Controversy surrounding NPEs | Week 7

Hi Again,

For my second blog post, I wanted to take a closer look into NPE's and their reputation. I was able to research them more to find out the controversy that surrounds these entities! Hope you enjoy this blog post. Looking forward to reading your comments and advice!

To begin, there is a lot of controversy behind non-practicing entities. Are they aggressively breaking down others or are they helping inventors get their fair share? This is a difficult question and it depends on who you are asking. Therefore, its understandable why there is so much controversy surrounding these entities. 

Here are some reasons why there is a lot of controversy surrounding NPEs.

1. The main critics will argue that non-practicing entities could potentially misuse the patent system and as a result demotivate innovation by true innovators 
2. Non-practicing entities are seen as companies that essentially diminish competition within the market (which in the long-run could potentially hinder development and growth of products, because without competition, there is less need to constantly improve products). Because they have the patents but do not create the inventions, they diminish competition which can also cause prices to rise.
3. Although NPEs may claim that they want inventors to receive their fair share, often times, the individual inventors are paid very small amounts in comparison to the NPEs, who earn huge settlements or licensing deals. 
4. Non-practicing entities do not act like actual businesses or true competitors because they do not produce any sort of product or service. Because of this, it is seen that they have unfair trade practices. 
5. Defendants in cases against NPEs cannot counter claim meaning that NPEs are immune to infringement claim or counter claims. 
6. The most common lawsuit that involves a non-practicing entity usually involves a settlement. In fact, 9 out of 10 lawsuits involving NPEs end in a settlement, making critics believe that this is just a money making scheme. 
7. Because of NPEs position (in which they own the patent but do not actually produce any product or service), they are the best positioned for the lawsuits they instigate and are able to extract huge amount of money from the alleged infringers. Additionally, due to the high cost and risk, the infringers are always more inclined to settle. 
8. NPEs are seen as not adding as much value as practicing entities because they are not involved in promoting innovation and new products. They are only focused on protecting patent from others. 

As you can see, there are many reasons why NPEs could be controversial. However, often times, NPEs cause many negative impacts.  In fact, when NPEs accuse a company of patent infringement it negatively affects the value of the company greatly. Additionally, many times the companies NPEs are suing, do not have sufficient funds and are forced to settle. It is understandable then why there is a negative stigma around NPEs. 

An example of a NPE lawsuit is the case between NTP, Inc and Research in Motion (also known as RIM). Essentially, NTP (the non-practicing enterprise) implemented patent infringement suit against RIM which resulted in a settlement of $612.5 million for NTP. However, in this case, some doubts were brought up about the validity of NTP’s patents. There was a review of their questionable patents which led to invalidating some of their patents. Unfortunately, before this took place, NTP and RIM settled their lawsuit in a settlement. RIM agreed to the settlement mainly because their was pressure from its investors and customers who was worried about RIM’s ability to continue its wireless services. 

Above is an example of the influence NPEs can have in the industry. Even though the patents validity was questioned, NTP still received a huge amount of money. 

Overall, I found this issue to be very interesting- what do you all think? Do you believe NPEs can be beneficial? Would love to hear your thoughts. Thanks for reading!