A patent troll lies in the area of intellectual property and in particular licensing. It is the name given to a company or an individual that uses license and patent litigation as its main economic activity. The name “patent troll” was used in 1993 to describe companies that filed multiple patent infringement suits. The term was popularized by Peter Detkin in 2001 while working for Intel.
This type of company is more commonly referred to as a Non-Practice Entity (NPE) because its main characteristic is not to produce any goods or services. This model is like blackmail: the company acquires one or more patents in the technical field that it does not operate itself. It then seeks to license its stock holdings to operate from companies that manufacture the goods or services by threatening a court action for infringement of those patents. This lawsuit is often based on controversial patents whose legal force is weak. Therefore, much of the litigation involving patent trolls is based on software patents or business method patents. Their targets can be both large corporations and small tech companies that cannot raise the necessary funds to try.
Corporations often pay the troll because, at worst, they are prohibited from using the technology claimed in the patent, and at best, legal fees far exceed what the troll demands, even if the case wins. Trolls’ activity is limited to acquiring, evaluating and selling patents.
A troll can also be paid to protect a company from another patent troll. If another patent troll sues the company, the patent troll protector will counter that patent troll with other patents. The patent trolls agree to settle this type of situation amicably.
Note that more and more manufacturing companies are using the services of NPEs to aggressively develop their patent portfolios while obtaining cross-licenses for portfolios held by NPEs.
In 2006, RIM, the maker of BlackBerry mobile phones, paid NTP $612.5 million to settle a lawsuit brought in US courts. Although still mainly concentrated in the US, this practice is already taking place in Europe, as evidenced by the dispute between Nokia and HTC to IPCom.
In order to combat this abuse, a global reflection on the purpose and function of patent law as it is perceived today seems necessary. The activity of patent trolls can restore a balance of power between individual inventors and large groups against which they would otherwise have no defense against patent infringement. The average cost of an infringement lawsuit has reached hundreds of thousands of dollars.
Troll strategies are legal. It is just the right vested in any owner trying to enforce an operating monopoly conferred by obtaining a patent. The definition of NPE could apply to many groups including IBM. This company sells patent licenses in a technical field that it does not operate itself.
The current reform of patent law in the United States raises a debate about the role of these practices. The Obama administration has launched a first set of strong measures capable of curtailing the power of patent trolls. In particular, among the obstacles should be mandatory disclosure in court of any person or entity that may have a financial interest in the complaint. For the Obama administration, the measures have very clear goals of increasing the functional costs of patent trolls, since the upstream work of the court case would be much more important.