You Received A Patent Troll Demand Letter Or Lawsuit? A Plain-English Playbook

What to do first when a non-practicing entity comes after your company

A letter arrives accusing your company of infringing a patent you have never heard of. Or you are served with a lawsuit filed in a distant district (probably the Eastern District of Texas) by a company that makes nothing and sells nothing. This page walks through what that is and what to do about it…in the order you should do it.

What is a patent troll?

“Patent troll” is the informal label for a non-practicing entity (NPE), also called a patent-assertion entity (PAE). These companies license and enforce patents instead of making products. Some hold legitimate patents and real claims. Others buy broad or aging patents and assert them widely, counting on defendants to pay just to make the problem go away.

A “high-volume filer” sends lots of demand letters or files many suits on the same patents. The ask is often set deliberately low—below what it would cost you to fight. That’s the core of the business model.

How the demand-and-settlement model works

The economics are straightforward and have little to do with the merits. Defending a patent case through trial is expensive and slow. The NPE knows this. If the demand is cheaper than the projected cost of defense, paying can look rational even when you believe you don’t infringe.

Volume does the rest. A filer that settles many matters for modest amounts can generate steady revenue without ever testing a patent in court. The real leverage is litigation cost and delay, not patent strength. Understanding that is the first step to a smart response. (Settlement numbers change over time, so ask counsel for current data that fits your situation.)

What should I do first?

Do not ignore it.

1. Note the deadline. A demand letter may have no hard deadline, but a lawsuit does. In federal court you generally have 21 days after service to respond (Fed. R. Civ. P. 12). Miss it and the plaintiff can seek a default judgment under Rule 55; that is, you can lose without ever arguing the merits.
2. Preserve documents. Once a dispute is reasonably anticipated, issue a litigation hold. Stop routine deletion of emails, design files, source code, sales records, or anything else that might be relevant. Destroying evidence creates a separate and serious problem.
3. Loop in counsel before you respond. Don’t send a quick reply or call the sender to “talk it through.” Informal statements can be used against you, and an admission is hard to walk back.
4. Say little externally. Avoid public comment until you understand your position.

How do I figure out whether the patent actually matters to us?

Evaluate the patent on two independent tracks. A win on either one can end the dispute.

Non-infringement. Infringement turns on the patent’s claims (the numbered legal definitions at the end of the document) not on whether products merely look similar. Compare your product or process to every element of a claim. If even one element is missing, that claim is not infringed. Strong defenses often appear only when someone carefully reads the claims against what you actually make and do.

Invalidity. A patent is presumed valid, but that presumption can be overcome. Common defenses under 35 U.S.C. § 282 include:

• Prior art. If the claimed invention was already known or described before the patent’s effective date, it may not be “novel” (35 U.S.C. § 102) or may be “obvious” (35 U.S.C. § 103). Prior art can be earlier patents, publications, products, or public uses.
• Eligibility under § 101. Some patents cover subject matter that is not patent-eligible, such as those claiming abstract ideas implemented on a generic computer. In Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014), the Supreme Court set a two-step framework: first ask whether the claim is directed to an abstract idea (or a law of nature or natural phenomenon). If so, ask whether it adds an “inventive concept” beyond that idea. Generic computer implementation is not enough. Many software and business-method patents asserted by high-volume filers are vulnerable here.

Can I fight back?

Yes. Engaging is not the same as litigating to trial. Several tools are available.

1. A credible early response letter. A well-supported letter explaining specifically why you don’t infringe, or why the patent is invalid over identified prior art, changes the conversation. It signals that you’ve read the claims and are prepared to defend, which can move you out of the “easy settlement” column. Building a reputation as a company that fights also helps; NPEs prefer quick, quiet deals and dislike seeing potential defenses put on the record.
2. Inter partes review (IPR) at the PTAB. IPR is a proceeding at the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board that challenges a patent’s validity. It is generally faster and less costly than a district-court validity fight. Two timing rules matter. IPR is limited to prior-art grounds based on patents and printed publications (35 U.S.C. § 311), and a petition cannot be filed more than one year after you are served with an infringement complaint (35 U.S.C. § 315(b)). That one-year bar is strict, so the IPR decision has to be made early.
3. Ex parte reexamination. Since 2025, the choice of whether to file an IPR has become more complicated because discretionary denials have risen significantly. Ask your patent litigation counsel for the latest guidance. If the IPR route does not work, ex parte reexamination, another USPTO challenge mechanism, might be a better fit.
4. Post-grant review (PGR). For a recently issued patent, PGR allows a broader validity challenge, including § 101 and written-description grounds, but the window is narrow: a PGR petition may be filed only within nine months of the patent’s grant (35 U.S.C. § 321). For most asserted patents that window has already closed, which is why IPR is the more common path.
5. Motions in the litigation. Depending on the patent and the claims, a motion to dismiss, a motion on § 101 eligibility, or summary judgment of non-infringement or invalidity can resolve a case well before trial.
6. Fee-shifting under § 285. In “exceptional” cases, a court may order the losing side to pay the prevailing party’s attorney’s fees (35 U.S.C. § 285). In Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014), a case for which I was district court litigation counsel. In Octane, a unanimous Supreme Court held that an exceptional case is simply one that “stands out from others,” either in the weakness of a party’s position or in the unreasonable way the case was litigated. The Supreme Court lowered the proof burden to a preponderance of the evidence. This matters to defendants facing weak, high-volume assertions: a plaintiff pressing a claim that does not stand up can be exposed to a fee award, and building that record starts on day one.

Why does engaging early change the settlement number?

Because the NPE’s leverage is your cost and delay. When you make defending cheaper and faster—by identifying prior art, preparing an IPR, or teeing up a § 101 motion—you undercut the assumption the demand was priced on. A filer that counts on quiet settlements tends to reassess when a target is ready to fight and has a credible fee-shifting argument. Early engagement doesn’t guarantee a lower number, but it consistently gives you more options than waiting does.

How should we work with counsel on this?

The most efficient approach keeps strategy in one place. Our practice handles patents, trademarks, and disputes through a single relationship—bringing in Harness prosecution specialists when validity or claim-scope questions arise, while litigation counsel leads the district-court, PTAB, or ITC response. The goal is a coordinated plan set early, while the most options are still open.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.