A. Patent Troll Companies

a. 　Patent Troll Companies (hereinafter referred to as PTCs) are individuals or organizations that seek to obtain compensation or licensing fees by asserting their patent rights against those suspected of infringing their patents without conducting any research or development themselves. Instead, they purchase other people's patent rights and aim to generate licensing income by asserting these rights.

b. 　It is said that the peak of PTCs' rise was in the early 2010s in the United States, and they have been on a declining trend since then. However, PTCs still exist, and if you are doing business in the United States, especially in technology (particularly software), it is necessary to prepare countermeasures against them.

c. 　Many PTCs do not practice their own patented inventions (e.g., they do not manufacture or provide services using the inventions they hold patents for). Because of this, they were previously referred to as "Non-Practicing Entities" (NPEs). However, since NPEs also include universities and research institutions, they are now referred to as "Patent Assertion Entities" (PAEs).

d. 　PTCs do not engage in inventing or implementing their inventions; instead, they purchase patents (mainly those that are not practiced and are dormant) and then claim that other businesses implementing technologies related to these patents are infringing their patent rights, demanding licensing fees. They are a particularly troublesome and legally legitimate entity.

e. 　The most vicious PTCs use dubious junk patents to sue small businesses indiscriminately. Even if the party sued knows their technology does not infringe or that the patent is invalid, they may reluctantly settle because they cannot afford the litigation costs. In particular, in the United States, litigation costs are high (ranging from several million yen to hundreds of millions of yen), so many companies find it more cost-effective to settle for several million yen rather than challenge the case. Moreover, if a company does not want to be involved in litigation right before an IPO, it may have to pay a "convenience fee" even if there is no basis in patent law to have the litigation withdrawn. This is a case where it can be called a "patent troll." In these cases, settlements are usually conducted confidentially, making the actual situation difficult to grasp.

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B. What PTCs Attack Is Patent Infringement

　Patent infringement, although there are some slight differences in definitions in each country, is commonly understood in many countries as using, without permission, all the aspects described in the patent claims of a validly registered patent. Practicing the technological ideas means performing activities such as manufacturing, using, providing, lending, part transferring, or applying these technological ideas. An example of this is manufacturing or using products reflecting these technological ideas.

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C. PTCs' Negotiating Tactics

　When PTCs target a party for patent infringement, they legally pursue (1) a claim for injunction, (2) a claim for damages, and (3) a claim for destruction (requiring the disposal of products or equipment using the technological ideas, such as inventories). Depending on the country, there are also criminal penalties for patent infringement. Being recognized as an infringer damages a company’s reputation because it indicates that the company does not respect others' rights (reputation risk).

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D. PTCs' Methods of Acquiring Patents

　A common method for PTCs to acquire patents is to purchase patents or dormant patents from others. Another method is to exploit proprietary methods of obtaining patent information or espionage techniques to obtain patent ideas that they then use to create their patents and employ these registered patents in infringement lawsuits. They look for companies implementing the same or similar technologies to their own purchased or acquired patents and threaten them with "patent infringement" to bring them into patent litigation. Once approached, it puts companies in a dilemma because they do not know what to do.

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E. PTC is Profitable

　The business model of PTCs is designed to be profitable. Specifically, they acquire patents either by obtaining them or purchasing them from others. Then they use the acquired patents to exercise their rights against business companies and receive settlement money. If the acquired settlement money exceeds the investment amount in a short period, the profit becomes larger. PTCs know the going rates for litigation costs, so they use techniques to make settlement amounts appear more attractive (lower) than the litigation costs, making it seem beneficial for the company to pay a settlement. Using these techniques, they can quickly and profitably earn as much money as possible in a short period.

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F. What PTC is Doing is a Legitimate and Lawful Intellectual Property Business

　PTC's activities are a legitimate business dealing with intellectual property rights. In fact, it is not an illegal act. According to various laws including the Civil Law and the Patent Law, it is legal. Therefore, the only proper method to confront PTC head-on is to confront them directly. PTC approaches companies that are either the legitimate right holders or have registered patents that they have acquired themselves, and they ask these companies to license the technology within those patents. An agreement is made on an amount of money that both parties are satisfied with. Since PTC itself does not operate a business, the company being sued cannot counter-sue with a different patent, nor can they enter into cross-license negotiations. The negotiations thus become unilaterally about paying licensing fees, unfair profits, compensation for damages, etc. While the company being sued may have weaknesses from products being stopped, PTC does not have a business that can be stopped, creating a defensive-only strategy against a phantom opponent.

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G. Defense and Countermeasures Against PTC

　Defense Against PTC Investigating and assessing the relationship between the self-product targeted and the PTC's patent claims occurs alongside researching the identity and potential of PTC. If it is found in the assessment that the self-product does not fall within the scope of the patent in question, a response stating so is given. Additionally, an investigation is done to see if other companies in the same industry have received similar claims, and the trends of PTC are understood. 　Unfortunately, if there is any possibility of infringing on the patent in question, a request for invalidation of the patent is made. Since 2010, the patent requirements have become stricter in the United States as well, similar to Japan. Specifically, the criteria for non-obviousness, which corresponds to the progressiveness in Japan, and the criteria for patent eligibility have become stricter. The standards for software-related patents have become quite difficult, making patent invalidation proceedings quite unfavorable for PTC. Thus, it can be effective to start a patent invalidation process as a preemptive measure before being sued by PTC. So, what should be done if targeted by PTC? Here, the basic response is introduced.

a. Early Resolution Brings Countless Harms and No Benefits

Early resolution is harmful with no benefit. Management may think that if it can be resolved early for a lower settlement amount than litigation costs, it should just pay PTC and end it. However, such companies that are willing to pay are a sweet target for PTC.

b. Cross-Licensing Negotiations are Ineffective

Cross-license negotiations are not effective. PTC often does not disclose its business status or engages in no business activities, which makes cross-license negotiations difficult. Their cross-licensing methods do not work with PTC.

c. The Mission of Intellectual Property Managers is to Minimize Settlement Payments

The mission of intellectual property (IP) staff is to minimize settlement fees. A basic method to reject paying settlement fees is to claim that the patents held by PTC have a high possibility of being invalidated by prior art, or that the company's product is not included in their rights. PTC wants to collect settlement fees as quickly as possible, so negotiations are drawn out to lower the settlement amount. It is considered a flaw that allowing PTC to prevail by paying settlement fees minimizes effort and cost. Although many Japanese companies could win against PTC if they seriously fought, many executives pay settlement fees to avoid trouble due to concerns about public image and stock price, resulting in ending litigation.

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H. The Main Battleground is Shifting from Large Corporations to Small and Medium-Sized Enterprises

　The main battlefield has shifted from large companies to small and medium-sized enterprises. Large companies have many intellectual property (IP) staff, so they are starting to adopt the above-mentioned countermeasures. Therefore, the next target for PTC seems to be small and medium-sized enterprises with fewer IP resources.

a. Disclosing Detailed Information About Your Own Technology on Websites, at Academic Conferences, Research Meetings, or Presentations is the Height of Folly

Disclosing detailed information about their own technology on websites, at academic conferences, research meetings, or presentations is a foolish strategy. It is not advisable to post detailed information about their development technology on their own website for the purpose of expanding sales channels. Additionally, regardless of whether the technology is in development or already commercialized, companies should not publicly disclose details about their products or technologies at research meetings, academic conferences, or seminars. PTC conducts espionage activities around the clock, covertly posing as attendees, organizers, or agents at these events, inspecting target companies' websites to steal information about their development technologies. These espionage activities make it easier for PTC to compare its patents with the products of the target company and thus make them more vulnerable targets.

b. Wave Attacks Using Divisional Applications and Related Applications are the True Essence of PTC's Expertise

The true essence of PTC lies in wave attacks using divisional applications or related applications. Skilled external IP personnel and agents, with practical experience in IP litigation and handling PTC, are not commonly found at patent firms, law firms, or large corporations, let alone in small and medium-sized enterprises. PTC takes advantage of this by targeting companies that have insufficient IP resources and experience, causing their IP activities to become dysfunctional. PTC repeatedly attacks these companies with many patents, including divisional patents (dividing a single parent patent into a bundle of ten divisional patents) and demanding exorbitant settlement fees.

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I. Achievements in Patent Troll Countermeasures Services

　At Intellectual Property Strategy Institute Ltd. and Intellectual Property Dispute Resolution Law Firm, we provide a patent troll countermeasure service (defense, repulsion, counterstrategies, and dispute resolution) that integrates four fields: the science and technology field, the civil and criminal litigation legal field, the patent legal field, and the international strategy and technology field. This is an unparalleled, highly specialized expertise that is impossible for patent offices or law firms to achieve. We have consistently delivered successful outcomes, minimizing damages such as compensation payments, unjust enrichment returns, and license fees to the lowest possible levels while ensuring favorable and satisfactory results for our client companies.

　Moreover, based on the successful track record of the intellectual property business mentioned above, we provide a variety of support services (as examples) for post-dispute resolution, including:

•   Intellectual property leak defense strategies for client companies

•   Strategies for managing external announcements and public relations

•   Intellectual property acquisition strategies to ensure clients secure patents and trademarks for their own use, preventing other companies (including PTC) from acquiring rights

•   Strategies to block the acquisition of intellectual property rights by other companies

　These services encompass the formulation, implementation, and management of comprehensive intellectual property strategies.

　Examples of entities we have successfully handled include: Acacia Research Corporation, Intellectual Ventures, InterDigital, IPG (Intellectual Property Group), MOSAID Technologies, Rambus Inc., Rockstar Consortium, Round Rock Research, Tessera Technologies, Walker Digital, Wi-LAN Inc., VirnetX Holding Corporation, Unwired Planet, Optis Cellular Technology, PanOptis Patent Management, Fortress Investment Group, Nimitz Technologies LLC, Mellaconic IP, Lamplight Licensing LLC, Penovia LLC, Allied Security Trust, Mavexar LLC, Adaptix Inc., Round Rock Research LLC, Rockstar Consortium Inc., Intellectual Ventures Management LLC, Acacia Patent Acquisition LLC, Wi-LAN Technologies Inc., Tessera Inc., Rambus Delaware LLC.

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J. Summary

a. PTC is still targeting large companies, but recently, small and medium-sized enterprises (SMEs) with a shortage of staff and experience are also under attack. Not only large companies, but especially SMEs, need to prepare agents to avoid becoming targets and to be ready if approached.

b. Our company provides a unique and highly specialized patent troll countermeasure service (defense, deterrence, countermeasures, dispute settlement) that combines the fields of science and technology, civil and criminal litigation law, patent law, and international strategic technology fields.

This intellectual property business offers a unique long-term and company-embedded position that patent firms and law firms lack. We perform patent searches comparable to those of the U.S. Patent and Trademark Office’s search reports for other companies, constantly monitoring client companies' IP clearances, defending them from patent lawsuits from PTC, and creating an environment where client companies can safely embark on and focus on research and development.

c. In addition to PTC-related services, we also provide various support services, including intellectual property leak defense strategies for client companies, external presentation and publicity management strategies, strategies for obtaining patents and trademarks independently to prevent rights from being taken by other companies including PTC, and strategies to block the acquisition of other companies' intellectual property.

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Intellectual Property Strategy Institute Ltd. and Intellectual Property Dispute Resolution Law Firm