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Is every individual inventor a patent troll?

Zachary Silbersher

Unified Patents recently released statistics on patent lawsuit filings.  The statistics show patent filings to be trending downwards fairly significantly from a peak in 2015.  Yet, the statistics also show that the individual inventor, asserting his or her own patent, is behind many patent suits.  Does that matter? 

In a very interesting piece from IAM Media, Richard Lloyd observed that Unified Patents’ statistics in prior years identified patent-filings by NPEs (non-practicing entities.)  Lloyd asked Unified Patents to break out of the composition of NPEs for the past several years.  He discovered that the group, NPE, included several individual inventors.  More importantly, he discovered that while NPE assertions were trending downwards, the number of patent filings by individual inventors nearly doubled between 2014 and 2018.

According to Unified Patents, these individual inventors comprise a significant portion of NPEs who are stifling R&D in the U.S. today.  In its 3Q2018 Patent Dispute Report, Unified Patents concludes,

“Unified is committed to protecting innovators and entrepreneurs by eliminating bad patent assertions against SMEs. Studies have shown that SMEs invest in less R&D and become less innovative after being sued. As seen in the figures below, NPEs have continued to use district court as a means to extract payments from SMEs in 2018.”

So, who are these individual inventors who are stifling R&D in our economy?  We have have worked on behalf of individual inventors who have asserted their own patents.  In one case, the inventor spent years working on his individual inventions, including teaching himself CAD so that he could create his patent drawings himself.  In another case, the inventor won a start-up award, and met with more than 50 companies attempting to license the technology.  In another case, the inventor’s startup was run out of business when a certain BigTech company launched a competing service offered for free.

In their view, these individual inventors followed the rules.  They applied for patents, attempted to commercialize them, and eventually sued when they identified what they viewed to be infringement.  Yet, the narrative around the purported scourge of the “patent troll” is that any non-practicing entity asserting a patent is necessarily stifling R&D within the economy.  Those statistics perpetuate, even though the stories from the frontlines of patent suits commenced by individual inventors don’t always bear that out. 

What about the other non-practicing entities?—the ones that are not owned by individual inventors?  In many cases, those NPEs are acting on behalf of individual inventors.  Generating licensing revenue from a patent, which in today’s climate often requires time, money and resources to launch multi-year litigations, is expensive.  That expense is often multiples of the cost of acquiring the underlying patent in the first instance.  Indeed, this is why patent-assertion entities often exist in the first place—to provide the resources for individual inventors, as well as other patent-holders, to pursue recourse for an infringed patent.

Nonetheless, the narrative persists that if you hold a patent, and you are a non-practicing entity—even if it is your patent, and your invention—then you are nothing short of a patent troll.  I don’t begrudge Unified Patents for aiding this narrative.  (To be clear, I am not aware that Unified Patents has ever called anyone a patent troll.)  Unified Patents fills a different demand within the market, namely, to provide an efficient alternative to defending patent-infringement lawsuits, including providing data and statistics around this space.  It is fair for them to spin the statistics to support the demand they are trying to fill. 

But, despite perpetuation of the narrative that asserting-patent-plus-not-practicing-it-equals-bad, no one is expending any significant political capital trying to change the Patent Statute to require that enforcement of a patent requires that the patent-holder is a practicing entity.   

Nor is it likely that will ever happen.   IBM generates material revenue from licensing patents that it does not practice.  Facebook has no qualms asserting patents that it does not practice when it suits its interests.  The list goes on, and multiple BigTech companies recognize that there is a time and place for asserting patents that you do not necessarily practice. 

Does the blurring and skewing of the definition of NPE actually matter?  Yes, because those statistics entrench bias, drive policy and eventually lead to court decisions and legislation.  This is especially so for an issue—patent reform—that is not front of mind within the collective conscious.

As Richard Lloyd commented, “it is one thing for politicians to vote through legislation that they believe will almost entirely affect faceless entities set-up solely to exploit the cost of US litigation, it is quite another for them to sign off on laws that could have a negative impact on the next Thomas Edison, Charles Goodyear or Alexander Graham Bell.”