Patent Trolls Cost the Economy $29 Billion in 2011

Troll lure, Patent D378308 by Douglas R. Roe et al.

Patents are supposed to protect inventors from having the results of their blood, sweat, and tears from being stolen by others, but recently, patents are increasingly being used as blackmail ... to the tune of $29 billion last year alone.

Rebecca J. Rosen of The Atlantic wrote:

If you're looking for a swell way to make a few bucks, here's an idea: buy up software patents, don't actually try and develop any products or sell anything, and then just sue people left and right for patent infringement. Congratulations. You're a parasite.
That's basically the only conclusion you can draw from a new study by James Bessen and Michael J. Meurer of Boston University which looks at the costs of patent litigation instigated by "non-practicing entities" (NPEs), the polite term for patent trolls. NPEs own patents, but don't actually use them to make goods or services that people would, you know, want. Rather, they use the patents to prevent other companies from creating goods or services that people might want. Lovely, really. The cost of this vital industry? $29 billion in 2011 alone, and that's just the direct legal costs, not even counting "various indirect costs ... such as diversion of resources, delays in new products, and loss of market share." The loss for the economy overall -- in terms of immeasurable opportunities -- is surely far greater.

Link - via Boing Boing

First of all the $29 Billion was not direct legal costs, it was calculated based on the change in the defendant’s stock price after it was announced they were being sued for infringement. This method of calculating losses is pure nonsense. Second, the study is flawed in that it assumes that all patent lawsuits were frivolous. If a company infringes a patent, then the drop in its stock price should be considered the amount of money the company stole from the inventor. This theft inhibits invention. For more information on the flaws in this study see http://hallingblog.com/flawed-study-by-boston-university-used-to-justify-infringement/