Patent Trolls Drive Majority of All U.S. Patent Lawsuits

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News Posted: Tue, Dec 11 2012 9:11 AM
You rarely hear politicians talk about patent reform, but perhaps it's high time the topic merits some discussion. The alternative is to leave the system alone and let businesses pay the price, even if they can't afford it. According to researchers at Boston University School of Law, the cost for businesses paying royalties to patent owners has risen fourfold since 2005, and it's the so-called "patent trolls" that are running the system.

The study found that companies in 2011 paid a cumulative $29 billion in expenses associated with nearly 6,000 infringement claims filed by non-practicing patent owners using their IP portfolios solely to collect cash rather than build products. In 2005, there were 1,401 claims resulting in $6.6 billion in costs, Bloomberg reports.

Despite the high costs, it's not the richest companies that face the majority of lawsuits. In fact, 59 percent of the claims filed in 2011 were related to businesses making $1 billion or less in annual revenue. Larger companies still end paying more, but smaller firms have a tougher time absorbing the costs, which works out to an average of $1.75 million for a small or medium-sized company. That's just to cover the legal and settlement costs; it doesn't take into account delays in production or diverted resources.

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"I was surprised at the magnitude and how much of it is really hitting small companies," said James Bessen, a lecturer of law at Boston University. "It's having a bigger effect on innovation than we had thought."

Bessen's comments on innovation echo those of Amazon founder Jeff Bezos, who in October of this year called for a truce in the patent wars. According to Bezos, the patent system is killing innovation rather than protecting intellectual property like they're supposed to.

As currently constructed, the system has motivated companies to spend big bucks on patents, in many cases just to avoid lawsuits. A recent example is the $500+ million bid Apple and Google placed on Kodak patents, mainly to protect themselves from litigation. If that weren't an issue, that $500 million could have been spent on building and designing products.
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Dorkstar replied on Tue, Dec 11 2012 9:37 AM

Damn, we were just talking about this yesterday. That's insane that 59% are "small" businesses. We're hurting our own growth, by making money off of having an idea on a piece of paper. We're not even advancing anything. Oh America, you are beginning to sink.

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rapid1 replied on Tue, Dec 11 2012 10:05 AM

Yeah this crap is very sad and deducts from our advancement technologically speaking in a large way. You cannot innovate because you might step on someone else toes, generally a very select few with APPLE being number one and Microsoft being the number two patent whore. The term troll does not seem to match to me as there basically seeking to sell and hold intellectually unavailable parts of there knowledge, the most screwed up part of it is the infinitely ridiculous ones like the style of the corner of a smart phone being patented. (by APPLE I think but don't quote me) and M$ collecting money from almost everyone in the game period, Nokia does it as well, Google seems to only do it to those who try and do it to them first, but I am sure they do it as well sometimes. It chokes innovation and is a very bad state of affairs I think for the world in general.

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OSunday replied on Tue, Dec 11 2012 12:26 PM

Patent trolls stifle competition and are going to end up snuffing out a lot of small businesses with great ideas and potential for growth because of the desire to make money. While big corporations can handle million dollar hits and aren't as effected by fee's of lawyers and going to court (and can also afford better lawyers, making them less vulnerable to patent trolls), and even worse is when big companies use their existing ownership of patents and ability to buy them up as a way to stifle competition.

This system is sort of ensuring the big men stay on top and the little guys don't have a chance to rise up.

The patent system is definitely in dire need of reform

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Dorkstar replied on Tue, Dec 11 2012 12:40 PM

rapid1:

Yeah this crap is very sad and deducts from our advancement technologically speaking in a large way. You cannot innovate because you might step on someone else toes, generally a very select few with APPLE being number one and Microsoft being the number two patent whore. The term troll does not seem to match to me as there basically seeking to sell and hold intellectually unavailable parts of there knowledge, the most screwed up part of it is the infinitely ridiculous ones like the style of the corner of a smart phone being patented. (by APPLE I think but don't quote me) and M$ collecting money from almost everyone in the game period, Nokia does it as well, Google seems to only do it to those who try and do it to them first, but I am sure they do it as well sometimes. It chokes innovation and is a very bad state of affairs I think for the world in general.

Let's not forget IBM & Intel here, they are known for gobbling up patents.

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Maybe one day, Back to the Future 2 will come true, and lawyers will be done away with. :-)

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Dorkstar replied on Wed, Dec 12 2012 11:50 AM

thunderdan602:

Maybe one day, Back to the Future 2 will come true, and lawyers will be done away with. :-)

Can we just focus on getting the hover board first?  Assuming there isn't a patent for it already...

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