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What 'Patent Trolls' Are and How to Avoid Them

Jan. 27, 2014

“Patent trolls” pick on both large corporations and small business with the threat of lawsuits and litigation. But what, exactly, is a patent troll?

A patent troll, or patent assertion entity, is a person or company with a patent or portfolio of patents who hunt for infringers of the patent with the hope of collecting money while stopping the infringement.

The business model for a patent assertion entity is to make money by threatening or filing lawsuits, said John Bradley Jackson, Cal State Fullerton Director of the Center for Entrepreneurship.

Unique to the troll firm is a strategy to exploit existing users of the patents (i.e. infringers) instead of using the patents for traditional business uses such as manufacturing products or licensing the rights to other users, said Jackson.

Sometimes the “troll” can be an inventor, but more often the entity acquires or buys the patents from inventors or other owners. “Patents get sold all of the time,” Jackson said.

The target or possible infringer can include companies that are large or small, with the small firms most unprepared to deal with the threats, he said. Smaller firms and technology startups are targeted because these firms are often undercapitalized and cannot afford the legal fees necessary to fight the troll.

Small and medium businesses represented 90 percent of the defendants sued, said Jackson.
In turn, the smaller firms and startups often choose to settle rather than fight.

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Tags:  Media