Innovation is a core driver of growth, particularly in industries such as technology, manufacturing and e-commerce. However, with innovation comes risk, including the growing threat of “patent trolls.”
Understanding how to respond to these aggressive forms of patent enforcement is essential to protecting your company’s financial stability and long-term strategy.
What is a patent troll?
The term “patent troll” refers to a non-practicing entity (NPE). These are companies or individuals that own patents but don’t use those patents to manufacture products or provide services. Instead, they generate revenue by asserting patent rights against other businesses.
Not all NPE activity is improper, but there could be concerns when the enforcement becomes aggressive, using methods such as:
- Broad or vague infringement claims
- Mass demand letters sent to multiple businesses
- Litigation strategies designed to pressure for quick settlements
These tactics can place significant financial strain on targeted companies, particularly the costs of defending a lawsuit.
Patent trolls often look for businesses that are likely to settle rather than engage in prolonged litigation, including:
- Companies with a traceable and transparent revenue stream
- Businesses using widely adopted technologies
- Organizations lacking in-house legal resources
When faced with a patent demand or lawsuit, it’s essential to resist making a hasty response. Conduct an assessment to understand the scope of the claim, the patent’s validity and whether your products or services actually infringe upon the patent in question.
Furthermore, not all patents are enforceable. Prior art, lack of novelty or issues related to the subject matter could call the patent’s validity into question.
You can challenge the questionable patent through an inter partes review (IPR) with the United States Patent and Trademark Office, which is often a more cost-effective way to resolve the issue. However, it’s important to be prepared if the dispute proceeds to litigation. Fortunately, courts have increasingly scrutinized weak patent claims, which may allow you to seek early dismissal or limit your exposure.
Patent trolls can be disruptive to your business, but with the right legal team and a strategic response, you may be able to successfully defend against unwarranted claims.