What is a Patent Troll?

Patent trolls are individuals or companies that exploit patents and the court system for financial gain, rather than producing their own goods or services. The individuals who file these patent claims do not actually develop a product or service. Instead, their strategy revolves around taking advantage of structural weaknesses within the United States patent and court systems to generate revenue. In spite of how it may seem, patent trolling is indeed a legal business practice. 

Key Takeaways

• Patent trolls are people or companies that use patents as legal weapons, rather than creating their products or services.
• Lawsuits and even threats of legal action are part of the business of trolls.
• The practice of patent trolling is generally legal.

How Does Patent Trolling Work?

There are many ways in which a patent troll can earn money without ever intending to use the patent. Usually, they will send letters to distressed firms in need of liquidity and buy their patents outright. Following this, the trolls search for their targets, which mainly are companies that use similar designs or processes to the patents they own. As a last step, the troll will sue or threaten to sue those same companies for infringement of patents. As a result, companies often pay licensing fees instead of settling lawsuits in court, which can cost millions of dollars. 

Economic Impact

The filing of unnecessary patents often leads to expensive lawsuits against innovative companies. Instead of concentrating on a core product or hiring necessary workers, a company spends their time and resources on abusive patent lawsuits. Consequently, this hinders innovation and causes long-term damage to the U.S. economy. According to Cornell Law Review, one study estimates that patent trolls cost companies up to $29 billion. According to another survey, small startups bear most of these costs since 41% of them incurred significant operational costs from patent trolls

There is one main point that becomes apparent after reviewing these reports: Patent trolls are costing innovators, and the U.S. economy itself, plenty of money and time. 

Bottom Line

Is your company threatened by patent infringement claims? Are you unsure of what to do about patent trolls? To prevent your business from being damaged by these detrimental legal practices, there are a few important steps to keep in mind. First and foremost, it is highly advised to refrain from signing any licensing agreements without first consulting with a lawyer. Secondly, if you receive a litigation demand from a patent troll, contact your legal counsel immediately. Litigation claims or threats that are ignored can lead to significant consequences. Finally, make sure your company has intellectual property insurance for any products and services it has created.

If you’re facing a patent troll, our patent attorneys are here to provide you with top-tier legal representation.