When Peter Detkin was assistant general counsel for Intel, in charge of patents, he used the term “patent extortionist” to refer to companies suing Intel for patent infringement and who were trying to “make a lot of money off a patent that they are not practicing and have no intention of practicing and in most cases never practiced.” This “extortion” accusation got Intel sued for libel (a type of defamation), since it can be defamation to falsely accuse someone of a “crime”: extortion is a crime, but the law does not regard use of lawsuits as extortion, since it’s legal. So while using the threat of lawsuits to “shakedown” your victims for money is similar to extortion, the difference is that it’s legal, while extortion is criminal. Similarly, taxation is similar to theft except that the state makes taxation legal, so that it is not officially included in the state’s definition of “theft.”
So Detkin came up with the term “patent troll” instead of “patent extortionist,” to avoid libel claims, and the term stuck.
Later, Detkin co-founded Intellectual Ventures, which some characterize as patent troll (as revealed in this NPR report, When Patents Attack, IV is apparently closely connected with Lodsys, the patent troll suing iOS developers for patent infringement). This interesting comment in the NPR piece indicates Detkin’s attempt to avoid his own patent troll label being applied to his new company:
As it happens, Detkin is the man who coined the term “patent troll.” He came up with it back in in 1999, when he was working for Intel.
We asked him how it feels to make money from an entity that’s behaving much like the patent trolls he once condemned [note: this refers to Oasis Research, a patent troll suing others using a former IV patent, which IV has a "back-end" deal with: as Detkin said "We sell [our patent to Oasis] for some amount of money up front, and we get some percentage of the royalty stream down the road that is generated from these assets.”]. He said:
These are patents we used to hold, we no longer hold. And we ensure that we have no control over the actions of these third parties. They are independent actors. They are not Intellectual Ventures. They may be monetizing in ways we disagree with, but it’s not our call.
…we believe in our heart that litigation is a highly inefficient way to do licensing. But let’s not lose sight that litigation is just licensing by other means.
In other words, we try to license these patents in a friendly way. But sometimes, you have to sue.
In other words, in response to the threat of the libel (itself a type of IP–a property right in “reputation”), patent attorney Detkin coined the term patent troll as a safer way to criticize people harming his company via IP. And then co-founded Intellectual Ventures.