Patent Trolls - What are they and why are they controversial?

By: Elias Borges, patent & trademark lawyer.

No doubt you have heard the term "patent troll" before and may have wondered what they where and why they were so controversial. States simply, a patent troll is a person or corporation (usually a corporation) which owns a patent for a technology, does not actually market or manufacture the patented technology, and makes money by suing other companies who do market the patented technology. Essentially, the patent troll company buys up old patents and then hunts around for companies who may be infringing on those patents. When the patent troll finds a likely target, they send out a demand letter to the target company and, should that company refuse to pay the license fee/royalty demanded by the patent troll, the patent troll will sue the target company.

Patent trolls are controversial because the troll company does not actually put any effort into marketing the technology itself. As it may be obvious to many, there is a world of difference between patenting a technology and getting that technology into the marketplace. Developing a new technology or product requires considerable effort. In addition to the considerable time and effort required to create the finished product, additional time and effort have to be invested in setting up a distribution network, educating the public about the new product, complying with government regulations, and so forth. It's not unusual for companies to sink literally tens of millions of dollars into developing and marketing a new product. Traditionally, patents were a way for a manufacturer or producer to justify the costs of getting the new product to market, because it guaranteed the manufacturer/producer a monopoly of several years for the product in question. Patent trolls, by suing manufacturers/producers after the product has already been successfully commercialized, reaps much of the profit associated with the new product without having to incur much of the costs and risks involved. This may, and in some cases has, discouraged companies/producers from launching new products.

But how is it possible for patent trolls to sue a manufacturer if the patent troll does not actually make the product? In fact, how can a patent troll sue a manufacturer for a product which the manufacturer has also patented? To understand this, one has to understand the intrinsic paradox of patent law, that a product may be "covered" by several different patents simultaneously, even if those patents are owned by different people. Hence, a manufacturer may invent and perfect a new product and seek to protect it by obtaining a patent for that invention. Since most inventions are simply improvements over already existing products, it's possible that the same invention can be covered by more than one patent - namely the patent for the original product and the patent for the improved product. Also, the manufacturer's new product could theoretically incorporate several different technologies, each technology being protected by a different patent owned by a different person or company. Also, patents are often written so broadly that the patent could cover numerous variations of the same product. The net result is that there are often a large number of different patents which may potentially cover many different types of products.

Since patent trolls don't usually manufacture any products, how is it that they come to own patents in the first place? There are two general methods. Usually, a patent troll will actively search for older patents which are still in force, are owned by individuals or small companies, and which relate to products which are already successful in the marketplace. When the patent troll finds a promising patent, the troll reviews the patent carefully to determine if the patent is likely being massively infringed by a large manufacturer with deep pockets. If the patent is being infringed, the troll contacts the patent's owner, and offers to buy or get an exclusive license for the patent. When the patent is purchased/licensed, the troll then contacts the manufacturer with the demand letter.

In some cases, individual or smaller companies which own one or more patents may contact a patent troll in the hopes of convincing the patent troll to take a license in the patents and pursue legal action against the potential infringing manufacturer. Many patent trolls purchase or license large inventories of patents in the hopes of successfully enforcing a few of them against unsuspecting manufacturers.

There are many commentators who believe that patent trolling is very harmful, as it may discourage companies from taking the risk of introducing new products into the marketplace. While this is a serious concern, manufacturers can take measures to protect themselves against patent trolls, most notably by conducting extensive patent searches before introducing a new product into the marketplace.

Patent trolling is not a modern phenomenon. Indeed, Jerome Lemelson, a well known and very successful patent troll, plied his trade decades ago (and amassed a huge fortune in the process). Given how lucrative patent trolling can be, it is unlikely that patent trolling is something that will end in the near future.