A New Patent Meme
The patentsphere's propensity to let the inventor be their own lexicographer is in full swing. This time the new addition to the glossary of patent monetization comes from patent insiders. The new patent meme centers around patent monetization-based business models. (The pejorative term patent troll is so platitudinous now.) Much effort has gone into figuring out an accurate name to call the various species of entities that play in this monetization sandbox. The latest meme, or meme-to-be is what to call the patent owners who come out to play.
What's in a name?
First came the differentiation between operating companies and people who don't make products but own patents. The practicing company makes things that use the patents they own. The non-practicing firms, non-practicing entities (NPE), invent things and own patents but don't make products — universities, research institutions and others — instead making money by licensing their patents. The problem was that this group included the academic universe and research firms but also lumped in patent trolls, the pejorative for people who skip the inventing things step.
Federal Trade Commission (FTC) in a concession to organizations that invent stuff but don't make stuff who were offended with being lumped into the same basket as patent trolls, created the term patent-assertion entity (PAE) to discriminate between the various flavors of NPEs who invent things and those who own patents to make money.
The Government Accountability Office (GAO), The audit, evaluation, and investigative arm of the United States Congress then weighed in when it compiled its report on patent litigation mandated by the America Invents Act (AIA). GAO added patent monetization entity (PME) to put a more refined spin on describing the activities involved in making money from patents but not necessarily making things that are covered by the patents.
GAO notes that,
The Federal Trade Commission uses the related term "patent assertion entities" to focus on entities whose business model solely focuses on asserting typically purchased patents. As such, the PME term also encompasses entities that might use third-party NPEs to assert patents for them.Basically when an operating company that owns patents and makes products creates a separate business entity (company) to enforce its patents and make money from them, that business is a patent monetization entity. This is a more refined definition of what others call Patent Privateers, the hired guns of operating companies. Characterizing firms making money from property rights contained in the US Constitution as privateers, a term coined for an armed ship owned (a big company who spins out its patents to a shell company) and officered by private individuals holding a government commission (managed by people who split the take) and authorized for use in war (to go after the competition and anyone else with deep pockets) in the capture of enemy merchant shipping (the cash), is a little to rough for GAO. So, GAO adds PME to the list.
Enter the Patent-Disenfranchised
Acacia Research describes the inventors and patent owners they represent as the Patent-Disenfranchised,
...the patent-disenfranchised are owners of patents that have not successfully converted their patented invention into a profitable product or service, and, therefore, are not generating profits from their patents.Inventors deprived of the rights and privileges bestowed upon them by the grant of a patent. The patent-disenfranchised are the little guys, robbed by the other guys who came along and built businesses and are making money from their inventions.
Despite the dramatic and attention getting name, Acacia has created a powerful definition to describe the predicament of the patent owners it partners with and the nature of their patented inventions,
Inventions that are so far ahead of the technology curve that there was no existing ecosystem that could have supported the patented products or services at the time they were introduced to market; Inventions that can only be deployed in very capital-intensive industries, such as semiconductor fabrication, energy, or medical sectors, but whose owners do not have massive amounts of capital; and Inventions that for one reason or another, including the shifting of cost-effective manufacturing overseas, are no longer being practiced by the patent owner.On the marketing front the firm adds, "Acacia enables patent holders to generate income on their patented inventions." Probably the least inflammatory and most straightforward explanation of what patent trolls do.
While the term is a little melodramatic, patent-disenfranchised is a compelling description that not only explains the inventor's dilemma when someone is makng an product covered by something they patented, it a term that will attract attention and resonate with the new millennials digital native type of technology entrepreneurs and innovators who are the next crowd likely to feel a bit disenfranchised when their own business models are eclipsed by bigger more nimble, better funded businesses. Many of these firms are just starting to invest in obtaining patents for their own essential intellectual property. Instead of viewing PAEs as evil trolls who steal their profits, this is a definition that screams, "beware dude when complaining about the evils of patent trolls, someday you may need a partner to maximize the return on those patents you spent all that money getting."
Here is another level of granularity in the discussions about patent monetization business models. It's all about the optics. This enhanced definition of the PAE business model also goes a long way in discriminating Acacia and some of its serious monetization peers from the unscrupulous patent holders who exhibit the indicia of extortion that is clouding discussions on legitimate patent monetization business models. Other elements remain unchanged. The patent privateers are big guys who spin out shell companies to hide their true identity and the ownership of the patent assets to go after other companies big and small to make money. PAEs are companies that team up with the patent-disenfranchised to create shell companies to hide the their true identity and the ownership of the patent assets to go after other companies big and small to make money. There is little discussion about who the clients of the PAEs are.
Operating companies and research guys split into operating companies and NPEs. NPE bifurcated into a second group, the PAE, because the traditional NPEs didn't want to be lumped in with the unsavory patent trolls in the patent caste system. The GAO to add another fork in the patent monetization dictionary, the PME because not all PAEs are just evil dudes (they are mostly dudes) who buy up patents and go after people for money. PMEs include the agents of big operating companies monetizing their non-correlated, intangible IP assets on behalf of their share holders, a legitimate business.
Acacia Research, a PAE who makes money monetizing patents and frequently takes a beating for it, added to the discourse by coining the term, patent-disenfranchised. In the annals of patent monetization this is the first term to describe the nature of the people who avail themselves of its services. A first at defining the participants in the business models and not just the models themselves. Acacia is recasting the PAE as the advocate of the disenfranchised inventor who invented cool stuff but was either too early to make money or not good at it but is entitled to be paid for their inventions. So begins a new patent meme.
To quote Francis Gurry's on the emerging patent monetization and patent trolling phenomena, "no one knows how to define this phenomenon and to say where the legitimate evolution of technology markets, with a wide and developing range of useful intermediaries, ends and where undesirable behaviour that puts innovation at risk commences. What we do know is that patent assertion entities share in common interest in the exclusion right that a patent confers and not in the underlying knowledge." Acacia may be moving itself closer to the useful intermediaries side of the equation by helping people understand who their customers are. A list of the patents they control would be nice too.