Business Opportunity Alternatives to Assertion-Based Patent Monetization

The commercial value of a patent derives from the fact that it confers upon its owner a legally enforceable exclusionary right, <i>i.e.,</i> the right to exclude others from operating within the product or process space defined by the patent claims. A patent that current and prospective infringers know will never be asserted against them has zero economic value. Thus, a patent implicitly carries with it the potentiality, <i>i.e.,</i> the threat, of assertion, and the value of the patent ultimately reflects the collective commercial risk that potential infringement litigation targets assign to that threat. On the other hand, patent assertion as a monetization model implies something more. Typically, the assertion entity has no other business and thus is not vulnerable to counterclaims for infringement of its targets' patents. It says to the target, 'We have a patent that covers what you are doing. Pay us a royalty or we will sue you.' The assertion model is essentially a zero-sum game, and the pejorative moniker 'patent trolls' has come into vogue as a way to describe those who exploit this model, although there is considerable controversy surrounding what attributes distinguish a troll from a legitimate patent enforcer. The value proposition for the troll's target is either to pay for a nonexclusive license (or covenant not to sue), or to contest infringement and/or validity of the patent in court and risk a damages award in the form of a reasonable royalty (which may be trebled for willful infringement) &mdash; or worse, the possibility of an injunction.

12 minute read August 29, 2007 at 11:30 AM

By

Ron Laurie