Due in large part to serious misunderstandings of the law and a concerted effort by potential licensees who believe vilifying patent holders to be a cheaper alternative, the very concept of patents has taken a beating in the public consciousness. Conceptually, a patent is intended to incentivize research and development by allowing the patent owner a period of exclusivity to recover the cost of development in exchange for full public disclosure of how to make and use the invention.  Patents also promote experimentation by competitors to find alternative solutions to the same problem.  Patents are generally monetized either by practicing the invention (making a product) or licensing the invention (granting someone else the right to make a product).

Recently, the avenue of licensing an invention has come under attack in the form of a public outcry against “patent trolls.” As with most such public attacks, the definition of a patent troll is left entirely up to the imagination; except that it’s very bad and there are lawyers involved.  To the small business man, a patent troll is someone who threatens a patent infringement lawsuit over some activity that the business man never even knew was patented; to the general public a patent troll is someone who buys patents to demand license fees and never makes a product.  Even the word “troll” is intended to invoke a fairly unpleasant image.  But all entities are not created equal.  Let’s remove the rhetoric and examine a rarely contemplated part of the patent world.

First, a more concrete definition: a non-practicing entity is an organization that exists to own patents and license those patents for a profit. Non-practicing entities do not intend to develop or produce new products.  What then is the value of non-practicing entities to society?

Non-practicing entities can acquire patents one of two ways: they can hire engineers solely for the purpose of thinking of patentable subject matter; or they can buy existing patents. In the first case, a company that employs engineers to think of inventions is doing exactly what the patent laws intended.  There is substantively no difference to the public if those inventions are practiced by the inventor or a licensee; the important point is that ideas now exist that might not have existed otherwise, and they will eventually be free to everyone.

In the second case, the non-practicing entity is providing a market for patents that otherwise would not exist. Patents are notoriously difficult to value because there is no fluid secondary market.  Furthermore, the more conceptually valuable a patent might be (imagine a single patent that applied to the entire internet) the more expensive and impractical it is for a single entity or person to implement.  Obviously large entities with substantial patent portfolios have little need for a secondary patent market, but individuals often cannot capitalize on their inventions or fight protracted legal battles with large entities over the validity of their patents.  Non-practicing entities can conglomerate many disparate patents from many different inventors within a particular field.  Without non-practicing entities to promote inventions in those patents, some or even most might languish in obscurity for their entire twenty year term.

We have made a sociological bargain that the public disclosure of a patent is worth the inconvenience of a limited monopoly. Having received the public disclosure, we cannot complain that the patent holder demands payment to use it, nor should we demand that the owner practice the invention or give up the patent: some people are good at ideas and bad at execution; it would be an additional burden on society to have a great invention only available from a single source that is incompetent at providing it.

The contrary position seems largely based on the erroneous notion that many patents cover “obvious” or ubiquitous ideas.

Patents mostly cover iterative improvements to existing technology. However, in new, quickly developing fields, patents may cover a relatively broader scope because the inventions tend to be of a higher level and more transformative.  At the same time, rapid technological development in the field, coupled with multi-year delays in patent prosecution, tend to make patented inventions seem “obvious” when they issue.  In patent law “obvious” has a special meaning: a claimed invention is “obvious”,  is there some combination of references, available at the time of the invention, that teaches or suggests all of the claimed features.  During examination, the patent examiner looks for published documents that teach the features of the claimed invention, and some reasonable motivation to combine the references.  In new fields of technology, available publications are just not as extensive.

A patent application filed today probably won’t be examined for two years, and may go through another year or two of prosecution before it issues. Of course technology from four years ago seems ubiquitous today, but only because someone invented it four years ago.

Whether or not a patent is valid, and whether or not someone actually infringes that patent, are legal questions. But the notion that a patent owner is not entitled to compensation for use of a patented technology because everyone uses it is absurd.  Transformative technology is what we demand from inventors.