Patent assertion entities or patent trolls are one of the most troublesome entities in the world of business and intellectual property. Although patent trolls own some patents here and there, they generally do not produce and goods or services. Instead, patent trolls use their patents to sue others.
Why is this strange?
If a business or entity owns a patent, you’d probably think that they are using that patent to protect something. That something usually comes in the form of a product or service. Patent protection helps prevent competitors from stealing or appropriating the product or service. But why would an entity obtain a patent if they don’t have any products or services or have any plans to produce any in the future? Sure, some people pursue a patent because it can be considered an achievement to obtain one. And there’s absolutely nothing wrong with that.
The problem is when someone who has no plans to produce any goods or services uses those patent rights to sue others for monetary gain.
Enter the patent troll
Patent trolls are notorious for using their patent rights to sue others for money. As stated earlier, patent trolls accomplish this by buying patents and then alleging that a party has infringed on their patents. Then they proceed to sue the other party in hopes of getting the other party to settle and pay them. Settlement payouts are generally the patent troll’s main source of income and they would rather get a settlement payout since litigation is very costly. Litigation would require the patent troll to spend millions to defend their patent in court, and the patent troll would probably lose money even if they won.
To read what it feels like to be sued by a patent troll, click here.
Patent trolls can hurt more than your wallet
The cost of litigating against a patent troll is extremely expensive. Fighting patent trolls in lawsuits can easily deplete a business’ bank account. But getting sued can also hurt a company’s stock. The patent troll we’ve been discussing so far is some what the regular or classical kind of troll. The classical kind of troll generally are those who use patent rights but lack intentions to sell products or services. However, there is another kind of patent troll called a reverse patent troll, and the reverse patent troll is is just bad. Instead of hurting your wallet, reverse patent trolls can hurt your stock.
How does a reverse patent troll hurt a company’s stock?
Unlike the regular patent troll, the reverse patent troll uses inter partes review (“IPR”) proceedings to hurt their competition. Inter partes review allows a party to challenge the validity of a patent after the patent issues. Patent trolls in turn use IPR to challenge the validity of the patents of other companies. But why would they do this? The reverse patent troll challenges the validity of other patents as an attempt to hurt a company’s stock. Investors feel less secure when the protection covering the company’s assets are constantly being challenged or destroyed. Moreover, potential buyers are less comfortable buying stock when a company’s IP rights are under attack.
To read more about reverse patent trolls, click here.
To make matters worse
In addition to losing your money, you can get sued for calling someone a patent troll. Some companies don’t like being called a patent troll and will sue you for defamation if you label them as one. Automatic Transactions, LLC (“ATL”) and David Barcelou (“Barcelou”) has sued 13 companies for defamation for calling them a patent troll. Defamation is defined as “[t]he taking from one’s reputation. The offense of injuring a person’s character, fame, or reputation by false and malicious statements. The term seems to be comprehensive of both libel and slander.”
The complaint alleged that the defendant’s ” launched a malicious, defamatory smear campaign” by labeling ATL and Barcelou as patent trolls. So even if you believe a company or individual is a patent troll and they engage in patent troll behavior, you may have to refrain from calling them a patent troll, unless you want to be involved a defamation suit.
To read more about how you can be sued for calling a company a patent troll, click here.
To read ATL’s and Barcelou’s complaint, click here.
What are your thoughts on patent trolls? What about how you can be sued for defamation for calling someone a patent troll? Leave a comment below to let us know what you think!
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Disclaimer: This article is not legal advice. It is only for educational or entertainment purposes only. Please do not use the article or contents of the article without permission. For legal advice and questions, please contact registered patent attorney Vincent LoTempio.