A patent troll writes to your US company: how the letter works, what Texas law says, and the defenses that actually change the outcome

The letter usually looks official. A company you have never heard of claims that your website's checkout, your product's wireless module or the scanner in your warehouse infringes its patent, and offers a license for a modest sum if you pay quickly. European owners of US companies are often shocked that anyone can be sued for merely using a product they bought. In the US that is possible, and an industry lives from it. The defenses have grown much stronger since 2014, and a small company that keeps its head can usually end the matter on reasonable terms.

What a patent troll is, in the government's own numbers

The neutral term is patent assertion entity: a company whose business is acquiring patents and licensing or litigating them rather than making products. The Federal Trade Commission studied the industry in depth and published its report in October 2016. Two findings explain everything that follows.

• The FTC distinguished portfolio companies, which license large patent bundles in negotiated deals, from litigation companies, which sue first and settle fast. In the study, litigation PAEs accounted for 96 percent of the patent infringement lawsuits but generated only about 20 percent of reported PAE revenues.
• The royalties these litigation companies typically obtained were less than the lower bound of early-stage litigation costs. The FTC concluded that this is consistent with nuisance litigation: defendants settle because defending costs more, not because they think they infringe.

That is the economic logic to keep in mind. The demand is calibrated to be cheaper than a lawyer. Your task is to find out quickly whether the claim has substance and, if not, to raise the sender's cost of pursuing you.

Why a small company that only uses technology can be targeted

Under the Patent Act, whoever without authority makes, uses, offers to sell or sells a patented invention in the US, or imports it, infringes. Uses is the word that matters. A shop using an off-the-shelf payment plugin, a café offering Wi-Fi, a manufacturer running a purchased machine can each be an infringer in law, even though they had no idea what was inside the product.

End users are attractive targets because they are numerous, they cannot easily judge the technology, and they usually lack a patent budget. Large vendors, by contrast, have patent departments and are willing to fight. A letter campaign to hundreds of small users can be more profitable than one lawsuit against the manufacturer.

For a European business the surprise is often scale. In much of Europe a patent dispute with a small user rarely makes economic sense for the patent owner. In the US, where each side normally pays its own lawyers unless a fee-shifting rule applies, and where discovery is expensive, a claim with weak merits can still have settlement value. Our overview of intellectual property protection in the US sets out the wider system.

The first thirty days after the letter

The worst responses are panic payment and silence. We work through these steps instead:

1. Do not reply yet, and do not ignore it. Once you hold the letter, you are on notice of the patent, and under the Patent Act notice can matter for damages. A hasty reply can concede facts.
2. Check the patent itself. On the USPTO's public records: who owns it now, whether it has expired, whether maintenance fees were paid (a patent expires if they are not paid by the end of the six-month grace period), and whether it has already been challenged.
3. Read the claims, not the abstract. Infringement turns on the precise wording of the claims. Letters often describe the patent far more broadly than its claims read.
4. Identify the product. Which purchased product or service is accused? Most commercial contracts and software licenses contain an indemnity or at least a duty to cooperate. Notify the vendor in writing immediately.
5. Check your insurance. Ask your broker whether any of your commercial policies covers intellectual property defense costs.
6. Look for other recipients. Trade associations and online forums can reveal that the same sender wrote to many companies. Joint defense becomes possible.
7. Calendar the dates. If a lawsuit follows, a one-year clock for one of the strongest defenses starts the day you are served.

Only then do we decide on a response, which may be a short request for claim charts, a referral to the vendor, or a firm rejection.

Texas law on bad faith demand letters

Since 1 September 2015 Texas has prohibited bad faith claims of patent infringement sent to end users located or doing business in the state. A letter is in bad faith if it asserts infringement and any of the following applies:

The Texas Attorney General enforces the law and can seek an injunction and civil penalties of up to $50,000 per violation. There is no private right to sue under this subchapter, but a complaint to the Attorney General costs nothing, and in our experience a sender who receives a reply citing the statute often moves on. The statute does not stop a genuine patent owner from notifying infringers or offering licenses.

The defenses that changed the balance

Several developments in statute and case law gave defendants real tools. Together they are why we are more relaxed about patent letters than we were fifteen years ago.

Inter partes review at the USPTO

Any third party can ask the Patent Trial and Appeal Board to cancel claims as not new or obvious, based on earlier patents and printed publications. The petitioner must prove unpatentability only by a preponderance of the evidence, while a court requires an infringer to prove invalidity by clear and convincing evidence, as the Supreme Court confirmed in 2011. The board must issue its final decision within one year of instituting the review, extendable by six months. Two limits matter: a petition is barred if filed more than one year after the petitioner was served with an infringement complaint, and a final decision estops the petitioner from raising the same grounds again.

Institution is discretionary. On 17 October 2025 the USPTO proposed new rules narrowing access to inter partes review where parallel litigation is under way. As of late October 2026 the Federal Register shows the proposal, with a comment period extended to 2 December 2025, and no final rule. Check the current state before you rely on this route.

Patent eligibility after Alice

In Alice v. CLS Bank (19 June 2014) the Supreme Court held that an abstract idea does not become patentable merely because it is implemented on a generic computer. Patents asserted against small businesses frequently claim ordinary business methods carried out online, and eligibility is a question a defendant can raise early in a lawsuit.

Fee shifting

The Patent Act lets a court award reasonable attorney fees to the prevailing party in exceptional cases. In Octane Fitness (29 April 2014) the Supreme Court defined an exceptional case as one that stands out for the weakness of a party's position or the unreasonable way it litigated, decided on the totality of the circumstances without a clear and convincing evidence burden. A troll that sues on a weak patent now risks paying your costs.

Venue

Since TC Heartland (22 May 2017) a US corporation can be sued for patent infringement only where it is incorporated, or where it has committed acts of infringement and has a regular and established place of business. So the state of incorporation also decides where your company can be sued.

Where your company can be sued

Patent venue is a quiet reason to think about structure when entering the US.

• A US corporation resides, for patent venue, only in its state of incorporation. Beyond that it can be sued where it has a regular and established place of business and has committed acts of infringement.
• A foreign company selling directly into the US is in a weaker position. The general venue statute lets a defendant not resident in the US be sued in any judicial district, and the Supreme Court in TC Heartland expressly left open how this applies to foreign corporations in patent cases.

For a European manufacturer this is one more argument for selling through a US subsidiary rather than directly from Europe, alongside liability and tax reasons; our page on branch or subsidiary in the US compares the options. It also means the choice between a Delaware and a Texas company has a patent dimension, which we discuss with clients who expect patent exposure.

When paying is the right answer

Not every claim is a troll's bluff, and not every bluff is worth fighting. We weigh three things:

If you settle, settle properly: a paid-up license covering past and future use, a release for your customers and affiliates, no admission, and confidentiality only if it does not hinder your vendor claim. A cheap settlement that leaves you exposed to the next letter on the same patent is no settlement.

Prevention costs less than defense

The companies that handle troll letters best prepared for them before the first one arrived.

• Indemnities in purchasing. For software, payment systems, connected devices and machines, negotiate an intellectual property indemnity from the vendor and keep the contracts where you can find them.
• Your own rights. Register your brand; our guide to registering a trademark in the US explains how. Where you have genuine technical inventions, a patent strategy for the US belongs in the market entry plan.
• Records of what you did when. Dated documentation of your own product development can become prior art evidence.
• A clean company. A properly run US company keeps any patent dispute inside the company, which is one of many reasons to protect the liability shield from the start.

Patent trolls are a real cost of doing business in the US, but a manageable one. The American legal system that allows the letter also gives you the tools to answer it, and in our experience a calm, documented response ends most of them. For how predictable US courts are for business more generally, see our page on legal certainty in the US.