Patent holding company

A patent holding company (PHC) exists to hold patents on behalf of one or more other companies but does not necessarily manufacture products or supply services based upon the patents held.

Patent holding companies may exist for tax reasons^[1] or to simplify administration.^[2] However, PHCs which aggressively seek to enforce patent rights through litigation or threats of litigation are referred to as patent assertion entities (PAEs) or, more pejoratively, patent trolls.^[3][4]

Rationale

Large companies

Large, multinational companies may have many separate divisions in different countries, or within the same country. If a patent is granted in the United States to a European-based arm of a multinational company, the U.S. arm of that same company cannot make use of the invention in the U.S. without infringing the patent.^{[citation needed]} It is also legally dangerous to ignore any infringement of a patent even if that infringement is by an associate company since it might create a legal assumption that you are not intending to defend your patent rights.^{[citation needed]}

Consequently, many multinationals set up a patent holding company in a tax-favourable country or U.S. state (e.g. Switzerland or Delaware) and then sell (i.e. transfer or assign) all of the patent rights for the company as a whole to that patent holding company.^{[citation needed]} The patent holding company can then focus on the task of granting licences to the different divisions of the multi-national as well as to third parties.^{[citation needed]}

Small companies

Similarly, it is not uncommon for a group of small companies to band together to consolidate their patents with one company in the group owning a portfolio of patents while another exploits them.^[2] If these numerous small companies are potentially competitors, they may not trust each other to maintain independent ownership of the various patents.^{[citation needed]} One solution is to set up a new patent holding company which can be jointly managed.^{[citation needed]}

Inventors

Similarly, it is common for independent inventors with valuable technology patents to set up a technology-licensing company and to assign all the patents for their inventions to that company (examples include Kootol and Townshend Intellectual Property, LLC).^{[citation needed]}

Patent trolling

On June 4, 2013, the National Economic Council and Council of Economic Advisers released a report entitled Patent Assertion and U.S. Innovation that found significant harm to the economy from patent assertion entities and made recommendations to address them.^[5] U.S. President Barack Obama also addressed the issue, criticizing companies that did not produce anything themselves and existed only to "leverage and hijack somebody else's idea and see if they can extort some money out of them".^[6][7]

See also

• Patent pool
• Patent portfolio
• Patent thicket
• Patent troll

References