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.