The patent holding company is the firm that is specifically set-up to manage and enforce patent rights. This can be done by means of infringement lawsuits. The patent holding company is often referred to as a patent troll, which is altogether not the most complimentary term to describe such. Patent trolls are often associated with rather opportunistic lawsuits against one or more infringers without the patent holding company having any intention to produce or commercially exploit the specific invention.
That being said, not all patent holding companies act in an opportunistic manner. Some firms set-up patent holding companies to simply consolidate and administrate several patents. For such a reason the patent holding company can thus also come into being for business legitimate reasons.
Other reasons for setting up patent holding companies include that of multi-national corporations which want to avoid infringement disputes because of the complexities involved when having branches or subsidiary companies in other countries. If the patent is registered in one country and not also in another, the branch in the other country cannot make use of the patent in the country where it is registered without infringing on the branch that has registered such.
Instead, companies rather set-up patent holding companies that assign patent licenses to the various subsidiaries or divisions of the multi-national corporation. Another instance where one may want to create a patent holding company is to be able to favourably compete in the marketplace. Smaller companies can group to combine their patent rights into a single company which allows for joint management of the company and thus greater power and more resources to exploit the various patents.
Inventors who lack the financial base required for competing in the market can also form a patent holding company to administrate their patents. In this case each inventor will assign his or her patents to the company responsible for administration and where required legal enforcement of such rights.