What is a patent troll?

Here’s my working definition of the confusing term: Patent Troll.

Definition: The patent troll does not research or develop the technology or any products related to its patent. Rather, the patent troll waits for others to independently develop the patented technology into useful products and to create a market for those products. Once the newcomers are locked-into the new technology, the patent troll seeks rents either through licensing or litigation.

Question: Is this type of activity bad?

Links:

25 thoughts on “What is a patent troll?

  1. Patents are bad for innovation and business. The primary purpose of patents was to protect INDIVIDUALS from large companies taking their idea.

    Today, individuals are not protected due to high litigation costs. For every individual who gets protected, hundreds of companies end up shelling out to lawyers. This greatly increases the cost of doing business, and makes the economy more inefficient.

    Patents should be abolished. The only benefit IP attorneys.

    It sounds crazy, but think about it. In the end it is the only answer.

  2. What is a patent troll?

    Patently-O writer, Dennis Crouch, puts out a working definition of a patent troll. “The patent troll waits for others to independently develop the patented technology into useful products and to create a market for those products.” The posted comment…

  3. Dennis;

    I think this is a good topic to be covered. First, I would add that the “troll” has to buy the patent that someone thought was not worth what they sold it for, otherwise the patent owner would not have sold it, in order for the “troll” to buy the patent and wait for the market to develop. Is this bad? I don’t think so, because part of the value of patents is that they are property that can be bought and sold. Wouldn’t their value be greatly diminshed if only the inventor could use the patent? If he could not get funding then the inventor’s invention could wither and he might end up with nothing. This is part of the free market of buying and selling items where the buyer sees value, and the seller doesn’t. Is this much different than buying stock in an undervalued company where the market potential for their products is in the future? Are not all the Ocean Tomo patent buyers “trolls” as they are buying patents where they were not involved in any of the research and development. And isn’t this a way for entities to recover the costs of research and development of inventions that the entities are no longer interested in? It is easy to look at one anecdote and see a lot of downside and looking for a simplistic answer without thinking the whole situation through, and I believe that is why this issue has arisen. Companies have bought and sold patents for a long time, and now because someone has bought a patent and asserted their rights, some are offended that the buyer did not originally invent the product or immediately commercialize the invention. Though the more this issue is talked about, the more people can understand the underlying basis for why this occurs, and properly think about whether it is good or bad.

  4. Requiring commercialization of inventions comfuses the grant of power to Congress to promote the progress of science and the useful arts with the grant to Congress of the right to control interstate commerce.

    If patents are subject to a use in commerce requirement, such as trademarks are, then the power granted in Section 8 clause 8 has been subsumed under the Commerce clause.

    Also, it is an error to state that Science and the Useful arts are promoted by the commercialization of an invention. Science and useful arts are promoted by the ***grant*** of a patent. That is the language of Section 8, clause 8.

    So it is hard to see a Constitutional basis for requiring that an invention be exploited to be protectible. Patents have the attributes of personal property, and as such do not require use in order for the exclusive rights to be enforceable.

    Efforts to require commercialization or to limit or deny the ability to obtain injunctions basically deny the fundamental nature of a patent – personal property. The attempt is to turn the enforcability of the exclusive rights of a patent into a tort action, with its attendant remedies – damages.

    It seems that there is a never ending debate about whether a patent should be property. It seems that the securing of exclusive rights would have put an end to the issue, but it has not.

    ABD

  5. I need to remain anonymous as I am involved in litigation. My VC funded company (I too am a VC investor in the company)acquired some IP from a affiliated VC funded company which we are presently enforcing against an entire industry which knew full well of the existence of the IP prior to finalizing an industry standard. Are we trolls? I’m not sure as we invested millions of dollars in the companies and thus funded the invention. Actually, I don’t care if we qualify under some random definition. Patents are property rights like all others and the owner has the right to exclude or receive compensation for its unauthorized use. Period. All the controversy is just the PR efforts of large companies trying to avoid paying royalties.

  6. While it’s important to think about how a “patent troll” might be defined from a legal point of view, I think the more critical use of the term is, in effect, a political one. So-called patent trolls, real or imaginary, pose a POLITICAL problem that places enormous pressure on all parties involved in creating or judging patent laws and regulations. In response, they act in ways that may enormously distort the patent system as we have known it.

    Legislators seek to change laws to address patent trolls. The Patent Office alters regulations in radical ways. Judges tend to seek any “out” they can to deny alleged patent trolls their legal claims. And all of this is driven, at base, by a public outcry against the supposed rapaciousness and unworthiness of any patent holder that may be smeared under the general rubric of “patent troll”.

    The point is, “patent troll” is basically standard issue political smear. It has no real meaning other than to associate a group of people with something disreputable and dishonorable. NTP is called a patent troll; Burst is called a patent troll; likewise, Eolas is a patent troll, as is MercExchange. They really have nothing more in common than that their opponents want to find a way of making any such entities go away, so that they don’t have to pay out a penny for using any ideas to which others have a right. Being very well situated in industry, enjoying high level connections in government, having a host of lobbyists and PR people at their disposal, and largely controlling an always pliant media eager for access, these powerful opponents can easily create a perception of a major problem where really there is none, by means of a simple, relentlessly repeated smear. Yet the patent troll smear resonates, and persuades such parties as the New York Times editorial board to call out for major patent reforms.

    It’s therefore crucial, I think, to deal with issue of patent trolls as a political one. This means that it’s not purely a question of legalities or even of logic. It is at least as much an issue of rhetoric, persuasion, and framing, as is any political issue.

  7. ” Definition: The patent troll does not research or develop the technology or any products related to its patent. Rather, the patent troll waits for others to independently develop the patented technology into useful products and to create a market for those products. Once the newcomers are locked-into the new technology, the patent troll seeks rents either through licensing or litigation.

    Question: Is this type of activity bad?”

    The troll is no more “bad” than any other person who operates within the existing patent framework. I think the question ought to be, should the law prohibit patent trolling but allow non-trolling patent activities? In my view, it is absurd to critize patent trolling, which is just a non-surprising exploitation of the patent system. If one does not object to the patent system on principle and in toto, I see no way to coherently object to patent trolling.

    I think the truth is patent trolling is revealing defects at the root of the patent system. The obvious response is to abolish the patent system. But this response is not acceptable to most people so they want to tinker at the margins with it: they want to keep the basic system in place, which is causing the problems that give them heartburn; and instead of eradicating the cause of the problem they want to slap a patch on it and try to outlaw the symptom they dislike. IN short, the criticisms of most people are a confused hodgepodge of unprincipled, ad-hoc utilitarian guesstimating.

  8. I agree with David. I think that patents are assets and can and should be treated much like other forms of property.

    This might sound self-serving, but I wrote a paper about this topic last year, entitled “Patent Investment Trusts: Let’s Build a PIT for the Patent Trolls.” (6 N.C. J.L. & Tech. 367). In my paper, I propose encouraging the evolution of patents into a traded commodity, through the development of a Patent Investment Trust (which is just like a REIT, except it uses patents as the property for the trust, rather than real estate). The paper also has some interesting info about the history of patent trolls.

  9. While we are at it lets define Patent Squatters. I suggest “a company that brings a product(or a feature of a product) to market without bothering to do a patent search to find out if somebody owns rights to that product (or feature). Commonly associated with companies who steal ideas brought to them by inventors and small companies who are looking for assistance in commercializing their developments and companies who copy their competitors’ products and features.”

  10. The problem with defining patent trolls is that their troll-like nature is highly subjective. Take burst.com for example. Once it was a small R&D company that actually researched, developed and patented some technology, although eventually it got crushed by the big boys. Then one day it decides to assert its portfolio of previously secured patents against the big boys, although at this juncture the company had been reduced to little more than an investment firm with a cache of intellectual property. Now companies like Apple and Microsoft are crying foul (although, they previously admitted that at one time discussing licensing the patented technology). Patent troll or just a disgruntled inventor asserting his patent rights? Or can an inventor only legitimately assert his patent rights, if he also manages to transform his invention into an ongoing business entity?

  11. It is fairly clear from the comments, that in any given situation “trollness” is in the eye of the beholder. Trollness is neither good nor bad in my opinion; instead, trollness is an inherent quality of a free market system of patent rights.

    I agree with Steve that, once granted, patents are property rights and any limit on what can be done with those property rights has to be imposed by the system in a rationale manner. Examples of those limits on patents would be anti-trust laws and regulations, and defenses to infringement based on inequitable conduct, shop rights or prior use.

    The problem that I see is not whether a patent troll is good or bad per se, but with the suggestions of limiting patent rights based on some concept of trollness. Imposing a restriction on patent rights in line with the concept of a patent troll will mean imposing an intent requirement that attempts to see into the mens rea or heart and mind of the patent owner/”troll”. While such a mens rea requirement is challenging to define and implement from a legal perspective, it is already a familiar aspect of the patent enforcement landscape in the form of the equitable power of a judge to enhance damages for willful infringement.

    Perhaps the debate about trollness is in reality a reaction by patent infringement defendants wanting to level the playing field to have the hearts and minds of the patent plaintiffs probed for “pure thoughts” in the same way that patent defendants must submit to such an examination with respect to their intentions in infringing a patent. Viewed from this context, a suggestion to change the patent laws to give judges the ability to adjust damages awarded in a patent infringement lawsuit based on the mens rea of the patent plaintiff is an undestandable way in which to level the playing field. Such a suggestion could codify and clarify the multiple Georgia Pacific factors which a judge now evaluates in the process of determining whether to enhance damages so that the heart and mind of both the plaintiff and defendant are taken into account in equal measures.

  12. Dennis – The label “patent troll” really is a red herring used by the multinational corporations who have never met a bad patent unless they don’t own it.

    Why are Ted Turner and others like him not called “copyright trolls” when they purchase copyrights and sell/license them to others? Ted Turner didn’t write “Gone With the Wind” but he certainly profits from buying the copyright and licensing others to use it. Why is this OK with copyrights but not with patents?

    We in the IP industry should expose this term for what it is; a political inflammatory device to demonize a patent owner (other than the big corporations) for exercizing her rights under the US Constitution.

  13. Dennis,

    Here is my definition of a “Patent Troll”.
    A patent troll is what the huge wealthy corporations, who hold the vast majority of all patents, call ordinary people and small companies who have the audacity to try to compete with them, on an equal footing, in their favorite game…Monopoly!

    These corporations think that a patent is the greatest thing in the world…regardless of how the invention was conceived or developed…as long as they own it!

  14. To echo Dan’s sentiment,

    “Patent trolls” contribute to the constitutional and statutory purposes of patents because they purchase patents, which inevitably encourages the development and disclosure of technology, unless you want to argue that inventors don’t seek patents as a means of making money, in which case we have a fundamental disagreement.

    Patents are the equivalent of property, and there is no requirement of “merit” for someone to purchase and hold property. I can no more claim that you are undeserving of your unoccupied second home, and thereby seize it and/or destroy it, than you can claim that patent trolls do not merit the legal protection of a patent, and penalize them for attempting to enforce it against others in industry.

    If you have a problem with the quality and nature of the patents that are being asserted, then you have a problem with the USPTO and the Federal Circuit. I have yet to see objective statistical evidence that “patent trolls” are litigating patents that are any more questionable than the patents that are litigated by industry entities. Anecdotal cases are sob stories, not proof.

    The only “patent troll” is an inventor that knowingly violates Rule 56. Everybody else is an investor.

  15. Patent Troll = anyone (except me) who threatens someone with a patent.

    Partially tongue-in-cheek.

  16. As someone who neither a patent attorney nor a developer of technology, but an investor in companies who possess IP, I find the concept of “patent troll” silly. Patents are assets and any owner of an asset that does not enforce infringement of rights is a poor manager. And frankly, I am so tired of the bleating about poor corporations complaining about unsuspectingly stepping into a “trap”. Baloney. I have over 30 years experience investing in IP companies and to use one as an example, who has licensed their technology since 1968;is extremely well known historically for their invention of the technology—it has been an extremely rare event (example only once since 1992) that they have been approached for a license proactively. Rather, they have to monitor and notify and enforce. It is my experience that infringers infringe until they are caught.

  17. The first part of the definition offered is invalid: “The patent troll does not research or develop the technology or any products related to its patent.” I consider it research to write a patent application that is considered non-obvious enough to lead to the granting of a patent.

    Article 1, section 8 of the United States Constitution authorizes Congress “to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Therefore, a patent troll is one who doesn’t use the patent rights they are granted to “promote the progress” but instead lays a trap with their rights to siphon the progressive efforts of others. For example, a patent owner who actively promotes their new idea through efforts to manufacture or offers to license is not a troll. A patent owner who doesn’t actively promote their new idea but doesn’t inhibit others from doing so is not a troll. A patent owner who passively waits for others to step on or near their rights in order to threaten them with a toll is a troll.

  18. As Derek and Tom have already suggested, the problem is not with patent trolls per se, but with bad patents. Nobody likes to pay royalties or risk an injunction, especially to a patentee that isn’t taking the business risks associated with commercialization that the accused infringer is taking. But it would be an overinclusive rule that disqualified all patentees who do not commercialize their patented inventions from asserting them. Patents have come to play a useful role in our economy by hedging against the risk that another firm will have a better marketing department, supply chain, etc.

    The answer to Justice Kennedy’s question at oral argument in Mercexchange is that patent trolls are the trolls under the bridge. But the friendly troll. Inventions, like bridges, are public goods. Permitting their builders to charge tolls is a good way to make sure that the right number of bridges get built, and that they get used efficiently. There is no reason why only the person who builds the bridge (as opposed to someone who the builder sells the bridge to in order to operate it) should be able to charge tolls. The problem is rather with making sure that bridges get built over rivers, and not over already existing major freeways — the problem of patent trolls is a problem with the quality and term length of patents.

  19. YES, trolling is bad. The historical purpose of having a patent system in the first place is to A) encourage development of the useful arts and sciences B) provide an incentive for divulging trade secrets.

    Trolls contribute to neither end. The only benefit of having trolls seems to be that it increases spending on litigation, and redistributes wealth to those who have not labored to create it.

    In other words, trolling is just window breaking (link to righttocreate.blogspot.com).

  20. “The patent troll does not research or develop the technology or any products related to its patent.” But wait a minute – somebody invented something, or there wouldn’t be a patent (or do you distinguish invention from “research”). And no university “develops the technology or any products” – it licenses the patent to someone who does. “Patent troll” means simply a patent owner that the speaker of the moment doesn’t like – no more than that.

  21. I don’t think there’s anything inherently harmful about an inventor choosing to patent, but not develop or market a technology. That said, from a litigation perspective, patent trolls have a number of procedural and substantive advantages over patentees that commercialize a technology. My concern is that for certain markets that creates a disincentive to commercialize, which when coupled with the patent as a barrier to entry, is harmful to the public.

    If a change in law or PTO regulations really is necessary (and I’m not sure that it is) I think the change should be directed toward minimizing the advantages trolls currently hold over other patentees with respect to the enforcement of their patent rights. The problem I see with many of the current proposed changes is that they hurt patentees in general, which I believe is ill-advised.

  22. One of the more disturbing things about the use of the term “patent troll” is how it gets extended to all kinds of legitimate players in the market, and how, in many ways, weak enforcement of patents creates a self enforcing prophecy regarding so-called patent trolls.

    A very important reason that many patent holders, especially in technology, go out of business, or never get investment in the first place, is that technology patents have historically NOT been taken seriously — certainly not in software. This means that VCs have in the past paid hardly the slightest attention to a potential company’s patents, or patent applications. Instead, they invest in a horde of “me-too” companies, justifying each such investment on basically random grounds. This imitative gaggle frequently displaces the true pioneer simply because others can garner better investment through charm or connections.

    After the fact, the patent holder, who very likely had been pushing the idea openly the earliest of all, is declared a “patent troll” if he comes at those who succeed in the market with a patent suit. And he is regarded as a troll because he’s then out of business, or, worse, was never able to put together the technology — again, precisely because he and his patents were treated as having no importance in the first place.

    In general, I’d say that one of the great reasons technology patents, software patents in particular, have such a poor reputation is precisely that they have never been taken seriously enough by the software industry, and the people who invest in it. This creates a situation in which, sometimes, people other than the true pioneers of an idea get the patent on it (the true pioneers ignoring the patent process altogether), in which investors don’t consider patents as a criterion for investment, and in which little prior art makes its way into the patent office to keep unworthy patents from being awarded in the first place.

    The very best way to reduce the problem of unworthy patents and patent holders in the technology market is to ENCOURAGE true innovators to patent their ideas, and to encourage investors to regard them with the proper weight.

    In short, the problem can be ameliorated best by promoting a strong patent system.

  23. The classic image of the patent troll is the entity that buys a patent for $50,000 at a fire sale, and then brings a $20 million law suit against a victim like Intel, Micro$oft, or Oracle.

    If the big companies of the BSA are so scared of patent trolls, let THEM go to the fire sales, and buy the $50,000 patent BEFORE the trolls. Surely this is cheaper than the amount of money they are investing in lobbying for a weaker patent system (which, BTW is China’s dream come true).

    The patent troll plays a POSITIVE roll in the invention ecosystem – the inventor invents a product and knows that if his marketing efforts fail (for example, the inventor’s start-up is snuffed out by the Microsofts and AOLs of the world or other large companies which simply copy the product and have access to the marketing channels), the inventor can always recoup part or all of his investment by selling off the IP (i.e. patents). The VCs that invest in start-ups ALSO know this, and this encourages them to invest in companies they may have overlooked otherwise.

    Anyone who has ever tried to raise money for a start-up knows how important this is, also.

  24. Dennis — Thanks for throwing the question out there “is this type of activity bad?” That’s the real issue with trolls…no matter how you define them. Some groups view that type of activity bad and would impose a type of “working the invention” requirement on our system, one way or another.

    Your definition is interesting. You use the phrase “waits for others.” To me, this implies a conscious effort to “sit under the bridge and wait for a traveller to try and pass.” But would this cover the activities of the “patent investor” that buys one or more patents in a fire sale and then enforces them against an industry? This has always been seen as the ultimate troll — someone who is not even connected with the inventor and is simply buying the right to bring lawsuits.

    Most of the definitions I’ve seen offered are similar to yours in that they require a lack of development efforts on the part of the alleged troll. But where is the line? Is a complete lack of development efforts required? What about the individual inventor who conducted development efforts for a few years, and then gave up only to see someone else succeed a few years later? What about the small business that experienced early success with the technology, but watched the industry move in a different direction and then made a decision to focus on enforcement efforts rather than product developement (because it might actually serve the interests of the shareholders better)? This type of activity has been characterized as “troll-like” before (see this post – link to promotetheprogress.com – on Promote the Progress and this post – link to okpatents.com – on PHOSITA for examples).

    The definition is tough to formulate for sure. I’d like to see people focus on your question instead. Is this type of activity bad?

Comments are closed.