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US Patent Trolling Costs $29 Billion a Year
New submitter Bismillah writes "This piece of research from Boston University seems to put an end to claims that patent trolling is 'socially valuable,' and instead is a social loss. 'We estimate that firms accrued $29 billion of direct costs in 2011. Moreover, although large firms accrued over half of direct costs, most of the defendants were small or medium-sized firms, indicating that [non-practicing entities] are not just a problem for large firms.' The total cost to society could be around $80 billion, according to the researchers. What's more, the costs have gone up fourfold since 2005."
'We estimate that firms accrued $29 billion of direct costs in 2011'
not the law firms.
...because the potential entrepreneur expects that if they become successful, a patent troll will take all their money?
That's a truly groundbreaking discovery. I mean, who could possibly expect that patent trolling may be bad practice?
If patent litigation was limited to inventors and the users of the inventions, and commodities derivatives were limited to actual producers and consumers, I suspect we would see a sudden reduction in income inequality. But it isn't going to happen, because the accumulation of wealth with the entrepreneurs gives them too much control over law and its enforcement.
(I am using entrepreneur in the literal sense of a middleman who seeks to profit without adding value; its meaning has been extended to "people who start productive businesses", which is part of the devaluation of linguistic currency that has helped getting us into this mess.)
From scarped cliff or quarried stone she cries "A thousand types are gone, I care for nothing, no not one."
Patent trolling not nearly as fun as trolling /.
Fact
Former Microsoft executive Nathan Myhrvold, who now heads up the controversial Intellectual Ventures patent rights company, told the All Things Digital conference two weeks ago that "I was never a popular kid in class".
"I'm not going to be popular in this class."
translation: back in school he was beaten up on a daily basis. Now he's armed with patents and lawyers and is going after everyone else's lunch money.
The patent trolling industry is worth £29 billion a year??? We must protect this vital industry - just think of the loss to the economy if anything happened to it.
You know if the MPAA put such a number so that we would feel sorry all the starving children and whiny stuntmen and stop pirating films online, we would all be aghast that such nonsense was posted on our august boards. However, since it is patents, I am sure we will all find the validity.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
BU seem me trollin', they hatin'.
Cars kill thousands of people each year. It's time we get rid of this menace from society!
In case anyone misses the point, if we mention only the negative aspects of just about anything, we can make a poor argument for getting rid of it. Of course, this argument will convince only someone who already believes that because it's what that person wants to hear.
What a fool believes, he sees, no wise man has the power to reason away.
How do I link this story to another headline? http://news.slashdot.org/story/12/06/27/028249/high-frequency-traders-are-the-ultimate-hackers-says-mark-cuban Essentially, it's the same ethic at work - making money by gaming the system. For high frequency traders, it is exploiting technological loopholes. For patent trolls, it is exploiting legal loopholes. Talk about a shadow economy - what happens to the U.S. economy if and when these nefarious practices are ended?
The study suggested that during 2011, 2150 companies mounted a total 5842 defences in US cases against intellectual property companies that owned and licensed patents without producing any related goods of their own.
As a result, companies lost an estimated $US29 billion in direct costs — legal and licensing fees
Well, yes, paying for a license or facing litigation is always going to be more expensive than simply copying someone else's work without paying for it. Similarly, copyright piracy costs trillions, according to the RIAA/MPAA, who think of every download as being a lost sale. That said, "things cost money" is not really a great argument for or against patents (or copyrights), but rather a simple statement of economics: would consumers and companies save money if they never had to pay for copies or licenses? Yes. Is that a reasonable argument for abolishing IP protection? No.
We have better arguments and better avenues for reform - damages based on patent owner's sales/licenses, instead of infringer's profits, for example - that may actually have traction. Trying to get Congress to reform patent law simply because licenses are expensive is destined to fail.
Who here is surprised by this?...
I know I'm in the minority here in that I have no problems with patents (copyrights, on the other hand, are out of control...). I do, however, have a significant problem with patents being wielded by non-practicing entities. Patents being claimed and enforced by Microsoft or Apple or Google or Motorola or Samsung or whatever other company who actually does something is fine. I know many people here are outraged when a company actually enforces their patent and calls the company in question a patent troll but the truth is they are simply enforcing their rights as a patent holder, as is their right. That's the point of patent protection and I'm fine with that.
Non-practicing entities, however, aren't protecting their intellectual property. They aren't protecting their innovative edge over their competitors. They are leaches. That's it. That's all.
While I don't pretend to think that fixing the problem would be simple, it would be nice to require patent holders to actually be actively using the patent to be permitted to enforce it. Yes, I realize that becomes complex for patents that are granted before the innovated product comes to market but I think that's not an insurmountable detail to overcome. The point remains the same - companies that aren't practicing entities should have no authority or ability to enforce patents. That would solve so many problems across so many industries.
We should try to tackle some of these patents by scouring the internet searching for any prior art to invalidate them. Companies no longer invent things anymore -- they just make money by trolling everyone else...
to the whole world!
Sent as ripples into the electromagnetic field. No single photon has been harmed in the process.
So...what they're really saying is high ranking corporate lawyers are paid way the hell too much. I kinda knew that already actually.
Two of their policy recommendations: "More rigorous enforcement of the claim definiteness standard would be an excellent step forward. ... One promising policy reform is greater use of fee-shifting to favor defendants in cases brought by trolls."
I am probably regarded as a pro-patent advocate here, but I have made those same recommendations on Slashdot in the past. For example, from October, 2010: "I am personally in favor of substantially tightening the enablement requirement (as well as the related written description requirement)." Enablement and written description are closely related to definiteness (they're all part of 112).
Or from earlier this year: "I favor greater use of fee-shifting in patent cases (i.e. patentee pays the other side's attorney's fees if the patent is invalidated)."
I say this not to say "I told you so" (I certainly didn't come up with the ideas on my own), but rather to point out that there are some important solutions that patent policy analysts agree on, even if they disagree about the nature or scope of the problems with the patent system. I think Bessen and Meurer are wrong about several things, but there's still common ground regarding policy recommendations.
Whichever the real cost of patent trolling is, I'd wager it's a drop in a bucket compared to the cost of bailing out banksters, or the cost of waging dubious wars. It doesn't make it any less relevant, mind you, but it seems to me that the latter two are much larger, lower hanging fruits.
How the car insurance companies will save me $XXX.XX per year? Or, how the RIAA was taking 52 CD-ROM burners from each pirate they nabbed to inflate their numbers?
Your first problem is trying to understand intellectual property by reading slashdot. The amount of (mis)information of this site is astounding. You would get better quality information about particle physics from a website directed to exploring the hidden meanings of the writings of James Joynce than you get about patents from this website.
First, nobody is going to sue you if you don't have any money. Unless you are raking in multi-, multi-millions/pounds/euros of revenue, you are too small.
Second, if somebody does sue you, their demands are likely to be very small. Most want you to use their technology -- they just want a little cut of the action.
My advice to any entrepeneur is (1) focus on building aviable business first; (2) protect your own intellectual property (it very well be the most valuable asset you produce); and (3) worry about other people's intellectual property only after you get big enough to pop up on somebody's radar. When (3) happens, you'll probably already be in your second or third round of financing and thinking about buying an island in the Caribbean with all the money you are going to make once you go public.
Let me guess, are you one of those people that are afraid to walk out of the house because there is some small chance that you'll get hit by lightning or bitten by a rabid raccoon?
1 work things so that you have to include the validity of the patent as part of the lawsuit
2 require that any patent be USED IN PUBLIC COMMERCE to prove its value
3 have as an automatic part of a suit that if you lose the suit you are liable for any and all business lost during the suit
4 any over time damages must be counted FROM THE TIME THE FIRST NOTICE was given (call this the Torpedo clause)
so that you can't get a patent sit on it for X years and then when like everybody is using the covered product start the lawsuits.
5 Also you must actively protect your patent* or lose any rights to damages (call this the Red October V Dallas Clause)
* note this does not mean you can't get a patent to keep something from being patented by somebody unpleasant (White Knight Clause)
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Absolutely, in my experience troll letters start as soon as you have MARKET VISIBILITY which has only become easier and more necessary in the past two decades. I started a software company in the mid 90's and even then trolls made making my small fortune miserable both before and even after we sold it, due to the always-present "indemnification" clause that puts the seller personally in line to pay any claims above some threshold. Yes I survived with a little luck, but it wasn't fun.
This could be looked at as injecting 29$ Billion into the legal economy. I mean Lawyers, Judges, Court Officials, all gotta get paid dawg!
Patent trolls rely on coercion (i.e. government) as their business model. In the absence of government and its special "right" to employ coercion (which it selectively lends to favored companies in the "private" sector), patent trolls could not exist.
Hedge funds rely on voluntary association (i.e. free choice) as their business model. In the absence of government, there is no reason to think that hedge funds wouldn't exist, since they don't require a special "right" to employ coercion.
According to the RIAA, as "one credible analysis by the Institute for Policy Innovation concludes that global music piracy causes $12.5 billion of economic losses every year".
www.itjerk.com
Lawyers have to feed their family's too ya know.
Jack of all trades,master of none
Like most things in our crony-capitalistic system this suits large corporations very well.
An out-of-control patent regime, like an out-of-control federal regulatory complex acts as an oligopolistic barrier to entry.
Sarbanes-Oxley, Dodd-Frank, software patents: all established by a corrupt political system to stifle competition.
I'm in agreement with you. But I'm posting as AC, for a variety of reasons. Namely, I am a patent attorney. I specialize in software patents and handle both prosecution and litigation. I also used to be a software developer, so I'm sensitive to the problems that software patents can cause.
So, with that being said I might be a little biased, but the reality is that I think most people would have way less problems with software patents if there were no more NPEs. The vast majority of patent litigation in the electronics/software industry is done by NPEs. While it does happen, you don't generally see the big firms suing the little guys. They typically sue each other, see,e.g.,Google, MSFT, Apple, and Samsung. If they want to see each other, who cares.
I think for there to be a workable NPE rule, you would have to limit the assignment of patents. It would be too unworkable to determine whether the company "practices" the patents. It would leave too much to interpretation. Moreover, it would be used to limit the scope of the patent to the items being practiced, which is not the idea of a patent. My rule would work like this:
1. Can only reassign in cases where your company or line of business is being sold 2. For a company to assert a patent they must show revenues from sales (other than licensing revenues) 3. You are on the hook for Attorney fees if Def wins on non-infringement (invalidity is more tricky, since its somewhat of a crapshoot anyway) 3. There would be an exception would for the original inventor/assignee, who need not show anything (they could essenttially by an NPE, if they wanted). They would still be on the hook for Attorney fees.
These are simple black letter rules, that would probably stop the vast majority of NPE suits.
Yes, and it would also kill the research departments at MIT, Cornell, USC, Harvard, Georgia Tech, etc., etc.
I have to question the credibility of any patent attorney who doesn't realize that universities file for and assign or license thousands of patents each year.
This is the totally wrong way to look at it. First of all, you will not be sued unless you are successful. Secondly, if you incorporate, you will be able to keep whatever money you make if they sue you into bankruptcy. But they won't do that, because they are like parasites. A dead host is useless to them. Instead, they will charge you what they think you can bare. If you are really passionate abut something, the threat of a patent lawsuit shouldn't detur you.
'We estimate that firms accrued $29 billion of direct costs in 2011'.What's more, the costs have gone up fourfold since 2005."
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The Patentology blog does a nice job deconstructing this study. One glaring problem the blogger pointed out is that, in their study, Bessen and Meurer do not differentiate among different types of NPEs -- for instance, they don't distinguish between independent innovators who license their inventions, universities, and the loathsome patent trolls. Sorry, but it doesn't make much sense to me to put these 3 groups in the same category. For one thing, whereas the dreaded "trolls" often tend to create an inefficiency problem in the economy, small inventors (who, like Edison, may choose to have others manufacture their products) and universities may add quite a bit of economic and creative value.