What is a Patent Troll?
A patent troll is a company or individual that acquires patents for the primary purpose of enforcing them against alleged infringers, rather than using the patents to develop new technologies.
The other terms for patent trolls include:
- Non-Practicing Entities (NPEs) – A neutral term used to describe companies that own patents but do not manufacture products.
- Patent Assertion Entities (PAEs) – A term used to describe companies that enforce patents aggressively for monetary gain.
How do Patent Trolls Operate?
Patent trolls or NPEs operate in the following manner:
- Patent acquisition – Patent trolls purchase patents from struggling companies, bankrupt businesses, or individual inventors.
- Threatening litigation – They send cease and desist letters or file lawsuits against companies allegedly infringing on their patents.
- Seeking quick settlements – Knowing that litigation is expensive, patent trolls often pressure businesses into paying licensing fees instead of fighting costly lawsuits.
Unlike traditional inventors or businesses, patent trolls do not create products or contribute to industry innovation.
What is the Difference between Patent Trolls and Legitimate Patent Holders?
Not all non-practicing entities (NPEs) are patent trolls. Some NPEs legitimately enforce patents to protect their intellectual property rights.
| Feature | Legitimate Patent Holder | Patent Troll (PAE/NPE) |
| Creates products? | Yes | No |
| Uses patents for innovation? | Yes | No |
| Litigates only when necessary? | Yes | No |
| Aggressively files lawsuits? | No | Yes |
| Seeks to block competition? | No | Yes |
Example of a legitimate patent holder: A university research lab that patents new technologies but licenses them to companies for commercial use.
Example of a patent troll: A company that buys old patents and sues businesses indiscriminately, even if the patents are weak or broadly interpreted.
How Patent Trolls affect Businesses?
Patent trolls cost businesses billions of dollars in legal fees and settlements each year. They cause:
#1. High litigation costs – Even frivolous lawsuits can cost companies millions in legal defense.
#2. Disrupt in innovation – Small startups and tech companies divert R&D funds to legal battles instead of developing new products.
#3. Licensing pressure – Many companies pay settlements to avoid lengthy court cases, even if they believe they are not infringing.
Example: The famous “Wi-Fi Patent Troll” case
A patent troll sued coffee shops, hotels, and restaurants for using Wi-Fi routers, claiming they infringed on a generic Wi-Fi technology patent. Instead of fighting lawsuits, many businesses paid settlements to avoid legal fees. The case was eventually overturned, but it demonstrated how patent trolls exploit the legal system.
How to Protect Your Business from Patent Trolls?
Conduct thorough patent research
- Before launching a product, conduct a patent search to identify potential infringement risks.
- Use AI-powered patent analysis tools to assess existing patents in your industry.
Challenge weak patents in court
- Many patents used by trolls are overly broad or invalid. Companies can file a Patent Trial and Appeal Board (PTAB) challenge to invalidate weak patents.
- The Alice Corp. v. CLS Bank (2014) Supreme Court ruling made it easier to invalidate software-related patents commonly used by patent trolls.
Join industry alliances against patent trolls
- Some companies form coalitions to fight patent trolls and share legal defense strategies.
- Example: Google, Apple, and Intel formed a joint defense group to pool resources against patent trolls.
Use defensive patents & cross-licensing
- Large corporations often buy patents to prevent trolls from acquiring them.
- Cross-licensing agreements between companies reduce litigation risks.
Advocate for patent law reform
- Governments are implementing anti-troll measures, such as requiring stronger proof of patent ownership before litigation.
- The U.S. Innovation Act aims to reduce frivolous lawsuits by increasing penalties for abusive patent litigation.
Key Takeaways
- Patent trolls do not create innovations; they exploit the patent system for financial gain.
- Litigation from patent trolls can be costly and disruptive to businesses.
- Small businesses and startups are frequent targets because they lack resources to fight lawsuits.
- Legal strategies like patent research, challenging weak patents, and joining defense alliances can help companies avoid being victims.
- Reforming patent laws is crucial to reducing abusive litigation and protecting true innovators.
Patent trolls have turned the patent system into a business model, extracting billions from companies that should be investing in R&D and innovation. While legal and corporate strategies exist to combat them, the best long-term solution lies in reforming patent laws to prevent frivolous litigation.
Want to safeguard your business from patent trolls?
Use our AI-powered patent search tools to detect potential threats, identify weak patents, and strengthen your patent portfolio. Stay ahead of patent trolls before they target your business.