So what exactly is a patent troll?
A patent troll can be a person or an entity who attempts to enforce or protect patent rights. Typically, the patent troll is on the hunt for patent infringers with the hope of stopping the infringement while collecting money. This pursuit may include a lawsuit or the threat of a lawsuit.
Patent trolls are often companies which own a portfolio of patents. Unique to the troll firm is a strategy to exploit existing users of the patents (i.e. infringers); this path is chosen instead of using the patents for traditional business use such as manufacturing. The business model for the patent trolls is to make money by threatening or filing lawsuits
According to RPX Corporation, a firm that helps reduce company patent-litigation risk, patent trolls in 2012 filed more than 2,900 infringement lawsuits nationwide which nearly six times higher than the number in 2006. (Source: Wikipedia)
Some infringement threats can be described as being done in “bad faith” and may include a lack of specificity about the alleged infringement, extraordinary settlement demands and/or damage claims, and excessive licensing fees. Often these threats include impossibly short deadlines for payment.
The target or possible infringer can include companies that are large or small, with the small firms most unprepared to deal with the threats. Smaller firms and startups are targeted because these firms are often undercapitalized and cannot afford the legal fees necessary to fight the troll. In practice, the smaller firms and startups choose to settle rather than fight.
The US Senate has been monitoring this situation and various pieces of legislation are under review to deal with the trolls. In the meantime, the patent troll thrives.
John Bradley Jackson
Center for Entrepreneurship