Patent Trolls Cost The Economy Half A Trillion Dollars

from the ouch dept

Last month, in talking about an episode of Planet Money with James Bessen on it, we mentioned his new research suggesting that patent trolls evaporated half a trillion dollars in wealth. Now that research, done with Michael Meurer and Jennifer Ford has been released (thanks to Tim Lee for the pointer): The Private and Social Costs of Patent Trolls.

Note that this isn't trying to count "losses" like the entertainment industry in trying to make up numbers about what would have sold. This is a direct observation on value of companies sued by patent trolls, and looking at how much of their value evaporates in response to the lawsuits. The $500 billion number represents a total over 20 years -- from 1990 to 2010. But, even worse (and not surprisingly), the numbers show that this number has been going up. Over the last four years, the total decimation of value from patent troll cases has averaged over $80 billion per year. In other words, over $320 billion of that $500 billion came in just the last four years.

Does this mean that some of this money is being transferred to actual inventors? Nope. Again, the research finds otherwise. The incentive to inventors has not increased by nearly the same amount. The research points out that licensing companies could add value -- but that under the current system, they do almost certainly do not. And as the problem is getting worse, all Congress can do is pass some hapless reform bill that doesn't even deal with the patent trolls issue at all.

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  1. icon
    E. Zachary Knight (profile), 20 Sep 2011 @ 9:23am

    Re: Re: Re:

    Not really. What is being referred to here is the following:

    An innovative new start up forms using a some cool technology. They get a bunch of press and some venture capital financing. The markets then value the company and its technology at a total of $50 billion.

    Then a patent troll lumbers from under its bridge and sues said tech company for infringement. No matter the out come, whether they settled or lost, the market then reduces the valuation of the company to $5 billion or less. That is a $45 billion loss in value. That is what is measured.

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