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They scour bankruptcy sales and auctions, looking for promising patents. They also buy patents directly from inventors. But these patent buyers — some attorneys and some entrepreneurs — have no intention of actually taking anything to market. Rather, they use ownership of the patents to sue companies that already use similar technologies. In most cases, the company that’s being sued, fearing expensive litigation, pays the patent holder to just go away.
Officially, these individuals or shell companies are called "non-practicing entities," but they’re more commonly known in the legal industry by a less flattering term: "Patent trolls."
"I think people used to call them extortionists and that got some people in trouble, so they sort of toned it down a little bit and decided the image of the troll waiting under the bridge came to mind," says Tom Saitta, head of the intellectual property group at Jacksonville’s Rogers Towers. "It’s seen somewhat as easy money in many circumstances."
Some of the alleged trolls say they have legitimate claims that their patents have been violated. Erich Spangenberg, a Texas entrepreneur, purchased a patent for an auto parts ordering process patented in 1994. The process was in widespread use in the auto industry. Spangenberg hired an attorney and sued. Most of the major auto companies settled, but Hyundai went to court in 2007 — and lost. Spangenberg was awarded $34 million in damages. The case is on appeal.
Many inventors see patent trolls as their only means to capitalize on their inventions if the inventors lack the capital to commercialize their discoveries. "The trolls look for patents that are basically just sitting around and offer the inventor something," Saitta says. "The inventor has made nothing so far and has spent all the money to get the patent, so suddenly someone walks up and says, ‘I would like to buy your patent.’ The inventor is in a winning situation."
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