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‘Patent trolls’ cost tech companies $500 billion, kill innovation

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According to The Private and Social Costs of Patent Trolls, a new study published by the Boston University School of Law, patent trolls are responsible for $500 billion of “lost wealth” between 1990 and 2010, and for a decline in innovation. The study defines patents trolls as “firms that license patents without producing goods,” otherwise known as non-practicing entities. The researchers have found patent trolls, typically smaller firms, often sue large companies for technology patent infringement to make a quick buck. The lawsuits have resulted in an average of $80 billion of lost wealth per year during the last four years. Read on for more.

“To the extent that this litigation represents an unavoidable business cost to technology developers, it reduces the profits that these firms make on their technology investments,” the researchers explained. “Studies show that the more a firm spends on R&D, the more it is likely to be sued.” Software patents are often targeted most due to “fuzzy boundaries,” and even though the larger firms are often found not guilty of infringement, they have to “anticipate the risk of future lawsuit-related losses as part of their cost of developing new technology and products,” which, the researchers argue, is a disincentive to innovate.

The Private and Social Costs of Patent Trolls argues that patent trolls push firms to purchase “vague, over-reaching patents” instead of innovating — at least now we know why there are so many ongoing tech acquisitions.

[Via Ars Technica]

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