WiFi Patent Fight

Previously on this blog we have talked about the patent challenges to wireless technologies posed by Canadian company, Wi-Lan. Now, according to this article on News.com a new challenger to WiFi has emerged, Acacia Research. In that previous post, IP Inferno defended the practice of a small company (Wi-Lan) protecting their intellectual property through patent enforcement. This case seems a bit different.

Acacia Research is described by News.com as a "patent warehouse." The patent in question was originally developed by a company called LodgNet Entertainment and was purchased by Acacia this past July. The strategy seems to have worked well for Acacia. According to the company's own press release they have signed 200 licensees for a streaming media patent which they have also been enforcing.

The idea of a special entity designed for the purpose of enforcing patents has some interesting pros and cons. On the "pro" side, it can be very difficult for an operating business to enforce their own patents. First of all it is expensive and time consuming, distracting the business from its core activities. Secondly, given the large patent portfolios of bigger companies, a small company seeking to enforce its patent rights must always worry about the bigger company coming after them with their own patent portfolio (legitimatly or not). Finally, customers often see a patent fight as a negative -- is the vendor focused on the right issues? Building a great product? Supporting customers? Or enriching lawyers? So it can be bad PR to protect your patents as a small company. Also on the "pro" side, an independent licensing entity does not have a conflict of interest in granting patent licenses in that they do not compete with the licensees. Thus there is a hope for "commercially reasonable" license terms.

On the "con" side, a special purpose entity enforcing patents has no reason to compromise with licensees, so litigation can go on indefinitely. Part of the strategy of a patent licensee is to exhaust the potential licensees willingness and ability to fight in court. This dynamic can allow bad patents to exact a tax on businesses unreasonably. Think of it as "protection money." Also on the "con" side, a licensing entity is not protecting their own specific business use of a patent, they are seeking as broad a definition of the patent as possible in order to rope in as many licensees as possible. Thus this trend of "patent warehousing" may lead to much broader patent claims being made. While this may make patents harder to enforce in the long run, as a tool for exacting "protection money" it could prove quite lucrative.

What do you think? Does patent enforcement, particularly through this special purpose entities hinder business innovation? Or encourage core research?