This chapter reviews studies of non-practicing entities (NPEs) (aka “patent trolls”) and their effect on the United States patent system. The information presented is not intended to pass judgment or persuade readers that NPEs are definitively beneficial or detrimental to the patent system, but rather seeks to inspire readers to assess the issue of NPEs from a more informed and detailed perspective. There are varying opinions and interpretations regarding NPEs, their behavior, and the effects of their behavior. Current empirical studies offer mixed evidence and conclusions regarding the effect of NPEs on the patent system. After reading this chapter, a researcher will be capable of determining substantial differences in the behavior and characteristics amongst the various types of NPEs. This would further help the researcher to differentiate which kinds of NPEs’ behavior are detrimental and which are favorable to the patent system.

Intellectual property (IP) law regimes in the United States are designed as trade-offs between protection for creators (inventors, authors, and the like), and the interests of the consuming public. Reform of the patent system does not ascribe to a general idea of optimality or system efficiency, but must address and respond to a complex interplay of economic interests. We characterize the interplay between interested groups, not only with respect to patent law, but also for trademark law, copyright law, and trade secret law. We link stakeholder preferences and economic power to the lobbying power of different economic groups in Congress. This analysis offers a rich assessment of the chances of success, and the ways in which our IP intellectual systems transform and evolve with respect to changing technologies and the economic interests of different groups involved. We provide an overview of the political actors and legal institutions that participate in the creation of IP policy and describe the types of entities that are most interested in driving IP policy.

Section 101 of the Patent Act establishes the baseline for patent eligibility. There are three common law exceptions to statutory subject matter eligibility: abstract ideas, laws of nature and natural phenomena. These exceptions were delineated with the primary goal of preventing a patent from preempting beneficial downstream research and innovation. In 2014, the Supreme Court took steps to clarify the abstract idea exception in Alice Corp. v. CLS Bank. The patents at issue in Alice concerned the use of computers as intermediaries for mitigating settlement risk. After commenting on the ubiquity of computers in modern life, the Supreme Court concluded that the use of a generic computer to execute an abstract idea was too routine and conventional to transform the abstract idea into patent eligible subject matter. In this chapter, we discuss post-Alice cases and the ways that they have applied the ambiguously worded two-part test from Alice. Our initial analysis underscores the continuing importance of the machine-or-transformation test. We also examine the “routine and conventional” analysis and the different types of processes that courts have tended to consider and find to be abstract ideas. For example, a mental task or something that can be figured out using a pen and paper is often considered an abstract idea. There are also several procedural issues that have repeatedly emerged, including the stage of litigation where a Section 101 analysis is appropriate, the importance of claim construction, and the presumption of validity for issued patents under Section 282 of the Patent Act. This chapter also examines recently amended USPTO rules and procedures and how they interact with post-Alice eligibility analysis.