Rent seeking is one of the most criticized aspects of the modern patent system. A primary adherent to the rent-seeking business model is the “patent troll,” whose income depends on lawsuits against parties that purportedly infringe one of the troll’s patents. These activities create minimal social value, and thus, discouraging this strategy has been a goal of state laws, federal laws, the courts, and the President of the United States. Despite the flurry of activity, the filing of troll lawsuits has not slowed. This Article proposes that patent trolls’ rent-seeking endeavors may be discouraged through an unexpected means: more rent seeking.
Invalidity Assertion Entities (“IAEs”) were an unexpected response to recent amendments to the Patent Act. Similar to patent trolls, IAEs engage in rent seeking. Their business revolves around threatening to invalidate a patent if its owner refuses to pay a demanded sum. The difference between an IAE and a patent troll is that, unlike trolls who allege patent infringement, IAEs argue only that another’s patent is invalid. In this pursuit, IAEs use a newly enacted administrative process called Inter Partes Review (“IPR”), which provides the public a means to challenge the validity of issued patents. This Article discusses why IAEs will rationally choose to target patent trolls and how this discourages troll activity, a policy goal that has been pursued for many years.
This social benefit conflicts with the negative public perception of IAEs. A former Commissioner of Patents has argued this business practice misuses the patent review system, while others have called for wholesale elimination of IAEs. At least one party has been sued for engaging in this type of rent seeking, and unenacted legislation proposed prohibiting use of the patent review system by IAEs.
