Patent Troll

A patent troll is a patent holder who uses patents in a way that is damaging to the supposed purpose of the patent system, encouraging new inventions and the advancement of technology.

The origination of the term is attributed to Peter Detkin, at the time an in-house patent lawyer at Intel. He used the word in the narrower sense of companies that purchased low value patents, which they then used in nuisance law suits.

The usage of the work ”troll“ here appears to come from its usage as a description of annoying participants in on-line discussions who deliberately provoke others by falsely claiming controversial or ignorant opinions.

The current usage of the term patent troll has become much broader and vaguer. It is often used of companies that purchase patents, but do not have any related business. This puts them in a much strong position because they cannot be threatened with counter suits (that are usually then settled through a cross-licensing agreement).

The term patent troll is also used more generally of companies that make extensive use of techniques such as stockpiling submarine patents.

If a company that shows signs of becoming a patent troll (i.e. it relies less on its original core business, and more on patents for future profits), this may be a signal that its core business is failing. If the value of the core business is declining, it means that neutering patents though cross-licensing (which helps keep the core business running smoothly) becomes less attractive. It is still difficult to assess how valuable a signal this is, but investors should probably keep it in mind.

Patent troll specialists can be extremely profitable. their main costs are acquiring patents and litigation, the potential returns, if they can buy a patent that blocks an important technology or product, are huge. However most of these are private companies and not easily available to investors. Investors may have ethical qualms about investing in technology companies that impede rather than contribute to progress.

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