In a recent Politico
article (“Study: Patent Trolls Exact Heavy Toll
” – subscription required
), James Bessen
from the Boston University School of Law, discusses findings from his recent report on the impact of patent trolls on the economy. “We wanted to understand what’s going on in the landscape,” Bessen explained. “It’s a new business model and it’s important to understand what this new model means to the country.”
Non-practicing entities (NPEs), aka patent trolls, are firms that license patents without producing goods. With co-authors Jennifer Laurissa Ford and Michael J. Meurer, Bessen examined what happened to the value of publicly traded companies’ stocks when a troll filed a patent infringement lawsuit. Their report, “The Private and Social Costs of Patent Trolls
” shows that NPE lawsuits are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010; over the last four years alone, losses averaged more than $80 billion annually.
The Politico article also states:
Most of the losses are borne by technology companies, as the patents at issue are often the ones with “fuzzy boundaries.” By that the researchers mean that software patents typically have “unpredictable claim interpretation and unclear scope, lax enablement and obviousness standards make [their] validity … questionable.”
“While the lawsuits might increase incentives to acquire vague, overreaching patents, they do not increase incentives for real innovation,” the researchers conclude.
“The defendants in these lawsuits are firms that already invest a lot in innovation. Their losses make it more expensive for them to continue to do so and it also makes them less willing to license new technologies from small inventors,” they add. “Meanwhile, independent inventors benefit very little from what the large companies lose.”
To sum up the findings in the report, Bessen told Politico: “The trolls are doing a lot of damage. The magnitude of the losses reveals that there is very little socially redeeming value to their actions.”
James Bessen is currently Lecturer in Law at Boston University School of Law where he does research on the economics of technological innovation, including patents and Free/Open Source Software. His research on software patents with Eric Maskin (Nobel Laureate in Economics) and Robert Hunt has been influential in European policy deliberations. He is the author (along with Michael J. Meurer) of “Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk