A Non Practicing Entity (NPE) can be broadly defined as "any entity that earns or plans to earn the majority of its revenue from the licensing or enforcement of its patents". Because these entities do not sell actual products or services, they do not infringe on the patent rights contained in others' patent portfolios. This feature is critical as it makes these entities essentially invulnerable to the threat of counter-assertion, one of the most important defensive measures in patent disputes.
NPE litigation is particularly challenging for companies facing it as they can be distracting to management, which must pay money to legal counsel to defend itself, or to the entity to secure a license, or both. Those who support NPEs argue that large technology companies can be regularly found guilty of infringement and thus deserve the onslaught of patent infringement litigation that NPEs offer.
A "patent troll" is a specific type of NPE that uses patents as legal weapons, instead of actually creating any new products or coming up with new ideas. These trolls are in the business of litigation and often simply buy up patents on the cheap from struggling companies. These patents are generally very vague and the trolls will proceed to send out threatening letters to those they argue infringe these vague patents and these letters threaten legal action unless the alleged infringer agrees to pay a licensing fee.
Those companies that receive infringement letters typically choose to pay the licensing fee, even if they believe the patent is bogus or their product did not infringe simply because of the high cost of patent litigation. In particular, the in-app purchasing technology development world has seen Lodsys, a company that neither makes nor sells a product, target small app developers. Lodsys has sued at least 11 of these developers with Apples and Google both intervening within the lawsuits, challenging the validity of Lodsys' patents. However, the slow nature of the justice system leave developers with the present choice of either taking a license from Lodsys or possibly entering into a lawsuit.
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