Thursday, October 1, 2009

NPE (Non-Practicing Entity) and Patent Reform Bill 2009

By the definition of Wikipedia (, "non-practicing entity" (NPE) is a patent owner who does not manufacture or use the patented invention, but rather than abandoning the right to exclude, an NPE seeks to enforce its right through the negotiation of licenses and litigation.

According to Patent Freedom (, as of December 2008, there are about 220 NPEs and over 800 subsidiaries including such as Intellectual Ventures and InterDigital. NPEs hold more than 16,000 patent families and are involved in more than 2,200 lawsuits (12% of total patent litigations).

Among the NPEs, especially Intellectual Ventures (IV) recently got a media attention due to a declaration of litigation proxy war. Gene Quinn, founder of IPWatchdog, expressed the IV's indirect route to court as "The Empire Strikes Back, Intellectual Ventures Style" (

NPE defenders argued that NPE is a natural evolution of IP business in the knowledge-based
economy. NPE defenders insisted that the NPEs could be appreciated for the valuable secondary market they are creating. These intellectual investors recycle otherwise unused assets and make them part of the productive economy again (

NPE opponents, however, said that the NPEs are hampering US innovation by abusing patent system and imposing heavy litigation cost and licensing fee burden to the companies. Recent written testimony before the Senate Judiciary Committee by Coalition of Patent Fairness ( revealed the negative role of NPEs in innovation promotion and job creation.

The Coalition of Patent Fairness insisted that the current patent system has created a litigation based cottage NPEs. The coalition mentioned that a meaningful reform through passing the Patent Reform Act of 2009 ( will enable US companies to dedicate more resources to technology innovation and the creation of new jobs.

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