Entities that exploit weaknesses in the U.S. patent and court systems to generate profits are known as patent trolls. They use various legal tactics and loopholes associated with patents and courts, such as filing frivolous patent infringement claims. Although their actions may not be illegal per se, patent trolls essentially operate by submitting patent claims without any genuine intention of creating a product or service.
A patent troll is a company that uses patent infringement claims to make money or hurt its competitors. They file patent claims without any intention of creating a product or service. Instead, they threaten other companies and demand fees for using the patents. This often leads to costly settlements, but it doesn't benefit the public. Patent trolls may also be called "patent sharks," "dealers," or "pirates.”
Patent Trolls and Legal Reforms
One way that patent trolls generate revenue is by charging fees for the use of their patents, much like how tolls are charged on roads without any corresponding improvements. This practice is more common in the U.S. due to issues in the patent and court systems, while in Europe, it's less prevalent because losers in patent claim court cases have to pay both parties' legal expenses, discouraging frivolous lawsuits.
In 2013, former President Barack Obama criticized patent trolls, highlighting their lack of productive contributions. A 2014 ruling by the U.S. Supreme Court in the Octane Fitness, LLC v. ICON Health & Fitness, Inc. case made it easier for courts to impose legal expenses on the losers in future patent claim court cases.
The term "patent troll" likely originated from an educational video produced by Paula Natasha Chavez, a U.S. Intellectual Property Law attorney, in 1994. The video aimed to raise awareness about the misuse of patents and discourage the practice of patent trolling.
Patent Troll Practices
It is difficult to fully understand the actions of patent trolls due to the various practices they employ. Some of these practices include:
- Enforcing a patent without any intention of manufacturing a product, providing a service, conducting research, or using it for the greater good.
- Pursuing baseless patent infringement claims to stifle competition. These claims are typically easier and cheaper for competing companies to settle rather than litigate.
- Buying patents, often from bankrupt companies at auction, and using them to sue competitors, claiming infringement.
- Utilizing a patent solely to enforce patent rights without any other purpose.
Patent trolling often involves venue shopping, where patent cases are strategically filed in specific districts known for favoring plaintiffs. For example, in 2015, 45% of U.S. patent cases were filed in the Eastern District of Texas, which had a judge with patent expertise and a pro-plaintiff track record. However, the practice of venue shopping by patent trolls has been limited since the U.S. Supreme Court's final ruling in the 2017 case, TC Heartland LLC v. Kraft Foods Group Brands LLC. It is important to note that when universities or non-profit research institutions file claims to protect unused patents, it is generally not considered patent trolling.
Patent trolls exploit weaknesses in the U.S. patent and court systems to make money or hurt their competitors. Although their actions may not be illegal per se, they essentially operate by submitting patent claims without any genuine intention of creating a product or service. Patent trolling is a controversial practice that has led to legal reforms and increased awareness about the misuse of patents.