Joff Wild

PatentFreedom’s business is spotting NPEs, understanding their activities and sharing information about them with those who have been, or fear they may be about to become, their targets. In Dan McCurdy and Chris Reohr, PatentFreedom is run by two individuals who have a deep understanding of the IP market and its operators. Since it was established in 2009, PatentFreedom’s raison d’etre has been NPEs; it knows NPEs backwards and it probably has more access to more information about them than any other source.

Because of all this, PatentFreedom’s stats are made use of by so many of those studying NPEs and the potential impact they have. It seems to me, therefore, that the first place to start when looking at the kind of information that the firm provides is with it views as to what constitutes an NPE. And this is what it says: “We define an NPE as any entity that earns or plans to earn the majority of its revenue from the licensing or enforcement of its intellectual property.” That means that all those studies that use PatentFreedom stats to assess the impact NPEs have on anything under the sun also have to accept that definition. And it’s a broad one, as I am sure that PatentFreedom itself would accept. It will include many entities that spend an awful lot of money on R&D, including universities and research institutions.

That this is the case is immediately clear when you inspect PatentFreedom’s list of the NPEs with the largest holdings of patents and patent families; on it you’ll find the likes of Rambus, InterDigital, Tessera, WARF, CSIRO and Walker Digital. Alongside these, there are plenty of privateers too; all of which are managing licensing programmes for operating companies that would presumably be doing it themselves if the privateer option were not available. Again, anyone using PatentFreedom’s database to undertake academic research on NPEs might usefully bear that in mind.

Meanwhile, for the backers of the proposed SHIELD legislation recently introduced to Congress, here is some more of what PatentFreedom has to say about NPEs:

NPEs are not all cut from the same cloth. In contrast to widely-held perceptions, approximately 60% of NPEs identified by PatentFreedom are asserting patents originally assigned to them, and another 15% are asserting a blend of originally assigned and acquired patents.

Thus, if PatentFreedom – whose entire business proposition is based on having more information about NPEs than anyone else – is correct, up to 75% of NPEs (under its very broad definition of what that term means) will not be hugely affected by SHIELD whether they win or lose the cases they may bring. This is because, one of the types of entity exempted by SHIELD from its ‘loser pays’ provisions is the “original inventor”; that is: “The inventor, a joint inventor, or in the case of a patent filed by and awarded to an assignee of the original inventor or joint inventor, the original assignee of the patent.”

That said, it is true that the remaining 25% of NPEs may be affected. But here’s the thing: PatentFreedom – which, I stress, has built an entire business proposition on knowing more about what they define as NPEs than anyone else - tells us that it had “profiled” over 680 NPEs as of January 2013. To confirm, that’s not 68,000 or even 6,800, that’s 680 – six hundred and eighty. Let’s be generous here and say the actual number is 700. I make it that of that number, the SHIELD Act may cover as few as 175 – one hundred and seventy five.

Now, let’s be honest here: is it really conceivable that 175 “trolls”, which mostly own just a few patents, are really wreaking so much havoc on US companies and causing them to dramatically cut investment in innovation to such an extent that legislation is required to curtail their activities? Or is it more likely that, in fact, for whatever reason the problem is being vastly exagerrated? Even more to the point, SHIELD will clearly and inarguably strengthen the hand of deep pocket defendants in patent cases when they are fighting battles against less well resourced opponents of any kind; is that a price worth paying because these 175 “trolls” are so vile, so evil and so corrosive that giving big corporates more opportunity to brush aside the little guy is the least worst option when seeking to do something about their activities? Perhaps; but don’t you think it might be worth someone actually trying to find out before this legislation, which is potentially so damaging, is given serious consideration?