Competitive pressures and rent-seeking behaviors have motivated companies and investors to develop indirect techniques for beneficially exploiting third-party intellectual property rights (IPRs) that qualitatively depart from the direct exploitation tools honed during the past thirty years of the pro-patent era. Among other things, companies have realized that they do not even need to own IPRs in order to consequently benefit from their exploitation. This phenomenon is labeled here “IP privateering” because of its similarities to an historic method of waging war on the high seas. This Article classifies IP privateering as a species of aggressive non-practicing entities (NPEs). The parameters of this newly identified strategy are probed using a variety of methods. The apparent evolution of this indirect IPR exploitation strategy is also traced among companies. A typology for IP privateering is provided that identifies the key variables associated with this strategy. Examples of privateering, both actual and hypothetical are discussed. The identified privateering scenarios, while small in number, have amounted to well over $3 billion in rent collections and have possibly saved sponsoring companies an order of magnitude more in avoided revenue losses. The infrastructure that supports privateering is discussed as well as how a possible patent oversupply may facilitate this strategy. The social utility of privateering is examined from various points of view including corporate, SME, investor, and inventor. Further questions are posed regarding IP privateering and aggressive NPEs (observing that both actors are likely supported financially by participants operating in the investment capital market), the need for ownership transparency in the innovation system, and whether the legislator should more explicitly design an innovation system that includes boundaries for various IPR strategies.
Indirect Exploitation of Intellectual Property Rights By Corporations and Investors
4 Hastings Sci. & Tech. L. J. 1