Trolling around the Patent-Antitrust Interface: The Roots of the NPE Challenge and the Role of Antitrust in Patent Reform

Date01 June 2014
Published date01 June 2014
Subject MatterArticle
THE ANTITRUST BUL L E T I N :Vol. 59, N o. 2/Summ er 2014 :221
Trolling around the patent-
antitrust interface: The roots of
the NPE challenge and the role
of antitrust in patent reform
Ov er t he p as t fe w ye ar s, a g ro wi ng n um be r of c ri ti cs h av e
complained that nonpracticing “patent trolls” threaten the American
economy. These entities and their patent monetization practices have
begun to generate inquiries from sources both scholarly and political.
This article sets the stage for the nascent antitrust inquiry into patent
troll s by rev iewi ng th e hist ory of t he pat ent- ant itru st int erfa ce,
showing the relationship between these two bodies of law and
broader economic thought, and demonstrating the ways in which
the—generally positive—recalibration of their interface in recent
decades has created many of our current challenges. In particular, it
focuses on the creation of our contemporary sy stem of very strong
patent rights beginning in the early 1980s and on the ways in which
these ri ghts hav e proven to b e so stron g that the y may be inv ite
anticompetitive abuse.
KEY WORDS:pate nt, antitrus t, patent-ant itrust inter face, non-pr acticing
entity (NPE), patent assertion entity (PAE),patent troll, patent reform
© 2014by Federal Legal Publications, Inc.
* Senior Expert, Keystone Strategy,and President, Informationism, Inc.
Over the past decade or so, patentees known as nonpracticing entities
(NPEs), patent assertion entities (PAEs), or—pejoratively and collo-
quially—“patent trolls”1have attracted a great deal of attention The
strategic and tactical techniques that these entities deploy in monetiz-
ing patents have begun to draw scrutiny and criticism from corners
rarely concerned with intellectual property (IP) issues.2
Specific complaints against NPEs have focused on a dispa rate
array of behavior Perhaps the most common complaint, and the one
most resonant with a broad public, concerns the broadcast of vague
“demand letters.”3NPEs deploying this strategy compile a lengthy
list of companies whose products or services bear some tenuous con-
nection to the NPE’s patents—perhaps nothing more than a shared
keyword —and then write letters con tainin g nonspe cific cl aims of
infringement and offering licenses for far less than the cost of litiga-
tion Given that the cost of litigating a patent suit fully often runs into
the millions of dollars, nuisance settlements can sustain a sizable NPE
busines s At perhaps th e opposite extreme o f sophisticatio n, some
nonpracticing companies that employ only engineers and lawyers
develop large portfolios of cutting-edge patents, and then participate
in industry-wide discussions concerning the adoption of standards.4
222 :THE ANT I T R U S T BULLETIN:Vol. 59, No. 2/Summer 2014
1See, e.g., Joff Wild, The Real Inventors of the Term “Patent Troll” Revealed,
IAM MAGAZINE, Aug. 22, 2008,
2The public concern has even reached the White House—a venue not
known (in any administration) for its attention to intellectual property issues
See, e.g., Ali Sternburg, Obama Acknowledges the Patent Troll Problem, PATENT
PROGRES S, http: //www.pat entprog ress.o rg/2013 /02/14 /obama -ackn owl-
edges-patent-troll-problem-w-transcript/ (last visited Jan. 18, 2014).
3The Electronic Frontier Foundation (EFF) and a coalition of its sup-
porters, for example , have launched an archive o f troll demand letters See
Recent Demand Letters, TROLLING EFFECTS,
/letters (last visited Apr. 22, 2014); and Julie Samuels,A Closer Look at Patent
Troll Demand Letters:A Dangerous Problem That Must Be Fixed, ELECTRONIC
FRONTIER FOUND. (Nov. 5, 2013),
4See, e.g., Symposium: The Use and Abuse of Voluntary Standard-Set-
ting Processes in a Post-Rambus World: Law, Economics, and Competition
Policy,57 ANTITRUST BULL. 1 (2012).
After securing a place in the standard for their technologies—thereby
locking many companies into their patents—these unscrupulous
NPEs reveal previously undisclosed information about the IP rights
they control, placing the locked-in companies at a severe negotiating
disadvantage in their attempts to secure the patent rights needed to
field commercially viable products that adhere to the standard.
Numerous other NPE strategies exist, only some of which are
even arguably objectionable, and any discussion of NPEs must recall
that not every inventor can launch a company implementing patented
technology. The participation of nonpracticing inventors, their legal
representatives, and their successors in interest are critical to the
proper functioning of the patent system; without them, patents would
be little more than tools that the government grants to large, powerful
incumbents seeking to extend and expand their monopolistic or oli-
gopolistic positions. Some of the more Draconian reform proposals
seem oriented toward curbing NPE activity in general rather than
merely selected abusive practices.5
The realization that both selected NPE practices and selected pro-
posed reforms can harm competition shifts the discussion of nonprac-
ticing patentees from the comfortable confines of patent law and
innovation economics to the interface between patent law and
antitrust law.A policy concern that started with a desire of portions of
the patent community to rein in selected abusive practices is widen-
ing to incorporate concerns from across the policy spectrum, explicitly
including those of antitrust lawyers and economists. And while the
antitrust community has long been interested in the sophisticated use
of deception in standard setting, it has only recently broadened its
focus to the full array of NPE strategies.
Antitrust inquiries into allegedly abusive NPE strategies have
been relatively few and far between. To date, NPEs have raised more
antitrust questions than answers. It is thus far too early to provide a
full discussion of the antitrust implications of NPE behavior .This arti-
cle intends instead to set the stage for a discussion that is currently
just beginning. It does so by reviewing the history of the patent-
PAT E N T- A N T I T R U S T IN T E R FA C E :223
5See, e.g., Lisa Shuchman, Caution Urged on Patent Reform, AM.LAW.,
Nov. 11, 2013 (describing the ways in which certain proposals could have a
broad negative effect on small business).

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