A Discussion on NPE

NPE is Non-Practicing Entity. Other related concepts include patent holding company (PHC), patent assertion entity (PAE) and patent troll. The entities do not innovate on their own, but they own innovative technologies by buying or getting licenses to acquire related intellectual properties. Then they find companies which infringe their patents and profit by signing a patent licensing agreement or winning the lawsuit.

According to statistics, more than 60% of the patent infringement cases in the United States were initiated by NPEs and such lawsuits caused more than 30 billion dollars losses to the defendant. The NPEs initiated litigations not because the infringers grab the market share of theirs. They wanted to get patent royalties from other companies through litigation. Some start-up companies became the targets of NPEs due to lack of accumulation in the field of intellectual property. According to statistics, at least 20% of companies in the United States that lack financial support have experienced infringement lawsuits. Because the cost of litigation in the United States may be much higher than the compensation, many companies chose to compromise. Most of the patent litigations were not open to the public, but settlements were reached through a confidentiality agreement at the public prosecution stage. This has further promoted the development of NPEs in the United States.

There are many different types of NPEs. Some NPEs specialize in patent trading and licensing. These entities generally take more radical strategies and frequently launch infringement lawsuits. Some NPEs hold a large number of patents, and they run the companies by providing patent protection service for customers. These entities are more defensive. Other NPEs are advocated by the government. Their main purpose is to stimulate the vitality of patents, so that the patents can be used to make related productions. These NPEs are not for profit.

No matter what type of NPEs, the commonality is that the NPEs do not implement the technologies but the rights of the patents. Patent implementation means that the patentees implement the patented technologies, manufacture the corresponding products or implement the corresponding methods. Patent enforcement means that the patentees claim the rights of the patents and try to get a higher return from the exclusive rights of the patents. Since patents are legal entitlements, the enforcement of the patents and getting the expected returns are legally permitted even legally encouraged, and it should not be subject to criticism. However, in actual operations, many NPEs which devote themselves to speculate have been born. The purpose of their efforts is not to promote the implementation of the patented technologies, but to find companies that implement the patented technologies. Then the targets of lawsuit are found. Once the targets are found, these NPEs often forces the found companies to pay high infringement fees or sign the patent licenses through threats of litigation. These NPEs received considerable high returns, at the same time, the responding industries suffered a heavy blow. It is completely unfavorable to the development of the entire economic market and increases the cost of the enterprise.

In the face of such NPEs that initiate infringement lawsuits aggressively, even if we subjectively consider they are patent trolls, we can’t sit still waiting for death, but take more active measures. Because the behaviors of these companies are legal under current legal system. The market economy is essentially a competitive economy, and there is no right or wrong. When it comes to fighting with these NPEs, what companies need to do is to learn to use the rules of patent and accumulate in the field of intellectual property. If a company want to win in the market competitions, an important factor is that he can use the rules of intellectual property freely.