Patent trolls against innovation and consumers 3/4
Feb 25, 2013
Patent trolls which start lawsuits mar the market, but these suits are not even shared on all patent classes. The study of James E. Bessen shows us that computer and communication patents account for seventy five percent of the lawsuits. In contrast, two percent of the suits involved chemical or drug patents. Software patents have been the major contributor to the recent explosion of lawsuits. With that in mind, what effect do these suits have on the market and, ultimately, the consumer? For starters, “Patent trolls have cost publicly traded defendants $500 billion since 1990.”
In the last four years, the average cost of lawsuits started from patent trolls has been $84 billion—“more than a quarter of US industrial research and development spending during those years” as Ars Technica says. If you believe the “troll’s’” claims to be true, then they are helping patent holders get the honoraria. So if most of these billions end up in the pockets of inventors, the system would be working as intended and innovation, the most important thing for software and computer, could continue uninterrupted. The resulting benefit of this would be that the consumer can buy new and innovative products.
In reality, this is not the case. According to James E. Bessen, 14 plaintiffs, who were publicly traded companies, are liable for $88 billion of lost wealth for the defendants. Yet, the revenue was only $7.6 billion. The real inventors got less than 10% of the defendants lost wealth. Trolls don’t help patent holders obtain honoraria, they simply earn money for themselves.
The patent system is supposed to reward companies who invest thousands if not millions of dollars towards new innovative designs and technology. Unfortunately, trolls have found not only a way to use the system to fuel their greed and cripple the aforementioned production of new goods, but also to stop innovation. Thus the patent system is actually becoming a net disincentive to innovation. A famous troll that exploits the system is MobileMedia. “MobileMedia Ideas owns hundreds of patents covering technologies incorporated in cell phones, computers, tablets, cameras and video game players and frequently enforces its patent rights aggressively which frequently gets notice in the technology media” Julie Hopkins said. They have sued several smartphone makers in the last time (Cases against: Apple, HTC and RIM-Blackberry), which cost the companies, and at the end the consumers, a lot of money.
The consumer has to stand all that. They never have the best product because innovation is diminished, if not halted altogether. However, regulators have begun to pay more attention to the practice of trolls. For example, Congressmen Peter DeFacio and Jason Chaffez introduced the SHIELD act, which will put the financial burden on the trolls. The bill did not make it to the floor for a vote, but will likely be reintroduced in the 113th Congress. This lets us hope that for all consumers a lower price and faster innovation in the future. A change is unavoidable in order to keep the innovation market a competitive and fair market.
How the U.S. patent system works now, the consumer pays too much for a product that is not as good as it could be in a market, which is not ruled by patent trolls and lawsuits.