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26-Jul-2017 10:51

Of those 79 respondents that received patent demand letters, 13 had revenue of under 0,000 showing how indiscriminate PAEs can be in their patent assertion campaigns.The study, using a comprehensive database of patent litigations developed by defensive patent aggregator RPX Corp., also revealed that at least 55 percent of defendants in lawsuits initiated by PAEs make under million a year in revenue.He specializes in developing IP strategy for young technology companies and blogs on this topic at Startups IP. Patent assertion entities (PAEs or trolls) regularly engage in the practice of sending patent demand letters to unsuspecting startups and small businesses in preparation for going after much larger entities.A patent demand letter is typically sent by a patent holder to a company it believes is infringing the patent, and in the letter, PAEs offer a license to the patent.Further compounding this problem is the fact that small businesses are often prohibited from discussing their strategies in responding (or not responding) to such patent demand letters in public by the license terms offered by the PAE.Thus, each company is left to fend for itself without understanding which strategy works best against the particular PAE they are dealing with.Similarly, the proposed SHIELD Act may force patent trolls to pay the defendant’s legal fees, but the defendant must still first spend time litigating to invalidate or prove non-infringement, and then seek successful collection from the PAE.To address this knowledge and information gap, Professor Chien proposes “collective, self-help-based solutions such as joint defense efforts and industry association groups.” As she further commented for this article, “the costs of assertion have been driven down by PAEs, the costs of defense could also be reduced if companies worked together to promote their common interests, for example in invalidating a patent with which they are threatened.” This is an excellent suggestion that may help reduce the attractiveness of small business to PAEs, but it relies on small businesses overcoming their reluctance to sharing information about being the target of PAEs.

In this way, small business may be considered the appetizer to the large company entrée.Unfortunately, information about easy targets for patent assertion travels quickly among the PAE community in the absence of negotiated confidentiality agreements.Often, licensees of a PAE are even listed on the PAE’s website, giving the other PAEs a list of easy targets.While patent litigation is expected to affect a business, the study’s finding that PAE’s use of demand letters against small companies can have a significant operational impact on those companies is troubling.Professor Chien defines significant operational impact resulting from a demand letter as being a business strategy pivot, product change, delay in hiring or meeting operational milestone, reduction in value of the company, and/or shutdown of the business.

In this way, small business may be considered the appetizer to the large company entrée.Unfortunately, information about easy targets for patent assertion travels quickly among the PAE community in the absence of negotiated confidentiality agreements.Often, licensees of a PAE are even listed on the PAE’s website, giving the other PAEs a list of easy targets.While patent litigation is expected to affect a business, the study’s finding that PAE’s use of demand letters against small companies can have a significant operational impact on those companies is troubling.Professor Chien defines significant operational impact resulting from a demand letter as being a business strategy pivot, product change, delay in hiring or meeting operational milestone, reduction in value of the company, and/or shutdown of the business.Leonid (“Lenny”) Kravets is a patent attorney at Panitch, Schwarze, Belisario and Nadel, LLP in Philadelphia, PA.