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Claims Without Merit are the Problem, Not Trolls

April 10, 2014

The effort to curb non-practicing entities takes place within a statutory framework that grants inventors the right to transfer a patent, and grants the transferee the right to enforce that patent. Nothing in the Patent Act limits the right of enforcement to operating companies.

The right of a purchaser to enforce a patent is as important to the original patentee as it is to the purchaser. Nortel Networks once dominated the Toronto Stock Exchange, but the company spiraled into irrelevance. Among its last remaining assets were 6000-plus patents and patent applications, which it sold to a consortium of Google’s competitors that outbid Google. The consortium hopes to earn, through its enforcement measures, multiples of its investment, and it hopes to squeeze that money from competitors like Google. Nortel’s creditors and shareholders received $4.5 billion from the sale.

There are indeed activities that harm our patent system. Mass mailing of letters threatening to sue, communicating false information to potential licensors and knowingly filing a lawsuit that is without merit in hopes of a settlement are all conduct that warrants redress.

In response, individual states have started to look for ways to protect individuals and small businesses from baseless assertions of patent infringement. In 2013 the Vermont legislature made it illegal to make a bad faith assertion of patent infringement. Vermont has also sued a patent owner under its existing Consumer Protection Act. Nebraska’s Attorney General introduced an almost identical piece of legislation.

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