NON-PRACTICING ENTITIES (NPEs)
TECHNOLOGICAL FIRMS
- Often called 'fabless firms', specialize in upstream R&D activities.
- Produce knowledge and new technologies that they then sell to manufacturing firms (located further down the value chain) which use them to develop, produce and sell tangible goods.
PATENT BROKERS
Complementary to technological firms.
Specialize in technology transfer and, more specifically, in intellectual property transfers.
Mediate between technological firms and manufacturing companies on markets for technology.
Buy patents and other intellectual assets from technological firms and then sell them to other firms (mostly manufacturing firms).
Negotiate the transfer of the patent without actually buying it.
PATENT TROLLS
Holders of patents who do not practice the inventions but instead hold large patent portfolios to exact licensing fees from legitimate businesses.
Patent trolls try to provoke hold-up situations, i.e. who do not want to grant licenses (at least not too early), but provoke infringement.
While patent brokers work to grant licenses (they look for customers, advertise their technologies on the Internet, etc.), patent trolls keep their patent portfolios hidden and want to be infringed.
Trolls are not engaged in licensing activities.
The patenting strategy of trolls, therefore, constitutes a hijacking of the primary role of patents. Originally, patents were designed to prevent infringement, whereas trolls use them precisely in order to be infringed.
Delayed infringement has a value for patent trolls because, most of the time, their patents have low value in negotiation (before a manufacturing firm has made sunk investments to manufacture the product), however they become highly valuable post negotiations, after important investments have been sunk by manufacturing firms.
This hold-up strategy enables trolls to earn a disproportionately large fraction of the value of a technology (a fraction far higher than the intrinsic value of the component brought by the troll).
