Removing the Troll from the Thicket: The Case for Enhancing Patent Maintenance Fees in Relation to the Size of a Patent Owner's Non-Practiced Patent Portfolio

Abstract

The legal literature is replete with discussions of the problems caused by large patent portfolios. While the strongest complaints are about non-practicing entities, or “trolls,” suing in the software and high-tech industries, large patent portfolios can cause competition and gridlock problems even when held by active industry participants. As has been well documented, many of the problems arise from the fact that patent boundaries and validity are often uncertain. Moreover, because assignments of patents need not be registered, and because trolls often use multiple shell companies, it is often difficult to know who owns what patent, or how many patents a particular entity owns. Thus, not only must innovators and firms worry about the size of patent portfolios in the hands of their competitors and trolls, but, even if they are willing to spend substantial time and effort, they may not be able to know all of the potential patent liability they may face, and from whom. It is proposed that patent maintenance fees be increased according to a sliding scale tied to the number of non-practiced patents a patent owner has in its portfolio. Thus, as the size of a firm’s patent portfolio increases, so too does the maintenance fee multiplier charged for all its patents, beginning with the second maintenance fee due date. All patents with common ownership interests would be aggregated in determining the fee enhancement. Because the enhanced fees do not kick in until 7.5 years after issuance, incentives to invent and to disseminate should not be significantly reduced. This proposal will encourage large patent portfolio holders to pare down their holdings by determining which of their older patents are not worth maintaining. This will benefit competitors and new inventors who are currently subject to hold-up problems from large portfolios — many of which are particularly caused by old, low-value patents held en masse.