Patent News

Jan. 27, 2015

The Hill: Congress should regulate behavior, not business-models, when crafting patent legislation, by Prof. Kristen Osenga

This post originally appeared in The Hill on January 27, 2015.

Innovation is serious business, yet much of the debate about the need for patent legislation has failed to reflect that. The notion of “patent trolls” has captured the imagination of the public, policymakers, and academics. This pejorative term has led to the condemnation of individual companies and the denunciation of entire business models, making discussions about patent legislation sound more like a witch hunt than an informed debate. As our nation considers again tinkering with the patent system – a system that drives innovation and places us atop the global economy – we should be making decisions based on facts, not fairy tales.

The term “patent troll” first emerged in 2001 to describe entities that made money licensing patents instead of manufacturing products. Since then, the term has been expanded and used to describe any entity that generates revenue from patent licensing. This broad, catch-all definition of what constitutes a “troll” unfairly tarnishes the name of universities, inventors like Dean Kamen, companies with large R&D budgets such as IBM, and formerly manufacturing entities that now license their technology like Blackberry or Nokia. Unfortunately, this overly broad, and rather unhelpful, use of the term obscures important differences between a firm’s behavior and its business model. Equating licensing activity with bad behavior is likely to irrevocably damage our patent system and the innovation it encourages.

The notion that a licensing business model makes a company a “troll” reflects a questionable and untested assumption that patent licensing is inherently harmful. According to “troll” lore, licensing is always costly and slows the pace of innovation. The other side of the story, however, is rarely told. Patent licensing firms speed up innovation by acting as matchmakers in the market, providing patents to up-and-comers, and facilitating transparency in the patent system. This results in more innovation, providing incentives to inventors and increasing the visibility of technological advances.

Take, for example, firms that previously manufactured products, but have now exited the manufacturing market (what I call “formerly manufacturing entities”). By examining these entities, I believe we can begin to address a serious gap in the traditional “troll” narrative, revealing the need for more precise language and scholarship to guide policy decisions.