Patent Troll

What Is a Patent Troll?

A patent troll is a derogatory term used to describe a company that uses patent infringement claims to win court judgments for profit or to stifle competition. The term may be used to describe a number of business activities that utilize patents and the court system to earn money.

While the practice of patent trolling is not illegal, a company that acts as a patent troll files patent claims without any intention of ever developing a product or service. The end result is bad faith infringement threats and licensing demands that require companies to spend a significant amount of money to settle these claims without any addition to the public good. A patent troll may also be called a "patent shark," "dealer," "marketer," or "pirate." A patent troll operation may be called a "patent assertion company," "entity," or a "non-manufacturing patentee."

How a Patent Troll Works

A patent troll may use a variety of methods and exploit legal loopholes to generate revenue without producing any material benefits and without any intention to use the patent in question. One analogy for a patent troll's actions would be earning the right to charge tolls on a toll road without performing any kind of improvements to the roadway. Hypothetically, the patent troll would earn money from charging huge fees for the use of the roadway or from imposing severe penalties for anyone who uses the road without knowing the terms of use.

Patent trolls are more common in the U.S. because patent trolls can take advantage of existing structural issues within the U.S. patent and court systems. Patent trolls are less prevalent in Europe because many European countries stipulate that losers in patent claim court cases pay the legal expenses of both parties. This has effectively eliminated a majority of frivolous lawsuits.

In June 2013, former President Barack Obama addressed the U.S. Patent and Trademark Office about the abusive practices of patent trolls: "They don't actually produce anything themselves, they're just trying to essentially leverage and hijack somebody else's idea and see if they can extort some money out of them." In April 2014, the final ruling on the court case, Octane Fitness, LLC v. ICON Health & Fitness, Inc., filed in the U.S. Supreme Court, made it easier for courts to impose the legal expenses of both parties on the losers in patent claim court cases in the future.

The term patent troll may have originated from an educational video, called the Patents Video, produced in 1994 by Paula Natasha Chavez, a U.S. Intellectual Property Law attorney. The goal of the video was to alert corporations and individuals to what some considered the weaponization of patents, as well as to dissuade future patent trolls.

Types of Patent Trolls

Patent trolls may employ one or more the following practices, though understanding the full breadth of patent troll practices would be difficult because of the many methods they use:

• Enforcing a patent without any intent of manufacturing a product or providing a service based on that patent, or without using it to conduct research, or otherwise utilizing it for the greater good
• Pursuing patent infringement claims that are baseless with the intent of stifling competition (These claims are ultimately easier and cheaper for competing companies to settle than to litigate.)
• Buying a patent (usually from a bankrupt company at auction) with the intent of suing a competing company by claiming that it has a product that infringes upon the newly purchased patent
• Any utilization of a patent to enforce patent rights only

Patent trolling may also involve venue shopping. For example, in 2015, 45% of patent cases in the U.S. were filed in the Eastern District of Texas, home to a judge with both patent expertise and a track record of favoring plaintiffs. The U.S. Supreme Court's final ruling in the 2017 court case, TC Heartland LLC v. Kraft Foods Group Brands LLC, has since limited the practice of venue shopping by patent trolls.

When universities or non-profit research institutions file claims for the protection of unutilized patents, it is not typically considered an act of patent trolling.