Patent Troll
What does "Patent Troll" mean in law?
A patent troll, more formally known as a non-practicing entity (NPE) or patent assertion entity (PAE), is a person or company that acquires patents not to develop or commercialize the underlying technology but primarily to extract licensing fees or litigation settlements from companies that are actually making products. Patent trolls exploit the high cost of patent litigation (often millions of dollars) by asserting broad or questionable patents against operating companies and offering to settle for less than the cost of defense. The Alice Corp. v. CLS Bank (2014) decision has been credited with curbing some patent troll activity by invalidating many broadly-worded software patents directed to abstract ideas, and legislative reforms such as fee-shifting provisions have further addressed the problem.
Definition
A patent troll, more formally known as a non-practicing entity (NPE) or patent assertion entity (PAE), is a person or company that acquires patents not to develop or commercialize the underlying technology but primarily to extract licensing fees or litigation settlements from companies that are actually making products. Patent trolls exploit the high cost of patent litigation (often millions of dollars) by asserting broad or questionable patents against operating companies and offering to settle for less than the cost of defense. The Alice Corp. v. CLS Bank (2014) decision has been credited with curbing some patent troll activity by invalidating many broadly-worded software patents directed to abstract ideas, and legislative reforms such as fee-shifting provisions have further addressed the problem.
Example
A shell company purchases a vague patent covering 'online shopping cart' technology and then sends demand letters to hundreds of small e-commerce businesses, offering to settle for $50,000 each rather than face expensive patent litigation.