The Evidence Is In: Patent Trolls Do Hurt Innovation

Posted on 2014/07/28 in Business, Google+, Innovation

"The White House and the Congressional Research Service both cited many research studies suggesting that patent litigation harms innovation. And three new empirical studies provide strong confirmation that patent litigation is reducing venture capital investment in startups and is reducing R&D spending, especially in small firms."

"There were six times as many patent lawsuits last year (2013) than in the 1980s. The number of firms sued by patent trolls grew nine-fold over the last decade; now a majority of patent lawsuits are filed by trolls."

"The economic burden of today’s patent lawsuits is, in fact, historically unprecedented. Research shows that patent trolls cost defendant firms $29 billion per year in direct out-of-pocket costs; in aggregate, patent litigation destroys over $60 billion in firm wealth each year. "

"Moreover, these costs fall disproportionately on innovative firms: the more R&D a firm performs, the more likely it is to be sued for patent infringement, all else equal. And, although this fact alone does not prove that this litigation reduces firms’ innovation, other evidence suggests that this is exactly what happens."

"[…] the biggest impact is on small startup firms […], most patent trolls target firms selling less than $100 million a year. One survey of software startups found that 41% reported “significant operational impacts” from patent troll lawsuits, causing them to exit business lines or change strategy. Another survey of venture capitalists found that 74% had companies that experienced “significant impacts” from patent demands."

Article by James Bessen on the +Harvard Business Review: 

The Evidence Is In: Patent Trolls Do Hurt Innovation
It’s time to do something about it.

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