Patent trolls take advantage of the fact that litigating patent cases is notoriously complicated and expensive. They are often able to threaten lawsuits—which can last for years and cost each side millions of dollars—leaving their targets more likely to take a license than to fight in court, even when those targets may have a great case that the patent is invalid or that they don't infringe. Taking these early licenses and settlements feeds the troll, continuing a dangerous cycle.

In order to understand why patent litigation is so expensive, it makes sense to understand a little bit about how patent law works.

First, let's start with the Constitution, which allows for the establishment of the patent system. Article I, Section 8 gives Congress the power

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.

This single sentence represents an important bargain: when someone invents something novel, the government grants her a limited monopoly to exploit that invention, usually for 20 years, and in return she must publicly disclose the invention. At the end of those 20 years, the inventor dedicates that invention to society, allowing others to practice it and build upon it. Traditionally, this monopoly was intended to provide an important incentive, especially where, as with pharmaceuticals, companies have to build factories and laboratories, hire workers, and endure rounds of testing before they can sell a drug.

Parts of a Patent

A patent is made up of multiple parts; the most important to understand are the specification and the claims. First, the specification sets out the patent owner's description of what she's inventing and why. It often includes figures, or drawings, showing how the invention might work. The specification may help explain what the invention is all about, but the patent claims are the heart of the patent. The patent claims really define the scope of the invention—they lay out exactly what technology the patent covers.

Each patent has a filing date, which is what it sounds like—the date on which the patent application was filed. This date is important because it sets the cut-off date for the invention, from which we can show that a patent should not have been granted at all because it was not a novel invention. In some instances, that cut-off date might be earlier, however. Patentees can, and often do, file applications based on earlier-issued patents (usually called continuations or divisionals). In those cases, the patent owner sometimes gets the benefit of the earlier filing date. You can usually find that earlier date on the face of a patent under “Related U.S. Application Data.”

The Patent Application

This brings us to what a patent applicant has to show to obtain a patent. The law includes standards for what can and cannot be patented. They are:

• Patentable Subject Matter: Section 101 of the Patent Act precludes patent protection for laws of nature, natural phenomena, and abstract ideas. Under the law, if an inventor tries to patent one of these things, he should not be allowed in the front door. Courts have recently been active in defining what is a "law of nature" and what is an "abstract idea." You can read more about those cases here.
• Useful: An invention must be "useful"—meaning it provides some sort of benefit and is usable—and must not be for criminal purposes.
• Novel and Nonobvious: A patent should only be granted if the invention is a new idea, one that is not already in the public domain. The question commonly asked is if the invention, at the time, would have been obvious to "one skilled in the art"—in other words, would an engineer who specializes in the same subject matter area have come up with essentially the same invention at the same time or before? If the answer is yes, then a patent should not be granted.
• Written Description: A patent should adequately disclose the technology invented so that it does two primary things: 1) teach others how to use that technology, allowing them to build and improve upon it; and 2) put others on notice of what is already patented, in theory creating a roadmap for what is and what isn't infringing.
• Enabled: Similar to the written description requirement, a patent should explain how an invention is accomplished and the best way to accomplish it.

A valid patent provides up to 20 years of exclusivity—a government-granted monopoly, often called a "right to exclude." It also comes with a "presumption of validity," a powerful tool that gives a patent owner the right to claim that others infringe his or her legal rights.

Patent Infringement

A party faced with a claim of infringement usually will argue that first, it does not infringe the patent, and second, the patent is invalid. This means explaining to a court the often complicated technology the patent allegedly covers, the technology that is accused of infringing, and why the two are different. It also means proving that the patent does not meet at least one of the above listed elements—for instance, that the invention was not novel or it was obvious when the patent was filed.

A party accused of infringement, or even a third party who has not been accused, may also file an action at the Patent Office, asking the Patent Office to review its initial decision granting the patent. These actions—usually called reexaminations—can be quicker and cheaper than full-blown litigation.

Speaking of litigation, why is it more expensive when it comes to patents? Well, first, the subject matter—technology—is often hard for a jury, and even sometimes judges, to understand. Second, it has essentially two separate phases—a phase defining what all the terms in the patent mean (which often leads to defining common terms like "about" or "consists of"), and then a phase determining infringement and invalidity. Finally, if the patent is found valid and infringed, there may be an entire other phase determining the proper scope of damages.

This is problematic for most areas of technology, but particularly so with regard to software. In a 2011 report, the Federal Trade Commission found that many people—even engineers and lawyers—could not understand what software patents mean, and consequently what they cover. It's no wonder that judges and juries likewise find themselves confused.

This also means that not only are patent trials long and expensive, but they are often unpredictable. The time and cost involved, coupled with this uncertainty, leave many feeling that they have little choice but to settle.

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