these past experiences can teach us a great lesson.

By the way do you know how they solved the problem of the “patent sharks”? That really deserves another blog.

“Non Practice Entities”

On the other hand we have the “Non Practice Entities” (NPEs). Although the term may not be well-known to us, we are familiar with what it stands for, given that this is the definition used for companies or entities that have patents but do not use their technology directly to produce goods or services, as producers of knowledge (universities, individual inventors) or intermediaries (industrial property agents, specialised brokers, investment funds).

They have played an important role particularly in the United States and venerated figures such as Edison and Goodyear form part of this army of inventors who survived thanks to the marketing of their technology by third parties.

We must also note the qualitative step forward implied by the enactment of the Bayh-Dole law in the United States in 1980 which, among other things, allowed and encouraged non-profit groups drawing on federal funds to have patents and sell them. This law largely influenced other legislation, with the first Spanish “Science law” in 1986 being one of the pioneers to reflect this.

The overall analysis of this figure and especially its mode of action in the market of “Non Practice Entities” should be looked closely at in Europe given that, as well as seemingly taking on significant economic relevance in an international context, it has featured in the latest reports of both Japan’s Central Bank and the US Bureau of Economic Analysis (unfortunately we have not found any European study worthy of note) with regards to the study of royalty payment balances. They believe these may be the start of a “pure knowledge market” and which can largely be attributed to the development of “Non Practice Entities”.

Going back to the title of this blog, in my opinion, there is an obvious danger to overusing the fashionable term of “patent trolls” in the European debate, with special fascination for their harmful effects. We can see that the authors who minimise and even see positive aspects in these behaviours, and they exist, have a scarce echo in Europe.

Regardless of whether or not you agree with these (I repeat) opportunistic behaviours, the problem is that this debate has eclipsed all other equally or more interesting realities such as the “Non Practice Entities”, and worse still, many have extended the derogatory term of “Patent trolls” to the modus operandi of “Non Practice Entities”.

If in Europe we are going to recalibrate the system it is essential to reflect seriously on this before tackling anything: this inflated debate on “patent trolls” that we are seeing in Europe could convert the “Non Practice Entities “ into its collateral victim and we miss out on this new “pure knowledge market”.

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