$29 Billion Spent Dealing With Patent Trolls In The US Alone Last Year

from the for-what-benefit dept

James Bessen and Michael Meurer, the pre-eminent researchers looking into the problems of the patent system have come out with a new study showing that, in the US alone, patent trolls had a direct cost for companies of about $29 billion. This does not include indirect costs, like the distractions of dealing with trolls or companies shutting down, products delayed or destroyed, etc. This is just about the direct costs, covering things like fighting in court and also settlement fights with the trolls. The study also found that small and medium businesses were the most impacted by this, often having to pay out to patent trolls (and to lawyers to deal with patent trolls).

Even more amazing is just how rapidly this cost has ballooned over the past few years. Check out this table from the report:


The report then goes further to try to figure out whether the trolls are actually benefiting innovation and getting more money to inventors, as the trolls and their supporters like to claim. Unfortunately, the research shows quite a different story — with very little of the money actually flowing back to either inventors or actual innovation. In other words, we’re talking about a pretty massive economic dead-weight loss here. Money flowing from actual innovators and creators… to lawyers, basically. Innovators grow the economy. Lawyers do not. This is a massive weight on the ability to grow the economy and to remain competitive. We’ve basically created a tax on innovation that flows to lawyers.

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Comments on “$29 Billion Spent Dealing With Patent Trolls In The US Alone Last Year”

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32 Comments
sgt_doom (profile) says:

Re: Uh-huh.

I think you’re on to something — a perfect vocation or avocation to accomplish something positive.

But this is simply the norm given that America is a completely fraud-based society.

Until we force those corrupt pols to quit “moving on” and going after those responsible for the assassinations, major heists by the banksters, and various and sundry financial fraud and manipulation, nothing changes, it only continues to get worse.

I’ll be Punisher II….

Jeffrey Nonken (profile) says:

Re: Re:

You and I have very different views of what constitutes a “patent troll”. Apple is a company that innovates, makes popular products, and sometimes uses its patents to beat up on competitors. It’s an unfortunate behavior, it’s anti-competitive, possibly trollish, certainly bullying, but it doesn’t make Apple a “patent troll”.

Whereas a patent troll is a company who exists solely for the purpose of using patents to suck money out of innovative companies.

SolkeshNaranek says:

Anyone really surprised?

“According to the Congressional Research Service 170 members of the House and 60 Senators are lawyers.

Out of a total of 435 U.S. Representatives and 100 Senators (535 total in Congress), lawyers comprise the biggest voting block of one type, making up 43% of Congress. Sixty percent of the U.S. Senate is lawyers.
Enough said. 37.2% of the House of Representatives are lawyers.

There are 81 Republican lawyers in Congress who list “lawyer” as their profession. There are 123 Democrat lawyers in Congress that list “lawyer” as their profession. Some may have not told that they had a law degree or practiced law, because they were doing something else, e.g., doctor, industrialist, teacher, real estate agent/broker, etc. It seems that the medical and real estate professions are also heavily represented in Congress.”

The above stats brought to you by Answers.Com (link to quoted data): http://wiki.answers.com/Q/What_percentage_of_US_congress_members_are_lawyers

and one unsurprised citizen.

DBurn (profile) says:

Small Companies get flattened

I was in the middle of one of these 20 years ago. Even then it can drain the life blood , in my case my retirement savings and my job, just getting involved. Make a very long story short:

Inventor A comes to my company. Has a narrow patent . We agree to license it and pay a minimum royalty while we develop it and a gross royalty on sales. All is good.
Then Inventor B steps up with a Patent troll with a very Broad Patent that suggests they invented the entire category. The whole situation screams for a declaratory judgement to invalidate the board claim Patent when I see the prior art.

We get quotes. $70-$100G and a “maybe” on the results. Too Much. We meet with the other side. It was fruitless. At first we agreed in principle on a patent pool with a sharing of the royalties or a cross licensing program so they could “sell” their invention to other manufacturers.

Inventor A approaches me after the meeting just steaming that we didn’t have the money to spend on the attorneys to invalidate and tells me that if they get one penny more than he gets, no deal. At that point, I had to trashcan it. The company I worked with was taking all the risk while these guys were fighting over all the profits.

End result, a third company company came in and using NEC engineers got around all of the patents. In addition they had money. 100s of millions. So all three went back to their respective corners. Twenty years later , long after the patents have expired and everyone is old with the testosterone gone. No one can say they made any money on it of any consequence although they are still trying.

We had generated a tremendous interest in the product via preview marketing. That blew the credibility when we failed to deliver. It was a no win situation.

Anything involving a patent fight , means a $1000/hour and someone with the means to fight. I can only guess how many inventions never saw the light of day because of these trolls. I made a vow never to get involved in a IP fight again. Anyone with a patent believes it is there God Given right to a gazillion dollars and F anyone else. That’s what opposing patent attorneys want. No binary decision making. All emotion.

The best way to deal with this for those interested in reform is a court administered test before any proceedings. The patent troll must have a commitment to develop the product. If they have never developed a product or set-up a reasonable licensing program, the suit should be summarily dismissed with orders to the patent office to re-examine the patent. If the patent is dismissed the plaintiff must pay all court costs and a significant fine.

The idea that a BS patent has to go through a series of expensive courtroom proceedings to be re-examined and depositions required to garner the intentions of the troll will keep exponentially expanding this until it materially moves the needle on GDP. Then the politicians will get involved and say we must save the Troll Industry. It’s a important part of the economy.

That’s one way. There are other situations, but court ordered testing of the plaintiffs intentions regarding their IP, should be required. That may stop these before they get started and take the profit out of the troll business.

mikey4001 (profile) says:

Doesn’t the RIAA claim something like $13 billion a year in lost productivity due to piracy? At $29 billion, this appears to be a problem that’s twice as bad as piracy. Armed with that knowledge, I am confident the we can just sit back, relax, and wait patiently for our beloved congress to take heed of the situation and then ceaselessly ram through bill after bill until something finally sticks. I’ll be holding my breath in the corner…

patent litigation (user link) says:

flaw

The Patentology blog does a nice job deconstructing this study. One glaring problem the blogger pointed out is that, in their study, Bessen and Meurer do not differentiate among different types of NPEs — for instance, they don’t distinguish between independent innovators who license their inventions, universities, and the loathsome patent trolls. Sorry, but it doesn’t make much sense to me to put these 3 groups in the same category. For one thing, whereas the dreaded “trolls” often tend to create an inefficiency problem in the economy, small inventors (who, like Edison, may choose to have others manufacture their products) and universities may add quite a bit of economic and creative value.

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