Patent Trolling Is Worse Than Any Other Time in History

It's the tech world's version of ambulance chasing: firms that earn money by asserting patent rights against other companies, without manufacturing any useful products of their own. And, according to the latest numbers, the economic burden of patent lawsuits is now unprecedented in U.S. history.

By filing one frivolous lawsuit after another, the trolls shakedown companies simply by claiming patent infringement. As the Harvard Business Review reports, patent litigation wipes out over $60 billion in company wealth each year. But, what's even more disturbing is the growing evidence that these costs are falling disproportionately on R&D firms—and stunting innovation in the process:

A researcher at MIT found, for example, that medical imaging businesses sued by a patent troll reduced revenues and innovations relative to comparable companies that were not sued. But the biggest impact is on small startup firms ….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.

Catherine Tucker of MIT analyzed venture capital investing relative to patent lawsuits in different industries and different regions of the country. Controlling for the influence of other factors, she estimates that lawsuits from frequent litigators (largely patent trolls) were responsible for a decline of $22 billion in venture investing over a five-year period. That represents a 14% decline.

Congress could make it harder to launch such frivolous lawsuits, but the most recent effort to pass such legislation died in the Senate under the assault of creatures more fearsome than trolls: lobbyists.