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=Definition=
No agreed-upon definition of patent troll exists. The term patent troll is used interchangeably with the terms non-practicing entities (NPEs) and patent assertion entities (PAEs). Despite similar sounding names, several key differences exist between the three terms.
² 79% of cases filed in Southern District of Florida
=Patent Assertion Entities and Small Business=
The current U.S. patent system restricts the market for innovation with high transaction costs and legal risks. [http://www.wired.com/2015/01/fixing-broken-patent-system/] Most small and medium-sized businesses are unable to afford the costs associated with patent litigation and are prevented from commercializing or licensing over 95 percent of current active patents. [http://www.wired.com/2015/01/fixing-broken-patent-system/] Therefore, many smaller-sized businesses rely on patent assertion entities to protect their patents and defend against expensive litigation. Patent assertion entities aggregate and manage patents and have the expertise to legitimately protect patents from infringement. [https://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf]
In illiquid markets where asets cannot be sold or exchanged easily, patent assertion entities can help match patent holders to patent buyers and transfer ideas and technology from inventors to manufacturers effectively. This allows inventors to focus on innovation while benefiting from the knowledge and connections that intermediaries possess. Patent assertion entities are able to incentivize innovation through the effective brokerage of patents. [https://www.whitehouse.gov/sites/default/files/docs/patent_report.pdf] They manage risks for small inventors and inform manufacturers or inventors of the usefulness of having another inventor's patent in their patent portfolio. [http://www.bna.com/challenges-of-defining-a-patent-troll/]
According to the U.S. Census Bureau, small businesses with less than 20 employees made up 89.6 percent of employer firms in the United States in 2012. [http://sbecouncil.org/about-us/facts-and-data/] Small firms produce more patents per employee than large companies and help drive innovation in the United States economy. The patents they develop have a greater impact and are often more technologically important than those of large firms. [http://www.imamidejo.si/resources/files/doc/analiza%20patentov%20v%20msp%20usa.pdf] The Small Business Administration reported that "although small firms account for only 8 percent of patents granted, they account for 24 percent of the patents in the top 100 emerging clusters." [http://sbecouncil.org/about-us/facts-and-data/] Because small businesses and emerging companies are not always able to protect their patents on their own and account for much of the innovation driving emerging industries today, they need patent assertion entities who have the power to protect their patents for them.
