Patent Trolls: Not All Bad Comes To Harm

Patent trolls are not the only companies engaging in patent aggregation, which is to build patent portfolios and monetize them beyond manufacturing. Many electronics companies with production capabilities also pursue patent aggregation activities. The impact this activity has on innovation is not a function of the vertical integration of the patentee in question. Instead, it is a factual case-by-case assessment of the specific patent aggregation activity considered.

Low manufacturing costs of today's global electronics product markets drive price competition to almost perfection. Competition shifts to quality and innovation, bringing Intellectual Property, particularly patents, onto center stage. However, quality and innovation depend on costly, trial and error research and development investments whose returns can be hardly achieved through direct sales of patent implementing products alone. Here, patent aggregation comes into play as an alternative path to raise revenue and finance further R&D.

Patent aggregation: more than trolls

Patent aggregation comprises several transactions where patents are treated more as products than as technological inputs. The transferability of patent rights enables such patents-only business, which increasingly happens in electrical engineering industries. Many electronics firms, such as Qualcomm or Huawei, couple end-product sales with patent aggregation practices such as patent licensing and selling (so-called Practicing Entities, PEs). Other firms...