New Bubble? Investing In Lawsuits

from the how-very-american dept

It's depressing, though perhaps not too surprising, to see how many readers have been sending in the NY Times story from this week about how some investors are dumping their money into lawsuits, with the idea of taking a piece of the profits. The article notes that a growing number of investors are doing this and that some see it as a "good investment during a recession" -- especially as various class action lawsuits have been springing up by people upset with the financial collapse and looking for parties to blame. Can you imagine investors who funded the real estate bubble now investing in the lawsuits over who's to blame for that bubble?

Of course, in many ways, many of the patent lawsuits by "non-practicing entities" (or as many prefer, "patent trolls") are exactly this as well. NTP, the company that stung RIM for $612.6 million over patents that the US PTO said were invalid was really just a bunch of investors, who all got to share in the "winnings," some of which they're now investing in more patent lawsuits. While the theory may be good, the problem is that it encourages bad lawsuits. One would hope that such investments wouldn't encourage such bad lawsuits because investors would rather invest in lawsuits that have a strong foundation, but that isn't always what we see. Since so much of these sorts of lawsuits (and certainly various class action lawsuits) feel like something of a crap shoot, what you end up getting is a case where these "investors" are better off "diversifying" across a bunch of questionable lawsuits, in the hopes that a few hit homeruns and pay off big time.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Anonymous Coward, Jun 3rd, 2009 @ 5:51pm

    Are there lawsuit based derivatives yet ?

     

    reply to this | link to this | view in thread ]

  2.  
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    Pwdrskir (profile), Jun 3rd, 2009 @ 5:52pm

    Idle hands are the devils.

    This is a sick and twisted way of undermining capitalism. Money should be backing innovation, not lawsuits. Why not hospitals next?

     

    reply to this | link to this | view in thread ]

  3.  
    icon
    ChurchHatesTucker (profile), Jun 3rd, 2009 @ 6:26pm

    No problemo

    I'll soon be offering lawsuit investment quants. Sign up now for priority investment opportunities!

     

    reply to this | link to this | view in thread ]

  4.  
    identicon
    Anonymous Coward, Jun 3rd, 2009 @ 8:41pm

    The Force Is not with Them

    AIPLA statistics show that 80% of all plaintiffs filing suits lose. It would seem that the odds of getting anything is not particularly good, unless they are counting on a quick settlement. I also wonder whether the odds are changing with recent landmark court cases such as KSR v. Teleflex and In Re Bilski?

     

    reply to this | link to this | view in thread ]

  5.  
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    iyogi (profile), Jun 3rd, 2009 @ 9:18pm

    RE:

    The problem is that it encourages bad lawsuits.

     

    reply to this | link to this | view in thread ]

  6.  
    identicon
    Michael Brutsch, Jun 4th, 2009 @ 4:53am

    Oddly, there used to be laws against this

     

    reply to this | link to this | view in thread ]

  7.  
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    minijedimaster (profile), Jun 4th, 2009 @ 7:17am

    Re: RE:

    troll

     

    reply to this | link to this | view in thread ]

  8.  
    icon
    Derek Kerton (profile), Jun 4th, 2009 @ 1:15pm

    Damage

    The damages that are awarded in US courts are typically to high. This encourages a "portfolio" of more frivolous lawsuits, because like VC investing, one winner in a portfolio of 10 pays off so big that it's worth the lost investment in the other 9.

    Would be better if we had more reasonable payouts.

     

    reply to this | link to this | view in thread ]

  9.  
    identicon
    alex, Jun 5th, 2009 @ 3:09am

    Thanks for sharing!

    Very new interesting new idea!

     

    reply to this | link to this | view in thread ]

  10.  
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    Ronald J Riley (profile), Jun 6th, 2009 @ 5:00pm

    Suits not frivolous.

    Patent lawsuits are very expensive. No one files frivolous patent lawsuits.

    Big companies are really complaining about lawsuits which have merit. They steal, get caught, and face large judgments because their theft is on a very large scale.

    The companies doing most complaining are losing one lawsuit after another. They have much more money than any inventor and yet with that huge litigation advantage they still lose.

    What does that tell you about their conduct?

    RIM is a perfect example of this. They lost big. They appealed all the way to the Supreme Court and lost at every stage. The reason is simple, they lost because they were wrong. They lost because they were caught foisting manufactured evidence on the court. They lost because they tried to use political influence to sway the court.

    When all that failed a massive PR campaign was used to distract people from the real reason RIM lost.

    Virtually every member of the Coalition for Patent Fairness is guilty of the same sort of conduct.

    Returning to the issue of costs. Small businesses are not being sued for patent infringement because it is not economical to sue for any infringement less than ten million dollars. In most cases it is not economical to sue unless the value of infringement is a hundred-million or more.

    Any business with that kind of infringement is hardly small.

    Why is TechDIRT being used to shill for companies stealing more than a hundred million dollars? Are they speaking on behalf of small business or on behalf of rather large businesses?

    Ronald J. Riley,

    Speaking only on my own behalf.
    President - www.PIAUSA.org - RJR at PIAUSA.org
    Executive Director - www.InventorEd.org - RJR at InvEd.org
    Senior Fellow - www.PatentPolicy.org
    President - Alliance for American Innovation
    Caretaker of Intellectual Property Creators on behalf of deceased founder Paul Heckel
    Washington, DC
    Direct (810) 597-0194 - (202) 318-1595 - 9 am to 8 pm EST.

     

    reply to this | link to this | view in thread ]

  11.  
    identicon
    staff1, Jun 7th, 2009 @ 7:23pm

    fog

    "NTP, the company that stung RIM for $612.6 million over patents that the US PTO said were invalid was really just a bunch of investors, who all got to share in the "winnings,"

    you're lost in a fog as usual. NTP backed the inventor who otherwise had no chance of benefiting from his invention. big corporate thieves don't like that...and neither do you. coincidence?

    Call it what you will...patent hoarder, patent troll, non-practicing entity, etc. It all means one thing: “we’re using your invention and we’re not going to pay”.

    please see http://www.piausa.org/ for a different/opposing view on patent reform

     

    reply to this | link to this | view in thread ]

  12.  
    identicon
    LawLeaf, Jul 14th, 2011 @ 12:27am

    In response iyogi. It doesn't promote bad lawsuits because there isn't a company that would place money on a case that is bad. You should understand that this is non recourse meaning if you lose the case, you don't have to repay the loan.

     

    reply to this | link to this | view in thread ]

  13.  
    identicon
    mary, Sep 29th, 2012 @ 3:55pm

    investing in law suits

    This has to be the most regrettable thing the law has done lately. Profit from BOTH sides of a tragedy.

     

    reply to this | link to this | view in thread ]


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