Study: Patent trolls have cost innovators $500 billion since 1990

By on September 21, 2011, 8:30 AM

Non-practicing entities (better known as patent trolls) have cost companies approximately half a trillion dollars in recent decades, according to Boston University researchers. After gauging tangible costs such as legal expenses and settlement payouts, James E. Bessen, Mike J. Meurer and Jennifer Laurissa Ford concluded that patent trolls such as Rambus have sucked about $500 billion out of innovating defendants since 1990.

That figure only includes publicly-traded companies it was derived by measuring stock market events. The theory is that if a firm's stock drops by a certain percentage following news of a lawsuit, that's how much the market believes the company will lose. Investors respond to litigation by lowering their earnings expectations, which reflects costs directly associated with the suit, lost business, settlement fees and so on.

This calculation excludes indirect expenses, such as employee distraction, legal uncertainty and cash spent on redesigning products. It also isn't precise because a company's share price can be affected by an endless number of variables, but the researchers used a large sample and they believe such factors should mostly cancel each other out. The study was performed with 1,630 suits against 4,114 defendants.

Unfortunately, the practice of patent trolling has grown more popular recently. It's estimated that for the last four years, defendants have lost about $83 billion per year. That's over $330 billion of the total sum and more than 25% of what the US spent on research and development in the same duration. Software patents represented 62% of the lawsuits, 6% involved mechanical patents, while only 2% were drug or chemical-related.




User Comments: 10

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1977TA said:

That's just sad. No wonder everything is so expensive. Can't really blame theft any more.

MilwaukeeMike said:

This is one of the many problems with the US patent system. Currently all you need to file a patent is an idea, and it takes years to get a patent because of all the back log. Here's a good story from Wired explaining it [link]

They recommend bringing back the 19th century requriement to submit a working model with your patent. I wouldn't be surprised if this helped the trolling problem as well. It'd be far easier to defend and protect your ideas if they were accompanied by some working code.

Why do they say it cost companies $500 bln? If they're using stock price as a measure, then doesn't it affect all shareholders?

SammyJames said:

milwaukeemike said:

[bring] back the 19th century requriement to submit a working model with your patent.

What -- do you mean ACTUALLY HAVING REAL THINGS?! But I thought that the Internet was supposed to be 100% VIRTUAL! Are you KIDDING?! *GASP* Are you REALLY suggesting that people actually do -- well, you know --

THINGS?!

What IS THIS WORLD COMING TO?! MY GOD -- it's full of CRAP!!!

(Sorry for all of the sarcasm. I totally agree with you. I'm just reacting to what I envision as horrified looks on the twelve-year olds who perpetuate the nonsense that somehow, everything should be free...)

- S

Cota Cota said:

1977TA said:

That's just sad. No wonder everything is so expensive. Can't really blame theft any more.

Not really, there's a lot of legal ways to overprice your products

For one example lets take Intel and their trillion versions of CPU's, we dont really need all those versions of CPU's, so if they focused in 3 or 4 versions of CPU's so they give low users, med users, advanced users and power users an indicated CPU power (just my idea), they would... could lower their prices due to not needing to keep tons of projects.

Guest said:

Patents should only be able to be enforced if the company is trying to produce and sell said product, as soon as they stop trying it is not fair for them to expect any money for someone else using this idea. That only stifles all our progression.

I think individuals should be protected up to £1million regardless though, its nice to reward the creator. But talking big business just in it to screw people, fook em, its a big bad world and its about time big business felt some serious competition and pressure.

Guest said:

Fook em?

Just who do you think will ultimately be fooked? The cost of this litigation is passed onto their consumers.

Muggs said:

Sad state this country is in. Freakin attorneys need to be banned.

SammyJames said:

muggs said:

Sad state this country is in. Freakin attorneys need to be banned.

Old joke:

Q: What is the difference between a dead skunk in the road and a dead lawyer in the road?

A: There are skid (tire) marks in front of the skunk...

Zecias said:

Cota said:

1977TA said:

That's just sad. No wonder everything is so expensive. Can't really blame theft any more.

Not really, there's a lot of legal ways to overprice your products

For one example lets take Intel and their trillion versions of CPU's, we dont really need all those versions of CPU's, so if they focused in 3 or 4 versions of CPU's so they give low users, med users, advanced users and power users an indicated CPU power (just my idea), they would... could lower their prices due to not needing to keep tons of projects.

do a little research and you will understand how that won't really make things cheaper.

P.S. even if it did make the production costs cheaper, they would still sell for the same price, because clearly they can get away with it.

caravel said:

"Software patents represented 62% of the lawsuits"

As ever...

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