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A patent troll is a derogatory term used to characterise a company that acquires patents for the purpose of extracting money from product developers.
A narrower term is non-practising entity (NPE), which denotes a sub-category of patent trolls whose only activity in a domain is patent trolling. One definition of NPE is "an entity that does not have the capabilities to design, manufacture, or distribute products that have features [covered] by the patent".
Who do they harm most?
Patent trolls are generally not a problem for free software projects, although a large software company could be targeted for its distribution of said software. Free software projects suffer more from harm with neither litigation nor threats and the harm to standards.
Trolling is legal
Indeed, when Microsoft repeated told the jury that i4i was a non-practising entity, the judge fined Microsoft for trial misconduct. Microsoft's lawyers were criticised for trying to get i4i condemned for something other than the accusation at hand.
Why a "practising" requirement wouldn't suffice
One suggestion is to require that litigators practise the patent in order to demand damages, however, there seem to be fundamental problems with this: How should courts deal with litigators who claim to have the intention to practise the patent in the future? or litigators who say that they are in the process of practising the patent and their lack of a tangible product is because they're still in the fund raising phase?
It's also unreasonable for fields such as pharmaceuticals, where it's normal to spend 10 years on development before having a product to show.
In any case, this sort of requirement would do nothing against a company that has a trivial or tangential product (which may not even be making money). Any litigator could make a phantom project before going to court, so this requirement would be easily reduced to a formality.
How to protect only the big companies against trolls
There are certain software companies who want to solve the problems caused to them by patent trolls, but at the same time they want to continue to use their own software patents against other software developers. These companies don't want to fix the unfair system, they just want to be the ones profiting from the unfair system. So they support:
- Making harsh measures such as injunctive relief harder to achieve (this has been partly achieved in the US case EBay v. MercExchange (2006, USA))
- Making it harder to block imports and exports (for example, in the US, via the US International Trade Commission
- Reducing the damages that patent holders can expect
- Making particularly low damage for cases where the patent holder is a non-practising entity
Each of these steps is somewhat useful for society too, but it will never solve the problem, and it distracts politicians and judges from the real solution.
According to Stanford University's Lex Machina, patent trolls account for 30% of all patent litigation. Kyle Jensen puts the number at just below 20% (500 of the 2,600 suits filed in 2009). Neither of these focus on software patents - it would be interesting to see how much higher the percentage is there.
PatentFreedom found that lawsuits from NPEs has increased from 100 in 1998 to 200 in 2004 and to 500 in 2008.
Google's Head of Patents and Patent Strategy said in March 2009: "Of the 20 patent lawsuits filed against Google since late 2007, all but two have been filed by plaintiffs who don’t make or sell any real product or service — in other words, by non-practicing entities or “patent trolls.”"
Example trolls and their lawsuits
- Acacia Research Corporation
- Blackboard inc.
- Intellect Wireless : used a "wireless messaging" patent to sue Apple, T-Mobile USA, Virgin Mobile USA, Helio, U.S. Cellular Corp, Motorola, LG Electronics, Sanyo Electric, Samsung Electronics, and HTC
- Intellectual Ventures
- WebEx - a company that acquired NCR's patent portfolio  
- MobileMedia Ideas LLC
- Divine, who bought and enforced e-commerce patents
- NTP, which sued RIM over the blackberry
- Webvention LLC
- Digitude Innovations
An example of a grey area is Microsoft. They clearly do practise their patents, but are still called a troll by some.
- Google Fights Back And Wins Against Bogus Patent Lawsuit From Guy Who Couldn't Even Code His 'Invention' 
While the broad facts of the case—a pair of entrepreneurs with one failed business idea, almost no computer programming experience, and a couple of patents march into court waving those patents and demand $600 million from one of the most successful companies of the digital age—might seem far-fetched, but they’re actually quite commonplace."
A similar problem is companies who do develop products, but when their product fails, they change their focus to extracting money from more-successful companies.
The problem is particularly acute when a company fails, and the only assets it has left are its patents. The receivers have a legal duty to shareholders to obtain maximum value from the remaining assets, and this may involve pursuing competitors who have succeeded in exploiting and marketing similar concepts to the ones that the failing company failed to exploit and market. The more successful the competitor, the better the chance of extracting a generous out-of-court settlement. Thus patents reward failure and penalise success.
Related pages on en.swpat.org
- 2009 patent litigation study - report from PriceWaterhouseCoopers which discusses non-practising entities
- Calculating infringement damages in the USA - what's up for grabs
- EBay v. MercExchange (2006, USA)
- Examples of use for sabotage
- More than trolls
- When Patents Attack: Intellectual Ventures and the war over software patents, 22 July 2011, NPR Planet Money
- Patents Trolls Gaining More Momentum, August 2008, BoycottNovell.com
- Patent troll, Wikipedia
- Patent Trolls: They Do Exist, January 2010, Technologizer
- Patent Litigation Run Amok, December 2007, Troll Tracker
- Patent Auctions Offer Protections to Inventors - an New York Times article ignores the public interest and defends patent trolls as simply being "business minded". Yes, and leeches drink blood because they're "survival minded", but for the host, the parasite is a negative thing.
- An application to the USPTO for a patent on... patent trolling!
- Ranking of Operating Companies by Number of NPE Lawsuits - a list of companies most targeted by patent trolls
- Patent enforcement companies speak at SF conference, May 2010, The Prior Art
- Patent Litigation Weekly: Data Shows That Troll Problem Persists, 2 Aug 2010, Law.com
- Bombshell Study: Heavily Litigated NPE Patents Overwhelmingly Lose at Trial, 22 Sep 2010, 271 Patent Blog - of course, individuals and SMEs can't afford to go to court
- PatentFreedom has interesting statistics on companies: Most Litigious, Most Pursued, Most patents held
- To be reviewed: Patent Troll Myths (paper), and the Patently-O article, and Slashdot dicussion
- The Private and Social Costs of Patent Trolls, Nov 2011, paper by Bessen, Ford, and Meurer
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