By Anthony S. Volpe
Special to the Legal
The continuing outrage against patent owners deemed nonpracticing entities (NPEs, aka trolls) appears to be part of our schizophrenia over wanting an economy dominated by creative business types and hating the creative business models that foster that domination. It now appears that there are further factures in what should be deemed a bad NPE and what should be considered a good NPE. In a recent congressional hearing, there were distinctions made among patent owners that just buy patents, patents owners that may have done research for some patents and may buy other patents and university research that produces patents that are commercialized by technology transfer departments.
This same division over what should be done with patent portfolios finds its way into many commercial situations. Consider the growing swell of criticism for Kodak’s failure to monetize its patent portfolio before going into bankruptcy. If Kodak had exploited its patent portfolio against commercial entities making products that were not produced by Kodak, would it have been an NPE for those assertions or a creative company that found a way to monetize its patent portfolio and recapture some of its investment in research? Some argue that Kodak and its assertion targets were not competitors, so Kodak, in those circumstances, is acting as an NPE. Others argue that even if Kodak and its assertion targets were not competitors, Kodak has an obligation to shareholders to return value on the money spent on research, regardless of whether it makes an actual product that incorporates the patented technology. Others argue that Kodak is still an NPE because it does not fit the university model of pure research for the educational value of the work, and it cannot hide behind its commercial research efforts. Similar situations present themselves when Google buys Motorola Mobility patents or the Rockstar consortium – Apple, Microsoft, Rim, Ericsson and Sony – buys the Nortel patents.
Many of the same entities that complained about NPEs are now in the same category if the classification for the category is based on the patent owner not producing the product covered by the patent or patents. See the Rockstar website. What all of this really means is that the term is poorly defined and the definition depends on which side you are at a given time.
What seems to be lost in the debate is the fact that patents are property that was developed at a cost to someone. The availability of a market for that someone to recover that cost or even profit is what drives the research in many of the smaller entities that cannot sustain large research budgets. As for companies like Kodak, it is the very availability of the aftermarket for patent portfolios that gives shareholders the best hope of some recovery and, at the same time, causes shareholders to wonder why such a valued asset was not monetized before the company went into bankruptcy.
Anthony S. Volpe, a shareholder at Volpe & Koenig, has corporate and private practice experience in securing, licensing and enforcing all aspects of intellectual property rights. His patent work includes appeals before the USPTO Board of Patent Appeals and interferences and international trade commission, prosecution of patent applications, rendering opinions regarding patentability and enforcement of patent rights.