The following guest post was written by Steph Kennedy of IP Troll Tracker.
Steph follows the patent industry closely, blogging about the issues surrounding patent litigation and the negative effect it is having on businesses far and wide. In early 2010, she re-started her own software development company (898 Data, LLC) and works from home developing database and web applications. Prior to that, she worked at a major law firm for ten years, and then took consulting assignments in the financial and patent litigation industries.
You know how when you were little and got in trouble? How did you know? If you were raised in the seventies same time period I was, you knew it instantly because your Mom and Dad used your full name: “STEPHANIE JEAN* you get down here this instant!” Nothing good ever came of being called by my full name, which is why, to this day, I go by a derivative of it.
Oddly, I do the same thing with my kids – only since for so long all I had was little boys, I had to insert extra made-up names to get the point across: “MICHAEL STEPHEN LEE FRANCIS JACOB RICHARD, don’t hit your brother over the head with a bat!” Because little boys don’t catch on as quickly as little girls, is what I’m saying.
The use of full names or nicknames or terms of endearment or pejorative titles sticks because they get your attention. This is no less true in the patent realm, where it’s enlightening to take a look at how the name given to companies who assert patents without actually bringing products to the market has changed since the whole Troll era began, circa 2000 if my timeline is correct.
Trolling for a Name
The term “patent troll” was the start. It’s a shameful moniker, as it’s meant to be. Trolls live under bridges and exact a toll for crossing them – bridges they didn’t make and don’t own. More often than not, these bridges are built over the proverbial road less traveled that suddenly became a road heavily traveled. For years, people went over the bridge sporadically (and for free!) but eventually everyone figured out what a great new route it was and then WHAM! The trolls have set up shop and have their hairy-knuckled hands out for payment. By that point, it’s too late to circle back and pick the other fork in the road. So, you know, the name sort of fit what these early patent monetizers were after. They never had then, and still don’t now, any intention of bringing anything to market. All they want to do is get a piece of the action through bullying.
Sometime around 2008, curiously about the same time that Patent Defense Aggregators started popping up, the term Non-Practicing Entities (NPE’s) popped up as well. One could argue that this term was created simply as a way to better explain what this new business model was. They are entities, or companies, that don’t actually practice (i.e., sell products or services) in the industry in which they hold patents and intend to litigate. “Patent Troll” doesn’t mean a whole lot to people outside of the IP world, so I’m guessing the insiders got tired of explaining themselves to investors and came up with this term. I am personally of the opinion that “NPE “ was created because Albritton and Ward got their tighty-whities in a wad in the Eastern District of Texas when the original troll tracker insulted them by using the term “troll”, often accompanied by hilarious images . But that’s just me.
Then the whole university system went and threw a wrench in the works because they too are part of the patent arena, in that the research taking place there is sure to result in a patentable invention or 5,000. Universities want to be known for their football team academics, and therefore aren’t in business to build products. It makes sense though that they would protect their intellectual property, but because they don’t actively seek out offensive, litigious uses for their patents they don’t quite fall under the NPE category. Thus was born a new term “Non-Competing Entity”, or NCE. They patent new ideas that they license out to generate revenue for the school, but have no intention of competing in the marketplace themselves by creating or selling anything. I first heard this term in early 2010 when researching the major patent-holders in the US, some of which happen to be universities. The NCE term is much nicer, and similar to NPE, much more descriptive of the intentions of institutions of higher learning.
An alternative definition of NCE should also be noted. Some industry folks define it as a company that manufactures products using patents that it holds in a particular industry (taking it out of the NPE bucket), but that also holds patents in other industries in which they do not manufacture products. It is in this “non-competing” industry that they then assert their patents, therefore putting them right back in the NPE bucket. They’re like chameleons, these guys. So by that definition, you’d almost be tempted to count an NCE as a ½ troll. Perhaps a troll with normal knuckles instead of hairy ones, or one who trims his nails to a fashionable length and showers more than once a year?
Patent Assertion Entities
The latest term du jour was first introduced by Colleen Chien at Santa Clara University in November of 2010. She calls them Patent Assertion Entities, or PAEs. Similar to NPE, this term is descriptive but without being negative. Anytime you put the word “Non” in front of another word, as in Non-Practicing Entity, the brain interprets it as bad. By focusing on what the industry is (Patents) and what the companies do (Assert), the term is perceived as more neutral.
I’m not exactly sure why we care what the trolls think in terms of how we refer to them, but one way to win at any game is to play nice. By using a label that is informative and contains no negative terminology, one cannot accuse a defendant of stacking the deck or using loaded terms. That’s sort of what it’s all about when these cases get to trial, no? The juries have oftentimes been selected because of a predisposition against Big Business. If the legal team for a big company targeted by a troll (oops… NPE! No no, my bad… PAE!) actually refers to the plaintiff as a “troll”, it says something to the jury. It says “The other side should be in trouble!”, much like it said something to me when my folks used my full name: “You, STEPHANIE JEAN, are in trouble.”
Breaking It Down
To recap, let’s toss in a chart that puts all the major terms in one place with their characteristics spelled out:
|Term||Characteristic Behaviors||Use Cases||Example||Threat Level|
|Patent Troll||Spuriously patent their own inventions or purchase existing patents, often dubious ones. Primary business model is patent monetization in the form of coerced licensing fees and/or threats of litigation.||Used by those on the receiving end of a nastygram, and when trying to incite negative public opinion. Generally accepted term for all serial patent litigators.||Round Rock Research, Wi-Lan, anything with the name Spangenberg in it or behind it.||Gawd-awful|
|NPE||Slightly less egregious, these guys will often participate in the patenting of an invention on behalf of Bob from Boise, Idaho, under the guise that Bob can’t figure out the patent system for himself and/or doesn’t have the money to fund it from petition to Granted status.Like a pure troll, they never intend to bring anything to market, but do on occasion actually help an inventor get his/her patent.||Used when the writer/speaker may have to deal with such a company in the near future, and they don’t want to piss them off is worried about offending someone.||Intellectual Ventures, Acacia Media||Gawd-awful minus a smidge, for the “helping Bob the inventor” thing.|
|NCE1||Patent ideas that come out of university research, and put those patents on the open market to recover money for the R&D it took to get there. Do not typically purchase patents except in the case of a technology transfer with another NCE.||Used sparingly as the definition varies. Studies are starting to exclude this category from troll statistics.||The University of Texas,
Columbia University, etc.
|Neutral; not likely to sue.|
|NCE2||Patent ideas within a specific industry and create products using those patents. Hold patents in other industries that do not compete with their core business and leverage those through assertions.||Ditto above.||Unresearched||Awful, but not Gawd-awful. Could sue, but are able to be sued in return as they have patents in other areas.|
|PAE||See Patent Troll. Other than a more neutral name, I’m not sure there is any difference between the two.||Academia and Government publications/media references.||See above examples||Still Gawd-awful|
Trending Toward Neutrality
What we see then on the timeline of terms is a trend toward neutrality, yet on the timeline of behavior of trolls/NPEs/PAEs, the trend hasn’t changed: they still behave badly, if the number of suits filed is any indication. So what’s in a name? It can be insults or information, depending on what year it is. To be honest, I think we can clear the whole thing up by using my own personally invented term: Lazy People Who Want Something For Nothing, or LPWWSFN.
Fine, Patent Troll it is.
*Name not changed to protect the innocent because I’m not innocent. I totally broke the vase my folks brought back from Korea by playing softball inside after having been warned repeatedly not to… and as punishment, I couldn’t watch Happy Days on Thursday nights for a month. I missed you, Fonzie.