Eluding the Patent Troll “Tax”: Strategies for Energy-Industry and Other Nascent NPE Targets

Over the past decade, the energy sector has experienced an unprecedented explosion of technological innovation and business restructuring. As with telecommunications and personal computing, this burst of creativity has greatly increased consumer choice. It has also greatly increased the number of patent suits filed against energy-sector defendants and has forced yet another industry to reckon with a problem that has plagued technology companies for years: patent trolls.

Non-practicing entities (NPEs), also known as patent-assertion entities or patent trolls, own patents but do not make or sell products based on those patents. Rather, these entities—often formed for the sole purpose of acquiring and enforcing patents—derive most or all of their revenue from monetizing intellectual property through licensing or lawsuits. Energy companies are becoming more welcome targets for NPE suits because they may not have developed strategies for combating such litigation, typically enjoy high profit margins, and rely on constant technical innovation, including technologies that incorporate hardware components.

Federal court dockets in 2015 indicate that NPEs may have found a new target in the energy industry, but their tactics and business models remain the same. Some strategies have been effective in the technology sector and should be helpful to energy companies facing this new challenge. There is, of course, no universal formula for patent troll defense, and deciding how and when to employ each of these strategies is critical. This leads to the final and perhaps most important piece of advice: find experienced counsel that is efficient, knowledgeable about your particular threat, well versed in patent litigation, and has good business sense. Patent litigation counsel must understand the defendant’s company, its products, its industry, and its goals in order to provide effective advice that protects the company from existing suits and does not inhibit its long-term business interests. Armed with a solid strategy, energy companies will be well prepared in the unfortunate but all too likely case that a patent troll happens upon them in the near term.

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