It’s Business, And It’s Personal

Patent trolls continue to generate business litigation

On Behalf of | Apr 17, 2014 | Business Contracts & Disputes |

It’s a special breed of business entity. It does nothing except buy patents in the marketplace, and then create business litigation against other companies for the alleged violation of one or more of those patents. If possible, it tries to pressure the targeted company into settling prior to incurring substantial litigation expenses. It does its work in North Carolina and every other state.

These entities are so disrespected that businesses generally refer to them as trolls. When used as a verb, to troll means to engage in the act of fishing, using a line and bait, or to lure fish with bait. That definition tends to catch the analogous flavor of the patent troll’s persona. Alternatively, a troll can be a hobgoblin, tyrant or monster engaged in nefarious activities in a mystical world of fantastical intrigue.

The less scornful reference to such companies by other businesses is a “nonpracticing entity.” Nonpracticing entities produce nothing of intrinsic value, but they do succeed in sometimes draining substantial lifeblood from young and inexperienced startups. Additionally, trolls have gone after the giants, and have extracted settlements from some of the biggest high-tech companies in the world, mostly by entangling them in the specter of ominous litigation that is best settled early and put to rest.

This disapproved corporate activity is not to be confused with a legitimate patent dispute between companies that do produce products and provide services. The troll will be identified by the fact that all it does is try to collect money for alleged patent infringements. This activity has become sufficiently problematic that federal legislation is pending to impose significant limitations.

The legislation would extract serious penalties in North Carolina and all other jurisdictions where such business litigation is ultimately unsuccessful. This is in line with the increasing practice of some of the larger companies to stand and fight the litigation all the way through to a jury decision. In some recent instances, patent trolls have lost cases to formidable corporate opponents. That has had the effect of encouraging others to fight instead of capitulating early to the troll’s demands.

Source: Pittsburgh Post-Gazette, “Patent trolls can be bad for business“, Kim Lyons, April 15, 2014