LES Webinar: Software Licensing Trolls: How They Are Monetizing Licensing Agreements And Putting Your Business At Risk

In the recent past, so-called “Patent Trolls” (a derisive term for certain Non-Practicing Entities or “NPEs”), were perceived as exploiting the patent system by amassing low-value portfolios and indiscriminately filing infringement lawsuits for the sole purpose of extracting “cost of defense" settlements. Eventually, their notoriety caught up with them and, due to legislative action and Supreme Court rulings, the heyday of the Patent Troll is largely receding.

 

In a new twist on the same theme, some investment companies and established software giants have begun monetizing software licensing agreements in a similarly exploitative fashion. However, due to the peculiarities of the contractual relationship between licensor/licensee, this emerging breed of Licensing Trolls presents an even greater potential risk to the average business. For example, where claims of patent infringement are subject to the protections of the court system, a claim involving breach of a licensing agreements is initiated by a low-cost software audit. Where the Patent Troll needed to obtain hard-fought injunctions or monetary judgements to carry through on their threats, the License Troll can allege tens of millions of dollars in damages and, absent payment, can unilaterally terminate valuable software rights entirely outside the court system. Finally, License Trolls benefit from the fact that they nearly always operate in the confines of contractually confidential audit proceedings, effectively siloing bewildered licensees and preventing them from the benefit of the experiences of previous targets. As such, combating licensing trolls requires more than a deep understanding of the law and an expertise in the technology at issue – it requires an experienced guide through this emerging shadow market that cannot be readily understood through normal channels.