There are different types of NPE. Individual inventors in universities and research institute are technically NPEs. These groups of inventors may not pursue the manufacturing and sales of their inventions because of a myriad of reason. Instead, they may license their inventions to others for commercialization or they may choose to sell the patents outright. This is different from start-up companies that have attempted to commercialize their patented technologies. The term NPE is also often used to refer to both small IP holding companies and larger IP aggregators who purchase portfolios of patents from inventors and others for the purpose of monetization. Unlike the universities or research institutes, these NPEs mainly purchase patents of others and enforce those rights as their main business plan or means of revenue. Some NPEs are also referred to as “Patent Trolls”. This is a pejorative term often associated with NPEs which threaten litigation and extort settlements on the basis of weak patents in an opportunistic manner.
Established NPE business model varies in aspects such as size, organizational structures and means of generating revenue. In Chuang A, 2006, “Fixing the Failure of Software Patent Protection: Deterring Patent Trolling by Applying Industry-Specific Patentability Standards” paper, she highlighted five types of companies dominating the NPE scene. She broadly coined them as Trolling Buyer, Trolling Resurrecter, Trolling Developer, Trolling Agent and Trolling Lawyer. She has used the term “trolling” which is a dismissive reference to NPEs. Nevertheless, she has bought up the key essential of the differences between the entities in the NPE ecosystem. In the succeeding paragraph, I will elaborate these different entities in terms of their business and revenue model.
A Trolling Buyer company purchases old or unexploited patents from others and assert patent enforcement against an industry. These...