Patent trolls: not all bad comes to harm

• English

dchrist@dennemeyer.com,cpauser@dennemeyer.com, external.ngalli@edennemeyer.com

Patent trolls are not the only companies engaging in patent aggregation, which is to build patent portfolios and monetize them beyond manufacturing. Many electronics companies with production capabilities also pursue patent aggregation activities. The impact this activity has on innovation is not a function of the vertical integration of the patentee in question. Instead, it is a factual case-by-case assessment of the specific patent aggregation activity considered.

Low manufacturing costs of today's global electronics product markets drive price competition to almost perfection. Competition shifts to quality and innovation, bringing Intellectual Property, particularly patents, onto center stage. However, quality and innovation depend on costly, trial and error research and development investments whose returns can be hardly achieved through direct sales of patent implementing products alone. Here, patent aggregation comes into play as an alternative path to raise revenue and finance further R&D.

Patent aggregation: more than trolls

Patent aggregation comprises several transactions where patents are treated more as products than as technological inputs. The transferability of patent rights enables such patents-only business, which increasingly happens in electrical engineering industries. Many electronics firms, such as Qualcomm or Huawei, couple end-product sales with patent aggregation practices such as patent licensing and selling (so-called Practicing Entities, PEs). Other firms, with little or no R&D, such as France Brevets or Sisvel, entirely forego manufacturing and specialize in patent aggregation activities (so-called Non-Practicing Entities, NPEs).

As a natural consequence of the property nature of patents, both PEs and NPEs can enforce their patents against infringers. Whether patent aggregation equates with anti-innovative patent troll activity cannot be a summary judgment dependent on the vertical integration of the patentee under scrutiny. Rather, it is a factual case-by-case assessment of the effects on innovation of the specific patent aggregation activity considered. EU competition law warrants such an approach, which ensures a positive relationship between innovation and competition law. In light of technological development, patent aggregation activities can either be proscribed as anti-competitive or justified even if otherwise anti-competitive.

Read more about patent aggregation strategies and their innovation effects by accessing the article published in the December 2019 issue of les Nouvelles.