Patent Troll Companies and their impact on Innovation

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A patent troll is an individual or company that acquires patents, often of relatively low commercial value, with the primary aim of filing lawsuits against alleged infringers to claim significant royalties. Unlike traditional inventors or patent holders, a patent troll does not intend to commercially produce the invention. Instead, the focus is on generating revenue through legal action.

The term was first used by Peter Detkin to describe entities that exploit patents in this manner. The word “troll” reflects the idea of provoking others, similar to online trolling, by leveraging patents to create legal and financial pressure.

Patent Troll

How Patent Trolls Operate

Patent trolls typically:

  • Acquire patents not related to their main business operations
  • Maintain hidden or “submarine” patents to surprise potential infringers
  • File lawsuits or demand licensing fees for technologies they do not produce

This practice allows them to generate income from royalties and settlements without contributing to product development or innovation. Although patent trolling was more prevalent in past years, the trend has declined due to legal reforms and increased scrutiny.

Implications for Companies and Investors

Patent trolls can have significant effects on both innovation and business operations:

  • Blocking Technology Development: By acquiring patents that cover a specific technology, trolls can prevent competitors from developing new products.
  • Revenue Dependence: Companies that rely heavily on cross-licensing or patent lawsuits for income may raise concerns for investors.
  • Legal and Financial Risk: Targeted businesses may face costly litigation or forced licensing agreements.

Before investing in a company, it is advisable to review its patent portfolio to assess whether the company operates as a patent troll. A red flag arises when a company earns more from unrelated patents than from its core products or services.

Patent trolls exploit the patent system in ways that hinder innovation and competition. While less prevalent today, awareness of their practices is important for inventors, businesses, and investors. Understanding how patent trolls operate helps companies navigate potential risks, protect intellectual property, and make informed investment decisions.

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