Blog 16: Definition of Non-Practicing Entities (NPEs)

A non-practicing entity (NPE) holds a patent for a product or process but has no intentions of developing it. Basically an NPE is any entity that earns or plans to earn the majority of its revenue from the licensing or enforcement of its patents.

Because they do not sell products or services, NPEs typically do not infringe on the patent rights contained in others’ patent portfolios. Thus, they are essentially safe from any threats of counter-assertion. For companies facing it, NPE litigation is therefore particularly challenging. It can be highly distracting to management, which must pay money to outside counsel to defend itself, or to the “other side” in order to secure a license, or both.

A patent troll is one type of non-practicing entity. Patent trolls amass large numbers of patents with the intention of launching patent infringement suits against companies and individuals that they maintain have illegally used some element of something for which they hold the patent. In the United States, the Federal Trade Commission uses the term patent assertion entities (PAEs) to distinguish patent trolls from non-practicing entities that have different motives.

Patent licensing by non-practicing entities (NPEs) is an increasingly argumentative topic. Sometimes it is referred to as “patent trolls” (a pejorative for all sorts of individuals and corporate entities seeking to enforce their patent rights), NPEs pose particular challenges to companies and often attract their rage and criticism. To even the rhetorical score, defenders of NPEs have begun to paint large technology companies as “serial infringers” that deserve these attacks of patent infringement litigation they currently face.

Read more about NPEs here: https://www.patentfreedom.com/about-npes/background/