Most people know that the U.S. Patent and Trademark Office (USPTO) encourages innovation by protecting intellectual property by issuing patents to inventors. The United States Federal District Court is responsible for adjudicating cases of infringement. The International Trade Commission (ITC) also plays a role in protecting intellectual property by reviewing patent infringement claims relating to imported goods. Unfortunately, the ITC is often leveraged by bad actors to stop the importation of products manufactured by legitimate companies. These fly-by-night firms known as “non-practicing entities” can hinder innovation while handsomely rewarding troll companies.
Non-practicing entities (NPEs), often called “patent trolls,” are businesses that produce no products and offer no services, but instead are engaged solely in patent “monetization” — a nice word for using patent infringement claims to extort licensing fees. They typically acquire as many patents as possible, which often are available to them because they are weak, marginal or vague. The trolls then sift through the patents looking for ones connected in any way to industries so they can file litigation claiming their patent rights have been violated. The objective for these trolls is to extract a large payout from the legitimate company. The money funds the next round of patent litigation against the next company that the NPE targets in a seemingly endless cycle of costly litigation, settlement, and new litigation. This is the patent troll’s business model — a version of wash, rinse and repeat to great effect and profitability.
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