Patent trolling cost the US $29bn in 2011

Boston Uni researchers slam ‘NPE’ lawsuits

New research from Boston University suggests that “patent trolling” is a very expensive business, costing $US29 billion in 2011 in America alone, and that trolling reduces the funds available for innovation.

The research, by James Bessen and Michael J Meurer of the university’s School of Law, drew on information published in litigation databases and a survey of defendants to come up with the figure.

Their research found that there were more than 5,800 defences by 2,150 companies against patent assertions by “non practicing entities (NPEs) in 2011.

While high-profile cases – by NPEs the researchers describe as “big game hunters” – give the impression that patent trolling is mostly between giant corporations, the researchers noted that the median defendant had annual revenue of $US10.8 million, and 82 percent of actions were launched against companies with less than $US100 million in annual revenue.

The researchers also analysed the financial state of publicly-traded NPEs, and state that these trolls “cost small and medium-sized firms more money than these NPEs could possibly transfer to inventors”. The result, they say, is that there’s less money available for invention.

The researchers note that NPEs have a long history, and that not all of it’s bad. “Some inventors lack the resources and expertise needed to successfully license their technologies or, if necessary, to enforce their patents. NPEs provide a way for these inventors to earn rents that they might not otherwise realize, thus providing them with greater incentives to innovate,” they write.

Nor is trolling via NPEs a new phenomenon, they write, noting that “patent sharks” in the 19th century used to target railway companies and farmers. However, the rise in NPE trolling has “reached a wholly unprecedented scale and scope”.

It should be noted that this research focused only on the NPE business model – it didn’t take into account the increasingly bitter, frivolous and expensive patent spats between active vendors such as Apple, Motorola, Samsung and the rest.

The paper is available here. ®