The invisible hand of the intellectual market

While recently reading a post at the excellent IAM blog about the acquisition of Core Wireless Licensing (a Luxemburg based company established by Nokia and holding 400 patents families related to wireless technology) by MOSAID (a Canadian NPE) I came across this sentence:

“Critics of NPEs… have always based their condemnation on the fact that NPEs do not produce anything and do not want to produce anything; instead, it is said, they are leeches who seek to suck money from companies that do produce stuff that people want to buy.”

Every time I hear this or similar descriptions of NPEs I have to admit I get slightly irritated. The reason being that I see NPEs as normal actors of a healthy free market. NPEs are in fact filling a licensing niche and playing an big role in commoditizing the IP market and monetizing it (a point that I believe was made by Joff Wild in his blog when explaining the changing role of these organizations). Granted NPEs are the speculators of a flawed patent systems that allows for broad patents to be issued with dubious validity (US being a major culprit) – but this is an issue caused by the patent systems themselves not by NPEs.

NPEs taking advantage of this and the high cost of patent litigation to take money from companies – is again the action of an actor operating in the free market – making decisions based on self-interest, demand, supply and competition. Given that the underlying problem lies with patent systems it is up to individual countries to reduce the number of patents of doubtful quality through patent office quality control and inexpensive pre/post grant invalidity proceedings. The problem is that progress on this front is much slower than needed.

NPEs exist today because there is a market opportunity. To believe that this business opportunity would have been better left alone does not make business sense; to stop and describe their actions as “harmful, greedy, mean, etc.” and spend hours talking about how much harm they are inflicting is in general a waste of time (unless you are lobbying in front of the respective institutions for better patenting systems and more uniform judging standards).

The truth is in business every company is always mean to someone, inflicting harm on someone to a smaller or larger extent (most often the competitors). Who are you mean to? If the answer is no one maybe you should reconsider your actions….

Image credit: MrGiles

7 Comments on “The invisible hand of the intellectual market

  1. The question concerns NPEs is a very interesting. In
    my opinion now we have  signs showing  foundations of a new kind of
    economy, an economy  which  will be based on innovation more than ever. In such economy the role of NPEs and similar business models  are indisputable. I agree that this issue is not simply whether NPEs are harmful or not. This kind of market can be regulated as any other market. The role of patent offices is crucial. A
    significant part of the problem, especially with software patents 
    can be solved by reforming in Patent Offices and relevant legislation .

    Have a nice day

    • Thanks for your
      thoughts Ventsi…. what you think to be the most important step in the next evolution
      of the IP market? 

      • Anna, I think that the future development of the IP market will be multilateral.
        think that on the one hand in the future it is possible to arise something like the
        stock market now ( Wall Street for instance), but this exchange will trades only with IP assets. Thus, companies will be able to deal with their patent portfolios.
        Another option is the emergence of so-called IP banks that exist in some form today. In future, these banks might operate on a professional basis as ordinary banks now. Anyone
        who owns some patents will be able to deposit them in such banks, the Bank
        will manage patent portfolios and after that will provide dividends.
        I believe that in future IP market will become more professional, as
        some controversial moments (such as patent trolls) will be overcome. This type of market will look like any other market now.However, I worry whether IP legislation will evolve at the same rate as market development.
        аз мисля че бъдещото развитие на IP пазара ще бъде многостранно.
        Според мен, от една страна, в бъдеще може да се появи нещо подобно на
        фондовата борса сега, но тази борса за търгува само с IP активи. По този
        начин компаниите ще могат да търгуват със своите патенти портфолиа.
        Друга опция е появата на така наречените IP банки, които съществуват под
        определена форма и сега. В бъдеще тези банки може би ще функционират на
        професионална основа, както обикновените банки сега. Всеки който
        притежава патенти например, ще може да ги влага в такива банки, банката
        ще управлява патентните портфолиа, след което ще предоставя дивиденти.
        Като цяло, аз считам, че в бъдеще IP пазара ще става все по
        професионален, като някой спорни моменти ( например Патентните тролове)
        ще бъдат преодоляни, нещата ще станат професионални. Този вид пазар ще
        изглежда както всеки друг пазар сега.
        Did you mean: Аз се притеснявам обаче дали IP законодателството ще еволюира

        Type text or a website address or translate a document.
        Az se pritesnyavam obache dali IP zakonodatelstvoto shte evolyuira sŭs sŭshtata skorost, kakto razvitieto na pazara.
        Bulgarian to English translation

  2. There are many reasons why the NPE (“patent troll”) business model has fast become dominant in the world of IP. Thomas Edison held over 1,000 patents, but practiced none of them. He invented, which is what he did best, and let others manufacture products from his inventions. If an inventor cannot sue for patent infringement and recover damages, they why should anyone invent anything? Only vigorous patent enforcement rewards inventors for their inventions and incentivizes others to invent.

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