From Non-Practicing Entities (NPEs) to Non-Practiced Patents (NPPs): A Proposal for a Patent Working Requirement

68 Pages Posted: 16 Sep 2014 Last revised: 23 Oct 2014

Date Written: September 15, 2014

Abstract

Injecting fresh oxygen into the strangled patent troll problem, professors Mark Lemley and Douglas Melamed advised us recently to change our focus from targeting specific entities that unduly burden technology users to addressing the underlying features of the patent system that account for “trollish” profits. Taking Lemley and Melamed’s advice seriously, this proposal focuses on one specific feature of the patent system that it believes to constitute the heart and bones of the troll problem – the legitimacy of non-practiced patents (NPPs). Particularly, it suggests changing the paradigmatic understanding of the troll problem, into one that understands that the patents that are being exploited to impose litigation threats and extract settlements are the real problem, not those who assert them. Because such patents are not developed into actual products or services, their holders are immune to a counterclaim of patent infringement. For the same reason, the likelihood of entering into low-cost, cross-licensing agreements over such patents is almost impossible. NPPs – patents that are not developed promptly into sufficiently commercialized goods – are the essence of the patent troll problem.

Pursuant to this refined conception of the troll problem, and borrowing from trademark law, this proposal contends that a patent working requirement, which requires all patent owners to promptly submit a proof of sufficient patent commercialization to the United States Patent and Trademark Office, excluding those having an acceptable excuse, may solve the patent troll problem. Under this model, the two fundamental features of NPPs that facilitate patent trolling could be no longer sustained. First, all patents will become suspected to a counterclaim of patent infringement. Second, low-cost, cross-licensing agreements will become essential to all patent exploitations. By substantially reducing the amount of NPPs, the proposed model is expected to thwart the assertion of useless patents against operating companies, consequently encouraging innovation and progress. At the same time, because it does not search for “bad actors,” the proposed model will allow different types of entities to operate in the market and support small inventors; so long they promote commercially beneficial inventions.

Keywords: NPEs, patent trolls, patent quality, patent usage, patent reform, working requirement, use in commerce, trademark

Suggested Citation

Perel (Filmar), Maayan, From Non-Practicing Entities (NPEs) to Non-Practiced Patents (NPPs): A Proposal for a Patent Working Requirement (September 15, 2014). University of Cincinnati Law Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2496281 or http://dx.doi.org/10.2139/ssrn.2496281

Maayan Perel (Filmar) (Contact Author)

Netanya Academic College ( email )

1 Unisversity Street
Netanya
Netanya, 31905
Israel

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