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Patent Assertion Entities

Written by the Fiveable Content Team • Last updated September 2025
Written by the Fiveable Content Team • Last updated September 2025

Definition

Patent assertion entities, also known as patent trolls, are companies or individuals that acquire patents, not to produce or sell products, but to generate revenue by aggressively enforcing those patents against alleged infringers through litigation or the threat of litigation. Their primary business model is to extract licensing fees or settlements from companies that may be using patented technologies, rather than to develop or manufacture products themselves.

5 Must Know Facts For Your Next Test

  1. Patent assertion entities often acquire patents from struggling or bankrupt companies, with the sole intent of enforcing those patents against alleged infringers.
  2. The rise of patent assertion entities has been a growing concern in the technology industry, as they are seen as hindering innovation and creating a climate of uncertainty and risk for companies.
  3. Patent assertion entities typically do not invest in research and development or manufacture products, but rather focus on generating revenue through patent enforcement and licensing activities.
  4. Proponents of patent assertion entities argue that they help small inventors and startups monetize their inventions, while critics argue that they abuse the patent system and extort settlements from companies.
  5. Efforts to curb the activities of patent assertion entities have included legislative reforms, such as the America Invents Act, and judicial decisions that have made it more difficult for these entities to succeed in patent infringement lawsuits.

Review Questions

  • Explain the business model of patent assertion entities and how it differs from traditional patent holders.
    • Patent assertion entities, or patent trolls, acquire patents not to produce or sell products, but to generate revenue by aggressively enforcing those patents against alleged infringers through litigation or the threat of litigation. Their primary goal is to extract licensing fees or settlements from companies that may be using the patented technologies, rather than to develop or manufacture products themselves. This business model contrasts with traditional patent holders who use their patents to protect and commercialize their own inventions, contributing to the overall innovation ecosystem.
  • Describe the impact of patent assertion entities on the technology industry and the broader economy.
    • The rise of patent assertion entities has been a growing concern in the technology industry, as they are seen as hindering innovation and creating a climate of uncertainty and risk for companies. By acquiring patents solely for the purpose of enforcing them against alleged infringers, patent assertion entities can discourage companies from investing in research and development, as they face the threat of costly patent litigation. This can stifle innovation and lead to higher consumer prices as companies pass on the costs of defending against patent lawsuits. Additionally, the activities of patent assertion entities are believed to have a negative impact on the broader economy, as they divert resources away from productive economic activities and towards litigation and settlement payments.
  • Evaluate the arguments for and against the role of patent assertion entities in the patent system, and discuss potential solutions to address the issues they present.
    • The debate around patent assertion entities, or patent trolls, involves competing perspectives on their role in the patent system. Proponents argue that patent assertion entities help small inventors and startups monetize their inventions, providing a valuable service and incentive for innovation. However, critics contend that patent assertion entities abuse the patent system, extracting settlements from companies through the threat of costly litigation, rather than contributing to the development and commercialization of new technologies. To address the issues presented by patent assertion entities, potential solutions include legislative reforms, such as the America Invents Act, which have aimed to make it more difficult for these entities to succeed in patent infringement lawsuits. Judicial decisions have also played a role in curbing the activities of patent assertion entities. Ultimately, the debate highlights the need to strike a balance between protecting the rights of patent holders and ensuring that the patent system fosters genuine innovation and economic growth.