Patent troll

A patent troll is an entity that acquires patents with no intention of exploiting them industrially, for the sole purpose of obtaining royalties or settlement payments by threatening companies with infringement proceedings. The expression, pejorative, describes a practice, not a legal category. One also speaks of a non-practising entity. The patent troll profits from the cost and uncertainty of litigation rather than from the technical value of its titles.

The patent troll model

First, the entity buys up patents, often former titles of struggling companies or portfolios stemming from research. Second, it sends demand letters to a large number of operators offering a licence at a price below the cost of a trial. Third, it sues the companies that refuse, choosing the courts regarded as favourable to patentees. The model developed in the United States, where the absence of an order that the loser pay the opponent’s costs and the scale of damages favour the strategy.

The patent troll in Europe and before the UPC

The phenomenon is more limited in Europe. The order that the losing party bear the costs of the proceedings, the requirement of proportionality of the measures and the availability of a nullity action reduce the appeal of the model. However the Unified Patent Court, which makes it possible to obtain an injunction covering many states in a single procedure, has raised concerns. Its first decisions have shown attention to proportionality and to the interests of the parties, which limits that risk. In French law, abuse of the right to sue may be sanctioned by damages.

The means of defence

Faced with a patent troll, a company has several levers: an analysis of the validity of the title and, where appropriate, a nullity action, an action for a declaration of non-infringement, a challenge to entitlement, a protective letter before the UPC and joint negotiation with other targeted companies. The website of the Unified Patent Court publishes the decisions useful for that analysis. In practice, the answer to a demand letter must be prepared with care, without implicit acknowledgment. The firm assists targeted companies, as presented on the page defending against an infringement claim.