The Myth of the Patent Troll: An Alternative View of the Function of Patent Dealers in an Idea Economy

Abstract

A new breed of companies has emerged, and they are being called patent trolls. A patent troll is a person or entity who acquires ownership of a patent without the intention of actually using it to produce a product. Instead, it licenses the technology to an entity that will incorporate the patent into a product, or it sues an entity it believes has already incorporated the technology in a product without permission. The government, corporate America, and the media are fervently acting against these trolls. New proposed legislation, a blizzard of Supreme Court cases involving trolls, and endless newspaper and magazine articles are all trumpeting the same story line: Patent trolls are bad for society and must be stopped.

This article suggests that patent trolls are actually good for the patent system. Patent trolls are more accurately described as patent dealers because they act as market intermediaries in the patent market. Once the activities of patent dealers are isolated from other distinct problems that have been identified with the patent system, specifically the issuance of poor quality patents and the problem of the patent thickets, it becomes clear that the emergence of patent dealers marks a stage in the natural evolution of the patent market. Patent dealers make the patent market more efficient by realigning market participant incentives, making patents more liquid, and clearing the patent market. The article concludes by rebutting the common complaints that patent trolls stunt innovation and spur unnecessary litigation.

Keywords: patent troll, patents, patent licensing, Eolas, Microsoft, Ebay, MercExchange, NTP, Research In Motion, RIM, Peter Detkin, patent extortionist, patent thickets, idea economy, intellectual property, patent system, nonproducing patent holders, KSR, Intellectual Ventures, Acacia