Google on Friday joined with BlackBerry, EarthLink and Red Hat to ask the Federal Trade Commission and the U.S. Department of Justice to examine how businesses that sells products or services — operating companies — have taken to outsourcing patent claims to companies that exist solely to litigate — patent assertion entities (PAEs) — as a way of imposing costs on competitors without risk of retaliation.
Technology companies traditionally have preferred to maintain large patent folios for defensive purposes. Filing a patent lawsuit against another technology company armored with patents was believed to be a risky proposition because the litigation would be expensive and the defendant could counter-sue, potentially winning an injunction against the plaintiff’s products.
But recently PAEs, also known as non-practicing entities or as patent trolls, have proven that the investment required to obtain a patent and then file lawsuits asserting infringement is worth the risk when weighed against the potential financial reward. And companies with many patents have realized that they can cross-license their patents to PAEs, thereby allowing them potentially to share in licensing fees or legal judgments without risk of a counter-suit. This practice is sometimes known as privateering, in reference to the former maritime practice by which governments authorized privately operated ships to conduct attacks on their behalf.