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Patent holding companies are companies set up to administer, consolidate and license patents or otherwise enforce patent rights, such as through litigation. Many patent holding companies have been characterized pejoratively as patent trolls due to aggressive enforcement of their patent rights through litigation.
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Large, multinational companies may have many separate divisions in different countries, or within the same country. If a patent is granted in the United States to a European-based arm of a multinational company, the U.S. arm of that same company cannot make use of the invention in the U.S. without infringing the patent. It is also legally dangerous to ignore any infringement of a patent even if that infringement is by an associate company since it might create a legal assumption that you are not intending to defend your patent rights.
Consequently, many multinationals set up a patent holding company in a tax-favourable country or U.S. state (e.g. Switzerland or Delaware) and then sell (i.e. transfer or assign) all of the patent rights for the company as a whole to that patent holding company. The patent holding company can then focus on the task of granting licences to the different divisions of the multi-national as well as to third parties.
Similarly, it is not uncommon for numerous small companies to band together to consolidate their patents in order to better compete with a larger company. If these numerous small companies are potentially competitors, they may not trust each other to maintain independent ownership of the various patents. One solution is to set up a new patent holding company which can be jointly managed.
Similarly, it is common for independent inventors with valuable technology patents to set up a technology-licensing company and to assign all the patents for their inventions to that company (Examples include NTP, Inc.; Townshend Intellectual Property, LLC and many others).