Intellectual Property Bullies in the World of Patent
As someone who represents smaller companies, I am frequently asked about the dangers posed by intellectual property bullies. In this context, a bully is a company that zealously or fraudulently enforces its intellectual property rights at the expense of other companies. Just like bullies in real life, intellectual property bullies come in many shapes and sizes. There are distinct differences between the entities who are overly protective of different types of intellectual property. That is, the variations between people enforcing copyright differ from those enforcing patent rights, and both are different from those enforcing trademark rights.
In patent law, you must have a registration in order to defend your patent rights. In some ways you can think of a patent as a deal between inventors and the government. The government will give an inventor the exclusive right to use (or practice) their invention if the inventor divulges how they made the invention/how it functions. For example, let’s say I run a frozen food company. I may have invented and patented 20 different ways to freeze food, but found that only one of those ways was the best for my business. I would still hold the exclusive rights in freezing food the other 19 ways, even though I was not using them in my own business. Accordingly, I could stop others from freezing food in any of those 19 ways, as they would be violating my patent rights.
Non-Practicing Entities (NPEs) and Patents
This situation creates a market of sorts. Many companies would not want to hold onto the 19 patents that they are not using. Often they sell these patents to other companies who never intend to actually use the invention that the patent covers. These companies are called non-practicing entities, or NPEs. They seek license fees or damage claims from other companies that are using infringing versions of the inventions. NPEs are often very aggressive about defending their patents, as this is their only source of income. They typically have spent a lot of money acquiring the patent registrations they own.
Back to my hypothetical frozen food company. My frozen food competitors might not be surprised to get a demand letter from my company asserting my patent rights. However, what often irritates my competitors is if an unrelated company, one that does not compete in the space itself, sends a cease and desist letter regarding patent rights related to freezing food. Because NPEs enforce rights in inventions from which they will never benefit, many people consider NPEs a bully. I am on the fence about NPEs being a bully, but I do understand the negative perception of them. However, NPEs serve a role in ensuring the original patent holder receives their deserved compensation for their inventions.