Patent Trolls Cost Inventors $25 Billion a Year
Patent Trolls Cost Inventors $25 Billion a
Year
A Boston University study published this week shows that patent trolls, companies that license patents but do not actually make or sell anything, have cost innovators some $500 billion in lost wealth between 1990 and 2010. The study arrived at the figure by observing the stock prices of companies sued for patent infringement allowing for dome deviation through general market trends and other factors.
According to the study, the average patent lawsuit results in $122 million in lost wealth for the defendant, with very little of that money making it into the hands of small businesses. Non-practicing entities (NPEs), otherwise known as patent trolls, claim to be useful in that they provide small inventors a way to make money on the products they create. In a situation where a large company infringes on a patent, the company says, the NPEs can afford to defend the patent in court, whereas a small inventor may not be able to do so.
NPEs purchase patents from inventors, then supposedly return a portion of any monies gained through legal action against infringers of the patents back to the inventor. But the Boston University study disputes that claim, saying just two percent of patent infringement lawsuits goes to the original investor. NPEs are making out better on the deal, and they are receiving just 9 percent of the big companies' losses.
So where is all that money going? The only people really profiting from all the litigation is the lawyers involved and the principals of the NPE firms. In the end, the study shows that patent trolls are essentially creating a barrier to invention. The study shows that the more a company spends on research & development, the more likely it is to be sued, as the vast majority of companies involved in patent lawsuits are firms that invest heavily in R&D.
A Boston University study published this week shows that patent trolls, companies that license patents but do not actually make or sell anything, have cost innovators some $500 billion in lost wealth between 1990 and 2010. The study arrived at the figure by observing the stock prices of companies sued for patent infringement allowing for dome deviation through general market trends and other factors.
According to the study, the average patent lawsuit results in $122 million in lost wealth for the defendant, with very little of that money making it into the hands of small businesses. Non-practicing entities (NPEs), otherwise known as patent trolls, claim to be useful in that they provide small inventors a way to make money on the products they create. In a situation where a large company infringes on a patent, the company says, the NPEs can afford to defend the patent in court, whereas a small inventor may not be able to do so.
NPEs purchase patents from inventors, then supposedly return a portion of any monies gained through legal action against infringers of the patents back to the inventor. But the Boston University study disputes that claim, saying just two percent of patent infringement lawsuits goes to the original investor. NPEs are making out better on the deal, and they are receiving just 9 percent of the big companies' losses.
So where is all that money going? The only people really profiting from all the litigation is the lawyers involved and the principals of the NPE firms. In the end, the study shows that patent trolls are essentially creating a barrier to invention. The study shows that the more a company spends on research & development, the more likely it is to be sued, as the vast majority of companies involved in patent lawsuits are firms that invest heavily in R&D.
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