n. A company that purchases a patent, often from a bankrupt firm, and then sues another company by claiming that one of its products infringes on the purchased patent.
These patent system bottom feeders have now become so common that Intel has coined a term to describe them: "patent trolls." Several problems contribute to making this "patent troll" business model a simple and effective source of illegitimate profit irrespective of the quality of the patent. For example, if the troll can claim that the patent covers $5 billion in annual revenue, that troll will ask for a royalty fee of a few percentage points of revenue; e.g., $150 million per year. While that may seem to be an absurd amount to pay to someone who bought a patent out of bankruptcy for less than one hundred thousand dollars, the troll will threaten the legitimate business with a permanent injunction at the end of the patent case, threatening the halt of the sale of a critical product or closing down a production facility. Even if the chance of the troll winning is low, the troll's costs are modest, normally a few million dollars at most. In contrast, the legitimate business the troll targeted faces potential financial ruin if it can no longer sell a key product. Intel recently faced such a troll who wanted $8 billion and a permanent injunction after purchasing the patent for $50,000.
Panelists cited the growing problem of "patent trolling," where an individual asserts patent rights over a firm for an invention that the individual is not actively using.
The assistant general counsel at semiconductor titan Intel Corp., Detkin spends much of his time these days fighting off claims of patent infringement by companies that have never made a semiconductor device. In 1999 alone, the claims topped $15 billion, Detkin said, and he hurls the epithet "patent trolls" at the companies that want Intel to pay up. He even keeps a couple of troll dolls on his desk in the gray warren of buildings at Intel's Santa Clara headquarters just as a reminder of his company's legal enemies. "We were sued for libel for the use of the term 'patent extortionists' so I came up with 'patent trolls,'" Detkin said. "A patent troll is somebody who tries to make a lot of money off a patent that they are not practicing and have no intention of practicing and in most cases never practiced."
Although Wang believes that Intel has occasionally been too quick to sue rather than settle, he maintains that the company is defending a solid patent position. Lee contrasts Intel with Stac Electronics, which last June launched a splashy patent suit against IIT's lossless data-compression processor before anyone had even seen a chip. The suit collapsed, but not before helping to sour the market for the IIT device. Wang says that he worries more about these fanciful suits from out of left field than about suits by companies like Intel. As for the Japanese, now depicted as the new patent trolls, Wang believes that for political and cultural reasons they are taking a merely defensive stance.