What Should Patent Trolls
Be Worried About?

IP News and Information

No One Likes a Troll

Trolls; they always get a bad rap. Whether they live under a bridge and eat goats that dare to cross, or they accumulate a large patent portfolio with the sole purpose of litigating against infringers, trolls usually have a bad reputation. In the patent industry, trolls are not looked upon kindly. They are called “trolls” for a reason. In reality, these companies are really called non-practicing entities, or NPEs, and they are organizations that don’t actually own, manufacturer or market any commercial property. However, NPEs do spend a great deal of effort and money acquiring intellectual property, namely patents, and then fiercely fight to protect those patents. So while they don’t commercialize their IP they do defend it wholeheartedly if anyone else tries to use it for commercial purposes.

Outlook Might Be Tougher for Trolls

It is for that reason that NPEs, or as many prefer to call them, patent trolls, are not well received in the patent industry by most other companies, especially larger ones. However, as we’ve mentioned many times before in this blog space, the patent industry and landscape have changed a lot in recent years and changes are only expected to continue. Those changes are affecting everyone in the patent world, including the so-called “tolls.” In the past, there was very little one could do to stop NPEs from operating with great success. However, the changing patent valuation market is having an affect on NPEs. Thanks to some very significant court rulings in the last couple of years and another unexpected foe, the “trolls” are facing a much tough road.

Banks Are Creating a New Option

The new player in all this is the banking industry. Banks have started to hit the NPEs by financing patent deals. One such deal is the recently announced debt financing by Blackrock to fitness device maker, Jawbone. How does IP fit into this equation? According to recent reports, Jawbone’s parent company is suing wearable activity tracker manufacturer Fitbit, claiming IP infringement. The reason banks are getting involved is because they have found a new way to determine valuation, which is based on credit-return models. However, “one of the best sources of a patent’s value comes from how enforceable it is,” notes IPTrader president Arlen Olsen. That being said, banks and financial institutions are coming up with more credit-based alternatives for monetization. That makes it possible for patents to actually be mortgaged, so-to-speak, in a new and friendlier way.

Wave of the Future?

Having the financial backing of a bank when it comes to protecting and monetizing patents cannot be understated. One of the difficulties companies face is the expense of protecting their IP rights in court. However, with the financial help of a bank or other institution companies can better defend themselves in patent infringement lawsuits. While patent trolls won’t be going away to live under a bridge anytime soon, this shift in the patent landscape is real and it is certain to have an affect on NPEs going forward. How much affect remains to be seen, but the shift in philosophy has certainly begun.