updated 06:30 pm EDT, Tue September 20, 2011
Unmeasured costs could be much higher
Three Boston University researchers have put a price tag on the cost of patent trolling in the US. The amount is a staggering $500 billion since 1990. In the past four years, the cost has averaged about $83 billion annually, amounting to more than 25 percent of US R&D spent over the time period.
Patent trolling occurs when a company, with no products of its own and no assets other than a broad patent portfolio sues or threatens lawsuits against another typically larger company with money in the bank. The troll's major intent is to force a financial settlement under the threat of a product ban.
The researchers, James Bessen, Mike Meurer, and Jennifer Ford only measured tangible costs such as legal fees and settlement payouts. They did not factor in indirect costs such as employee distraction, legal uncertainty, and the need to redesign products. Also, the study only quantified losses to publicly held companies. What was not included was the cost to smaller privately held companies which had to litigate or even go out of business because they could not afford to defend their positions.
Several large companies, in preemptive moves have acquired other companies or their assets to bolster their patent portfolio and legal position. In July, Rockstar, a consortium comprised of Apple, Ericsson, EMC, Microsoft, RIM and Sony, bought over 6,000 patents from Nortel for $4.5 billion. In August, Google acquired Motorola for $12.5 billion to help fend off patent attacks against the Android OS, though mostly against larger companies rather than trolls.
Congress has begun to respond to trolling and shortcomings of the patent protection process. In September, the Senate passed the America Invents Act. The bill, which streamlines the patent procuring process and beefs up the USPTO, hopefully will both speed up patent approvals and prevent overly broad patents from slipping through and being used by patent trollers. [via Ars Technica]