In the intellectual property world, a non-practicing entity (NPE) is any party that has obtained a patent they have no intention of using themselves. Why would a business or other party obtain a patent for a product or process they have no plans to use or develop?
To answer this excellent question, you’ll need to understand the different types of NPEs. Let’s look at a few of the more common types.
Those who refrain from using their own work intentionally
Sometimes, universities and research institutions will create or design a process or a piece of equipment or software but will not have the resources needed to develop it. They’ll often authorize the use of their patent by others for their research and development needs. However, holding onto the patent that they’re not utilizing personally will still protect them from having their patent stolen or misused.
DPA and OPA strategies
Some companies use what’s called a defensive patent aggregation (DPA) strategy, where they buy potentially competing patents to avoid being sued by those patent holders in the future. Others engage in offensive patent aggregation (OPA), where they buy patents and then license them to companies or other entities that produce products using those patents. They essentially make their money from licensing fees, not from using the patented technology in question themselves.
There’s another type of NPE, which the Federal Trade Commission refers to by another name and acronym: patent assertion entity (PAE). These are often referred to as patent “trolls.” They purchase a large number of patents, typically from individuals and small businesses, solely to file patent infringement suits against others and charge licensing fees to others who want to use any element of their patent. Oftentimes, they’ll wait until a company has made a large investment in a product and then hit them with a patent infringement claim so that they have no choice but to pay.
Since the percentage of patent lawsuits filed by NPEs is growing, it’s crucial for those with patents to understand the motives of these various types of NPEs. As always, having experienced legal guidance is crucial to protecting your patents and protecting your company from intellectual infringement actions more broadly.