On June 4, a White House Task Force released a report boldly claiming that the patent system in this country is seriously flawed and requires prompt corrective legislative and executive action. The White House’s current complaint focuses on frivolous litigation by patent trolls, now dubbed patent assertion entities (PAEs). They were formerly known as non-practicing entities (NPEs).
These entities are “companies that do not make products, but buy up or own patents and sue businesses they claim are infringing on those rights in order to collect licensing fees.” The report claims that they are disrupting technological innovation by engaging in frivolous litigation that places established firms in a hopeless bind: either they must agree to an undeserved cash settlement, or they must litigate in court where they typically prevail, but often at a ruinous cost.
In the words of President Obama, these entities “don’t actually produce anything themselves.” Their business model relies on “leverage[ing] and hijack[ing] somebody else’s idea [to] see if they can extort some money out of them." The report goes on to state: “These entities are commonly known as ‘patent trolls.’ Likewise, the so-called ‘Smartphone Patent Wars’ have ballooned in recent years and today, several major companies spend more on patent litigation and defensive acquisition than on research and development.”
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