Of Patent Rights and Unreasonable Taxation

In this post, Thom Kobayashi tackles the highly-sensitive issue of NPEs and patent rights from an unusual perspective.

There’s a lot of negative press around Non-Practicing Entities (NPEs).  So much so that it looks like it might be one of the few things Congress and the President can agree on.  But to me it is not that simple, and a topic on which reasonable people can disagree.  It was not always like this. 

When I started in the IP world 8 years ago, it was a pretty small space.  I was just getting out of Business School after a 20-year career in Semiconductor Manufacturing.  A patent attorney friend of mine ended up offering me an opportunity to help out with some overflow work while I looked for a “real job”.  After a couple of years of that I got offered a gig at a big licensing company in the NW United States. Back then, patents were more of an afterthought.  Sure “Rembrandts in the Attic” had already been published, but there was not playbook to monetize your portfolio

Having studied the venture capital cycle in school, I came to appreciate that as a start-up, your patents were really important for two reasons.  First, they kept the big, established players in a market from simply copying your technology and using their supply chain and economies of scale to put you out of business.  Second, they were also used as a financial instrument to secure the loans for your business.  In an increasingly web-based world, the financial institutions wanted more than a handshake to secure their funds. 

So I look at the term Non-Practicing Entity, and I see an entrepreneur that had his technology ruthlessly copied by a larger competitor so that he was unable to compete on features and was forced out of business by price.  I also see the Venture group that funded that good idea, now in possession of some IP that has clear commercial impact.

When I started, these folks were the entities that were considered the engine of the US economy and the people the patent law was supposed to protect.  Patents were there to make it possible to invest in new ideas and small businesses so that they could take advantage of the their own unlimited growth potential.  Patents were there to help tear down the old to make room for the new.  IP was the one place where the small could face off against the big and defend their products on an equal footing. 

I understand that people can take advantage of the system as it stands, and we may need to change things - but for over 200 years, the entrepreneur and the investor have built this country into the biggest economic engine on the planet.  My fear is that in order to solve one problem we will indeed ‘throw out the baby with the bathwater’.  The patent right to prohibition has been key to forcing out the past to make room for the future.  Let’s keep in mind that with whatever flaws might exist, the patent system allows for investment in invention.

Leave a Comment