A patent troll is an individual or an organization that purchases and holds patents for unscrupulous purposes such as stifling competition or launching patent infringement suits.
In legal terms, a patent troll is a type of non-practicing entity: someone who holds a patent but is not involved in the design or manufacture of any product or process associated with that patent. Non-practicing entities include legitimate institutions such as startups, technology transfer agencies, universities and research organizations. To differentiate patent trolls from legitimate non-practicing entities, they are sometimes referred to as patent-assertion companies: organizations that exist solely to obtain patents and profit from them through patent infringement claims.
Patent trolls usually obtain patents from a number of sources and collect them in volume. Most patents come from the auctions of bankrupt companies, from companies who don't intend to act on a technology and from individuals without the funds to develop their inventions. The patent system vulnerable to abuse because patents frequently describe a general concept rather than a product or process and may not define what it protects in adequately precise terms. In 2011, for example, a patent assertion entity called Innovatio threatened to sue 8,000 hotels, stores and coffee shops in the United States, claiming that the use of Wi-Fi infringed upon 17 of its patents. The company claimed that although household Wi-Fi also constituted an infringement, they would not sue individual homes. Many of the businesses paid settlement fees ranging from $2,300 to $5,000. Similar alleged patent infringement cases have targeted the aggregation of news stories into podcasts, sending photocopies to email, and using shopping carts on a website.
In the United States a bill introduced into the House, the SHIELD Act (H.R. 845) is designed to make patent infringement suits less attractive. If the bill is signed into law, if a patent troll loses such a suit, they will be required to pay the defendant's costs. Because court costs can run into the millions, it is hoped that the risk of loss will be sufficient to dissuade patent trolls from launching frivolous suits.