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Beware the Patent Troll?

What is a Patent Troll? A Patent Troll is an individual or entity with patents that earns money not through manufacturing the patented product or process, but by threatening other producers into licensing the patented technology. Patent Trolls rely on the very high cost of patent litigation (usually $1.5 Million dollars for each side) and low royalty demands to build their coffers. By steering clear of deep pocket infringers Patent Trolls make very lucrative profits. They key to being a successful Patent Troll is to convince the accused infringer that a lawsuit will be filed. Even if the accused infringer were to fight the lawsuit and win, there is very little likelihood that the accused infringer will ever recoup the huge attorney fees spent in its defense.

So why have Patent Trolls become such a problem recently? Two reasons. First, as Internet-related business method patents were just recently allowed by the Patent Office, the Patent Office had very little ammunition to strike down early Internet-related patents. Accordingly, the Patent Office granted many patents on old technology. These patents are bad, but few companies are willing to spend the $1.5 Million to invalidate them. Second, courts are very unfamiliar with patents in general and technology patents in particular. If a Patent Troll were to ply their system with basic mechanical patents, courts, understanding the basic technology, would be likely to kick out frivolous infringement lawsuits.

With complex patents, however, courts are very reticent to kick out lawsuits covering technology with which they are unfamiliar. Accordingly, accused infringers are faced with the decision to pay a little to the Patent Troll or a lot to their attorneys. Faced with this proposition, most accused infringers pay the royalty fee.

What is being done about Patent Trolls? The Patent Reform Act is currently making its way through Congress. The Act contains limitations on the rights of patent holders who do not use their patented products to pursue those who do. This obviously will not stop the problem altogether, but it is a valuable first step.

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