I was at an event this morning where the subject of so-called "patent trolls" came up (see also an earlier posting). Trolls are creatures who live under bridges and demand payment from travelers who wish to cross the bridge. Patent trolls are companies and/or individuals who buy patents for the purpose of making money off of infringement claims (rather than for the purpose of marketing/developing the invention). As such, trolls are a subcategory of (and take the organizational form of) the patent holding company. A good example of a patent holding company is Royalty Pharma, which makes its money off of the royalty stream. However, defining a troll, and differentiating it from a holding company, is sometimes tricky.
At the conference this morning someone made the analogy of patent holding companies and rental car companies. The rental car companies don't operate those cars -- just like patent holding companies. The cars, in fact, sit around, not being utilized, for periods of time -- just like the patents being held by those companies.
Interesting analogy, but incomplete. I have no problem with holding companies serving an important market-making function of essentially renting out patents - just like an airport rental car company. I agree with the argument that patent holding company provides a valuable service (see IEEE Spectrum: Hooray for the Patent Troll! - which unfortunately equates trolls and patent holding companies).
But the analogy quickly breaks down. I don't have a problem with rental car companies, of course. But I would have a problem if that rental car company parked their cars in such a way as to block all of the entrances to the airport and said that the only way into the airport was to rent one of their cars, at whatever price they wanted to charge you -- and by the way, if you got out of your car and walked, you would be trespassing and they would shoot you dead.
That is the business model of the patent troll.
I think the appropriate analogy would be a rental car company that parks its cars at convenient places around the city with the keys in the ignition, let's people take them and arrange for insurance, parking, etc, and then sends them a letter threatening them with arrest for auto theft unless they pay a large rental fee.
A troll is only a troll if they intentionally let real infringers operate for a while (make investments in the technology) before pouncing OR if they pounce on questionably infringing companies, knowing that paying a license fee is cheaper than fighting in court.